In a fragmented industry like auto parts distribution, defining what is average gets a little more complicated.
To shed some light on the definition of ‘average’ within automotive parts distribution, Counterman, in collaboration with Babcox Research, conducted a survey of parts stores from all over the country. The survey was mailed to parts stores of all colors, shapes and sizes, from giant, nationwide retailers and program groups to small, one-store ‘mom and pop’ independents. The responses offer a glimpse into the wide-array of parts stores throughout the industry. Counterman conducts this survey every other year, and all of the numbers to which this survey compares are from the 2000 survey. For the 2000 survey results, see the November 2000 issue of Counterman. It’s also available online at www.counterman.com.
First, let’s define our terms. This article tries to paint a picture of three similar, yet distinct, store groups. They are:
- Program Group Stores – these are either independently owned stores affiliated with a program group or a company-owned program group jobber. This would include both independent and GPC-owned NAPA stores, for example.
- Retail Stores outlets – this would include AutoZone or other national or regional retailers, for example.
- Independent Stores – this group includes those independently owned stores that are neither owned by a WD, nor affiliated with any program or marketing group.
OVERVIEW: STORE SALES
According to the survey, overall average sales either have risen (if you’re a retailer) or fallen (if you’re everyone else). Retail locations surveyed posted the healthiest sales volume gains – averaging a little more than a 9 percent gain over 2000 sales levels.
For everyone else, the degree to which sales volumes have fallen depends heavily on what kind of store you operate. The news for program-group affiliated stores is not great. For these stores, average sales volumes fell nearly 9 percent – from $1,005,000 to $915,634 per store. But the pain is really felt by those true independent parts store locations – the average sales volumes across the nation for independent stores dropped dramatically from $1,306,000 to $719,264 over the course of just two years.
While competitors to aftermarket parts distribution include such entities as car dealerships and two-step WDs, across all stores surveyed, the majority of respondents continue to view jobbers and retailers as a store’s main source of competition.
However, many traditional parts stores (both program group and non-affiliated stores) still don’t view national and regional retailers as a major source of competition. But the previous numbers prove this to be a near-sighted view of the overall competitive landscape. In fact, retailers have been the most aggressive in trying to gain wholesale business, which has traditionally been viewed as the mainstay of the jobber market.
WHO IS GETTING SHOPS’ BUSINESS?
Increasingly, sales outlooks are more and more closely tied to the amount of wholesale business a store can gain over the competition. According to the Counterman data, the number of program group stores and independent locations that claim an increase in the number of commercial accounts served has fallen. At the same time, the number of retailers that claim an increase in commercial accounts has risen, from 48 percent in 2000 to 63 percent in 2002.
But don’t be fooled by these numbers. By looking at sales mixes, it becomes evident that while the number of retail locations that claim an increase in wholesale accounts has risen, that has not made much of a dent in their respective wholesale/DIY sales mixes. The bottom line: retail sales efforts to gain wholesale accounts are still in their fledgling stages and the overall dollars are not yet enough to move the retailers’ sales mix to be less DIY focused.
The sales ‘mix’ on the traditional side continues to be decidedly wholesale-dominated. The independent jobber appears to be fortifying his sales to professional accounts by increasing his wholesale vs. DIY sales mix, (or the falling population of independent stores has allowed a greater percentage of exiting ones to pick up new business.) The average independent jobber sells 61 percent of his product to the professional market. Meanwhile, wholesale sales for program group jobbers have dropped off. In 2000, nearly 68 percent of their sales went to wholesale accounts. In 2002, that number has dropped to 64.4 percent. Retail sales mix has remained relatively unchanged, with DIY sales still comprising about two-thirds of a store’s overall sales.
Based on a first glance at the survey’s inventory level data, it would appear that retailers have roughly doubled the level of inventory as compared with traditional stores. But this is merely an indication of dollar amounts – not SKU count. Retailers may carry a higher dollar amount of inventory, but the raw number of SKUs carried by the typical traditional parts stores is generally much higher. Additionally, the ‘mix’ of inventory at a typical retail outlet is usually much different that that found at a more traditional store.
INFLUENCE AND BRANDS
Do parts professionals influence brands stocked? It depends on the kind of store surveyed. Because of their structure, program-group affiliated stores and independent jobbers had the highest level of ‘purchasing authority.’ On average, 83 percent of respondents at a program group jobber location indicated that they have brand stocking influence. Not surprisingly, that number drops dramatically when looking at retail locations: A little more than 17 percent of retail respondents can claim brand stocking influence.
But when it comes to influencing sales, every counter professional has influence. Consider the number of brands within that same product category carried at any given store. Just because they’re on the shelf does not guarantee they will move off that shelf. Each parts professional, regardless of store type, must make branding sales decisions with nearly every transaction.
That being said, there is quite a bit a brand shuffling going on in the market – both at the jobber and retail level. Looking closely at the number of brand movement, retailers lead the market in the number of brands added to their systems. A staggering 80 percent of retailers surveyed have added four or more brands or lines in the last year. In 2000, more than two-thirds reported such a brand change.
And because shelf space is such a precious commodity, retailers are as aggressively dropping brands and lines as well: This year, nearly 63 percent of locations reported dropping four or more brands or lines, up from 41 percent in 2000.
For traditional stores, there is still brand/line changing going on – in part due to much of the store and WD consolidation that has occurred in the market over the last 18 months. A fifth of all program group stores, and a quarter of all independent stores, say they’ve added four brands or lines in the past year. As for dropping lines, nearly 10 percent of program group stores and 7.5 percent of independents have dropped as many.
Wholesale accounts choose their sources for a variety of reasons. Most of the data Counterman currently has points to product ‘availability’ as a common reason to choose one source over another. After all, why call if you know they won’t have what you need? Ask retailers why repair shops choose their store location for their parts and they’ll typically say "price."
