A growing working population and expanding middle class base are key demand drivers for the online auto components industry in India. E-commerce has today become the standard mode of transactions in retail. This coupled with fast and easy Internet access and the option of choosing from a huge variety of products has made online buying almost effortless. However, online sales of automotive spare parts for cars still remains largely under-tapped in India, leaving great potential for its digitisation and growth. Auto Tech Review recently met Yevgen Sokolnikov, CEO & Co-founder, Boodmo, an online marketplace for auto components, to discuss challenges and growth opportunities in this space.
IMPACT OF GLOBALISATION
Globalisation has resulted in a vibrant, fast-paced automotive spare parts market in India. With rapid evolution, there’s now unprecedented competition between international and domestic online spare parts marketplaces. Online markets are open to all buyers, which means that customers can first compare prices of the product of their choice on different online platforms before finally settling to buy from the site that gives them the best deal. To become and remain the destination of choice for customers to buy auto spare parts from, online auto components sellers have to constantly cope with the competition, offering genuine products at best prices.
COMPETITION FROM THE OFFLINE MARKET
The dynamics of the offline auto spares market is totally different from the online one. Offline local markets usually have loyal customers because of the easy accessibility of spare parts, and also because of the often engaging tips from local suppliers and the mechanics at the stores, which entice customers in a big way and earn their long-term loyalty. However, these customers do not realise that most of the times, the spare parts being sold to them are actually non-genuine or spurious components.
Despite this fact, stakeholders in the automotive value chain continue to buy from the offline market, adding to its size. The fact remains that buyers are not yet ready to shift to online spare parts market en masse, and many are also sceptical about the quality of the product. Online markets are unable to match the discounts and deals some players provide in the offline market, so to keep up the pace and gain recognition and credibility, online players have the task of educating their existing and future clients about the relevance of genuine products in terms of their ability to boost safety and reliability.
IMPACT OF GST ROLLOUT
The Indian auto-components industry is broadly classified into the organised and unorganised sectors. A majority of automotive spare parts market comes under the unorganised sector, which comprises relatively low-value products and caters mostly to the aftermarket category. There are a lot of local players in the unorganised sector who are not registered for GST. With the rollout of GST, however, many players, who also happened to be auto spares suppliers to the online auto components sellers, have withdrawn their collaboration with the online suppliers. This is because they belonged to the unorganised sector and did not follow the standard billing procedure. GST has therefore caused a loss in the supply chain of the online spare parts markets, while also impacting the e-commerce of spare parts businesses. Sokolnikov believes that GST will get integrated into the whole system in some time, helping the industry to become more organised and flourish in the future.
HANDLING RETURNS, INVENTORY MANAGEMENT
Cancellation of product delivery by customer after ordering the product is a major challenge faced by almost every online market player today, be it in any sector, and is particularly evident in the automotive aftermarket. In many instances, it happens that customers buy a spare part just for checking, and at times, they order without any genuine requirement at their end. What these ‘customers’ do not realise is that returning or replacing an auto spare part comes with a significant cost, and complications in terms of logistics. But this factor is something that online players need to be prepared for and thus account for, as well.
Inventory management includes managing the stock of products. Different parts are available for different automotive companies and online component markets constantly need to make changes according to new innovations and products launched in the market. Apart from keeping stocks ready, online market players also need to be good predictors of the upcoming demand trend in the market. So players with a well-setup network for sourcing spare parts will always be leading the race.
THE WAY FORWARD
The Indian auto components industry is growing and has been witnessing healthy growth for the last few years, complementing the Indian automobile industry’s positive momentum. It has emerged as the 7th largest in the world and is one of the most competitive industries globally.
However, the convergence between technology companies and auto manufacturers is blurring industry lines, even as consumers evolve from an ownership-centric mindset to service-centric one. Thus, the supply chain is seeing a transformation, leading to a gradual shift from offline auto component market to online. Given that shift, the online auto components sector is poised to grow in a big way in the years to come.
TEXT: Anwesh Koley