Sears Exec Brought In to Help AutoNation
Republic Industries, the nation’s top car dealer, on Friday hired Sears’ marketing chief in an effort to pump some life into its strategy of transforming its AutoNation USA car empire into the first national auto retailing brand.
John Costello, who helped create “The Softer Side of Sears” campaign that revitalized the nation’s No. 2 retailer, will become president of Republic overseeing marketing as well as car retailing and rental car operations.
“John Costello is the best marketer in the U.S.,” said Walter Loeb, a retail industry analyst with Loeb Associates in New York. “Retailing is about understanding the customer and nobody does that better than him.”
Costello, who will join Republic at the beginning of next year, comes as the auto retailer is gearing up a broad effort to meld its used and new car operations under the AutoNation banner.
Headed by billionaire Wayne Huizenga, Republic entered the car business just three years ago. It now operates 40 AutoNation used-car superstores and 246 dealerships in about 30 markets. It also owns Alamo Rent-A-Car and National Car Rental Systems. The Fort Lauderdale, Fla.-based company wants to sell, lease, finance, insure, service and rent cars.
Republic earned $384 million on revenue of $12.7 billion in the first nine months of 1998. But profit at its used-car megastores has been lackluster and analysts have criticized the company for having an incoherent strategy.
Republic executives say that its initial focus was building and acquiring critical mass in key markets. In Southern California, for instance, it has opened three used-car outlets and acquired 29 new car dealerships. More expansion is expected in the Southland in the next year.
The company’s next step is to use its growing market presence to build a national brand, something that has never been done in the highly fragmented auto retailing industry.
“It’s time to put the accelerator to the floor in our effort to become a premier automotive industry marketer,” said Steven Berrard, co-chief executive of Republic. “John Costello has the marketing skills and retail experience we need to drive us more quickly to this next level.”
Costello, 52, is credited with broadening Sears’ appeal, especially to women who once viewed Sears as largely a stodgy, outdated tool and appliance outlet rather than a full-service department store. Outgoing and hard charging, Costello helped implement the restructuring plans of Sears Chairman Arthur Martinez, who sought to revitalize the company by renovating stores, selling unprofitable assets and realigning management.
Using “The Softer Side of Sears” marketing campaign created by ad agency Young & Rubicam in late 1993, Costello began changing consumer attitudes toward Sears. Clothing sales in particular rose.
His departure comes as Sears is again facing tough times. Store sales are down this year as it confronts increasing competition from discounters like Wal-Mart. Costello, who also did stints at Procter & Gamble and PepsiCo, is being replaced by Mark Cohen, the former chairman of Bradlees who joined Sears as a senior merchant in January.
At Republic, Huizenga will remain chairman and co-chief executive with Berrard, who relinquishes the president’s title to Costello. Analysts said the move would allow Berrard to focus expanding the AutoNation national retail chain. Those efforts have recently slowed because of Republic’s slumping stock price.
One of Costello’s first jobs will be to oversee Republic’s roll out of its first new-car dealerships under the AutoNation brand. It will spend as much as $10 million to transform 22 Denver stores into John Elway AutoNation dealerships. Elway, the Denver Bronco quarterback, sold his stores to Republic in 1997.
The Denver dealerships account for about 25% of all vehicle sales in the area. They will sell cars under a set-price, no-haggle policy. The company is planning to expand the AutoNation concept at all of its stores nationwide, hoping to complete the transformation within three years.
