J.R. "Pitt" Hyde III: Hall of Fame

Discount Store News, Sept 15, 1997

MEMPHIS, TENN. -- AutoZone founder and former chairman J.R. "Pitt" Hyde III has a favorite story about how Sam Walton used to pick him up at the Bentonville Airport in a 10-year-old Buick whose seats were covered with dog hair. By the time he got delivered to Wal-Mart's board meeting, Hyde had to pick dog hair off himself.

Hyde concedes that he borrowed ideas from Sam Walton, who himself freely cribbed ideas from others. One idea from was to pass along savings to customers.

Another idea was the the company cheer. At AutoZone it begins "AutoZoners always put customers first" and goes on to pledge the best merchandise and prices in the best stores.

Hyde took over the family business at age 26 and retired this past March at age 54. He remains on the board and still owns a 9% stake in a company with a market capitalization of $4 billion.

"Its a great relief to me to be free of all operating decisions," he says, although he still runs a real estate company and the Hyde Foundation.

The keys to AutoZone's success are simple, Hyde said: establish a people culture; institute a culture of thrift, including six-day work weeks; become a low-cost producer, passing along the savings to customers; and be an innovator.

Among the AutoZone innovations high on Hyde's list: launching an EDLP policy in auto parts; offering lifetime warranties on both private label and branded parts; establishing an electronic catalog; and store technology, such as linking stores with headquarters via satellite.

AutoZone was founded as part of the Malone & Hyde food wholesale and supermarket business that Hyde's grandfather started in 1907. Those antecedents had advantages and problems for the new thrust into auto parts, Hyde said.

Malone & Hyde sold its food business in 1988 to Fleming, now one of the country's two largest wholesalers, to focus on AutoZone.

"I have no regrets about getting out of the food business," Hyde said. It requires more investment and provide lower returns than other retailing businesses, he said.

Hyde said he also detected a poor trend: much of the profits in supermarkets stemmed from forward buying.

Before venturing into the auto parts business, Hyde looked at 200 to 300 auto parts stores and noted that while they all were making a lot of money, they provided poor customer service and satisfaction. Jobbers stores (which supply professional mechanics) were getting DIY business by default and making DIY customers pay high prices for parts.

Stores were dirty and self-service, he said.

So instead of buying an existing chain, such as Chief Auto Parts or Checkers, Hyde started from scratch.

"The concept hasn't changed," Hyde said. AutoZone built a culture of customer satisfaction, and all job titles have customer satisfaction as part of them, as in chairman, customer satisfaction.

"We've made a religion out of putting the customer first."

AutoZone brought discounting to auto parts retailing. "No one was operating on an everyday, low price basis," Hyde said.

That's where the supermarket experience paid off. The overstored segment operates on margins as slim as 1%, he said. "There is a lot of discounting in the food business that we applied to what then was a non-competitive auto parts business." and it brought service.

About two-thirds of AutoZone offerings are specific application parts, so DIY customers need how-to-install advice and parts look up service, Hyde said.

"We've benefited greatly from creating a environment that encourages employees to put the customer first," Hyde said. "People want to work in a culture of excellence."

As a newcomer to the parts business, AutoZone also had to develop the product knowledge side of the business, Hyde admitted.

The biggest difference between supermarkets and parts stores is that groceries are self-service and are high turns. In contrast, auto parts require customer service and are low-turn goods.

That entails totally different ways to manage business, Hyde said.

"It took time to learn the business. But we had time to learn because it was so non-competitive." Today, everybody is a "Zone Clone," Hyde said, and there is pressure to innovate.

Ahead for AutoZone includes is the entrance into the highly competitive los Angeles market and Expansion outside the United States. The most likely international market would be South America. "They never scrap cars down there," Hyde said. In Europe and Japan, automakers have a lock on the aftermarket, Hyde added.

Hyde foresees tremendous consolidation ahead as the DIY and the commercial markets merge. "There will be fewer but bigger players in the future," he predicted. "I've never ruled out an acquisition.