Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, January 1, 1994 TAG: 9312310121
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: BY JUN SHEN KNIGHT-RIDDER/TRIBUNE
DATELINE: BRADENTON, FLA. LENGTH: Long
The parts will cost $225, but the 53-year-old employee of a Bradenton truck company said it could have cost up to $800 if he'd taken the car to a mechanic to replace the parts and service the car.
Platt said he saves money and gains peace of mind by doing the repair work himself.
He is not alone.
Nationwide, analysts say, do-it-yourself weekend mechanics spend $25 billion annually for automotive parts, maintenance supplies, mechanic tools, equipment and car accessories.
And the do-it-yourself market has fueled a boom in what's called the automotive aftermarket business - the retail side of the trade. That trend is prompting manufacturers and wholesalers to cater specifically to the demand of retailers.
Several years of economically tough times contributed to the rise in the business as people began to keep their cars longer.
The aftermarket retailing industry has at least doubled its revenue, which was about $14 billion in 1980, said William A. Julian, vice president of equity research for New York-based Mabon Securities.
And Skip Potter, director of research of Automotive Service Industry Association of Elk Grove Village, Ill., says retail sales of auto parts, tools, equipment and accessories such as car seats, wax and other cosmetic products reached $60 million to $70 billion a year. Many service stations or mechanic shops buy from retailers, too.
With the changing times, the stores themselves have changed.
Auto-parts stores used to be hard to find and were dark, dingy, greasy places.
But now, people have no trouble finding the flashy yellow buildings and logos of Discount Auto Parts, checkered-flag signs of Rose Auto Stores and red-and-black motif of Advance Auto Parts. And automotive parts sections are modern, clean and highly visible in chain stores such as Kmart, Wal-Mart and Target.
The rapid growth of the retailing market can be traced back three decades, according to Bobby Cox, vice president in charge of retailing for Ace Auto Parts of Clearwater, Fla.
When his family started operating Ace in 1971, Cox said, retailing was virtually nonexistent. Then, the store wholesaled the "hard parts" such as engines and alternators to mechanic garages and service stations, he said.
That changed in 1977 when discount retailers began to appear, Cox said.
In response, Ace Auto Parts began to diversify to take advantage of the emerging market. It began stocking automotive accessories such as car seats and waxes, and also enlarged showrooms to cater to retail customers.
Today, Cox said, Ace's retail business accounts for 40 percent of its total revenues. Its wholesale business remains at 60 percent.
While auto-parts retailing has grown to a significant size, Julian said, the momentum of growth is sputtering - largely because of the uneven performance of market players.
For the past several years, the average annual growth rate of auto-parts retailing overall has been hovering around 2 percent, he said.
At the same time, many of the big chains have experienced growth rates of up to 25 percent annually.
Julian said small chain-owned and independent stores are being squeezed as they try to compete in price and product selection with larger chains and discount department stores, he said.
"A lot of retailers are not doing well, for a variety of reasons, including not having the right products, or the prices are not right."
In 1990, the latest available data year, wholesale stores and small retailers had 32 percent of the do-it-yourself market, discount department stores 26 percent, convenience and drug stores 10 percent, new-car dealerships 4 percent, mail-order firms and other retailers 6 percent. Market share by 35 of the largest auto parts stores is 22 percent.
To compete, small chain stores must have a good mix of products and competitive prices, Julian said.
Some independent stores and small chains joined NAPA Auto Parts Co. and other buying groups to minimize price disadvantage. But the differences linger.
Discount Auto Parts and Pep Boys of Philadelphia are experimenting with the huge depot or warehouse-store concept to put more pressure on competitors, he said. Pricing in these stores is even lower and the selection greater because of buyer volume, he said.
Potter said changing automobile technology also is changing supply-and-demand elements of the business.
Traditional parts such as spark plugs no longer need frequent replacement in late-model cars, he said.
But more sophisticated emission controls and other computerized parts common on late models are beginning to need service, and aftermarket manufacturers are reporting increases in those sales, he said.
Julian predicts the auto-parts retailing business will continue to grow, despite the doomsday predictions that fuel injection, on-board computers and other technology will knock the do-it-yourselfers out of business.
"Back in 1987, many predicted that there would be no more do-it-yourselfers because of the complexity of the new technology, and professional service would become a necessity," he said. But the size of that market has grown sevenfold.
"I think the core [of do-it-yourselfers] is stable. Yes, the technology will drive some people out, but the flip side is that because car repair is becoming more expensive, more people will also come into it."
Fifteen years ago, Potter said, there were probably 15 makes of cars sold in the United States. Now, as many as 50 makes, both domestic and foreign, are available.
"The growth of the car makes will create a lot of potential, and retailers and manufacturers will have a tough time meeting all the inventory needs."
In anticipation of that growth, many of the largest chains are aggressively adding new stores to eke out more market share, Julian said.
The big guys probably will continue to thrive in the coming years, creating more pressures on competitors, he said. Those chains can expect annual sales growth of about 8 percent over the next five years, he noted.
Car dealers' parts departments should see an increase of about 1 percent to 2 percent market share, because many foreign cars are equipped with dealer-only parts and they are improving service, he said.
The market looks dim for the rest of the players - small chains, wholesalers and discount department stores - as they face the increasing competition.
But Julian is not ready to count small players out.
"I am not going to pick a loser out of these small chains or independents. They can still do well, if they have good people working for them and have the right mix of prices and products."
by CNB