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Changes Coming At U.S. Auto Parts

U.S. Auto Parts Network’s new CEO, Lev Peker, told analysts on the company’s March 7 quarterly report conference call that U.S. Auto Parts has struggled to revitalize its e-commerce business, as reflected by a continuous traffic decline since the fourth quarter of 2017. He said that, in just over two months since rejoining the company, the team has identified multiple opportunities.

“I believe the struggles from our e-commerce channel have largely been internally-driven issues, as opposed to structural business challenges,” Peker stated on the call. He said that revitalizing U.S. Auto Parts’ e-commerce channel and returning the company to profitable revenue growth will require a reallocation of resources and incremental investments in personnel, technology and new marketing strategies.

Peker explained that, to deliver the right parts, U.S. Auto Parts needs to enhance its back-end architecture, restructure its data and catalog, and deliver a best-in-class user experience on any channel the company sells through. Along those lines, U.S. Auto Parts has hired a new chief marketing officer, tasked with building up the marketing team.

“We have also started building a user experience and analytics team to support both marketing and [UX (user experience)],” he said. “Both of these teams are supported by our technology team, which is undergoing tremendous growth both in the U.S. and Manila. These expanded marketing, UX and technology teams are critical additions as we look to execute on our new growth strategy.”

FEWER WEBSITES … “Following my review of our operations, it was clear that part of our internal missteps were driven by a lack of focus, which resulted from spreading our resources too thin,” Peker said. “In order to focus the team and to deploy our assets most efficiently, we are in the process of reducing the number of websites we operate. This will allow for a more simplified development approach, more focused marketing and real attention to user experience. We plan to take a similar approach with our marketplace channel.”

“We still believe that we need to be present where consumers shop, but we need to provide users of our sites with the same, or better, experience than they would receive on the marketplaces. This is why we will be placing a significant effort on restructuring our data and catalog methodologies to enhance the discovery of products and make our catalog a stronger competitive advantage,” Peker explained. “On the marketplaces, we will continue to adhere to best practices, and we will continue targeting customers who prefer to shop in that channel.”

He emphasized that customers’ expectations are shaped, not just by U.S. Auto Parts’ direct competitors, but by all of their experiences on the web. “We have to ensure that we deliver the same or better. This includes site speed, discovery of products, ease of checkout and post-purchase experience, including setting the proper expectations for shipping times,” Peker told analysts on the call.

MERCHANDISING … He noted that the focus on fewer sites will allow U.S. Auto Parts to also focus on merchandising higher-gross-margin products. “The thinking that we have now is that one of our sites will be tailored to private-label products, where we will fill all the gaps that we have,” Peker said. “There are some part names where we don’t have any private label at all today. Brakes, starters and alternators are just some examples. We want to house all the part names.

“We also want to bring in private-label products that are hard to find. Some of the examples that were recently brought in are dash covers for trucks. Those are higher [average order value (AOV)] items that are a little bit harder to find, and they allow us to enjoy a competitive advantage.”

He added that, when it comes to branded products, the focus will be on performance and accessories, which are minimum advertised price (MAP) items that sell at higher margins.

From a drop-ship perspective, Peker said U.S. Auto Parts may carry fewer SKUs. “We still want to make sure that — for every specific vehicle, for every specific year/make/model — we are carrying a full assortment of parts, but we may reduce the choices that the customer has to make,” he explained. “Instead of carrying 20 brands, we may carry five or seven. We are going through that evaluation right now at a part-name level and at a vehicle level.”

This is, in part, based on the notion that U.S. Auto Parts has to show its users fewer choices so that it becomes easier for them to pick.

In terms of new marketing initiatives, the company will make investments in both organic and paid channels while also tapping into social media influencers and better brand marketing. According to Peker, these efforts also will require implementation of a new customer relationship management system as well as investments in retention marketing.

WILL TAKE TIME … “While I am very excited for the journey ahead, there is much work to be done. The implementation of our growth initiatives will take time, as we will have to take a step back before moving forward. However, we expect to begin realizing some of the benefits from our investments toward the end of this year,” Peker said.

U.S. Auto Parts did not issue any formal guidance for 2019, citing Peker’s short timeframe back with the company, but did express expectations for delivering revenue growth for the year as well as positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA).       — Marc Vincent

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