How to Start a Car Accessories Business
The number of auto parts stores in the United States exceeded 63,400 in 2019. This industry generates around $58 billion per year, but the competition can be fierce. If you're planning to start a car accessories business, make sure you have a clear understanding of the market. Research the different business models, narrow down your niche and build a robust client base.
Car accessory stores are a profitable business because the replacement of damaged or old auto parts is a must for any driver. Without these components, you cannot drive your car safely. Their quality, though, varies from one brand to another. There are cheap aftermarket auto parts, original equipment manufacturer parts and accessories, premium car accessories, custom auto parts and more.
The global car accessories market is forecasted to reach $522 billion by 2022 — that's a significant increase compared to 2016, when it was valued at $360.8 billion. Online sales are on the rise too, with an 8.9% compound annual growth rate. According to IBISWorld, American car accessory stores sold merchandise worth $5 billion over the internet in 2019. Popular companies like O'Reilly Automotive and AutoZone sell their products both in stores and online, and this allows them to reach a wider audience, engage their customers more effectively and provide a wider range of goods.
Take the time to research the market and industry trends and study your competitors to see how they promote themselves. Also, check the legal requirements for starting and running a car accessories business. Although this industry has low barriers to entry, you may still need certain licenses and permits to get your business off the ground. If you're planning to offer extra services such as car repairs, you may be subject to additional requirements.
In this market, you will compete with thousands of other car accessory stores, auto spare parts stores and auto repair shops. Therefore, you need to find a way to make your business stand out. Consider narrowing down your niche to better target your customers and gain a competitive edge. As your business grows, you can increase your offerings and provide your clients with more options.
Interior car accessories, for example, serve both aesthetic and functional purposes. These components enhance a vehicle's visual appeal while providing comfort and sound insulation. Several niches exist within this market, such as passenger car interior accessories and commercial vehicle interior accessories. Furthermore, you can specialize in one or more types of products, such as interior lighting, flooring, steering wheels, consoles or seat covers.
Decide whether you want to sell new or used car parts and accessories. You may also sell performance parts, maintenance parts and other specialty products. To further narrow down your niche, determine whether you'll offer original equipment manufacturer, original equipment or aftermarket auto parts, considering your budget and target audience:
- OEM: This term designates auto parts and accessories approved by the car's manufacturer and produced in its factories. The products are typically sold directly from the manufacturer to retailers and distributors. Ford, for example, uses Bosh fuel injectors for some of its cars.
- OE: Car parts and accessories that are fitted to a vehicle in the manufacturer's factory are labeled "OE." These are the original parts with which a car was built.
- Aftermarket: These parts and accessories are not produced by the original manufacturer. Their role is to replace damaged or worn-out OE parts, enhance a car's visual appeal or boost its performance.
When it comes to opening a car accessories store, you have two main options: start your business from scratch or buy a franchise. When you run your own business, you have more freedom and flexibility. You decide what to sell, how to market your products and when to expand your operations. The downside is that most startups have a high failure rate — about half of all new companies in the U.S. close their doors within five years due to financial problems, lack of focus, poor planning, bad marketing and more.
A franchise, on the other hand, is a proven business model and can boost your chances of success. If you choose this option, you may find it easier to secure financing to start and run your business. Additionally, you will receive training and ongoing support, so it's not necessary to have years of experience to open a franchise. Unfortunately, you'll have less freedom and limited possibilities for business growth.
Depending on your niche, you may choose from several franchise opportunities. Tint World, for instance, assists its franchisees with location selection, HR procedures, sales and other key aspects of running a car accessories business. The company provides marketing support, pre-opening training and financial assistance as well as software and other resources. Aspiring entrepreneurs must have $60,000 in liquid capital, a net worth of $150,000 and a good credit score before submitting their application.
Once you've chosen a niche and business model, come up with a plan. Think about your vision, business goals and finances and then put everything together to get a better picture of the whole. A solid business plan can make it easier to secure funding, prioritize your objectives and stay organized. Furthermore, it may help you mitigate risks and avoid unnecessary mistakes.
