Specialty concepts evolve, waxes shine bright - automotive supplies - Discount Industry Annual Report: part 2: Merchandising and Productivity Analysis

Discount Store News, July 16, 1990

Specialty Concepts Evolve, Waxes Shine Bright

The warehouse club concept has arrived on the automotives aftermarket scene, with two chains now operating in Southern California and a third in the works for New York's Long Island market.

And two chains, Wal-Mart and Sears, are checking out the burgeoning car care mall industry for growth opportunity.

As for product categories, waxes and polishes reflect the brightest picture, posting a 9 percent gain last year to $190 million at retail. That followed a 6 percent increase in 1988. Others categories show sluggish to flat sales, or in the case of spark plugs, a continued decline.

Moreover, if further proof is needed that most full-line discounters dislike the problems involved with car maintenance, two regional holdouts have gotten out of the car care business over the past year.

Meanwhile, the drive of the two largest automotives specialty chains, Western Auto and Pep Boys--Mannie, Moe & Jack, to build larger stores that feature a heavy component of auto service continues space.

Those are the major merchandising developments over the past year in a specialty category that has seen consolidation come to a screeching halt.

In San Diego, Calif., Auto Parts Club paved the way by opening the first automotives warehouse club.

Auto Giant, a new startup of warehouse club entrepreneur Robert J. McNulty, followed with the second warehouse club unit in San Bernardino, Calif. And McNulty has filed an initial public offering for funds to launch a similar club, Auto Depot, to operate on Long Island.

Although open to DIY customers, Auto Parts Club gears its offerings in warehouse units of 40,000 square feet to the professional installer. For example, it has added brand new engines, not rebuilts, to its product mix in the two units now running.

In contrast, Auto Giant is aiming at the retail consumer, both the DIY customer and the Do-It-For-Me customer. Its first 50,000-square-foot unit, to be joined soon by a second, offers 20 service bays for a wide range of car service.

McNulty's Auto Depot, which could make its IPO by the end of July, will operate on a similar concept. Auto Depot hopes to raise $7.8 million to open two units.

Representatives of both Wal-Mart and Sears attended a car care mall conference which was held in Newport Beach, Calif., in April.

Around 1,000 car care malls have sprung up around the country, offering a variety of auto specialty shops, such as tires, quick lube, body repair, car stereo and glass replacement.

Wal-Mart is looking for developers to build car care malls next to its discount stores, most of which offer no auto service that would compete.

Only about a quarter of the 1,402 Wal-Mart stores offer auto service, and Wal-Mart continues to take a store-by-store approach toward including service in new stores.

That contrasts with K mart's four-year-old policy of skipping auto service in all new stores. Moreover, K mart is closing existing auto service centers in markets where they fail to provide an adequate return on investment. Only about half, or 1,100 of the 2,200 K mart stores offer auto service, compared with a high of around 1,600 several years ago.

Sears still is testing a small, freestanding auto center that could handily slip into a car care mall or strip mall that wouldn't support a full-fledged Sears service center.

Called Sears RoadHandler car care centers, the four test stores in Chicago feature four service bays and a tiny showroom floor that displays mostly tires.

Sears is making automotives one of its power formats and probably will start to introduce it after completing its Brand Central program, adding national appliance brands to its Kenmore private label offerings, and the Craftsman Home and Yard Center, adding national brands to its Craftsman offerings in hardware and lawn and garden.

Besides the freestanding RoadHandler centers, Sears continues to test two concepts that could provide the model for a remake of its full-size auto centers associated with Sears stores.

One is Tire America by Sears, a four-store test, which strips the auto centers of all merchandise except tires, shocks and batteries. Operated by its Tire America subsidiary, acquired along with Western Auto in 1988, the centers eliminate general automotive service, such as tune-ups and oil and lube, to concentrate on service related to tires, such as front-end alignment and shocks, and electrical service, such as alternator, starter and battery replacements.

The hardware departments of each Richmond, Va., Sears store have taken on a limited assortment of auto chemicals, waxes and oils.

Tire America by Sears offers especially sharp tire prices.

Sears itself is testing another concept in two Milwaukee stores, also eliminating general service but offering a wider mix of parts and accessories.

Sears merchandises both test concepts around a variety of national tire brands, in addition to its private label Roadhandler line.

The two giants of the specialty segment continue to emphasize larger stores that offer auto service.