Wal-Mart does to tune-n-lube what specially stores cannot

DSN Retailing Today, June 7, 2004 by Debbie Howell

Even up against sophisticated auto parts chains with broad selections, Wal-Mart's strategy of selling a convenience-oriented assortment of basic auto parts and accessories combined with its price advantage in product lines such as tires and motor oil garners admiration due to its sheer size and sales volume in this category.

Wal-Mart doesn't divulge its revenue from Department 10, or automotive, although many estimate its sales exceed that of segment leader AutoZone's $5.6 billion. Some have put the figure at $7 billion, including revenue from Sam's Clubs.

"It's a part of their business that's not going to go away anytime soon and probably produces some pretty nice revenue and profitability. It really is a convenience," said George Whalin. president of Retail Management Consultants of San Marcos, Calif.

Beyond the automotive products sold in its discount stores, supercenters, Neighborhood Markets and Sam's Clubs, Wal-Mart operates about 1,700 Tire & Lube Express centers. This service business has tripled in size over the last decade.

Wal-Mart's automotive sections in its supercenters and discount stores seem small in square footage, yet the category is one that other mass retailers have struggled with and in some cases scaled back. Wal-Mart continues to offer a multitude of basic parts, even as accessories take over more shelf space.

Often overlooked as an industry player in automotives, Wal-Mart stepped up to the plate recently when it joined other retailers and suppliers to promote the "Be Car Care Aware" campaign sponsored by the Automotive Aftermarket Industry Association (AAIA).

"They saw that by getting involved and leveraging the momentum being achieved in the aftermarket by the campaign as a way to help contribute to educating consumers about the benefits of regular vehicle maintenance and care and to familiarize consumers about Wal-Mart's Department 10," said Rich White, vp of marketing and communications for AAIA.

White said more than 3,000 Wal-Mart stores hosted events in April to promote the campaign, which ultimately relates back to additional revenue. Participating stores developed brochures, aisle signs and in-store television spots encouraging vehicle maintenance. One event encouraged children to identify a vehicle part on a poster, to be followed up with a visit to Dept. 10.

While many auto chains took part in the campaign as well, Wal-Mart's participation showed a commitment to this category, which remains a solid if perhaps slow-growth segment. Overall, the $34 billion do-it-yourself automotive aftermarket in the U.S. grew 4.4% in 2003, and with Wal-Mart's overall sales rising 11.6% last year, it's likely the retailer's automotive revenue beat industry gains.

Wal-Mart's strengths in automotive include low prices in basic commodity items along with good deals on tires and quick-lube service. The impulse nature of Wal-Mart's automotive section is promoted aggressively, with end-caps and racetrack displays of items such as windshield washer fluid, car wax and hand cleaners at hot prices driving traffic into aisles.

Another aspect of automotive that Wal-Mart does quite well is marketing to demographics as part of its "store of the community" strategy. Assortments vary, depending on the neighborhood. One supercenter in Garland, Texas, with a high Hispanic population, recently featured an extended assortment of performance-related accessories and car audio products not typically offered. In some markets with a high ratio of truck owners or rural residents the might feature larger truck accessories.

"If there are specific requests that customers ask for :he automotive department manager is absolutely empowered to call our merchants. The buyer would then do their best to support the stores with this merchandise that customers are wanting," explained Danette Thompson, a Wal-Mart spokeswoman.

The challenge for Wal-Mart is to keep automotive relevant to the budget-minded shopper, stay on top of accessory trends and keep pace with, rather than be outgunned by, the service-oriented auto parts specialists.

WAL-MART STORES

CORPORATE HEADQUARTERS: Bentonville, Ark.

TOTAL ANNUAL REVENUE: $256, 329 million

AVERAGE STORE SIZE: 96,833 square feet

NO. OF STORES & TRADE TERRITORIES: 5,085 in 50 states and international

SOURCE: Company reports