Tuesday, September 15, 2009

What’s Going On at NAPA?


If Genuine Parts – NAPA – were a technology company, would it be Digital or Apple? I think Digital. They seem to be failing in dream-like market conditions.

At one time NAPA was the aftermarket Terminator company – a machine that fed and grew the IRFs (independent repair facilities), propelled along a growth path that could be characterized as highly professional and highly competent.
They were the benchmark.

Any way you look at it, they have been receding so far in 2009, while several notable others have been cleaning up.

What’s happening?

Shifts in repair service are certainly taking place, and these shifts are putting NAPA at a disadvantage.

AutoZone has been steadily growing while primarily feasting on the DIY (do-it-yourself) market. A major impact of this recession, and its related Paradox of Thrift, is that more vehicle owners are taking on low-hanging-fruit repair responsibilities – antifreeze, battery replacement, LOF – the simple stuff. These newfound DIYers are shopping for this sort of stuff and, again, because of the Paradox of Thrift, are choosing lower cost alternatives. They shop at stores specializing in the DIY market and those that have the breadth of choice they want. Bingo! AutoZone.

Or, we can tell the same story with pictures. I went to Google and typed in “napa auto parts” and the first choice on the fetched list was AutoZone (I don’t understand Google – sometimes it was second on the list.). Cute. Now, go to the NAPA website and get ready to time travel back to Jobber World. It almost looks like it was designed in the 1950s – certainly it was not designed for a new millennium recession-era DIYer.

AutoZone’s web site was designed for the times we live in.

So what’s happening to NAPA? NAPA is getting slammed for not evolving its channel for the current recession-era market conditions, and it will not simply get over this little bump and get on with its role of world domination once things get better – not even for the truck, dozer, and tractor guys. AutoZone has its eye on the DIFM (do-it-for-me) market and will continue to steal share from NAPA with better merchandising, newer and fresher stores, and a broader/better concept. In a nutshell, the big news in the IAM is shifting non-OEM shares with a short term focus on satisfying the bump in DIY sales.

I asked Nissan’s Peter Bennett (a dear friend whose brain I am in awe of) what he thought. “Capitalistic constructive deconstruction at work. If you’re not growing, you’re dying. The losses and issues at the other business units within GPC, which have been considerably more severe, have no doubt hindered their investment strategy and focus on NAPA. But one suspects they’ve been in denial for quite some time. Like their website, their physical store presence has been outpaced by their competitors. I think NAPA stores are smaller, darker, and still mainly in strip malls or older semi-urban buildings. Their competitors have struck out in larger, brighter, and more inviting facilities. While assuming that most auto parts purchases are made by men, I wonder if the competitors’ brighter and newer facilities have proven to be more attractive to female customers? Comments from NAPA’s competitors in their quarterly statements frequently discuss their increasing initiatives to the Commercial sector – IRFs. Clearly NAPA is feeling that competitive sting.”

Bottom line: NAPA should acquire K-Mart from Sears and have Martha Stewart develop a line of designer spark plugs. OEMs? Unless your dealer parts departments look like an AutoZone store (BTW, they don’t), don’t bother chasing them. Focus on dealer service retention and wholesale.

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