Aftermarket November 2022

R ising inflation, spiralling prices and higher servicing costs are all combining to pose a challenge to the aftermarket sector, wth a recent McKinsey report forecasting stagnating revenue growth across European auto aftermarkets of around 1.5% annual growth until 2030. Car owners are already cutting back on spending, reviewing budgets and delaying non- essential repairs. Considering this, retailers and distributors must adapt their businesses to better support their consumers’ needs. One route they should consider is improving the flexible payment options they offer at checkout, such as buy now pay later (BNPL), which would help ease the financial burden on their customers. Stuck in first gear So, why is the industry stuck in first gear on this? The UK automotive aftermarket ranks as the fourth largest industry in Europe and ninth in the world, and contributes over £12bn annually to the economy, supporting 345,600 jobs. This means that the fact that the outlook for the sector is weakening is extremely concerning. Furthermore, research consultancy IBIS World is forecasting that the average age of UK motor vehicles will start to fall this year, suggesting a dip in second-hand car sales, which typically need more 14 AFTERMARKET NOVEMBER 2022 BUSINESS www.aftermarketonline.net BUY NOW PAY LATER: THE SOLUTION TO STALLING AFTERMARKET GROWTH? Would the aftermarket benefit from the wider availability of buy now pay later (BNPL) payment options? aftermarket support. Compounding this negative backdrop is rising prices. In a survey conducted by the Motor Ombudsman earlier this year, some 63% of independent garages and dealerships said that because of delayed deliveries and global supply chain problems they would be raising prices over the next six months. They also noted evidence of drivers cutting back on spending on their cars as part of their efforts to limit spending. The impact of all these trends is likely to see a rise in buyer hesitation. Cart abandonment, across all industries, already sits at nearly 70%. The cost-of-living crisis will inevitably increase this figure further still. So, how can the aftermarket sector meet this issue of rising cart abandonment head-on? Expanding the scope Expanding the scope of checkout finance offers a solution. To stem the resulting revenue loss from increased cart abandonment rates and falling consumer demand, retailers should consider and evaluate flexible payment options. Finance options such as hire purchase and personal contract purchase (PCP), which allow a buyer to spread payment over a longer time period, are largely confined to purchasing new or used cars, rather than vehicle parts and accessories. However, implementing a more flexible payment option at checkout for these products and Huw Phillips, Head of Sales at Deko