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Outsourcing the Brand


7/1/2005
By Jon S. Owens

 

I recently read an article that discusses a new retail strategy - Pay N Save - from aftermarket retailer CSK Auto. According to the article, the Pay N Save concept was created to provide a "convenient, easy-to-shop alternative to the mega-store hassle." A Pay N Save spokesperson said, "you can think of a Pay N Save as a mini Costco meets a tool store meets a Michael's."

Sounds like a nice concept for CSK (operators of Checker Auto Parts, Schuck's Auto Supply and Kragen Auto Parts), and we wish them nothing but success. However, the more intriguing part of this strategy, in my opinion, lies a little beneath the surface. Later in the article, the CSK representative says, "We have a team of buyers, including a buyer in China, and we are good importers." The statement is made with regard to the new Pay N Save concept, but could it apply across the entire CSK business? Sure it could, and probably does. But, not just at CSK.

AutoZone, Advance Auto, Pep Boys, O'Reilly, NAPA, CARQUEST and others all have sophisticated procurement departments and procedures. All of them are adept at sourcing products from around the globe. The question then becomes, at what point are they all comfortable with sourcing products directly from manufacturing plants overseas, rather than relying on others to do it for them? This is an intriguing scenario, and is worthy of dialogue and debate.

At the core of the issue is the all-mighty brand. For example, why should CARQUEST rely on a current supplier to bring them auto parts made in China by some joint-venture manufacturing plant when they can source directly from that plant or some other plant looking to expand their presence in the US? If they aren't already, parts manufacturers will be faced with this scenario very soon, just as suppliers in other retail markets, like consumer goods and hardware. This is where the value of the brand comes directly into play. Sure, it's easy to figure that things like warranty, sales representation, product knowledge and (most importantly) product performance are a few of the key determining factors as to whether a retailer can source on its own or stick with the manufacturer it knows and loves. But, each of those things (plus more) are part and parcel to the value of the brand.

Ultimately, the retailers will decide whether the manufacturer's brand (and, subsequently, all of the things that come with it) is valuable enough to allow them to continue as the source for various parts. Certainly, at the repair shop level, a brand like NAPA carries as much weight (if not more) as a brand like Wix or Fel-Pro or Gates (to name a few). These are all great brands, and they all have consistently delivered great products and services to professional technicians and DIYers for years. In the new global manufacturing economy, where just about anyone can make anything better and cheaper, product sourcing is quickly becoming a strategic advantage, whether you're a manufacturer or a retailer. As such, brand recognition and strength are now more important than ever, and delivering on the brand "promise" becomes the key differentiating factor.

If you can not consistently communicate and deliver the value of your brand, and what your brand represents, you simply will have a very difficult time surviving, regardless of whether you made the product or not.















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