CarParts.com is working to expand its customer base and reduce its marketing expenses as its traditional customer base has faced economic pressures.
The online seller of auto parts and accessories has historically served cost-conscious consumers and used paid search to reach them. However, those consumers made a “significant pullback” on their spending in 2024, and paid search has proven to be “expensive,” CarParts.com CEO and Director David Meniane said Tuesday (March 25) during the company’s quarterly earnings call.
CarParts.com refocused its strategy early in 2024 to add new customers, including business-to-business (B2B) ones, and to prioritize nonpaid marketing initiatives, Meniane said.
By the end of the year, the company’s net sales had dropped from $675.7 million to $588.8 million, its gross profit had declined from $229.4 million to $196.7 million, and its gross margin dipped from 33.9% to 33.4%, according to a Tuesday earnings release.
Meniane said during the call that the sales were “slightly below expectations,” while the gross profit and gross margin were “near the upper end of guidance.”
“2024 was a transformation and investment year as we look to upgrade our customer base and change the long-term margin profile and unit economics of the business,” Meniane said.
To expand its customer base, CarParts.com is expanding its product assortment and growing its wholesale channel, Meniane said. The company is adding last-mile transportation and higher-touch sales in key markets to boost its B2B business.
The company also launched a premium paid membership that currently has 3,000 members.
“Over time, we expect this part of our business to help raise our net profit margins,” Meniane said.
To reduce its marketing costs, CarParts.com is enhancing its site conversion, strengthening its search engine optimization and driving its mobile app adoption, he said.
“Our best-in-class mobile app, with over 800,000 users in less than 18 months, now accounts for over 10% of eCommerce revenue and growing, while allowing for a long-term change in our paid versus nonpaid traffic mix,” Meniane said.
Meniane said during the call that he would not comment on the strategic alternatives process the company announced March 5.
“That process is being overseen by our board of directors with the assistance of financial and legal advisers,” Meniane said.
The company said in a March 5 press release that it began exploring strategic alternatives, including a possible sale of the company, after receiving inbound strategic inquiries.
