Please don't misunderstand. I'm certainly not a proponent of walking away from the DIY business. Contrary to some naysayers, it's not going to collapse anytime soon. However, it will erode over time due mostly to an aging population and the increasing sophistication of automobiles.
Thus, we are now witnessing long-time, hard-core automotive retailers declaring that the commercial business is automotive nirvana. Case in point is Pep Boys, whose president and CEO, Jeff Rachor, says the commercial part of the business is the "growth market." No doubt he has a strategy to go after the commercial business, but may not be focused enough on commercial business fundamentals. For example, the latest Pep news was an announcement about a partnership with lanelogic, a strategic investment of Copart, Inc., to facilitate a way for consumers to sell their vehicles for cash (see cover story). Although I'm the first to applaud new thinking and initiatives to build new profit centers, this particular move seems incongruous with trying to obtain more commercial business. Strangely, Rachor says that this service should attract incremental DIFM sales. On the contrary, since this program calls for consumers to turn in their present vehicles at Pep Boys service facilities, the opportunity for any kind of parts sales or service work will be gone. Simply, the consumers attracted to this program will be those who want to dump their vehicles and take the money and run. As lucrative as the used car market is, there should be decent profits in this for Pep. Still, this program is more of a short-term benefit than a long-term commercial strategy.
And then there's Advance Auto Parts, whose management not only has recognized the value of the commercial business, but has methodically moved forward with a thoughtful plan to increase it. Now with a 27/63 commercial/retail mix, the company has alluded to hitting a 50/50 balance, which just happens to be the O'Reilly Auto Parts mix that I have proselytized about for two decades.
Some may raise an eyebrow at Advance's hiring of key executives from Best Buy, the mega electronics retailer. This is understandable since some of the retail prima donnas previously hired at some auto retailers haven't had the best track records understanding the commercial business, let alone growing it.The Team That Best Buy Built includes President and CEO Darren Jackson, as well as the top positions of finance, supply chain and information technology and investor relations. But it appears the recent Advance hires may be anomalies who truly understand where the future of the aftermarket lies and therefore, where their future lies. I have to admit that my interest is piqued when I consider the investment that Advance is making in training and inventory, coupled with sophisticated retail techniques and internal systems networks that would rival that of Wal-Mart. The most important hire may be Judd Nystrom, VP of finance and investor relations, because he will have to stave off Wall Street's short-term thinking a la Pep's "get-some-quick-cash-in-the-coffers" scheme in favor of the steady mule-like performance of the commercial business.
Ironically, Advance just may be a retailer that not only steals a significant chunk of the commercial business from some of the industry stalwarts, it may be in the process of reinventing it. At the very least, it is becoming more like a jobber.
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.
LARRY SILVEY
