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Auto Parts Will Be a Tough Race for Amazon

Investor concern about the prospect of Amazon disrupting the automotive parts retail sector have created opportunities in Advance Auto Parts and AutoZone, both of which are now trading at attractive discounts to our valuations.

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Zain Akbari: We believe recent investor concern about the prospect of Amazon disrupting the automotive parts retail sector will create opportunities for investors to take a position in Advance Auto Parts and AutoZone, both of which are now trading at attractive discounts to our valuations. While Amazon has obviously been a game-changing competitor across many categories, we believe automotive parts pose unique challenges that will prove difficult to crack. 

Among DIY customers, vehicle owners' dependence on retailers' trained sales personnel for basic diagnostics and advice on finding and installing the right component is a significant part of the value proposition, one which we believe will be difficult for digital participants to replicate given the unfamiliarity of most vehicle repairs to motorists.  Furthermore, customers need parts quickly to return their vehicles to working order, making next-day delivery less attractive. 

Zain Akbari does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.