AutoZone (NYSE: AZO) is the undisputed leader in the auto parts retail industry. With over 6,000 stores across the United States, Mexico, and Brazil, AutoZone has established an unrivaled scale and brand awareness among do-it-yourself (DIY) customers looking for auto parts and accessories. AutoZone‘s rise to the top of the industry has been driven by its extensive product selection, competitive prices, and helpful customer service.
However, AutoZone is far from the only player in this massive and highly competitive market. A number of sizable competitors are battling with AutoZone for market share, each with its own unique strengths and strategies. Some are other large specialty auto parts retailers, while others include general retailers, online-only ecommerce companies, and wholesale parts distributors. For investors monitoring the industry, auto parts shoppers comparing their options, or entrepreneurs and executives studying the competitive landscape, it‘s crucial to understand the key rivals putting pressure on AutoZone.
Let‘s examine the top competitors and break down how they stack up to the industry leader:
1. Advance Auto Parts
Advance Auto Parts (NYSE: AAP) is AutoZone‘s most formidable and direct competitor as the second largest auto parts retailer in the United States. Founded in 1932, Advance Auto Parts now operates nearly 5,000 stores under its flagship Advance Auto Parts brand as well as the Carquest and Worldpac brands aimed at professional customers.
In terms of product selection and retail footprint, Advance Auto Parts is very similar to AutoZone in focusing on an extensive selection of replacement parts, motor oil and fluids, batteries, accessories, and more. Advance has historically had a somewhat larger presence in northern states compared to AutoZone‘s stronghold in the South and Midwest. One key difference is Advance‘s larger focus on professional repair shops in addition to DIY consumers, with professional shops making up 60% of Advance‘s sales compared to roughly 20-25% for AutoZone, according to JPMorgan estimates.
Advance Auto Parts‘ revenue reached $11 billion in 2021, up 8.8% from 2020, as the company has continued to deliver steady growth. Advance sees opportunities to keep expanding its store footprint, gain market share in the commercial business, and grow its DieHard brand acquired from Sears. In fact, Advance plans to add 100-150 new stores per year while also expanding in certain priority international markets like Mexico. Advance‘s improving results and ambitious growth plans make it likely to remain AutoZone‘s top rival in the years ahead.
2. O‘Reilly Auto Parts
O‘Reilly Automotive (NASDAQ: ORLY) is another major force in the industry, operating over 5,700 O‘Reilly Auto Parts stores across 47 states. From its founding in 1957, O‘Reilly has grown through a combination of organic store openings and key acquisitions like its 2008 purchase of CSK Auto.
Like AutoZone and Advance, O‘Reilly offers a wide selection of aftermarket parts for nearly all vehicle makes and models. O‘Reilly has a somewhat larger focus on the professional service provider side of the business compared to AutoZone, generating about 44% of its sales from mechanics and repair shops. O‘Reilly is also known for its strong distribution network, with over 350 sales locations allowing for quick same-day or next-day delivery of in-demand parts to its professional customers.
O‘Reilly has consistently grown its top and bottom lines, with revenue increasing 15% to $13.3 billion in 2021 and net income up 27%. The company sees a long runway for growth ahead as the average age of vehicles increases, driving demand for replacement parts. O‘Reilly‘s proven playbook of steady expansion, strategic acquisitions, and margin-enhancing private label parts give it a good chance of continuing to thrive.
3. NAPA Auto Parts
NAPA (National Automotive Parts Association) is another leading auto parts provider with a large North American presence, operating nearly 6,000 stores in the United States as well as Canada. NAPA was founded in 1925 and today operates as a subsidiary of Genuine Parts Company (NYSE: GPC).
While NAPA is similar to AutoZone in offering an extensive selection of auto parts and accessories, the company has an especially strong reputation among professional mechanics and auto repair shops. NAPA has over 17,000 NAPA AutoCare Center locations that perform over 21 million vehicle repairs annually. This extensive affiliated service center network helps drive NAPA‘s parts sales and brand awareness with both professionals and DIYers.
NAPA also differs from AutoZone in its business model of distributing auto parts primarily through independent retailers, in addition to some company-owned stores. In fact, NAPA supports over 6,000 independently-owned NAPA stores and 15,000 independently-owned NAPA AutoCare repair facilities. Genuine Parts Company reported revenue of $18.9 billion in 2021 across its automotive and industrial parts businesses, with the automotive segment (which includes NAPA) accounting for 66% of total sales.
4. Pep Boys
Pep Boys is another major auto parts and service retailer, with over 1,000 locations across the United States and Puerto Rico. Founded in 1921, Pep Boys has long been a leading retailer of tires, parts, and accessories. The company was acquired by Icahn Enterprises (Nasdaq: IEP) in 2016 for $1 billion.
Although Pep Boys is smaller than AutoZone in terms of store count and revenue, it still has a sizable retail presence, especially in major metropolitan areas. Pep Boys is known for offering a wide range of professional auto services including tire installation, oil changes, brake service, and more. This is a key differentiator from AutoZone‘s primary focus on retail parts sales. Pep Boys‘ service business drives over half of its total revenue.
Pep Boys has also been expanding its ecommerce business, aiming to provide a seamless omnichannel experience as more consumers shift parts purchases online. While financial results are not disclosed separately by its parent company, Pep Boys likely generates annual revenue in the ballpark of $2-3 billion based on past disclosures prior to its acquisition. The company‘s extensive service offerings and strong brand make it a significant player.
5. Amazon and Online Retailers
Arguably the most significant threat to AutoZone and the traditional auto parts retail industry is the rise of ecommerce, led by Amazon (NASDAQ: AMZN). While online sales still make up a relatively small percentage of the total auto parts market at less than 10%, Amazon and other online-only retailers have been steadily making inroads and chipping away share from physical retailers.
Amazon now offers a wide selection of over 1 million parts and accessories from various sellers on its marketplace. The ecommerce giant has identified the automotive category as a strategic growth priority, striking first-party sales deals with some parts manufacturers, expanding its same-day Prime delivery service for parts in select cities, and adding features like its "Part Finder" tool that allows shoppers to shop by vehicle make and model. Industry analysts estimate Amazon currently generates at least $5-6 billion in annual auto parts sales.
AutoZone has responded to the online threat by heavily investing in its own ecommerce capabilities in recent years. AutoZone.com now offers over 1 million SKUs and the company has developed a robust "Buy Online, Pick Up In-Store" offering to leverage its network of retail locations as a key advantage over online-only competitors. AutoZone reported domestic ecommerce sales grew 28.8% in 2021, significantly outpacing growth in its domestic brick-and-mortar comparable store sales. AutoZone is also expanding its commercial business, aiming to increase its share of sales to professional service providers.
Looking ahead, there‘s no doubt that ecommerce will continue to steadily grow as a channel for auto parts purchases. However, AutoZone‘s proactive investments in digital capabilities, strong brand loyalty among DIYers, and extensive physical footprint give it a good shot at maintaining its industry leadership by effectively serving customers across both physical and digital channels. AutoZone‘s blended online/offline model should allow it to benefit from the best of both worlds in the evolving auto parts retail landscape.
Other Notable Competitors
Beyond these large national auto parts retailers and online marketplaces, AutoZone also competes with a fragmented mix of competitors across the auto parts ecosystem:
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General retailers like Walmart (NYSE: WMT) and Target (NYSE: TGT) have been expanding their auto parts selections in-store and online to capture a small piece of this large market. While they lack the specialized selection and service of dedicated auto parts stores, their convenient locations and low prices make them a potential threat in certain categories.
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Specialized parts retailers focused on certain vehicle makes or types also compete for a slice of the market. For example, Transamerican Auto Parts (acquired by Polaris in 2016 for $665 million) is a leader in selling parts and accessories for trucks and off-road vehicles to passionate enthusiast customers.
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Auto parts wholesale distributors like Parts Authority, Delphi Technologies, and LKQ Corporation supply a large network of independent local auto parts retailers and service centers with inventory.
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Auto dealerships and national service center chains like Jiffy Lube, Midas, and Valvoline are major commercial buyers of wholesale parts and compete with retailers like AutoZone for consumer service revenues.
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Independent local auto parts stores unaffiliated with the large national chains also continue to serve many towns across America. Although they lack the scale advantages of the big retailers, these independent stores often benefit from strong community roots and customer relationships.
The presence of so many different companies fighting for a piece of the auto parts and accessories pie reflects the market‘s massive size, steady growth, and importance to the broader economy and transport ecosystem. For AutoZone to maintain its grip on the #1 market share position, it will need to fend off attacks from competitors of all sizes and types.
Competitive Outlook
As you can see, the auto parts retail industry is characterized by fierce and fragmented competition that keeps the major players on their toes. The battle between the big players like AutoZone, Advance, O‘Reilly, and NAPA will likely continue to grab most of the headlines. However, the industry will also be shaped by other important competitive dynamics such as:
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Growth of Auto Parts Ecommerce: Online sales of auto parts are forecast to grow at an 11%+ CAGR through 2030 according to Grand View Research, outpacing growth in the overall aftermarket parts market. Retailers‘ relative ecommerce chops will be an increasingly crucial competitive differentiator.
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Expansion of Private Label Product Lines: Many of the large retailers have been investing heavily in expanding their higher-margin private label parts assortments. For example, O‘Reilly now generates over 45% of its sales from proprietary brands and Advance Auto Parts has been aggressively expanding its DieHard brand. The push into private label puts the retailers into more direct competition with the large parts manufacturers.
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Increasing Vehicle Complexity: As vehicles become more technologically advanced, electrified, and computerized, parts retailers will need to ensure they are offering the right high-tech parts assortment while also providing the requisite digital diagnostic and repair capabilities to help customers maintain these complex vehicles. Partnerships with OEMs, diagnostic providers, and repair shops will be key.
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Shifting Consumer Preferences: Industry surveys show that younger consumers are more open to purchasing auto parts online or from general retailers compared to their older counterparts. Retailers will need to keep adapting to changing consumer preferences in areas like ecommerce, subscription services, loyalty programs, and omnichannel support.
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Race for Talent: As with many industries, auto parts retailers‘ ability to attract and retain high-quality employees is a key competitive factor, especially on the commercial side of the business where deep technical expertise is required. Expect retailers to keep investing heavily in employee training, retention and culture.
Ultimately, the auto parts retailers that can combine extensive product selection, omnichannel convenience, strong supplier relationships, technical expertise, and operational excellence will have the pole position in the race for market share. While AutoZone has a lot going for it, the company will need to keep its foot on the gas to maintain its lead in this dynamic industry.
