There is a traditional Chinese salutation that roughly translates to, “may you live in interesting times.” These are most certainly interesting times in the automotive aftermarket.
Lately, I have found myself thinking quite a bit about a most interesting marketplace development: Advance Auto Parts' acquisition of CARQUEST. The significance of one of the Big 3 retailers buying one of the Big 3 traditional distributors is earthshaking. Placing it on the Richter scale of aftermarket occurrences, it may be the biggest thing since CARQUEST acquired WORLDPAC.
Advance Auto Parts, CARQUEST and WORLDPAC have operated successfully and independently for years. The question now is, how will they be integrated, if at all and how much tougher can they be under a single ownership?
Advance has a strong track record of integrating companies it acquires. I recalled that they had a history of acquisitions, but I forgot how significant a history it was.
Look back with me: They acquired Western Auto in 1998; Carport Auto Parts and Trak Auto in 2001; Discount Auto Parts in 2002 and Autopart International in 2005. While I have no data to support the observation, I suspect that at least one of those acquisitions was actually larger than Advance. I'm talking about Western Auto, where the management team of the day was challenged with the not-so-small task of shedding hundreds, if not thousands of service bays. That undertaking was accomplished with no external evidence of strife.
But Advance also has experience in operating acquired entities separately. Look at Autopart International. The 200+ store chain was acquired in 2005 and has operated autonomously ever since.
All this history begs the question, "What will the new entity look like?"
From the outside looking in, Advance would appear to have it all. They have the DIFM and DIY business covered. They have something for independent garages as well as the national chain shops. And clearly, they have products for domestic and foreign nameplate vehicles.
Undoubtedly, whatever configuration the new business takes, it will be a formidable competitor for every reseller in the marketplace. Additionally, they will be a force to reckon with as a purchaser of products and will create more than just a bit of hand wringing by the supplier community as they “rationalize” lines, brands and suppliers.
But there are ample challenges for the combined businesses to face. Regardless of the direction they choose, some integration will be necessary. It will be demanding and will consume significant time and resource. There will be crashes of culture as businesses are comingled or coordinated. Then there is the minefield of integrating computer systems that nearly always takes longer and costs more than the experts say. Let’s not overlook the messy business of closing distribution centers and stores and implementing cost reduction plans (including headcount). All the while, someone must address the challenge of keeping the independent stores in the fold. They have their hands full to be sure.
One can also speculate that a move as bold as this is not likely to go without a response from the marketplace. That means we can all start speculating as to what the next big consolidation, merger or acquisition will be. I’m certain that the heads of every auto parts retailer and program group are studying options and plotting counter moves as you read this.
Interesting times to be sure. Stay tuned.
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