Auto Parts Retail An Outperformer

With inventory for new autos limited and prices for new and used automobiles skyrocketing, demand for auto parts has risen steadily coming out of the pandemic, resulting in strong sales performance among three of the four major auto parts retailers of Auto Zone, O’Reilly, and Napa.

Brandon Svec, national director of U.S. retail analytics at CoStar Group, tells GlobeSt.com that the auto parts segment has been an outperformer for a few years running thanks to the aging fleet of light vehicles across America, the average of which recently reached an all-time high.

“With sales rising, each of these three has meaningfully contributed to the rise in demand for brick-and-mortar retail space seen over the past three years,” Svec said.

Auto parts retailers have accounted for nearly 5% of all retail space leased since 2021 compared to an annual average of just 3.1% during the five years preceding the pandemic, according to CoStar data.

Placer.ai tracked the top retailers and found that in Q1 2024, major segment players AutoZone, O’Reilly Auto Parts, NAPA Auto Parts, and Advance Auto Parts saw respective year-over-year  visit increases of 3.5%, 5.1%, 1.7%, and 1.7%.

More than 40% of total visits to the four chains in Q1 went to AutoZone, followed by O’Reilly Auto Parts (32.1%), Advance Auto Parts (18.6%), and NAPA Auto Parts (9.2%).

Though AutoZone continues to lead in relative visit share, O’Reilly Auto Parts boasts the most loyal customer base of the four chains.

On a quarterly basis, O’Reilly Auto Parts saw the biggest YoY visit increase, despite lapping a strong 2023. The chain, which drew 32.1% of total visits to the four brands in Q1, saw quarterly YoY foot traffic increase by 5.1%, according to Placer.ai.

O’Reilly was also recognized as having one of the top loyalty programs in the country.

AutoZone, which received 40.1% of quarterly visits to the four chains, saw quarterly YoY visits increase by 3.5%. Advance Auto Parts and NAPA Auto Parts both saw quarterly YoY visits increase by 1.7%.

Patrick Nutt, executive vice president, SRS Real Estate Partners, Capital Markets, tells GlobeSt.com that given the backdrop of the US economy, where the effects of higher borrowing costs are being seen flowing through to the average consumer, it’s no surprise to see people spending more time and effort fixing and repairing existing vehicles versus purchasing a newer vehicle.

“Fortunately, all the major players within the space such as O’Reilly and AutoZone have done a great job in their expansion efforts, locating new stores and relocating older stores in high-traffic areas within new major retail developments so that they are primed to receive this influx of customers,” Nutt said.

“Additionally, many of these repairs and need for parts are time-sensitive, so while it’s no big deal to wait for tomorrow’s Amazon shipment for an order of new socks when there’s a need to repair your vehicle to maintain your ability to get to work or pick up your kids from school, having that physical storefront nearby and convenient is imperative.”

He said this is an example of brick-and-mortar retail being an irreplaceable part of a business.

Richard Rizika, Partner and Co-Founder of Beta Retail, tells GlobeSt.com that the retail auto parts store business is experiencing significant growth driven by its shift toward integrating digital channels with traditional retail.

“Consumers increasingly prefer the convenience of online shopping, even though final purchases may still happen in physical stores,” Rizika said.

“This trend requires investment in e-commerce platforms and digital marketing as well as right sizing and spacing of physical stores networks.”

He said the rise of electric vehicles (EVs) is also transforming the market.

“Auto parts retailers need to adapt by stocking EV-specific components and training employees about EV maintenance,” he said.