The road to profits - Automotives Hard Parts

Discount Store News, Oct 16, 1995

The do-it-yourself automotives customer is alive and well, and often shopping at discount stores.

"There are always people who will do their own filtration and spark plugs. That business keeps rolling along," said Cliff Cohen, sales manager for regional automotives retailers at A.C. Delco, a leading supplier of automotives.

A two-pronged DIY market has emerged. Budget-minded customers economize by maintaining their own vehicles, while auto enthusiasts have adopted car maintenance as a hobby.

To better serve the different types of Diyers, chains such as Kmart and Target are adopting a micromarketing approach to automotives products. One planogram is used in stores with value seekers in mind. Another caters to enthusiasts who prefer high-tech products and are willing to pay more for them.

In addition, discounters are utilizing hard parts to bolster margins weakened by promotional automotives products. Although motor oil is the category that drives shoppers into the store, discounters are hoping to capture these customers once they get into the store and convert them into purchasers of other items.

"Motor oil is used as a loss leader to bring customers in," explained Mike Jannsen, buyer for Prange Way Stores. "Margin is in the other areas."

It's already known that motor oil can lure customers into the store. That customer-pulling power can be harnessed to improve sales of related merchandise such as funnels, chemicals or hard parts. The appealing facet of multiple purchases is that many of these categories, such as batteries and accessories, yield gross margins in excess of 50%.

To this end, retailers such as Rose's, Bradlees and Kmart are working on strong programs to tie oils together with hard parts.

With overall trends favoring discount store growth, some experts believe that mass marketers will dominate automotives sales with in excess of a 54% market share by the year 2000. Presently, discounters represent about 35% of sales, manufacturers estimate.

Despite the sales potential for discounters, there's no denying that some mass market operators have recoiled from the category because of stiff competition. Jannsen at Prange Way conceded that the growth of category killers like AutoZone and the prevalence of fast-lube shops have caused some mass marketers to pare back selections.

"What you keep is a convenience set," he explained.

Beyond category killers, there are new contenders for automotives sales. The Home Depot has extended its auto offerings in its new Crossroads format, which was unveiled in Quincy, Ill.

However, those who remain supportive of automotives see opportunity in market voids.

The area remains strong in the Big Three--Wal-Mart, Kmart and Target. And Wal-Mart has expanded its auto stock-keeping units and is actually adding services to include tire and lube express centers in supercenters.

"There are still markets where you need to serve a need," said Daryl Tillis, a buyer for Rose's.

Rose's offers a full array of auto items, with an emphasis on hard parts.

Although Kmart is getting out of the auto service business, it is committed to the hard parts category. "We want our stores to be where do-it-yourselfers think of going," said a Kmart spokeswoman.

A Kmart unit in Parsippany, N.J., for example, has devoted five aisles--each spanning 22 ft.--to auto supplies. Air and oil filters comprise a significant portion of the space. Brands include Delco and Allied Signal.

The mix is rounded out by motor oil, antifreeze, batteries, battery chargers, mirrors, moldings, mats, tarps., gas cans, waxes paints and emergency kits. Batteries are another core component of the department, with Delco as the preferred supplier.

Nearby, a Bradlees unit allocates two aisles to automotives, which encompasses car mats. mirrors, seat and wheel covers. flat fixers. air filters, batteries and battery charsers.