PARTS iD: The Long Tail In A Technical Niche – Seeking Alpha

March 25, 2022 by No Comments

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Introduction

PARTS iD (NYSE:ID) released its annual report for 2021 this week. Although sales went up almost 12% from the previous year, the income from operations was negative due mainly to increased costs in advertisement and supply chain disruptions.

On the other hand, the total addressable market (TAM) is enormous for a small company like PARTS iD. This article will analyze if it is in a good position for attacking it and scaling its operations.

Total Addressable Market

The annual report points out that according to Hedges & Company, the entire automotive aftermarket and auto care industry will be $439 billion in 2022. PARTS iD has been historically focused on specialty automotive equipment, with an estimated market of $48 billion. But it is targeting to grow through automotive repairs, international expansion, and the addition of new verticals. In any case, with Revenue during 2021 of $448.7M, there is still a long way to grow to $48 billion (100 times).

TAM PARTS iD (PARTS iD 10-K FY2021)

The special-equipment industry is not expected to grow spectacularly. Based on the SEMA Future Trends January 2022 Report, around 3% annually till 2030.

Specialty-Equipment Industry Market Size Forecast (PARTS iD 10-K FY2021)

But what is essential for PARTS iD is also the penetration of eCommerce into this segment. According to Hedges & Company, the annual growth rate for parts eCommerce is projected just under 9% through 2025. They expect it to reach $38 billion in 2022 in the US.

Key Factors

Jeff Bezos has often mentioned the three critical factors in online retail that won’t change in the future. They are offering a vast selection, fast delivery, and price. But in the case of this particular segment, we also have to consider the need for technical assistance. Whether in identifying which specific part to buy or which other complementary features require the installation, the lack of technical support can prevent the sale.

On the other hand, the famous saying in commercial Real Estate investments is that the three more critical factors are location, location, and location. We can translate this to organic traffic, organic traffic, and organic traffic in eCommerce. If nobody visits your store, then no matter how wonderful it is, you won’t get any sales. Paid visits are another option, but they cost money and wouldn’t scale.

Below we can see the organic traffic of the different PARTS iD sites during last month.

Comparison of Last Month Organic Traffic – PARTS iD Sites (Created by the author with Ahrefs info)

Although the organic traffic of the other seven verticals is growing sharper, carid.com is currently the leading revenue generator with a big difference. So I am going to focus this article on this segment.

Competitors

Analyzing the car accessories segment, we can find three different kinds of online competitors: generalist eCommerce sites, other specific online retailers, and brick-and-mortar competitors with online stores.

Generalist eCommerce sites

Like Amazon (AMZN) or eBay (EBAY), wide-purpose sites sell some of the same products PARTS iD offers. Their catalog is enormous, and you might find many specific parts. But these sites are not built specifically for the auto parts or similar complex segments (boats, recreational vehicles, etc.). So they lack the …….

Source: https://seekingalpha.com/article/4497566-parts-id-the-long-tail-in-a-technical-niche

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