The aftermarket economy has been, for many businesses that do not have their core business in this matter, a secondary income option. Yet the very real possibility of a global recession is pushing more and more companies to honestly ponder if the aftermarket economy could be a safe haven for their brands and products.
A more than reasonable idea, that today, we want to explore. Is it true that the aftermarket economy suffers less during a recession? Could it be true that the aftermarket sectors sometimes even grow during a recession? Should your company or brand consider opening a new line of business in the aftermarket?
Let's find out!
Understanding the aftermarket economy
What is the aftermarket economy?
First things first, let's start by defining what is aftermarket. Technically speaking, the term "aftermarket" refers to a secondary market for the goods and services that are either complementary to main products or services or related to its primary market goods, like spare parts or modifications.
Also, it is important to bear in mind that, for most industries, the primary market consists of durable goods, whereas the aftermarket consists of consumable or non-durable products or services. Which makes the aftermarket a market of – most of the time – recurring purchases. Keep this in mind, for we will return to this idea later.
In short, when we talk about the aftermarket economy, we talk about the products and services that are offered as spare parts or complementary goods to primary products and services sold either by the same company or by other brands.
Can all companies offer aftermarket products and services?
Yes and no. Technically, most of the companies could – in theory – offer some kind of aftermarket product or service, linked to their primary product or service. In practice, sometimes this is just not profitable or viable.
Besides that, aftermarket native companies are ultra-specialized to cater to the specific needs of the aftermarket economy. Which indeed are different than the ones of the primary industries.
For example, in the automotive aftermarket, many of the brands that deal with aftermarket products or services, are ultra-specific or niche brands that offer technical solutions to upgrade a vehicle for very specific functions that are not part of the ‘out-of the-box’ or ‘stock’ capabilities of that particular vehicle.
And it makes all the sense in the world, taking into consideration that buyers are precisely buying in the aftermarket for specific niche solutions.
So, jumping into the aftermarket just for the ‘fun of it’ might be a terrible mistake for a brand that is not willing to fully commit to competing in this ultra-specialized economy.
Is the aftermarket economy more resilient to a recession?
Yes. Why? Well for multiple reasons, the main one is that re-usability and refurbishing are – by definition – normally cheaper than new production. And also, the need for repurposing becomes far more acute during times of recession.
This makes the aftermarket economy the kind of economy that is better adapted to recession times, and some will even argue that is an economy that thrives during a recession.
To add to this, we have to keep in mind a few other factors:
Aftermarket products are normally recurring purchases.
Aftermarket economy is more flexible in its pricing than the primary industry.
Aftermarket products can bypass, sometimes, the resource limitation of their primary counterparts.
Aftermarket products can be made by using non-functional primary products. Meaning that, in some cases, even if the aftermarket loses access to source materials and resources, it can do other products derived from parts of the primary products.
Now, this doesn't account for the obvious reason that, companies and individuals when pressured by the budget, will most of the time prefer a functional cheaper solution than a new product. Which is the biggest and most clear argument of why, during recessions, the aftermarket seems to fare better than the primary industries or markets.
That being said, not all are peaches and roses with the aftermarket economy. In fact, the aftermarket is indeed diminishing alongside the rest of the industries and the general economy.
To put this in perspective, let's take a look at some numbers regarding perhaps one of the most powerful and symbolic aftermarkets, the automotive aftermarket in the U.S.
According to the Aftermarket iReport from Lang Marketing, the current automotive aftermarket in the U.S. is less resilient than ever.
The report claims that traditionally the automotive aftermarket had as their core business products considered non-discretionary, meaning products that were essential for the correct vehicle operation. But in the last 20 years to the date, this has changed.
The core business of the current automotive aftermarket in the U.S. is not based on spare parts, as much as it is based on customization options to add extra functionality to the vehicles. Something that, during a crisis, is not the first order of the day.
In any case, even when the aftermarket economy could have shifted towards a more customized/extra capabilities approach, the reality is that it remains the main source for spare parts and for any niche-specific improvement needed for the re-purposing of any primary good.
So, it remains far more resilient to an economic crisis than the regular primary goods industry.
What should offer an aftermarket capable e-commerce platform?
Now that we have seen the logic that makes the aftermarket economy a safe bet during recession times, it is only logical to ask, what quality should we search for in an aftermarket e-commerce platform?
And this is a tricky question because well, not all industries are the same and each has its own requirements for an ideal e-commerce platform.
But all in all, we can mention a few capabilities that a competent e-commerce platform should be able to offer to any aftermarket business. Let’s take a look at three of them!
Aftermarket e-commerce requires versatility and growth capacity
Any good e-commerce platform should be able to adapt and change to better fit the business it is servicing. If the e-commerce platform you are currently using – or considering using – is cumbersome to modify, or requires a lot of resources and technical expertise to be customized to your company or brand needs, then perhaps you need to look somewhere else.
Especially because aftermarket-oriented e-commerce is normally also B2B e-commerce. And both the B2B and the aftermarket sectors require and benefit a lot from customized checkout processes and from the capacity to deal with each B2B buyer in a different and personalized way.
Contrary to B2C e-commerce – which by its nature can be more streamlined – B2B e-commerce really shines when your brand is capable of handling all the potential customers and B2B buyers with their own quotes and variables are taken into consideration.
Aftermarket e-commerce is a recurring purchases-oriented e-commerce
One of the key differences of a well-done aftermarket e-commerce site, is that it understands that its clients and potential clients are there for a long-term relationship.
As we previously said, most of the aftermarket industry focuses on consumable or recurrent items. This means that, from an e-commerce perspective, your platform should have the capability to track the customer journey. In order to highlight the main points of your clients and increase their satisfaction and loyalty of them towards your brand.
Aftermarket e-commerce should be efficient
Finally, companies and B2B buyers that search for articles in the aftermarket economy, require extensive information. Keep in mind that most of the aftermarket components are meant to be used exclusively with a specific primary good.
So, a competent aftermarket e-commerce should be capable of providing any B2B buyer perusing its website, with all the relevant information regarding the particular spare part or product he is interested in.
Technical data, compatibility, versions, and all the relevant information to allow the customer to make an informed decision about your product, is a must to succeed in the aftermarket economy.
After all this information, do you think your company could benefit from delving into the aftermarket economy? Or if you are already in the sector, do you feel like your online platform matches the capabilities that we described?
If not, we encourage you to take another look at what you are doing, so you can change the course and use the next global recession as a growth opportunity!