Every year, the Specialty Equipment Market Association (SEMA) releases an analysis outlining trends happening in the US automotive aftermarket speciality equipment market. The report contains many good insights based on industry data sources, consumer surveys, government statistics, and more, representing the prior calendar year (ie. 2020 market report contains 2019 findings and 2020+ forecasts).
Last year, I recorded a podcast sharing my top 10 learnings from the 2019 SEMA Market Report. Recently, SEMA released their 2020 report and I thought it would be a good exercise to review and compare with 2019’s report to see if any major shifts or changes are happening.
Below are the top 10 takeaways I took from the 2020 SEMA Market Report. As always, you can download this, and many other free reports, in full, by visiting sema.org/research.
#1 – 4% Growth in 2019
As previously forecasted, the specially equipment market grew by about 4% in 2019, bringing total retail sales to $46.2 billion. However, looking forward, SEMA expects a sharp decline in 2020, with a decrease of 12%, which they predict will take four years to recover from. This is due entirely to the COVID-19 pandemic and its economic effects.
#2 – A Condensed Recession
Economists have long predicted a recession to occur in 2019 or 2020. It looks like 2020 is the year. However, as I have speculated, and the SEMA Market Research division seems to concur, COVID-19 may actually decrease the overall recession timeline, which could help minimize any losses seen in the overall economy. This is good because rather than a longer, spread out, 12-month recession (like 2008-09), it could be shortened to a few months🤞.
#3 – Purchases At Physical Locations Increased
To my surprise, the percentage of purchases made at physical locations actually increased in 2019. I expected that online sales would increase as the world continues to digitally transform. However, according to the market report, physical retail sales actually increased by 1 point. This is primarily due to increases in auto parts chain (ex. AutoZone, etc.) and new vehicle dealership physical locations. Online marketplaces like eBay decreased by 1 point, while most other channels remained flat.
#4 – The Pickup Truck Market Is Still Strong
The pickup truck market continues to represent the largest opportunity in the special equipment industry. This segment continued to grow over last year, taking up an additional 4% share, stealing from the small car, mid-size car, upscale car, and sports car segments.
#5 – 2020 Shrinkage In All Categories
While in 2019 the SEMA Market Report forecasted that every product category would experience growth, the inverse is true for 2020. Every product category is forecasted to decrease in 2020, most likely due to the effects of COVID-19. One thing worth noting is that the freshest piece of data in this report is from May 2020. As we’ve experienced from the COVID-19 debacle, things can change very quickly. It is very possible that this forecast could change as well.
#6 – Websites Still Win
As a digital marketing guy, I can appreciate data like this. The top three places that accessorizing consumers look for information about specialty equipment are: (1) search engines (44%), (2) manufacturer website (40%), and (3) word-of-mouth from family and friends (37%). This has changed slightly over 2019 research. Previously, the manufacturer website was in the #3 position, with 37% of accessorizers using this channel to search for information about parts. This points to the increasing importance of manufacturers having resourceful websites with a solid search engine strategy in place.
#7 – DIY Is Growing
This one I found surprising. The DIY (do-it-yourself installation) segment of accessorizers appears to be growing. This is in contrast to my own personal theory, which is that the DIFM (do-it-for-me installation) segment is likely to be higher-growth because of younger consumers being less likely to own a toolbox, vehicles in general becoming more technologically advanced, etc. However, SEMA market research shows that in 2019, do-it-yourself installations increased for every product category, with the exception of safety, exterior utility, and tire/wheel product categories.
#8 – Accessorizers Own Trucks, Except Younger People
Another data point worth noting is that while the pickup truck segment represents the largest share of accessorizers (23%), there is one exception: younger people (ages 16-29). For young accessorizers, the top vehicle segment is the mid-range car (23%) and second is the pickup truck (20%). This is flip-flopped from every other age group. In fact, the older the demographic, the more likely they are to own a pickup. Does this mean we will see a trend back to cars in the future? 49% of younger people (ages 16-29) own a car, whereas this is only 31% of accessorizers ages 50-59.
#9 – Accessorizers Still Own Toys
This was a trend I previously noted, but it is worth reiterating. Automotive accessorizers are almost 2X as likely to own a recreational “toy” (ie. ATV, RV, boat, motorcycle, etc.). This represents many opportunities in terms of cross-selling and, as we’ve seen from major M&A activity like the Polaris purchase of Transamerican, further integration between the two markets may be coming.
#10 – Most Businesses Don’t Expect Growth in 2020
One unique analysis SEMA included in this report, as opposed to previous editions, was information regarding COVID-19. According to surveys taken by over 1,800 professionals in late May 2020, it appears that the majority of industry peers do not expect to see sales at the same as or greater levels than 2019. In fact, most (51-54%, depending on the position in the vertical) expect some type of decline over 2019. The reality is, especially if you don’t have some type of digital component to your business, 2020 is going to be a tough year. My genuine hope is that this does not come to fruition and that those in the industry are able to find ways to pivot, transform, and grow – that not only helps them survive the COVID-19 pandemic, but thrive beyond it.
If you haven’t already, I highly recommend reading the entire 2020 SEMA Market Report. Again, this is available for free at sema.org/research.