Auto part sales is a $100 million dollar industry in Latin America and the Caribbean. In these countries, a majority of the automobiles were manufactured in the 1980s. Finding replacement parts for these autos has become a difficult process as auto makers focus on cars produced in the last ten years.
Typically, old cars are used as a source of parts once they can no longer be repaired. The major obstacle to accessing the market is the sparse number of auto part stores in the region where the prices for auto parts are high. Most of these auto stores focus on the upscale customer and don't carry a wide range of parts for the older autos.
D.A.P. Exports will sell parts to auto stores but we will also pursue a new distribution network as well. The largest buyers of auto parts in the region are taxi companies. D.A.P. Exports has established an extensive network of contacts with these companies, and we will sell directly to them.
D.A.P. Exports will focus on the following target customers:
It is expected that individuals will also purchase from D.A.P., but the repeat business, lower price sensitivity and larger volume per order mean that stores and taxi services will be more attractive customers for D.A.P.
Currently, the markets are too small to attract many competitors. The auto parts shops in the region are not expanding to meet the demand for parts for older cars. They are instead focusing on the newer cars that are being imported into the countries by wealthy individuals.
Utilizing the taxi services as a distribution network as well as primary customers is an excellent strategy to capture market share of a segment that is currently being ignored by bigger players.
It is estimated that there are over 25,000 vehicles in the region that are used by taxi services. And that number is growing.
The taxi firms are excellent target customers for D.A.P. Export products. First, they represent the largest buying block in our target countries. In addition there is no established channel for them to purchase parts for their cars at this time.
By buying direct from D.A.P. Export, they reduce the cost of parts and they get exactly what they need quickly.
Although many of the taxi drivers are independent or work for small companies, the informal network within this group is extensive. There is a lot of downtime in this business, where drivers are waiting for fares. They will chat to friends/colleagues about their cars and their work. We will benefit from this through word-of-mouth recommendations.
Without much competition, the key to maintaining the customer base is the right parts, at a reasonable price, delivered quickly. As D.A.P. Exports meets customer's demand for parts in a timely manner, sales will grow. The company will be able to strengthen the business relationships that will be critical when competition does emerge.