Auto Parts Retail: Amazon Vs. Brick & Mortars

Although Amazon.com, Inc. AMZN generally has lower prices, brick-and-mortar stores in the auto parts retailing segment have “other advantages,” BTIG’s Alan Rifkin said in a report. He believes that, despite Amazon’s lower prices, traditional auto parts retailers would be able to defend their market share in the DIFM (Do-It-For-Me) and DIY (Do-It-Yourself) channels.

Ratings And Price Targets

• AutoZone, Inc. AZO: Rated Buy, with a price target of $900.
• O'Reilly Automotive Inc ORLY: Rated Buy, with a price target of $310.
• Advance Auto Parts, Inc. AAP: Rated Sell, with a price target of $120.

DIFM Channel

Rifkin believes that DIFM was “well-insulated” from Amazon. In this segment, Amazon’s two-day Prime and same-day delivery services seemed “inadequate,” since these customers need parts within a couple of hours. Amazon cannot provide this service.

“Relationships with trusted account reps who understand auto parts and can respond timely to problems are key services AMZN does not offer,” Rifkin wrote.

DIY Channel

The analyst noted that although the DIY segment was more exposed than the DIFM segment, brick-and-mortar stores offering DIY were well positioned. He noted, “We believe the large majority of DIYers need professional help in part selection, repair advice and frequently cannot wait for a part, especially failure items.”

Amazon could gain traction with DIY customers who know exactly what part is needed and were willing to wait two or more days for delivery. “We think this is a minority of the DIY base,” Rifkin pointed out.