One Way Inflation Is Impacting Auto Parts Sales – Reduced Brand Preference
For years, we at Spork have seen firsthand that auto parts and accessories consumers have strong brand preferences:
- For replacement and maintenance parts, consumers are typically drawn towards OEM and/or premium brand names over concerns about quality and reliability
- For accessories, consumers are drawn toward brands with clear identities and values, as accessorizing a vehicle is as much about personalization as it is about increasing capabilities
However, inflation has started to erode consumer preference for premium brands, and many of our clients have seen a decrease in premium brand sales. In this article, we’ll expand on what we’re seeing and how we’re advising clients to adjust.
Major Retailers See Shift Away From Premium Brands
Major retailers like Walmart and Target have seen some pretty significant changes in consumer brand preference:
- At Walmart, a Q1 profit miss was attributed to declining interest in premium brands amongst cost-conscious consumers
- At Target, “house” or private label brand sales are up substantially this year, driven at least partially by inflation
- Historically, private label sales thrive in times of inflation
At Spork, we’ve seen several shifts in consumer behavior over the past few months. Some changes we’ve seen are a result of shifts in discretionary spending. Some are a result of consumers ordering vehicles rather than buying them off the lot, and the impact that has on accessory sales. But inflation is definitely playing a role in sales as well, and we have also seen sales for premium branded products taper.
Additionally, we’ve seen increased interest in saving money on simple repairs and/or regular maintenance. For example, check out Google search interest in maintenance parts like oil filters and brake pads (see below).
For Retailers, It’s A Great Time To Launch A White Label Brand
If you’re an auto parts or accessories retailer, launching your own white label brand is always a good idea:
- White label brands give you maximum control over your margins and pricing
- White label brands can be created specifically to compete with products you’re already selling – you can limit your SKUs and coverage to products you know you can turn
- White label brands can be tuned to target a specific niche or audience that existing brands ignore (or might not be aware of)
- White label brands are an asset and a key part of any business exit strategy
Because of all of these benefits, we’ve recommended white labeling to our clients for years. Still, this moment in time is unique, and with inflation and a recession in our future, launching a white label now makes sense.
For Brands, It’s A Great Time To Market ‘Value’ Lines And To Think About Promotions
Generally speaking, the smartest thing brands/manufacturers can do is invest marketing dollars into premium lines. This is because premium lines have higher margins and can support marketing costs, while at the same time creating a halo effect that drives sales for the entire company.
However, at this moment in time, it’s probably worth pushing the “economy” brands. Messaging can emphasize value and respect for a customer’s budget, while at the same time differentiating between value and premium lines. As always, certain features should be reserved for premium lines only.
Additionally, brands should look carefully at promotions and special offers that don’t erode perceived value. Calendar-based sales are a good idea for brands, as are rebates and upsell offers like “buy one of our premium line products at full price, and get a value line product for free.” Price reductions are an option too (one we’ve seen several companies implement), but ideally, pricing would not change more than once a year or so.
Inflation And Value-Oriented Shopping Won’t Last Forever
Finally, it’s important to note that consumer behavior will inevitably shift away from concerns about inflation and/or “stretching the budget.” It might take a few months – or even a couple of years – but at some point, consumers will not want to buy the value products. Inevitably, consumers are drawn toward premium brands that emphasize quality and values. Therefore, it’s smart to keep marketing your premium lines and products, albeit at a lower share of the budget than 12 months ago.
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