Startups that have a business plan in place grow about 30% faster than those without one. This document not only highlights your strategy and goals but also allows you to think things through and make sure everyone on your team is on the same page. Plus, it keeps you accountable and can help you identify potential mistakes, risks, threats and opportunities. A car accessories business plan may cover the following aspects:
- Executive summary (a short, clear description of your store, its products, your marketing strategy and your competitive advantage)
- Industry overview and market analysis
- Company description
- Product offering
- Mission statement
- Keys to success
- Sources of income
- Strategy and implementation
- Roles and responsibilities
- Financial projections
- Cost estimates
- Capital requirements
- Marketing and sales strategy
- Pricing strategy
Tackle every aspect of running a car accessories business. Consider your target audience, competitors, suppliers, market conditions, distribution channels and other key factors. Think about where your store will be located, determine the amount of space required for inventory storage and make a list of suppliers. Set a marketing budget and seek the most cost-effective ways to raise brand awareness and promote your store.
When writing a business plan, consider your company's strengths and weaknesses. Use its strengths as a selling point and turn its weaknesses into opportunities. For example, you may not have the resources needed to compete with popular car accessory stores and outlets, but you're only selling brand-name products of the highest quality. Also, look for opportunities and try to identify any challenges and threats your business may face.
What you're doing now is called a SWOT analysis. This acronym stands for strengths, weaknesses, opportunities and threats. In general, companies have full control over their strengths and weaknesses but little or no control over opportunities and threats. However, they can anticipate any potential threats and come up with a backup plan.
Economic downturn, for instance, is a potential threat to the car accessories market. Employment rates typically decrease when the economy is bad, causing people to use their cars less often and turn to public transport services. As a result, they won't purchase auto parts and accessories as often as they used to.
Now that you have a business plan, go ahead and register your company with the state. Next, go to the IRS website and apply for an employer identification number; this process is free of charge and can be completed online. You also need to choose a type of legal entity for your car accessories business. Generally, sole proprietorships are ideal for small, local stores.
If you're planning to grow your business in a relatively short time and open new stores across the U.S., opt for a limited liability company. This legal structure protects your personal assets and offers more flexibility than a corporation. Additionally, it doesn't require shareholder meetings and extensive documentation as corporations do.
The fees for forming an LLC vary among states. California residents, for instance, must pay $85 plus a $20 filing fee. Texas, on the other hand, charges $300 for this service.
In addition to a general business license, you may need other licenses and permits to open a car accessories store, and each state has different requirements. For example, if you plan to sell used auto parts and accessories in Georgia, you must first obtain a used motor vehicle parts license. All applicants must submit a $10,000 security bond, an original certificate of insurance, photos of themselves and their business location and fingerprint cards. They are also required to pay a $150 application fee and a $24 fingerprint fee.
Depending on the state and the nature of your business, certain permits may be required. For instance, if you use a truck to transport car parts from your warehouse to your store, you may need a special permit. A brick-and-mortar store might require signage permits, zoning permits, fire department permits and so on. Failure to comply with these regulations can result in hefty fines.
Don't forget about insurance. At the very least, you will need a general liability policy, product liability insurance and business property insurance. If you sell car parts and accessories online, consider getting cyber liability insurance as well. This policy will cover the costs resulting from customer identity theft, hacking and other internet-related crimes.
Your marketing strategy will depend on whether you sell in a physical store or online, your target customers and how much you can afford to spend on advertising. Banners, flyers, brochures, catalogs, newspaper ads and other traditional advertising methods work best for local stores. Another option is to partner with car repair shops, gas stations and other noncompeting businesses in your area and engage in cross-marketing.
Consider sending introductory letters and brochures to potential customers, such as transport companies and local businesses. Let them know about your products and make them a special offer. You may reward customers who place bulk orders with discounts or free services, such as tire fittings.
Set up advertising campaigns on Google and social networks to reach your target audience. Claim your business listing on Yelp, Yellow Pages, Angie’s List, Merchant Circle, Citysearch and other online directories. For increased exposure and store traffic, create a business website and publish content regularly. List your products and write compelling descriptions optimized for search engines.