Car Parts Shops Paradise for Shade-Tree Mechanics : Everything Under the Sun : Competition High Among Stores for the Do-It-Yourselfer
Don Sickler’s family of four in Alhambra owns two old Mustangs, a ’68 Ford station wagon, a ’68 Cougar, a ’74 Subaru and an ’80 Chevrolet. And don’t forget the ancient Dodge.
Enough to keep an auto repairman in business full time, right? Wrong. The high school math teacher figures he has saved thousands of dollars during the past two decades as a do-it-yourself “mechanic of desperation” who spends hours grubbing around with socket wrenches, water pumps and oil filters.
“If something’s broken that I think I can fix, I do what everybody else does,” Sickler said. “I go down to an auto parts store that will have what I need.”
For the legions of backyard mechanics like Sickler--and for the thousands of chain stores and mom-and-pop outlets that supply them with auto parts--Southern California is as good as it gets.
The combination of a car-worshiping populace, extensive freeways, temperate weather and lack of a mass transit system have made for a boom business ever since Manny, Moe and Jack--yes, the Pep Boys were real people--brought to Los Angeles their concept of selling auto parts directly to customers in 1933.
“Los Angeles is the No. 1 market in the world,” said Robert Haft, president of Trak Auto, a 225-store chain based in Landover, Md.
“The consumer in Southern California, more than anywhere else, has never lost his love affair with his car,” said Sarah Frankson, Chicago-based publisher of Automotive Marketing, a trade publication.
Every day in the Los Angeles area, auto dealers sell an average of more than 1,800 cars. The state of California accounts for more than 10% of the nation’s 160 million automobiles. In 1986 alone, Californians registered more than 1.1 million new cars, topping New York State by more than 300,000.
With Americans keeping their cars longer and women bolstering the ranks of do-it-yourselfers, auto parts retailers nationwide have cruised in recent years to estimated annual sales of between $60 billion and $70 billion, with California accounting for a major portion. That’s a lot of shocks, antifreeze and tires--not to mention fuzzy pink dice.
But big as the market is, the business has shifted into low gear in the past three years and might even be going in reverse, industry observers and retailers say.
For one thing, automobiles are becoming increasingly technological and complex, making under-the-hood repairs by do-it-yourselfers a more daunting proposition that is often best left to dealers and professional mechanics. “Without elaborate diagnostic equipment, you don’t do anything on the car, you just break it,” Sickler said.
Good News for Consumers
At the same time, the market for auto parts and accessories--a traditionally high-markup business that leaves plenty of opportunity for price cutting--has been divvied up among a wide variety of companies. Service operators specializing in tuneups, quick oil and lubrication changes, transmissions, mufflers and tires are siphoning off millions of dollars of business from auto parts stores. In addition, general merchandisers, discount operations and even supermarkets are giving more shelf space to motor oil, car waxes and other big sellers.
But the same factors that tighten the screws on retailers are good news for customers, who benefit from the intense price competition and abundance of locations.
“I would say I patronize five different stores, based in part upon distance and need,” said home mechanic Sickler. “If it’s windshield wipers, I’ll go to the nearest store I think has the best price. . . . If I have to get a water pump right now for a ’74 Subaru, I’ll go five miles.”
Richard Stevens, a former Xerox engineer who lives in Temple City and owns 19 cars, said discount stores will occasionally beat the price of auto parts chains on items such as motor oil. “I use large enough quantities that I’ll buy a case or two at Target,” he said.
Pep Boys, considered the industry’s pacesetter with a successful formula that includes repair service, views some of these trends with concern. “The competitive situation has gotten stiffer for companies like Pep Boys, which for many years had the market by the horns,” said Mitchell G. Leibovitz, president of the Philadelphia-based company, which has 85 stores in California.
And for smaller chains and independents, the changes are cause for even more alarm. “We’re going through a wrenching transitional period,” said Merv York, owner of U-Save Auto Parts Stores, an eight-store chain based in Van Nuys. “We’re under attack from all sides.”
Another Consolidation
Facing such a climate, more regional auto parts retailers are expected to follow the lead of Schuck’s, a company based in the Northwest that last year purchased the Checker and Kragen operations from Lucky Stores in a $155-million deal. The acquisition, which quintupled Schuck’s size, vaulted the privately held company into the industry’s No. 1 position in terms of number of company-owned stores. (More than 2,000 stores operate nationwide under the Western Auto Supply name, but those are predominantly “associate dealers” that are not required to buy through the Kansas City, Mo.-based company’s distribution network. Many sell home appliances and sporting goods as well as auto parts.)
Another major consolidation might be in the offing if Robert Haft and his father, Herbert, are successful in their bid for Chief Auto Parts, a large chain put on the block by convenience store operator Southland Corp. as part of a restructuring. In Southern California, the three major chain competitors are Trak, Pep Boys and Chief.
“Mergers and acquisitions are going to be the rule over the next five years,” said Stephen Weinress, a partner in the Los Angeles investment banking firm of L. H. Friend.
The auto parts business has certainly seen its share of transitions. The well-lighted, supermarket-like chain stores of today bear little resemblance to the hole-in-the-wall places of the past, where auto parts were sold off jumbled shelves from behind a greasy counter. Trak Auto, for example, was actually spun off in 1979 from a drugstore operation. (To be sure, there are still tens of thousands of the traditional counter businesses, known as jobbers, supplying parts for repair shops and even for service-oriented retailers such as Pep Boys.)
