Parts Ecommerce In 2023: What Will Change And What Will Stay The Same?
It’s that time of year when everyone makes predictions about the next year. In this post, we’ll tell you what we expect to change, what won’t change, and why. The big notes:
- This is going to be TikTok’s year (unless it isn’t)
- The funny money (a/k/a venture capital funds) is leaving ecommerce for greener pastures
- Amazon, eBay, and other giants are going to focus on profit again
- Pickup trucks – and pickup truck accessories – are going to have a “meh” year
- You will want to renegotiate credit card rates again next year
Details are below.
TikTok Is Going To Have A Great Year (Probably)
YouTube ad sales are slowing. Facebook looks like it’s dying, albeit very slowly. Twitter is a dumpster fire. And while it’s true that US social media use has likely peaked (or will peak soon), social media is still extraordinarily popular.
The takeaway: If Facebook is shrinking and Twitter implodes, consumers will have to go somewhere to get their social media “fix.” And that somewhere is TikTok, which has been growing like a weed and has lots of room to grow bigger. Short-form videos are popular with consumers under 30 and gaining popularity every day.
If there’s anything that can slow TikTok’s growth, it will be politics and the threat of a US ban on the social media application. But until TikTok is banned (and who knows if that will happen), people in marketing and advertising need to get on the TikTok bandwagon.
The Funny Money Is Finally Drying Up
Ecommerce – and auto parts ecommerce by extension – has been awash in venture capital (VC) for years. We’ve seen it firsthand here at Spork. This is what often happens:
- A VC firm acquires a small but valuable parts/accessories etailer
- The VC firm starts throwing money at their new etailer, doing things that aren’t profitable in the name of top-line revenue
- All the growth comes at the expense of companies that have to turn a profit on every order, and who don’t have a big bag of cash to bail them out in bad months
Love it or hate it, VC fundamentally altered the ecommerce landscape for the last decade…but the party seems to be coming to an end. VC interest in funding ecommerce is down.
- The decline in ecommerce sales over the last year or so has challenged the growth narrative that gets VCs so excited about ecomm
- A lot of direct to consumer ecommerce brands have invested in traditional brick-and-mortar retail, which also challenges the ecomm growth narrative
While there will always be VC-backed ecommerce plays, the ecommerce growth slowdown this year will chase away a lot of VC investment next year.
The Parts Ecommerce Giants Are Pulling Back On Ad Spend
Amazon, eBay, and several other large auto parts retailers seem to be pulling back on ad spending, which makes sense considering announced layoffs from Amazon and rumors of layoffs at other large parts retailers (who shall remain nameless here). Pulling back is the only way to get costs in line and earn a profit, at least if the economy is heading into a recession (as it would seem to be).
Suffice it to say, we believe customer acquisition costs will come down a bit in 2023, which should be good for profits.
Pickup Trucks And Truck Accessory Sales Are Going To Have a “Meh” Year
Would you believe that pickup truck sales and home equity loans are correlated? Research shows that the correlation is weak, but said research doesn’t address how home equity impacts transaction values. Based on our experience as an agency, we’d say that home equity drives a lot of pricey new truck purchases.
And with real estate interest rates being higher than at any point in recent memory, consumers can’t access cheap funds at favorable terms to buy increasingly expensive pickup trucks. Truck sales were slow over the last year because of pandemic-related supply chain problems, but dealerships are now seeing pickup truck supply return to pre-pandemic levels.
This is to say, new trucks are available at your local dealership, but too damned expensive for most consumers to afford. Therefore, a slowdown in both truck and truck accessory sales is to be expected…at least until interest rates come back down and/or automakers offer deep discounts again.
2023 Is A Good Year To Renegotiate Your Credit Card Fees And Rates
A little bird tells us that several big-name credit card processors are offering previously unheard-of deals on credit card processing. This is probably a result of higher interest rates (which help banks make more money).
But whatever the reason, your auto parts ecommerce company should not pay 2.9% for credit card processing unless you’re a very small retailer. If you haven’t renegotiated processing rates in a while, we’d recommend reaching out to 360 Payments (a company we really like) as well as a company whose name rhymes with “shmay hal.” You might be surprised by what kind of deal you can get.
2023, here we come!
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