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Using Technology and Industry Cooperation To Reach the Next Generation What Millennials' Online Buying Habits Mean to the Aftermarket Automotive Aftermarket Suppliers Association September 2015 Delivered by UPS

What Millennials' Online Buying Habits Mean to the Aftermarket · What Millennials' Online Buying Habits Mean to the Aftermarket ... • Millennials (Gen Y) ... younger generation

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Using Technology and Industry Cooperation To Reach the Next Generation

What Millennials' Online Buying Habits Mean to the Aftermarket

Automotive Aftermarket Suppliers Association September 2015

Delivered by UPS

Using Technology and Industry Cooperation to Reach the Next Generation 2  

Using Technology and Industry Cooperation To Reach the Next Generation

What Millennials' Online Buying Habits Mean to the Aftermarket

At this unique time in U.S. history, six living generations make up the nation’s population. For years, Baby Boomers (b. 1943-1960) have been the nation’s largest generation and marketers have catered to their needs. In 2015, Millennials (b. 1980 – 2000, also known as Gen Y) now outnumber Baby Boomers, which also shifts the prime consumer target to a younger, more technology oriented shopper. In this Special Report, the Automotive Aftermarket Suppliers Association (AASA) dispels the many myths and misconceptions about Millennials as car owners and automotive aftermarket consumers and, in conjunction with logistics expert UPS, examines how the aftermarket can reach this “connected” generation.

Table of Contents

Introduction: Millennials Are the Next Big Consumers ................................................. 3 The Generational Landscape of America

Dispelling Myths about Millennials as Car Owners ...................................................... 3 Millennials’ Love Affairs with the Car

The Buying Habits of Millennials .................................................................................. 5 Technology Is Vital

Optimizing Your Reach to Millennials ........................................................................... 6 Focus on e-Communications

Conclusion: Millennials and ‘The Connected Aftermarket’ ........................................... 7 The Power of Connectivity

About the AASA Special Report: Using Technology and Industry Cooperation to Reach The Next Generation

• EDITOR: Bill Hanvey, senior vice president of programs and member services, AASA • WRITER: Margaret Beck, senior director of marketing and communications, AASA

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Source: Deloitte’s Global Automotive Consumer Study

INTRODUCTION: Millennials Are the Next Big Consumers

At this unique time in U.S. history, six living generations make up the nation’s population:

• Greatest Generation (b. 1901 – 1924) • Silent Generation (b. 1924 – 1942) • Baby Boomers (b. 1943 – 1960) • Gen X (b. 1961 – 1981) • Millennials (Gen Y) (b. 1980 – 2000) • Gen Z (b. 2001 – today)

In addition, the generational make-up of U.S. population is shifting. On June 25, 2015, the U.S. Census Bureau announced that Millennials (also known as Gen Y) now make up more than one quarter of the U.S. population (83.1 million), exceeding the 75.4 million Baby Boomers, and replacing them as the nation’s largest generation. Millennials are now the largest target audience for consumer products – and they have money to spend. According to the Special Report from the Automotive Aftermarket Suppliers Association (AASA), “Millennials as Consumers and Drivers,” now that the economy is improving, so are Millennials’ personal finances. With Baby Boomers rapidly retiring and living on fixed incomes, Millennials are outpacing them in buying power. The Millennial Generation holds great potential as long-term automotive aftermarket consumers – but the aftermarket will need new strategies to reach them and their wallets.

Dispelling the Myths about Millennials as Car Owners Popular culture and the media typically paint Millennials as unemployed and carefree, happy to live with their parents and either bum car rides or take the bus. While the average Millennial is far different from this picture, Millennials have been slower to develop a love affair with cars. Although Millennials have delayed obtaining their licenses, buying new cars and driving as much as previous generations, AASA believes they will be as or possibly even more car-centric as their elders.

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“Deloitte’s Global Automotive Consumer Study” reports the top reason Millennials haven’t purchased a car is affordability with operational / maintenance costs coming in second. However, the study reports that four in five Millennials say they plan to purchase or lease a car within the next five years. Millennials’ love affair with cars may be just beginning. Since they had to wait to purchase their first car, they may be inclined to keep it longer than previous generations according to AASA industry analysis. This creates an increase in a key driver of aftermarket growth: average age of vehicles. Due to the sheer size and improving economic status of the Millennial generation, they also may contribute to another key driver for aftermarket growth: miles driven. Miles driven have been stagnant over the past five years, probably due to the slow economic recovery. However, estimates from the U.S. Department of Transportation’s (USDOT) Federal Highway Administration (FHWA) show that U.S. miles driven topped an estimated 1.26 trillion miles in the first five months of 2015, passing the previous record – 1.23 trillion -- set in May 2007. The FHWA’s “Traffic Volume Trends” report, a monthly estimate of U.S. road travel, shows the nation’s driving has steadily increased for 15 consecutive months and that 275.1 billion miles were driven in May alone, the most ever in May of any year. Due to the reasons outlined above, AASA believes that Millennials have the real potential to drive more miles and hold onto their cars longer – making them prime customers for the aftermarket.

