Wednesday, October 21, 2009

To NAPA, No Way. But Bring On the Paranoia – David Carlisle

The front page article in this week’s Automotive News confirmed my nonchalance when hearing that some terminated dealers were setting up NAPA operations in their nuked stores. The article contained anecdotes on a few dealers who tried (unsuccessfully) to reinvent their former Chrysler locations as used car dealerships and service centers.

If you’ve ever been a farmer, you’ve been to a NAPA store – if, for nothing else, you’ve been there for hydraulic couplings. A defunct dealership has pretty much nothing in common with a NAPA store. The owner/operators are different (they understand parts and selling parts to DIY and IRFs), the real estate is different (NAPA stores don’t look like dealerships), the help is different (NAPA has professional counter-persons), the delivery service is different (delivery inside 45 minutes), the relationships are different (aim to be the top supplier to local IRFs and treat them so well that they come to pick up the parts they want), the overhead is different (no boats to float), and the purpose is different (mechanical parts wholesale vs. warranty service and used car sales). So, it’s like comparing the Space Shuttle to a school bus – you choose who is who.

I asked one of my partners what he thought of this.

About 2 or 3 months ago when the story first came out about closing Chrysler stores switching to NAPA, frankly I was worried. At the same time, my 2004 Chevy Malibu (about 105K miles) needed some work - an electrical problem where my gas gauge did not tell me if the gas tank was empty or full. So I went on the web and found the nearest NAPA Service store. I went during lunch without an appointment to live the experience. This is not the traditional NAPA DIY/Wholesale store with Ford Rangers out front to deliver parts to local installers. The NAPA brand that dealers were converting to is a service brand focused on the DIFM market. I recall reading about NAPA claims that there are hundreds of these. This store was on 12 mile road in Berkley, MI and a very convenient location. But, I had to park on a side street because there was no parking available at the store. The parking lot in front of the store was filled with ten to 15 year old cars. The signage was lousy. I drove past the store and had to turn around and come back. This was formerly an independent store. Based on my reading of plaques in the lobby, about 2 or 3 years ago they signed up with NAPA. The lobby was filthy. Dirty floor. Cobwebs in the corners with dead bugs. The coffee pot was unplugged with the cord wrapped around it. The display case/counter was filled with dust and knickknacks from 5 years ago. The counter person was the proprietor’s wife. She was in slippers. Nice lady. The proprietor was the head mechanic. Really nice guy. Friendly, dirty uniform, dirty everything. His son was also a mechanic. That was it. Three people. Within 20 minutes they had my car in the bay for diagnosis without an appointment. This was good. When the proprietor finished diagnosing my car he called me into the garage to review his findings. The place was filthy – poorly lit and filled with junk between the service bays. One bay had his late model Chevy that he uses in Woodward Dream Cruise. He diagnosed my car, but did not have the right part on hand and told me I could come back in a week and he would fix it. He did not charge me for the diagnosis. I never returned to this NAPA service center because, although the proprietor was a nice guy, I couldn’t bear to sit in the lobby again. It was like being stuck in purgatory. Based on my personal experience, NAPA service centers are effectively local mechanics that buy NAPA parts and sell service to lower income people that want their 7 to 10 year old car fixed inexpensively. They will put up with a lousy experience to get their car back on the road cheaply. It was silly, on many dimensions, for NAPA to think this brand made sense for former dealers.
If NAPA wants to extend its reach, on the cheap, into the bombed-out sparse dealer territories, it would make more sense to retrofit other smaller and less expensive bankrupted rural real estate. The cause of all this ruckus was a rather public display of the second stage of grief: (1-denial, 2-anger, 3-bargaining, 4- depression, 5-acceptance). This week we read about the 5th stage in this cycle.

From the start I thought that the whole NAPA thing was stupid, but I really liked the thought impetus – let’s call it paranoia – that it represented.

A few years back we worked with an OEM on the paranoia we all had about mega public dealer groups. Our client was paranoid that big box retailers/publicly held Giga-Dealer groups might shift emphasis from the manufacturer brand to the retailer brand. In a biblical sense, we thought there might be a whole lot of rain coming, and asked ourselves if we should build an ark. We concluded that the risk/cost/reward of inaction was infinitely higher than assuming the worst case. Looking back in time, again in a biblical sense, we only got some intermittent showers. But, the paranoia generated huge improvements in areas including e-business, parts & service field organization, customer treatment & customer retention behavior, establishing a “Continuous Process Improvement” culture at dealerships, dealer agreements, and more. It was a Renaissance without the preceding Dark Age. We built the ark. They didn’t have to use it until October, 2008. It worked.
The most interesting part of this ridiculous NAPA story was the “hook” it had for many in the industry. The “hook” was all about retrenchment, partners turned competitors, weak underbellies, and walking away from the dealer parts and service businesses in select geographies for select customers. The hook was about something that the industry understands and sometimes feels helpless about. The hook was about customer retention.

Let’s embrace the possibility of the NAPA threat and think about building some boats. Hmmmm … If this NAPA possibility was real, then:
  • We have to think about how we service all of our customers, not just the ones located in urban areas near good stores. We might conclude that we should do something about commonsense-designed “genuine” remote service outlets for both warranty and customer pay service work. Or we may conclude that convenience means more than a short drive – like getting your car fixed correctly, on time – and continue to improve in those areas.
  • We have to think about how we stack up against the IAM in the mechanical wholesale space. We might conclude that we need to make profound changes to how we go to market outside the dealer service lanes.
  • We have to think about our back of store vulnerabilities and what the real threats are from companies like NAPA, O’Reilly, and AutoZone. We might conclude that we need to nurture a group of “can-do” dealers to step-up to the plate and compete for all segments of the service business that aren’t today’s low-hanging fruit.
Bottom line: Let’s try to grow up to a point where we don’t need disasters to rouse us from our complacency. We need to figure out how to understand that something we’ve got is broken without the bile of fear as our kick in the pants.

No comments: