The macro environment for growth in the DIY aftermarket auto parts channel has been very favorable so far in 2016 (through June). There are a number of macro-economic trends that we closely monitor to better understand why our channel is performing the way it is. The two main areas of focus are miles driven, which is heavily influenced by gasoline prices, and weather patterns. Year to date, miles driven and gasoline prices have been positive influencers, while the lack of weather extremes hasn’t helped generate growth.
May 2016 set a new single-month record high for miles driven, and on a 12-month rolling basis it is trending at +3.4%. Gasoline prices for the first 26 weeks of the year were, on average, $0.39 per gallon cheaper than the same period in 2015. If we take a step back and look at the bigger picture for miles driven, we are starting to see a deceleration of the growth trend. And if we change the lens to look at miles driven on a per capita basis, we see that as individuals, we are driving no more than we were 20 years ago.
Extreme cold, rain, snow, and even heat can really help the industry to move product. The first six months of year, as an aggregate, ranked #3 out of 122 years for warmth. On the precipitation front, so far, it has been an average year with no real extremes. This lack of extreme cold and rain hasn’t benefited the industry.
For the first six months of the year, dollar volume in our channel only grew 1.5%. There are a few factors that kept that number from being higher. First, we are lapping two prior years of 4% growth. Second, we’ve noticed that the average selling price in over half of the categories we track actually declined, which drove the overall average price of all tracked categories down 0.2%. A change in the mix of what is selling has influenced this trend. The battery category, ranked #1 in dollar volume, saw the “good” grade of batteries gain unit share at the expense of “better” and “best”. In the full synthetic and high mileage motor oil segments, all top brands saw a decline in the price per quart, while private label volume increased. A similar story emerged in the wiper category where “standard” blades grew share at the expense of “premium” blades. Those three categories alone have a big influence on overall channel performance; in aggregate, they make up over 43% of total tracked volume in our channel. All of this led to unit volume growth of 1.8%, marking the first time in the history of our sales tracking service that we’ve seen unit growth outpace dollar growth.
Our analytics and modeling team produced a forecast late last year that said our channel would grow 2.7% in 2016. We are trending behind that forecast. How will the second half of the year shape up? Has our industry shifted promotions earlier in the year leading to soft performance? A big winter storm in Q4 could dramatically influence the overall results as well. Stay tuned.