eProcurement Top Rankings: Auto Parts🚗
Part 2 of our rundown of the top tech players in B2B SaaS
In our previous edition, we explored the remarkable rise of eProcurement 2.0 and its profound impact on the building materials and construction sector. As promised, we now turn our attention to the next additional vertical that is seeing significant adoption, auto part distribution. And then, we’ll cover food service in our upcoming edition. Although we have singled out these three industries, it is essential to note that the eProcurement revolution extends beyond these domains. The eProcurement market will see continued growth and market penetration as more SaaS tools want to provide an integrated, seamless procurement experience for their SMB customers.
Just like with construction/building, we will shine a spotlight on the foremost tech leaders, shedding light on their fundraising efforts, market scale, business models, notable collaborations with distributors, retailers, and suppliers, as well as the challenges distributors must address to maximize the potential offered by these opportunities.
A Refresher: eProcurement 2.0
SaaS companies (software-as-a-service) have emerged as key enablers for SMBs (small-medium businesses), offering a range of tools to streamline operations, sales, job dispatching, employee management, and now, supplier procurement. These SaaS tools can be likened to the contemporary iteration of ERP systems, but tailored specifically for SMBs, recognizing that the latter do not require the complexity and costs associated with traditional ERPs. Over the past two decades, these SaaS solutions have gained significant traction within the SMB market. Now as these once niche SaaS offerings reach critical mass within their respective verticals, they are moving to capitalize on the realization that they can generate substantial revenue while effectively addressing genuine pain points related to supply procurement.
A comparative analysis distinguishes eProcurement 1.0, exemplified by SAP Ariba, Coupa, and other ERP-powered procurement tools, catering to large enterprises. Typically, these tools assist enterprises in procuring non-essential expenditures and, on occasion, even mission-critical inventories. With a broad horizontal focus, eProcurement 1.0 primarily supports enterprises spanning diverse industries. Conversely, eProcurement 2.0 represents a contrasting approach, precisely targeting specific problems faced by SMB customers operating within distinct verticals. The vertical-specific nature of eProcurement 2.0 solutions allows for tailored resolutions aligned with the unique requirements of SMBs in a given industry.
What is an eProcurement Connector?
A slight difference from our construction/building SaaS Top ranking is that in the auto part space, you’ll notice we’ve highlighted some “connector companies”. Connectors operate between SaaS tech companies and a distributor or supplier ERP. These connector companies play a vital role in facilitating seamless integration between many supplier ERPs and many SaaS companies who want to facilitate eProcurement. By acting as a bridge, they enable the exchange of commerce, streamline the creation of purchase orders in distributors' ERPs, and facilitate the sharing of pricing and inventory information. For the SaaS company, they make it much easier and faster to get access to suppliers.
So why are we now highlighting connector companies in auto parts, but had nothing to say about connectors in our eProcurement SaaS Construction rankings?
Early Mover Benefits: Both leaders in the space have been working at this problem for a very long time. PartsTech has been in operation since 2012 - and, coincidentally, that’s the same year that eBay acquired WHI Nexpart. Both players have been working to carve out unique sources of demand to entice distributors & suppliers to integrate with their platforms (see: Solving the Chicken and Egg Problem🐣). Where Nexpart has eBay as a captive demand channel. Partstech has over 40 SaaS tools. More on that below.
ERP System Fragmentation: The auto parts industry, in particular, is characterized by a smaller number of dominant ERPs, whereas the construction industry exhibits far greater fragmentation with numerous ERP systems in use. The presence of fewer ERPs in the auto parts industry simplifies the integration process for eProcurement connector companies, making it easier to bridge the gap between distributors & suppliers and SaaS providers.
What is an SMS?
Not to be confused with a text message :) SMS stands for Shop Management System. If you’re a mechanic, auto body shop, tire dealer, etc. - you’re looking for a SaaS tool to help you run your business. Manage jobs, schedules, employees, inventory, invoicing customers and much more. Some of the SMS tools are better for different types of mechanics or auto body shops. And, some of the SMS tools put a greater emphasis on eCommerce and helping a mechanic interact with their prospective customers - whereas, other tools are more focused operationally. As you can see, the specific tasks are obviously quite different than a SaaS tool for an electrical contractor - but, at a high level, these SaaS tools are serving a similar purpose: helping the SMB operate their business better - end to end.
Where are the VCs?
You’ll see a number of leading SaaS tools that are either owned or have significant investment from a strategic like Napa or Mitchell1 or a private equity firm, like in Tekmetric’s case. Relatively to construction, we see a much higher ratio of strategic and PE investors than VCs in auto parts. In construction, there were only a few PE owned companies out of our top 20.
We see that starting to change however. There’s more demand than there is supply for mechanics. And, that’s not going away anytime soon: the average age of a car in the US just surpassed 12.5 years. When you broaden the analysis to other SaaS tools used by mechanics and in the auto part vertical, you see more VC investment. Some of these tools have less ability to influence materials eProcurement however so they didn’t make our list.