It's a phenomenon that started some four years before The Great Depression. Calvin Coolidge was president, and the Model T would continue to roll off Henry Ford's Dearborn, MI, assembly line for another two years. That phenomenon was programmed distribution, and it changed the face of aftermarket distribution forever.
The year was 1925, and on April 17 of that year, a group of men who operated what were then quaintly called 'automotive parts stations,' gathered in Detroit to form a new group called the National Automotive Parts Association - now universally known simply as NAPA. Little did these men know that they were breathing life into an idea that would dominate auto parts distribution and the way the industry thinks about branding for the rest of the century and into the next.
In the yellowed and fading pages of the aftermarket's history, programmed distribution got its start at that Detroit meeting. Over the following years, many others were launched, but program groups didn't really get going until the 1970s. By the era of disco and Watergate, WDs and jobbers were struggling with the idea of giving up their independence to what seemed like a fad that might eventually lose its spark in a few years. However, programmed distribution proved to be no Pet Rock; these merchandising and management assistance programs, as they were called, became a force to be reckoned with from the late '70s onward.
Program Group Growth
Between 1971 and 1978, approximately 20 of these program distribution groups were created, and by the 1980s, there were some two dozen such groups. In relatively short time, it seemed like everyone became associated with one group or another. However, over the years, those 24 groups have been nearly cut in half, down to a mere 14. (See the Counterman Program Group Poster, which is tipped to page 25, for a complete list of today's program groups.)
This has generally happened through group consolidation, the recent of which was the merger of AllPro/Bumper to Bumper and Auto Value into Aftermarket Auto Parts Alliance in January, 2000 and the merger of PRONTO and Viper two years later.
Although a program group consolidation has not happened in nearly two years, that doesn't mean the market is not ripe for one and talks between groups still happen from time to time.
APA President Dan Freeman believes there is the possibility of more program group consolidation, ultimately down to about eight. To Freeman, program groups can be divided into four distinct camps: The National Chains, characterized by a focus on private labels and a somewhat inflexible approach; the Big Box Groups, characterized by a smaller number of large WD members that own many stores and provide a more flexible program; The Diverse Membership Groups, which have many smaller WD members that often specialize in PBE, undercar, fleet, full service and import; and the Buying Groups, which function primarily as group purchasers. According to Freeman, each of the 14 current groups falls into one of these four categories.
"I believe there will be two program groups in each of the four categories," said Freeman. "At APA, we have been working toward the goal of being one of the two groups in our designated category (Diverse Membership Group)."
However, not everyone agrees with Freeman. Bill Maggs, president of PRONTO, thinks that there are just too many barriers that would make further group consolidation a reality. Maggs should know: his own group was in consolidation talks with another group as recent as 2002-2003.
"We've looked at those opportunities over the past couple of years," said Maggs. "There are a lot of dynamics in group management that come into play. When you look at the groups, you can see that we're the same in many respects, but at the same time, we are so different that merging would require members to make a lot of changes."
Maggs cited differences in an area like compliance as just one factor that can stall merger plans between groups. There would be a lot of line changeovers, and that's not necessarily good for members.
Issues like member overlap, though, can be overcome, said Maggs. PRONTO, for example, supports both the PRONTO program and the Vipar programs simultaneously.
WD and Store Consolidation
The real consolidation within distribution has been less among the groups themselves and more among the WD members of those groups.
Recent examples of this include Genuine Parts Co.'s acquisition of another NAPA member, NAPA Hawaii, and General Parts Inc.'s merger with fellow CARQUEST members Auto Parts Warehouse and, most recently, Straus-Frank. Aftermarket Auto Parts Alliance members O'Reilly Auto Parts and Replacement Parts Warehouse, Federated member Fisher Auto Parts, IAPA member MAWDI, as well as Parts Plus member Uni-Select are all examples of WDs that continue to buy other WDs and/or store groups. More and more, program groups are becoming populated by a limited grouping of WDs and their company-owned stores rather than the wholly separate worlds of the independent WD and independent parts store. That being said, there are still some groups that remain staunchly independent, such as IWD and the RPM Group. Most program groups offer similar programs, but it is the level of expected participation in these programs that separates one group from another.
