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VOL. 132 | NO. 19 | Thursday, January 26, 2017

Report: Amazon Wants to Take On AutoZone, Other Parts Retailers

By Andy Meek

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AutoZone earlier this week got a taste of what just a hint – however thinly sourced – of fresh competition from the retail behemoth Amazon can do to investor nerves.

The Memphis-based auto parts company saw its shares shed a little more than 5 percent of their value in a single day the same day other parts retailers were similarly punished by investors. It was apparently on the strength of one news report – a New York Post take on Amazon making a play to move deeper into the auto parts segment.

“Amazon boss Jeff Bezos, whose online behemoth is likely to become the country’s No. 1 apparel retailer this year, is setting his sights on what could be his next sector to dominate: the $50 billion do-it-yourself after-market auto parts business,” the Post reported.

It went on to note that in recent months, the Seattle-based retailer has inked contracts with large auto parts makers which could spell trouble for retailers like AutoZone and others.

To be sure, interest in this sector is both old and new for Amazon.

For one thing, Amazon has already begun selling name-brand parts. It also has launched a kind of informational hub for consumers that can be accessed from the main Amazon site – it’s called Amazon Vehicles.

As far as what’s new, the Post quotes a Wall Street analyst prediction that Amazon could see its auto parts business expand more than 50 percent this year.

By way of a comment from AutoZone, which releases its second quarter earnings Feb. 28, a spokesman directed attention to a Morgan Stanley analyst report published Jan. 24. Its quick take on the matter: “We have received many investor questions on the NY Post article discussing Amazon’s increasing role in the automotive aftermarket. Our thoughts specifically related to the auto parts retailers is that Amazon poses a long-term threat but does not have the capabilities in place today to disintermediate the segment.”

The Morgan Stanley note goes on to argue that Amazon is no threat to parts retailers like AutoZone today but that it very likely could be tomorrow – or, rather, over the long term.

Even now, Amazon currently sells product at lower prices, according to Morgan Stanley, “a challenge the industry must deal with over time.” Among the reasons it’s no threat today is the way retailers like AutoZone “customize inventory towards local market needs, source this inventory in markets close to consumers and embed the last mile of delivery in their business model/cost structure.”

Service is also part of the experience at AutoZone, where customers can ask representatives questions directly. Other benefits include the ability to obtain parts immediately in many cases, and getting employees’ help with routine tasks like checking a battery.

Such realities may, at least for now, insulate such retailers from a digital disruption. Nevertheless, AutoZone CEO Bill Rhodes has been stressing on multiple earnings calls with analysts the company’s interest in bolstering its digital and web offerings.

In related news, AutoZone is planning a massive growth push for the spring. The company has said it plans to hire more than 12,000 new full and part-time employees nationwide through April.

The company is looking for people to fill jobs that include sales representatives, delivery drivers, parts sales manager, commercial sales manager, store managers and hub specialists.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 76 145 2,480
MORTGAGES 65 148 3,042
FORECLOSURE NOTICES 3 11 488
BUILDING PERMITS 213 310 5,313
BANKRUPTCIES 43 87 1,866
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UTILITY CONNECTIONS 23 52 1,064
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