Wal-Mart expands automotive service as K mart cuts back

Discount Store News, Dec 14, 1987

Wal-Mart Expands Automotive Service as K mart Cuts Back

While Wal-Mart is expanding automotive service, K mart is cutting back. The twin developments stress even more their respective thrusts: Wal-Mart toward hard goods and K mart toward soft goods.

Target, the consummate soft goods discounter, is out of the auto service picture completely. It closed all 193 of its remaining service centers in February 1986 and converted the space to soft goods.

Before taking the ultimate step, Target had cut back to specialized auto service in tires, batteries and shocks from general service.

Out of 121 new Wal-Marts opened last year, 49 got auto service centers. Most of the larger, urban stores built this year are getting service centers. Overall, 225 out of Wal-Mart's approximately 1,100 stores offer auto service. Moreover, Wal-Mart is going to test quick lube service at its new hypermarkets, starting with the unit set to open after Christmas in Garland, Tex., outside Dallas.

Closing Auto Service

In sharp contrast, K mart opened 36 new stores this year, and declined to install auto service bays in any of them. Moreover, over the past 18 months, K mart has closed an estimated 75 auto service centers to make more room for apparel.

Consequently, the proportion of K marts that offer auto service is steadily declining.

Out of some 2,203 stores, only an estimated 1,400 stores operate auto service bays.

That compares with around 1,900 auto service centers four years ago. That was before K mart closed about 300 marginal or money-losing centers in one fell swoop. Since then, auto service managers have had to convince headquarters that their operations could produce better margins than could soft goods. Many have lost that argument.

Last December, Wayne Sales, divisional merchandise manager for auto accessories and service, spelled out K mart's policy regarding existing service centers: "We will constantly evaluate every service center and make a business decision as to how successful we are."

In a typical closure in the Dolton, Ill., store last December, K mart knocked out a wall and put sporting goods in the space that the service bays once occupied. Then it expanded apparel into the square footage that sporting goods once held.

As another indicator of the de-emphasis of automotive service, K mart last February abolished K mart Enterprises, eliminating a vice presidency and its staff. That was a subsidiary established in 1965 to assume operation of what used to be leased departments in sporting goods and automotives.

In addition, K mart over the past two years eliminated five auto service managers at the regional office level and 20 district automotive managers, a former K mart auto service executive said.

The only part of K mart Enterprises that remains is the merchandising group under direction of dmm Sales, said Maxwell Parsons, who retired as vice president in April 1986.

Parsons said K mart declined to fill his position after he retired and then abolished the Enterprises subsidiary.

"I understand they have closed a number of auto service centers," Parsons said, "but I don't know how many."

K mart declined to reveal how many automotive centers it has closed.

The closings include at least five in the Chicago area, where Venture closed all 20 of its Chicago-area service centers in August.

A Chicago store manager for a mass merchandiser that is expanding auto service said he has interviewed a number of K mart employees for mechanic and service manager jobs and his headquarters had interviewed a couple of K mart auto service people for executive positions.

"They're cutting back," the store manager said, requesting to remain nameless. "The auto service program [at K mart] is in turmoil," the manager said he was told by the K mart employees he interviewed. "It's getting harder and harder to get the job done. The people aren't there because of payroll cutbacks."

"There is a lot of apprehension because of the thrust towards soft lines," said the former K mart auto service executive. Also requesting anonymity, he attributed the cutbacks to Joseph Antonini. Before taking over as chairman and chief executive officer of K mart Corp., Antonini was influencing the direction of auto service while he was president of K mart Apparel and heir apparent of Bernard Fauber, said the executive.

As another indicator of soft lines ascendancy over auto service, Gus Giotis previously was a soft lines merchandiser before being appointed director of auto service in 1983, the former executive said. "I left when I saw the handwriting on the wall," he said.

He estimated that K mart takes in close to $500 million a year in auto service revenues.

K mart's cutbacks make sense, said Richard A. Vinet, a Langhorne, Pa., consultant to the auto service industry, because of problems with training mechanics, high costs of equipping service bays and slow turns in installed parts.

Capital investment for a six-bay auto service center runs about $250,000, Vinet said. To make a reasonable profit, such a center has to garner $720,000 a year in revenues, and profit margins would range from 5 percent to 10 percent, after labor costs.