Advance Auto Parts (AAP) has turned auto parts retailing into less of a one-company race. Comfortably in 2nd place (AutoZone is #1), AAP operates nearly 3,700 stores under the Advance Auto Parts, Advance Discount Auto Parts, and Western Auto banners in about 40 states, Puerto Rico, and the Virgin Islands, as well as an e-commerce site. Its stores carry brand-name replacement parts, batteries, maintenance items, and automotive chemicals. AAP's Autopart International (AI) unit operates more than 200 locations and primarily serves commercial customers, including garages, service stations, and auto dealers. Commercial customers account for around 35% of AAP's revenues while do-it-yourselfers generate the balance.
The company's main segments are parts (alternators, batteries, belts and hoses, engines and engine parts, and spark plugs and wires), accessories (floor mats, mirrors, vent shades, and MP3 and cell phone accessories), chemicals (antifreeze, brake and power steering fluid, Freon, and windshield washer fluid), and oil (transmission fluid and other automotive petroleum products). The parts segment accounted for close to 65% of sales in 2011. Accessories accounted for about 15% of sales and both the chemicals and oil segments represented about 10% in 2011.
Sales & Marketing
Advance Auto Parts builds it marketing and advertising campaigns around radio, direct marketing, digital and local marketing. The company also employs Spanish-language television, radio, and outdoor ads to reach Latinos. In early 2011 the firm launched its "Service is our best part" campaign nationwide. The campaign targets core DIY customers and emphasizes service.
The company fared well amid the recent deep recession in the US. AAP's top line continued to climb steadily in 2011, when revenue reached $6.1 billion -- a nearly 5% improvement from $5.9 billion in 2010. (Since 2007, when sales were $4.8 billion, AAP has grown its revenues by more than 25%.) Profit growth has been even more impressive. The company logged about $395 million in net income in 2011, about a 15% gain over 2010. (Profits have risen by around 60%, from $238 million, since 2007.) Interestingly, it has been the tough economic environment that has helped to pump up AAP's earnings. With disposable incomes falling and the unemployment rate remaining relatively high, Americans are hanging on to their cars longer and relying more on mechanics for maintenance and repairs to keep vehicles in good working condition. (Professional mechanics are part of AAP's commercial customer segment.)
AAP is looking to the commercial market for growth opportunities and hopes to eventually generate 50% of its sales from the segment. To better serve commercial customers, AAP in 2011 added more parts from key manufacturers to its inventory and expanded its workforce with parts professionals, delivery drivers, and sales representatives.
To drive sales among DIY customers, AAP has focused on improving customer service. In recent years the company introduced more structured training programs, and it has been assessing the effectiveness of its staffing model. In 2011 AAP rolled out the "Service is our best part" advertising campaign, emphasizing the retailer's commitment to providing higher quality service.
Both commercial and DIY customers are benefiting from AAP's store network expansion in both new and existing markets. In 2011 the company opened about 105 stores. During 2010 the retailer added nearly 150 more locations.
If customers would rather not stop by one of AAP's stores, they can place their orders through the company's e-commerce site, which began operating in 2009. Shoppers can search through AAP's inventory of more than 100,000 parts and accessories, as well as choose from in-store pickup and delivery options. Admittedly late to online retailing, the company said its e-commerce platform has had a positive impact on revenue and is expected to be a significant sales driver in the years ahead.
Mergers and Acquisitions
To boost its store count significantly overnight and add to its distribution capacity, AAP acquired B.W.P. Distributors, Inc., in late 2012 to take over about 125 BWP company-owned stores and a pair of BWP distribution centers in Massachusetts and New Jersey. As part of the deal, AAP transferred rights to distribute to more than 90 independently owned locations to an affiliate of auto supply company General Parts International, which will operate one of BWP's distribution centers in New York.
Founded as Advance Stores Company in 1929, AAP was a general merchandise retailer until the '80s. From there the company shifted its focus to automotive parts retailing, targeting DIY customers. – less