For the auto parts business, “the real catalytic change in marketing came in November, 1973,” when the Arab oil embargo began to drive up the prices of gasoline and motor oil, Weinress said. “That forced people to look at how to save money.”
Recession Resistant
Self-service gasoline pumps quickly became the rule. Once gas stations found that they could make more money in self-serve, they converted space to car washes or convenience stores, eliminating traditional service and repair functions. With the closings of an estimated 80,000 neighborhood gas stations during the past decade or so, Sears, K mart, J. C. Penney and other retailers took up the service slack.
Then specialty retailers sprang up, offering auto parts for do-it-yourselfers. Recently, the market shifted again with the advent of such places as Jiffy Lube and other franchised specialists, which cater to a group known in the industry as the “do-it-for-mes,” those willing to pay a modest fee for the convenience of not having to get their hands dirty.
Auto parts merchants have benefited from a recession-resistant business, analyst Weinress said. “If the market’s really booming and auto sales are high, then the car manufacturers are gobbling up components for sale of new cars, and the prices of parts go up,” he said. “When the industry is soft, people tend to buy fewer cars and maintain the ones they have.”
The average car on the road today is 7 1/2 years old, up from 6 years old just five years ago and 5 years old a decade ago. Drivers have some real motivation to keep those vehicles humming, too, given that the average price of a new car has risen to $12,500 from $8,000 in 1980.
High Markups
To differentiate themselves, each auto parts retailer tends to gravitate toward a particular niche. Pep Boys offers perhaps the greatest depth of merchandise in large, convenient stores with adjoining service bays. Trak Auto positions itself as a low-price leader, whereas Chief Auto Parts markets itself as having convenient locations, many open 24 hours a day, and a toll-free hot line. Kragen, another major Southland competitor, emphasizes low prices and customer service.
With their marketing clout, the big chains leave a number of independents in their dust. But countless family-run outfits continue to survive, if not thrive, as the source of last resort for the offbeat--such as an alternator for a ’55 Chevy.
“We have our image of being a place where you can get hard-to-find parts,” said Wayne Ishimine, whose family owns Slauson Auto Parts in South-Central Los Angeles, across the street from a Pep Boys and between two Trak Auto stores that are half a mile away to the east and west. “We can’t get into a price struggle (with the chains), or we’d lose.”
Even so, Ishimine, 27, is thinking of bringing down prices on fast-moving items and raising the prices of “stuff that doesn’t move that often, because people are willing to pay those prices.” Ishimine, who was an economics major at UCLA, also believes that customers are attracted by his workers’ experience. “I know a lot of countermen at Pep Boys or Trak or Chief are just summer-job type of guys. With us independents, it’s more (of a) career.”
Ishimine’s jobber business, started 25 years ago by his father, Hideo (whose daughter, Joanne Ishimine, is a television anchorwoman on Channel 7), has also signed on with Carquest, a nationwide distribution and advertising cooperative based in Tarrytown, N.Y. Such cooperatives are viewed as a last hope for many independents to cut the costs of advertising and purchasing.
Ishimine acknowledged that his nondescript white shop, adorned with the logos of auto parts manufacturers, has been in “kind of a slow period” the past couple of years, with business down about 10%. But it is still a lucrative field, he said. “I guess consumers won’t like it, but it’s a high markup business.” (Depending on the item, auto parts retailers mark up prices anywhere from about 35% to 100%.)
Like other retailers, auto parts stores lure customers with “loss leaders,” items with low markups. “Grocery stores use Coke, milk, maybe dishwashing detergent,” said Kenny D. Cason, national ad manager for Southland Corp., parent of Chief Auto Parts and the 7-Eleven convenience stores. “May Co. may use Calvin Klein shirts. We use the same philosophy . . . on oil, filters and spark plugs.”
Small Cars Help
At Chief and other companies, women are increasingly buying some of these fast-moving products and doing their own light maintenance, adding a quart of oil or “maybe even getting into an oil change,” according to Michael H. Manor, the chain’s general manager. Industry estimates show that women now make up 25% of do-it-yourselfers, although that number includes those who may only pump their own gasoline.
Despite the stiff competition, auto parts chains view Southern California as a sturdy market, particularly with the fast-growing Latino population. The penchant for small cars, especially imports, will buoy purchases, observers say.
“After buying a basic small car, people want to dress it up,” said Chuck Laverty, editor of Automotive Week, a trade publication based in Wayne, N.J. “They add comfort accessories such as speed-control devices, trunk lock release systems and sunroofs.”
Pep Boys’ strategy will “continue to be to look for opportunities to open stores in Southern California,” said Leibovitz, the president. The company recently opened its first stores in Atlanta, part of a gradual, nationwide rollout. Investment analysts view Pep Boys as having the best shot at becoming a truly national chain in an industry composed of mom-and-pop stores and regional operations.
“The potential . . . for the company to become the McDonald’s of automotive service is not a pipe dream,” analyst Stephen F. Mandel Jr. wrote in an Aug. 27 investment report for Goldman, Sachs & Co.
Pep Boys stands to benefit especially from its emphasis on service, said Donald C. (Rusty) Jackman, publisher of Motor Service magazine. With a slowing of the do-it-yourself trend, he said, “the biggest growth area in terms of getting cars fixed is in the independent repair shop area.”
