As an online parts retailer, it’s important to work with a supplier/distributor that you can count on. Not only will this make your business run smoothly, it will also set you on a path to growth.
The problem is, finding a parts supplier can be tricky. Suppliers don’t really advertise or promote themselves the way that other service companies do, and there’s a lot of “insider” info that isn’t available to the general public.
While we have nothing to do with the auto parts and accessories supply chain (we’re a marketing company focused on etailers), we’ve done our best to come up with an explanation of the industry that NEWBs can reference.
Suffice it to say, if you already have a supplier, feel free to skip the rest of this post.
Understanding the Chain
The auto parts supply chain goes like this (basically):
- Manufacturer. They are at the top of the chain. They design and produce the parts.
- Distributor. The distributor buys parts in bulk from a manufacturer, then warehouses them for sale to retailers.
- Retailer. The company that may or may not hold parts in inventory, and who may or may not have a physical store.
We say “basically” because there are exceptions to the above. Some retailers, for example, are also manufacturers. Some distributors will wholesale parts to retailers AND retail parts to consumers. Some distributors are secretly selling out of another larger distributor’s warehouse. Some manufacturers will work with retailers (allowing a retailer to bypass the distributor and save a little money), and there are even manufacturers that have developed easy-to-use drop ship programs available directly to retailers of any size.
The point here is to understand that there are 3 basic types of entities in the supply chain. The title of our article is “finding a parts supplier” because retailers have options…a supplier isn’t always a distributor.
What Distributors Can Offer Auto Part and Accessory eTailers
If it’s possible for retailers to connect directly with manufacturers (as described above), why would anyone work with a wholesale distributor? The short answer: service and convenience. Here are the more common advantages that come with working with a wholesale distributor:
- Many distributors offer drop-shipping services for a fee. Basically, retailers who utilize drop-shipping do not stock inventory. Instead, a retailer pays a distributor to pick, pack, and ship the order directly to the customer from the distributor’s inventory. While drop-shipping has some disadvantages (lower margins being the biggest), it allows for very low overhead and is quite popular.
- Some distributors offer local delivery (sometimes even same day), which is great for retailers who have a physical store or shop. These distributors often cater to repair shops and tend to stock mostly replacement parts, but many of them have auto accessories available same day as well (especially in larger markets).
- Some distributors offer easy online part look-up and ordering tools, which make it easy for part retailers to verify fitments, order parts 24/7, etc. Retailers with physical stores also appreciate these look-up tools, as they often allow the retailer to show the part directly to the customer (photos, specs, etc.) without worrying about pricing or “losing” the customer to another retailer.
Of course, these services aren’t free. Drop-shipping, for example, eats into already narrow margins. Local same-day delivery comes at a high price compared to waiting 3-5 business days for parts to arrive by mail. A great system for finding and ordering parts often leads to higher prices and fees. etc.
Obviously, you want to look at all your options.
Other Things To Know About Buying Auto Parts Wholesale
Most etailers we work with will purchase their parts either from one single distributor (one that has a large inventory and a good drop-ship program), or they will buy direct from the manufacturer and hold their own inventory. There are pros and cons to both approaches, but as far as “gotchas,” there are a couple:
- Make sure you understand payment terms, shipping policies, and return/exchange policies. Some distributors with drop-ship programs demand healthy restocking fees and net-30 payment terms. Others are more lax. If you don’t understand, you can lose a lot of money fast.
- Make sure you understand the volume discounts available, and keep an eye on them. Manufacturers often deal in massive volumes, but occasionally they’ll work in smaller volumes to generate some cash flow. You might be able to buy 50 parts (instead of 500) at a great discount, at least if you’re able to pay right away.
- Likewise, distributor pricing changes based on total revenue. The bigger your etail operations become, the more you should expect from the distributor in terms of discounts and services. After all, if your retail operation is big enough, you can bypass the distributor…so they need to work to earn your loyalty once you start to do a lot of business with them.
A great place to get started on your supplier search is at the annual SEMA show in Las Vegas, held the first week of November. You can meet with manufacturers and explore buying from them direct, and you can also talk to distributors about their various programs. If you’re just getting started, don’t be afraid to tell that to the distributor or manufacturer. Some of them have special programs for new etailers.