At AAPEX this year, the Aftermarket Outlook 2024 included retail and aftermarket trends as presented by Nathan Shipley, executive director and industry analyst with Circana.
Circana tracks consumer behavior across industries, including automotive. Shipley's presentation looked at consumers from a macro level, through e-commerce, and specifically though an automotive lens.
The presentation started out with a broad overview of the consumer. Year to date, general merchandise dollars fell 4% and units fell 7%. Consumers are cutting spending in areas that pertain to food, contributing to what Shipley described as a "trading down" effect. Additionally, lower income consumers make more budgeting choices when gas prices and rent go up.
Shipley said when evaluating today's consumer versus the consumer at the height of the COVID-19 pandemic, there are differences. During the pandemic, savings rates went up and credit card debt went down. Now that interest rates have gone up and there have been other cost of living increases, some consumers are dipping into their savings for day-to-day living.
Circana's data stated 77% of consumers plan to cut back on spending because of inflation. Another factor is the student loan repayment structure, which Shipley described as a "long game" in terms of tracking. According to Circana's data, 25% of people surveyed said they didn't plan on paying back their loans. Others asked about it are waiting for another change in the payback structure before they determine a plan of action.
In terms of some transportation specific trends, year to date gasoline prices are down 15.3% ($3.50) versus 2022 ($4.13) and are up 34.3% to 2019 ($2.61). Mass transit ridership trends down. Take the New York City subway, for example, where ridership is at 70% of pre-pandemic average. According to the United States Department of Transportation, year to date miles driven in August 2023 are up 2.4%, down 1.3% versus 2019.
Shipley highlighted a consumer push in road trip culture. Survey results from Circana showed 60% of consumers planned to take a road trip over this past summer. Work from home culture has an impact, as well. 50% of remote workers surveyed by Circana claim to have traveled for pleasure without taking time off work in the last six months.
Households with a $100K or greater income are the top contributors to unit sales across the aftermarket. Targeting the higher income consumer changes how brands go to market because these consumers spend differently than lower income consumers.
Vehicle elements such as motor oil, filters, and vehicle air fresheners are up in units, which Shipley noted as an interesting trend that could be linked to delays in maintenance or the age of vehicles on the road, which are both up. For tires, (on light truck/passenger cars) units are up 3% and price is up 5.6% year to date for September 2023. In terms of dollar growth, motor oil is a top tracking category, along with filters and automotive refrigerants. Shipley said they don't typically see these automotive components in terms of dollar growth, but now there are three categories represented.
- Shipley closed out the presentation with a short-term outlook for the automotive aftermarket. Here were some of the key touchpoints:
- Higher income consumers offset maintenance deferral of low-income consumer;
- Don't discount the lower income consumer—deferral preventative maintenance can be offered (wipers, oil changes, etc.);
- New car inventory and incentives have returned;
- Discretionary categories will be the worst performers this year across income groups;
- Keep an eye on student loans and the impact on the economy.