That’s not to say that other things like returns policies are not important. Indeed as the number of wholesale accounts who choose to buy from retailers grows, so too has the level of returns they are having to handle. In most cases, returns have increased, and today the return rate for retail locations is now nearly 13 percent, up 1 percent over 2000.
So too have the number of warranty returns increased. In 2000, 12.4 percent of returned product was returned to retail locations as a defect. Today, that number is at 13.3 percent.
Invoices for retailers have increased to the DIYer ($22.35 in 2000 to $24.35 in 2002). Invoices to wholesale accounts, while 1.2 times that of DIY invoices, have fallen vs. two years ago. In 2000, the average wholesale invoice was $49.40; today it is at $46.69.
Retailers are getting quicker at the delivery game. In 2000, the average delivery time was nearly one hour. The 2002 survey indicates that wait has dropped dramatically to just 30 minutes.
What does the future hold for retailers? If you ask them, the outlook is a good one. The vast majority of retail locations surveyed expect their wholesale business to increase. In fact, 81 percent of retailers believe wholesale business will continue to flow their way. Considering the resolve and deep pockets these businesses have, there is little doubt of their ability to make that happen.
FOCUS: INDEPENDENT PARTS STORE
Independent parts stores have the most flexibility to offer the products and brands their customers want. They are unencumbered by the restrictions that can be placed on other kinds of stores within programmed systems. These stores have decided, for a variety of reasons, to remain independent in an increasingly company-owned or affiliated market.
When asked about their suppliers, independents give fairly good marks to them. The majority of stores (60 percent) gave their suppliers an "above average" or "excellent" rating when it comes to things like reliability, support and service.
But even though those numbers are encouraging, many independents feel that these same supplier’s service and reliability is not as good as it once was. For this 2002 study, significantly fewer stores gave their suppliers top marks. In 2000, 27 percent of stores gave "excellent" marks to their suppliers. That number drops to just under 20 percent this year.
Order fill is a very important facet of any manufacturer/distributor relationship. Independent stores, in general, indicated that order fill has improved over that last two years. Nearly 70 percent of respondents said their primary suppliers’ order fill is "excellent" or "above average."
As compared with other kinds of stores, the number of daily transactions for independents lags. Nearly three-fourths of independents surveyed said they conducted 100 or fewer transactions per day. For comparison’s sake, half of program group stores and merely 4.5 percent of retailers claimed 100 or fewer daily transactions.
What does the future hold for the independent? There is a place in the market for them today, but whether they can hold onto marketshare in the face of great competition remains to be seen. Operating efficiency and store personnel wil play a key role in determining a store’s level of success.
FOCUS: PROGRAM GROUP STORES
Program group affiliated stores are a pretty loyal group. Once they choose a group, they generally stick with it. In fact, over the years, the percentage of stores that have made the leap to another group has remained unchanged: Nearly 70 percent of stores say they have remained loyal to their groups. That’s not to say they would not change affiliation – better than half of stores surveyed said that they would make a switch.
The reasons for a change range from better pricing and brand recognition (most cited reasons) to WD support and training (least cited reasons.) Brand recognition remains the number-one benefit stores say they get from their current group, followed by pricing, brands stocked, marketing support and the returns policy.
Overall, program group stores rate their suppliers a little more favorably than their independent cousins. Nearly 80 percent of program group stores rated their suppliers as "excellent" or "above average." Similarly, the fill rates of their primary suppliers ranks more favorably also among program group stores. More than three-fourths of all affiliated stores surveyed marked their primary supplier’s fill rate as "excellent" or "above average."
Interestingly, our study indicates that fewer repair shops prefer a group’s private label over the manufacturer’s brand. In 2000, 21 percent of stores felt that the private label was preferred over the manufacturer brand. This year, that number drops to 18 percent of respondents. However, the majority (61 percent) of stores say that the private label is sometimes preferred – and that ‘sometimes’ is probably based on specific product categories and lines.
According to those surveyed, the outlook for the future is neither optimistic nor pessimistic. About half of respondents (53 percent) indicated that they predict a future increase in the amount of wholesale business. However, 47 percent of stores surveyed said that they expect future sales to professional repair shops to remain flat or decline.
And so that final ‘some up and some down’ feeling really is the best characteristic of the overall parts store market. There are no clearcut winners here – some retailers are doing well, others are not. Some program group affiliated stores are gaining marketshare, others are losing. And in the independent market, where the most attrition has occurred, those who are holding their own will continue to do so. Those that are not will either be consolidated into a larger group or go out of business altogether.
What is average in the parts store market? Only time and the skill of the individual store owner, manager and parts professional will tell.
Special thanks to Bob Roberts from Babcox Research for his tireless assistance in the tabulation, analysis and delivery of this information.
The 2002 Counterman Parts Store Survey is the most recent in a series of annual surveys conducted with the readership of Counterman magazine. This study was undertaken to analyze the auto parts store population in the United States. The results will enable a more complete understanding of jobber operations, retail, manufacturer, WD and other interested parties.
The method for collecting the data parallels that used for the 2000 study. The pool of potential respondents was divided into three segments: independent and company owned program jobbers; company-owned retail outlets; and independent, non-affiliated jobbers.
The survey was conducted via mail to a random sample of 5,000 outlets nationwide. The initial mail date was Sept. 26, 2002. Completed questionnaires were accepted for tabulation through Oct. 23, 2002. The response rate was 18.4 percent.
The sample chosen entailed a systematic sampling procedure in which every ‘nth’ name was selected from the segments mentioned above. The names originated from the Counterman subscription roster.
This article is based on a much larger and more compete survey conducted by Babcox Research. For more information on the 40-page study, contact Bob Roberts at [email protected].