A divided economy is forcing aftermarket suppliers to think carefully about where their products fit, and for whom.
Speaking at the MEMA Aftermarket Suppliers Global Summit in Miami in February, Ben Brucato, vice president of membership and engagement with MEMA Aftermarket Suppliers, described what he called a K-shaped economy that is reshaping how different customers buy parts and services.
He told attendees that the industry is dealing with “higher income earners actually earning more, low income earners earning less, which is a kind of a very interesting phenomenon,” even as inflation and debt loads climb.
Brucato said this split is showing up in the way consumers approach vehicle repair and maintenance.
He noted that the stock market and real estate are healthy, while inflation is rising. However, “we do see lower income earners not earning as much as price increases.”
That, he suggested, has a direct impact on the parts business.
“Challenges with private label and with competition and product erosion,” Brucato said, adding that this could mean a revision of what ‘good, better best’ means going forward.
“Is good going to do better because of the low-income earners having to tighten their belt? But then is the best going to do better because high-income earners are spending more money,” he wondered.
For suppliers, Brucato framed a market where value products and premium offerings could both see demand grow, for different reasons, while middle options and margins feel pressure.
With mortgage rates still elevated, costs going up all around consumers, debt is growing.
“Overall, that is not a great picture, and that contributes to this K-shaped economy,” Brucato explained.
Think of auto debt. People are more worried about making payments on their car first and foremost.
“So this can very much affect maintenance and repair and how they do that,” Brucato said. “If people can’t make their car payment, are they really going to get their car fixed?
And this may change the types of products consumers buy and how suppliers position their brands and portfolios.
“How is that going to affect your product? How is that going to affect your brand, your marketing and different strategies there?” Brucato asked.
He stressed that fundamental drivers such as aging vehicles and rising miles travelled still support long-term growth. But he also listed consumer affordability as a risk to keep an eye on.
“What impact does the economy have this year on low-income earners, and how will that affect their buying decision?” he said. “That’s something to look at.”
