50/50 won't be End Game

Jan. 1, 2020
O 'Reilly Automotive Inc.'s definitive agreement to purchase CSK Auto Corporation may be the most important news of the decade. And it's not because of the obvious, i.e., that the purchase gives O'Reilly the immediate clout in the West and a place on
O 'Reilly Automotive Inc.'s definitive agreement to purchase CSK Auto Corporation may be the most important news of the decade. And it's not because of the obvious, i.e., that the purchase gives O'Reilly the immediate clout in the West and a place on the national stage. Of course, that's worth talking about — but that's just the headline to this evolving story.

The real meaning of this story is much broader than the bragging rights that O'Reilly gains. And it's much broader than saving CSK from itself. The broader service is that of helping the industry, because it will mean better efficiencies and a better business focus on such a large scale that the entire industry will benefit. Unequivocally, this union will result in a stronger aftermarket and basically, there are three reasons for this.

First, O'Reilly will indoctrinate CSK employees to its dual market thinking. There won't be room for any sales and service sloppiness. Instead, O'Reilly will train its employees to speak the language of the commercial customer, as well as the less demanding DIYers. That's good for O'Reilly, CSK and the entire industry.

Second, O'Reilly will clean up any inventory inefficiencies. Not only are such inefficiencies bad for a company, but on a scale this large, any inventory hiccup affects the entire distribution system. O'Reilly will bring balance to the type of inventory it carries and more prudent sales and return policies that will benefit itself, CSK and its suppliers.

Third, and most important, is the emphasis on the commercial market. As I have preached for quite some time, this is where the growth opportunities are for all parts resellers. Ones like CSK that have a heavy retail emphasis stand to lose over time to those with a more balanced market attack. That is why AutoZone, Advance and Pep Boys are scrambling to balance their commercial/retail ratios.

The 50/50 market strategy has worked well for O'Reilly for many years and no doubt it will right CSK's imbalance between its commercial and retail businesses. But O'Reilly's next step, in my opinion, needs to be a tweaking of this strategy with more emphasis on the commercial side of the business with consideration,of course, given to regional and local market conditions. Frankly, it's a quickly growing DIFM market. There isn't any escaping the sophistication and complexity of today's computerized vehicles and the tools required to fix them.If you need an analogy as to how difficult they are to repair, look no further than your own computer. When was the last time you successfully fixed it without the aid of a computer geek?

Well, I don't expect everyone to agree with me on this issue; however, I do expect some meaningful dialogue, which can be had at the upcoming Global Automotive Aftermarket Symposium in Chicago May 20-21 (www.globalsymposium.org). There's no better place to discuss this and other important industry issues. But GAAS is not just any symposium. It is the only non-profit conference that most aftermarket trade associations sponsor and attend, because it provides scholarships to aspiring aftermarket students who will be the industry's future leaders.

The exchange of ideas with industry colleagues and the investment in your industry's future should be reasons enough to attend GAAS. The bonus, of course, is to be able to argue with me about the O'Reilly/CSK merger.

Larry Silvey, a 25-year veteran of the automotive aftermarket, is editor-in-chief of Aftermarket Business and editorial director for the Advanstar Automotive Group, which consists of Aftermarket Business, Motor Age, ABRN and Styling and Performance.

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