Taking a new road - Category Update: Automotives Hard Parts

Discount Store News, Nov 4, 1996

In automotives, do-it-yourself is quickly changing into do-it-for-me. That trend coupled with the emergence of auto supply superstores has mass merchants looking for alternative routes to profits.

"With industry consolidation ignited by the influx of category killers, retailers need to find ways to differentiate themselves," says Brent J. Snelson, director of sales for ACDelco's consumer-related aftermarket.

Adds Beth Richard, an analyst with Everen Securities in Chicago, "Newer vehicles are becoming more complicated and tougher to repair and accesorize. That means retailers need to look for growth with professional audiences or look for items that appeal to a leisure shopper."

Chains may be scrambling to find their niche in the market, but auto still represents substantial sales.

Underscoring the importance of the category was Kmart chairman Floyd Hall who, on a recent tour of his chain's newly opened Manhattan store, announced that Kmart garners $100 million annually from battery sales alone.

The automotives sector generated $36.7 billion at retail in 1995, according to information collected by Everen, and it's exhibiting a growth rate in the 6.5 percent range. Discounters, according to Discount Store News research, bring in $4.03 billion of that total, and the category delivers sales per square foot and margins exceeding many other categories.

Sales per square foot ring in at $377 at discount stores with margins in the 22 percent range. Although discounters confirm the automotives category--chemicals, paints, parts, tires and accessories--remains viable, most say they've had to adopt new strategies because of slow growth. Overall discount store sales rose 2 percent to 3 percent, buyers estimate, to date, in 1996 vs. 1995.

In unit sales, hard parts like spark plugs and batteries are flat, although some East Coast markets surged last winter because of extreme weather conditions. But dollar sales are increasing due to trade-up strategies on the retail and consumer levels. Chemical sales are flat, but retailers are attempting to boost margins with private label offerings.

Accessories are showing good upward movement. "People are holding on to cars longer and trying to update them with things like mirrors and new mats," a Sears spokesman says.

Venture Stores, which has exited the automotives category completely two years ago as part of its emphasis on soft lines, is now attempting to capitalize on "casual" auto products.

Instead of appealing to the same customer as the vertical hard core auto specialists, Venture is going after the leisure-oriented shopper who might want to upgrade a floor mat or headlight.

The chain is also easing back into the chemical sector of the business. The new set includes oil, anti-freeze, chemicals and additives, oil and air filters, cleaning supplies, waxes, floor mats and seat covers.

"We are not trying to attract the same customer as the auto parts superstores," says Mike Klein, buyer for automotives at Venture. "We want the leisure buyers. We offer the traditional items they are concerned with, such as oil, air filters and anti-freeze. We do not carry products that require installation by professionals."

Rather than carry traditional broad selections of auto products, many discounters are taking an in-depth items approach. Hill's, for instance, cut back on engine oil offerings to three or four top brands.

Kmart also sliced its vendor structure with an eye on featuring the No. 1 or No. 2 national brands, plus private label.

In fact, private label remains a key profit avenue for several chains in automotives. Wal-Mart launched its Tech 2000 line of oils and chemicals this year; Target unleashed its Car & Driver line.

Some retailers are looking for partnering options or specialty divisions to serve customer needs.

Sears, for example, is trying to serve different market needs by offering an array of formats such as its Sears Tire Centers with batteries and tires and its specialty stores, including the recently acquired Nationwise and Wheels Discount Auto, which sell a wide variety of parts.

To serve a base of Sears customers who like being able to have services on the premises, 76 Sears stores now have on-site Jiffy Lubes. There are also Parts America stores, freestanding units that vie for shoppers with the likes of AutoZone and other specialty stores.

Retailers, attempting to duplicate on-premise services, are installing computers at the point-of-sale to keep customers from veering to category superstores. For example, Wal-Mart, the discounter with the broadest automotives assortment, has a huge department with air filters, oil filters, fuel filters, spark plugs, batteries, wipers and other accessories. There are three computer look-up centers--for batteries, windshield wipers and one for other parts. The center is equipped with touch screens and has the ability to print shopping lists based on consumer inquiries. The screen also flashes various brand logos and photos of products when not in use. When, for instance, the contraption is queried about oil filters for a Chevy S-10 Blazer, three brands come up: Fram, STP and ACDelco.