Benefits of Membership
At its essence, programmed distribution has given its members a systematic formula whereby they can compete, bringing new efficiencies, purchasing power, effective marketing and merchandising strategies to what has become a very competitive playing field. They have also brought new levels of sophistication to the jobber and service dealer who wants to expand market share by transforming the store and staff to reflect a more polished, consumer-friendly image.
Programs often include wearables, signage, co-op advertising and national warranty programs, as well as a more recognizable private label brand. In the 1980s, programmed distribution invited private labeling into the mix of services being offered to participating WDs and their jobber customers. In some cases, programmed distribution groups have done so well weaving their names into the minds of the end user that the group itself has became the product's brand. Counterman's Professional Auto Repair Technician Survey, which is published every September, consistently reveals that program group private label brands rank highly among technicians' brands of choice for certain product categories.
As program group private labels become more prominent in the market, some in the market wonder which is more important: Who makes a product or who distributes it? In the minds of technicians, the line between the manufacturer and the distributor from a branding standpoint is becoming less and less clear.
As these groups and their brands continued to gain momentum over the years, manufacturers were pressured to provide better economies of scale, as well as various private label programs. Many of these manufacturers began consolidating with other manufacturers to build more strength through the offering of many lines. As a result of this "banding together," the balance of power slowly shifted from the manufacturer to the customer, increasing the purchasing power and leverage of the groups.
In order to justify the cost of these various acquisitions and mergers, as well as meet the demands of the stronger and more synchronized groups, many manufacturers had no choice but to reduce their field sales forces. Obviously, this meant less training and less face-to-face contact between manufacturers and their customers. Program groups have filled these voids by launching their own training programs and field sales staffs, in essence, putting the "program" in the program group.
Service Dealer Programs
The benefits of program group affiliation don't stop at the jobber store. More and more repair facilities are becoming affiliated with a particular program group, branding themselves as an independent jobber store might. It's a smart strategy as program groups have devised programs that tie the WD to the store to the shop through branding and pricing advantages.
The way program groups have extended their brands is with these service dealer programs. As any savvy business owner will tell you, marketing is everything. But despite that fact, marketing is often overlooked, under appreciated and unapplied by the majority of the automotive service community. Like independent jobbers, independent repair shop owners are often caught between lacking the marketing tools their businesses need to grow and how much control they are willing to give up to foster that growth. Many of them want the look and feel of a branded, national franchise - along with all the bells and whistles - yet at the same time they don't want to give up their fierce independence or the good name they've worked hard to develop over the years.
As program groups have proven with their successful independent store programs, these attributes don't have to be mutually exclusive. Initially, programs were developed by member warehouses for independent parts stores, allowing them to be independent to varying degrees while benefitting from national advertising, nationally branded signage, private label products and more.
The vast majority of the program groups in the U.S. aftermarket offer some sort of installer program, and each can vary greatly in terms of program depth and structure (See Counterman's Program Group Poster.) Typically, these installer programs are administered at the national level by the group headquarters. Individual programs for specific service dealers are created, promoted and sold to installers by the affiliated parts store and/or warehouse. The exact benefits and cost of the program vary from WD member to WD member or store to store.
In the end, that's what program groups are all about: creating value for members. Groups accomplish this through more than just group buying (although never underestimate the influence of that.) Groups add value through the program, whether that includes a technician training program, a store inventory management system or simple group buying. It's the differences among the memberships that define the program, and perhaps that more than anything else will determine who does or does not merge with whom.
Although much has happened to program groups since their inception on that Spring day in 1925, one thing is for certain, program groups and the influence they and their members wield are here to stay.