There are a number of ways to increase revenue in business and the automotive industry is no different. In the parts department we sell parts to customers, but identifying who those customers are can be complex.
With the rise of digital communication, which includes the internet, email, phone calls, and text messages, parts departments have evolved far beyond solely supplying their dealerships’ service departments. Today, parts can be sold to various customers, from local mom-and-pop shops, such as “Al’s Service Center,” to large chains like Firestone and AutoZone. Additionally, technology enables the sale of parts online to customers nationwide and even worldwide.
With so many diverse options, dealerships must evaluate factors such as operational costs, market reach, and profit margins when determining the best approach to increase net profits. In this context, my dealership explored whether to expand into the wholesale market or to tap into the online parts market by considering costs, potential profitability, and market availability.
Research showed that expanding into wholesale parts sales can be a valuable way to connect with your local businesses while generating revenue from customers who might otherwise go elsewhere for vehicle repairs. There are two primary wholesale customer types in the automotive industry:
• mechanical shops that manage maintenance and repairs (e.g., brakes, tires, engine issues)
• body shops that focus on vehicle body repairs (e.g., hoods, doors, fenders).
Most dealerships do not have body shops, so supplying body shop customers probably provides a dealership to access new revenue channels. Wholesale parts sales are lucrative opportunities for dealerships, with the automotive wholesale market having grown from $224.35 billion in 2023 to $237.36 billion in 2024. This reflected a compound annual growth rate of 5.8%.
However, a significant drawback was the high rate of returns, especially from body shops. When customers return or don’t purchase parts, dealerships must either stock the parts or return them to the manufacturers, adding inventory costs and potentially affecting the parts department’s profitability.
On the other hand, we learned that establishing an online sales portal expanded the dealership’s customer base nationwide. Unlike the traditional customer base, which spanned a limited local radius, online sales could reach any U.S. location. Most online orders required a VIN number, which reduced the chance of errors as well as the chance of returns. The in-depth process customers followed when choosing the part was beneficial. Plus, in my experience, most returns resulted from shipping damage which was usually covered by shipping insurance. This reduced the financial risk for the dealership.
The size of a dealership’s wholesale operation can vary widely. A quick illustration includes two previous places I worked:
• a luxury brand dealership (Alfa Romeo & Maserati) that limited wholesale to walk-in customers
• a dealership that delivered parts within a 75-mile radius and employed seven drivers for daily deliveries
Individual dealerships will differ when deciding between these approaches since each depends on goals and resources. For dealerships starting in the wholesale business, it can be economical to limit services to a handful of local shops and require customers to pick up their orders. However, in areas with high competition from nearby dealerships selling the same brands, market share can be impacted by this decision.
In terms of online sales, partnering with a company specializing in online automotive parts sales (such as RevolutionParts) offers several advantages. Revolution Parts integrates with a dealership’s database and manages marketing, sales, and customer interactions, which can be valuable for growing an online presence.
Wholesale shops, whether repair or body shops, typically buy parts at a discount, often 15–30% off the manufacturer’s suggested retail price (MSRP). The dealership supplying the parts would profit, but probably less than if the dealership sold directly to the customer. Returns can further diminish profitability, as unsold parts may require restocking or processing costs.
In contrast, retail customers purchasing online typically pay full MSRP. Thus, selling the same parts online yields the dealership additional returns in profit. With Revolution Parts, shipping damage is covered by insurance, so dealerships incur no extra costs. Revolution Parts also promotes parts across multiple channels, such as eBay, Amazon, and the dealership’s website, thereby increasing visibility. Furthermore, Revolution Parts assists in selling outdated parts at a discount, helping dealerships clear inventory without using additional funds.
As JCPenney’s founder James Cash Penney wisely noted, “No company can afford not to move forward. It may be at the top of the heap today but at the bottom tomorrow if it doesn’t.” Both wholesale and online sales present advantages and challenges. While each option entails startup costs, the potential for profitability in the expanding automotive parts market makes both strategies viable. Ultimately, the best approach depends on your dealership’s goals, resources, and commitment to innovation.
Chris Paulson is a Parts Manager at Suresky Chrysler Dodge Jeep Ram in Goshen, NY, with 10 years of experience in the automotive industry, specializing in inventory management, procurement, and operational efficiency. Over the past decade, he has worked to streamline parts departments, improve stock accuracy, and ensure timely distribution to meet both customer and service demands.
