CarParts technologies shifts into higher gear by attempting to become the leader in b2b software for automotive aftermarket
It’s a business where getting your hands dirty is half the fun, and Alan Bennett is looking to clean up by bringing sophisticated technology to tinkering under the hood.
His CarParts Technologies is now moving aggressively to become the leading provider of software for warehouses and others in the $100 billion-plus automotive aftermarket, an already crowded market continually attracting new players.
Bennett, 53, the company’s founder and chief executive, is taking a two-pronged approach: building e-tailer CarParts.com and at the same time strengthening his business-to-business software applications through research and acquisitions.
So far, the approach seems to be working. CarParts debuted on the Web in 1999 after two years in development and generated $2 million in revenues in its first year. Last year, that number rocketed to $30 million and, according to Media Metrix and other Web-ranking services, the El Segundo-based business has become the busiest retail car parts site on the Web.
“The automotive aftermarket is a huge industry, central to people’s lives, but it’s an industry without a lot of sophisticated technology and it’s very disconnected,” said Bennett.
Researching the market
Bennett had previously operated an Internet catalog site, catalogsite.com, before launching CarParts about four years ago.
Knowing that he wanted to transition away from the catalog business, he began systematically surveying various industries. Ultimately, Bennett settled on the automotive aftermarket, deciding it lends itself to both Web-based retail sales and software applications that could add efficiencies to the supply chain, from manufacturers through to consumers.
Bennett who was able to attract $8 million in initial round venture financing from CMGI @ventures, St. Paul Ventures, Brand Equity and Ravenswood Capital set up shop above a neighbor’s garage in Santa Monica and hired a group of software engineers whose main task was to create the parts database.
The first task was to secure agreements with various warehouse distributors, since Bennett was betting that a virtual auto parts store could carry the millions of parts that might be needed by the tens of thousands of different makes and models of cars on the road.
That’s vastly more than the 20,000 or more parts that a neighborhood parts store might carry, or even what a retail superstore would have on hand.
The challenge was to create a massive database capable of efficiently handling all those car parts, and which would also serve to standardize references in an industry where identical parts can have different reference numbers.
While the market is ripe, it’s also one that has drawn a lot of competition, including Web-based reseller Wrenchead.com, CarPartsOnSale.com and PartsAmerica.com, which the company considers perhaps its primary competitor in the retail market.
PartsAmerica, based in Torrance, is a joint venture of Advanced Auto Parts and CSK Auto Inc., which separately operate various retail chains nationwide, including the Kragen Auto Parts Stores. The Web site allows customers to return parts that they don’t want to the retail stores.
Thilo Koslowski, lead automotive analyst for Gartner e-Business in San Jose, thinks the hybrid Web/brick-and-mortar approach of PartsAmerica may have an advantage in the retail market.
“Most consumers still go to stores for their parts. Not enough consumers are buying parts over the Internet,” he said. “If you can help consumers find their part online, this speeds up the process. It can be very helpful.”
Commerce a sideline
However, Bennett maintains that he always envisioned CarParts’ e-commerce focus as nothing more than a sideline for a business that would focus on the B2B marketplace. That’s even though the company was a dot.com in name before changing to its current moniker last year.
In any case, in its effort to penetrate the B2B supply chain, CarParts last month completed its third acquisition in less than a year, purchasing Anderson BDG, a maker of store management software for retail businesses. Clients include such big names as Midas and Discount Tire.
Bennett’s previous acquisitions were CR Computing Solutions, a developer and marketer of business applications for wholesalers and “jobbers” (the stores that supply mechanics), and AutoNet International, a provider of extranet and Web development services to warehouse distributors.
The acquisitions, Bennett said, have allowed the company to grow faster than it would have if it had attempted to develop its own software and customer base. The deals were made possible in large part by the $42 million the company raised in a second round of financing early last year.
The AutoNet purchase was key to the release last year of the company’s PartsXchange software, a system that allows retailers and jobbers to order parts from warehouse distributors over the Web. The distributors also can use it to order from manufacturers.