Source: Deloitte’s Global Automotive Consumer Study

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The Buying Habits of Millennials

Technology may be a tipping point for many Millennials when it comes to deciding to buy a car. The “iPhone generation” tends to be swayed by the latest and greatest electronics. More than 70 percent of younger Millennials (born 1990-2000) say that infotainment features are “must-haves” when shopping for their new car. As the car increasingly becomes consumers’ largest mobile electronic device, it has potential to attract this younger generation. Technology such as hybrid vehicles, autonomous vehicles and telematics (infotainment and diagnostics) could all play a potential role in the “automotive renaissance” among the Millennial generation.

Recent analysis from Frost & Sullivan, “Future of Parts and Service Retailing in the Automotive Aftermarket” (https://www.frost.com/ne4b), notes that Millennials’ shopping and buying habits will have an impact on the aftermarket. Trends such as augmented reality, gamification and telematics will redefine user experience and open new opportunities for remote support and logistics, according to the report. Since 53 percent of Millennial car owners are women, selling strategies and store formats to drive sales and loyalty among female customers will increase. Analytics enabled with big data will fuel an e-retailing boom in the aftermarket, according to Frost & Sullivan. Clearly, the generation in the crosshairs of this boom is the one with the most mobile devices: Millennials.

Source: Deloitte’s Global Automotive Consumer Study

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Optimizing Your Reach to Millennials The Frost & Sullivan “Future of Parts and Service Retailing” report notes that, although online stores have brought various benefits to the consumer, the elusive component for online shopping has been the “touch and feel” experience of the product. This is especially true in the aftermarket where brick and mortar parts stores are still preferred by most customers, especially if it is a trusted store, even among “always connected” Millennials. The answer for the aftermarket may be the “brick and click model” – where physical and web stores coexist. Integrating smartphones, e-retail stores and parts providers could be the step forward to one-on-one and customized retailing, the Frost & Sullivan report notes. The “brick and click” model could be the bridge between the “always connected” Millennial Generation and the aftermarket, where e-retailing is just beginning to pick up speed. But aftermarket suppliers and channel partners must pay close attention to the “click” portion of “brick and click.” Serving Millennials means doing more than just delivering a good product – this generation expects an excellent online experience from beginning to end. Building their loyalty takes more than an online store that's easy to navigate. Suppliers and distributors must focus on providing detailed online information, including clear product descriptions with images, detailed product information and comprehensive installation instructions and videos. Suppliers should support independent repair facilities through training and jointly managed apps to make it easy for consumers to find a qualified shop to do the work, and help shops communicate important service reminders to tech-savvy Millennials. Optimizing a website to provide detailed information is vital for Millennial consumers – shipping and returns information should be clear, as well as visibility into package location while in transit. UPS works with aftermarket suppliers and their channel partners to create efficient processes to enhance Millennials’ e-commerce experience when shopping for aftermarket products. UPS Developer Kit Programmers can incorporate UPS functionality into a website to make internal processes faster and give online shoppers the information they need to make decisions. UPS Application Programming Interfaces (APIs) can help increase efficiency with services such as address validation, package tracking, locator services for drop-off or pick-up and shipping service cost calculators to allow customers to pick the service best for their budget and needs.

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The UPS Ready® Program offers aftermarket suppliers access to UPS's shipping and visibility services with an easy to use out-of-the-box integration experience, assuring streamlined business operations and fast integration of new services. Services include:

• Shipping/Order Management • Marketplace/e-Commerce • Accounting & Financial Management • Enterprise Resource Planning • Transportation/Warehouse Management M • Integration Software & Services

With value-added services such as UPS My Choice and UPS Access Points, online customers can customize their home delivery options, including delivery times and locations seamlessly around their own busy schedules. As with any business, some parts and components will inevitably need to be returned. UPS® Returns offers flexibility in return shipments through options including labels in the original shipment, through the mail, via e-mail or self-service printing from the Web.

CONCLUSION: Millennials and ‘The Connected Aftermarket’ The growth of the Millennial Generation and its reliance on mobile devices is just one example of how real-time connectivity using a hand-held device is likely to disrupt the aftermarket. Motorists are looking for repair shops using their mobile devices – and searching online for reviews of shops and products. Shops are sending text and e-mail reminders to customers about needed service, and a growing number of apps provide motorists with shop locations and service reviews. A tidal wave of change is likely to break soon in the aftermarket, and studies seem to indicate that our industry is lagging behind the adoption by consumers and businesses seen in other service categories. Aftermarket suppliers are challenged to stay on top of this change and reach the largest market for its products: Millennials. Understanding the new “Connected Aftermarket” will be key to the development of your business plans for the coming years. AASA is committed to providing the thought leadership and, in conjunction with partners such as UPS, to presenting solutions to ensure your products are a part of the conversation in the “Connected Aftermarket.” AASA (www.aftermarketsuppliers.org) exclusively serves manufacturers of aftermarket components, tools and equipment, and related products which support 710,000 employees in the United States. “AASA, The Voice for the Automotive Aftermarket Suppliers