An ever-expanding marketplace erupts with fierce competition.
Historically throughout much of the South, wealth had always been based on the value associated ith land and the agricultural production that it was able to harvest. Atlanta, though, has its roots as a transportation hub; its name stems from the old Atlantic and Pacific Railroad.
When Union Gen. William Tecumseh Sherman embarked upon his infamous March to the Sea during the Civil War, northern Georgia was a particular strategic target. Officially, civilian structures were off-limits for destruction. In reality, most everything was burned to the ground.
Today Atlanta's city emblem is the phoenix, a mythical bird heralded for its ability to rise from the ashes. And Hot 'Lanta has risen with a vengeance, fueling a scorching aftermarket that has been invaded by just about every viable enterprise looking to take advantage of unending expansion.
In most battlegrounds, the various businesses hunger for sometimes-meager slices of a finite pie. In Atlanta, the pie just keeps getting bigger, as does the competitive heat generated by interloping enterprises rolling into town.
"Our pie has grown, but we have a lot of new players coming in," says Dan Buzzard, a regional vice president for Uni-Select based at Warehouse Distributors, Inc., which has 14 WD locations throughout the area. "Everybody comes in, and for the first few years you have to battle and battle."
In Marietta, Ga., for example, "Five years ago there were three stores, now we have 11 competitors."
Adding to the competitive fire is the famously congested traffic conditions coupled with the demand from technicians for quick delivery, as they have many choices when ordering parts.
Covering more than 8,000 sq. miles, Atlanta's 28-county Core Based Statistical Area (CBSA) experienced a 10 percent population increase from 2000 to 2004. The growth is projected to continue at an 11.6 percent clip through 2009, according to U.S. Census Bureau estimates.
Eight Atlanta-area counties ranked among the Top 10 for population growth from 2000 to 2003, with rates ranging from 16 to 26 percent.
As new residents radiate outward in all directions, settling on lands that were once vast plantations, "the retailers are going to these small areas just like Wal-Mart used to do," says Danny Ward, president and CEO of Southeastern Automotive Warehouse, Inc., which does business throughout Georgia, Tennessee and South Carolina."It's new, it's young and it's modern," Buzzard explains, describing Atlanta's rapidly evolving landscape. "There are a lot of young executives and people keep moving into town. One of the advantages of Atlanta is that it's a growing area, and it's growing with auto parts."
The Atlanta region's population now exceeds that of 25 states. Its overall retail market ranks No. 10 in the nation with more than $69 billion in sales. As a prominent worldwide headquarters for numerous corporations, including CNN and Coca-Cola, the array includes the venerable Genuine Parts Co., founded in 1928, and its National Automotive Parts Association, which we all know as NAPA.
According to R.L. Polk & Co. market analysis, 53 percent of the CBSA's motorists are DIFM customers; 8 percent fall into the DIY category. Nearly 40 percent are "tweeners," those who choose DIFM or DIY repairs based on circumstance. The national DIFM vs. DIY ratio is 42 percent to 32 percent.
"The installer business is growing like crazy because the population is expanding and many of these people are do-it-for-me," says manufacturers' representative Bob Knight, a principal with Powell/Scheibe/Knight/Brannon, Inc. "AutoZone, Advance (Auto Parts) and O'Reilly (Automotive Inc.) have been very successful at pushing the installer market in Atlanta."
Splitting the pie
"The pie keeps on expanding in this market," Knight notes. "AutoZone and Advance are particularly aggressive because they have so many stores, and they're all after pieces of the pie." O'Reilly is a relative newcomer, but it is moving fast by consistently opening outlets. "That's obviously put a hit on the independents," according to Buzzard."I think O'Reilly is trying to make this a second home," reveals another WD. He has even purchased stock in AutoZone and O'Reilly just "so I can see what's going on" by reviewing the financial documents publicly held companies must produce.
"The battleground is as brutal as anywhere. You have every name in the industry here," Buzzard observes. "In Atlanta, because it's such a growing market, there's been room for new stores and players to come in. There's room for everyone in this market — barring poor management."
"The market is just going to get bigger and bigger, and I see no end to the growth," concurs John Heard, sales manager for Original Equipment Marketing, an ACDelco distributor and National Pronto Association member. He'd prefer, though, that no additional parts operations come a calling: "When this gets published, we're going to have distributors from Chicago to Miami wanting to get into this market."
The existing competitive challenges include "a NAPA on every corner" along with the installer-based coverage accomplished by AutoZone, Advance, CARQUEST and O'Reilly, among others, Heard says.
As a manufacturers' rep, Knight sees problems for the WD segment stemming from a disturbing tendency toward cost-based competition. "The distributor folks get into the price game too much. Everyone is giving it away!" he contends. "Everybody goes after price and it becomes very difficult. You can't run a full-service business if you're giving things away. They're underestimating their services."
The shakeout of small mom and pop stores versus chain-owned or affiliated operations has been ongoing for quite a few years.
"We've been in this market consolidation for so long," says Knight, "that the ones who haven't recognized this (focus on customer service) have already bit the dust; they're gone or they've sold out. The jobber who has picked the right products for his customer base is probably doing alright. All the retailers coming in this marketplace have increased the competition. It's still a customer service business."
This market evolution essentially has eliminated cluttered, dirty stores staffed by rude counterpeople. "A lot of them are already gone. You have to pay attention to your customers and their needs," Knight says.
Driving the business
Atlanta's battle lines are largely drawn around an operation's ability to deliver – literally. There is an overriding urgency to get the correct part quickly delivered to the various shops. "Those guys have a hundred sources to call," says Heard. "If you don't have it — or you can't get it to them within an hour — they'll get it from someone else. We try to do 'hot shot' and get there within 30 minutes."
For many installers, "it's not always a price issue — it's availability," Heard points out.
Original Equipment Marketing, known locally as OEM, employs an outside service to provide its 30 daily drivers. Such outsourcing provides considerable savings by assuming the burdens of providing the vehicles, maintenance, insurance and staffing. "It's this company's responsibility to make sure I have enough drivers," says Heard. "I can't say to a customer, 'I can't get your part until tomorrow because my driver didn't show up.'"
The company implemented e-commerce technology a year ago with great success. Its return rate is less than 4 percent.
"We really don't get abused by returns," says Heard, who also credits a veteran customer service staff. "All of our inside people here have years of experience. It's a tribute to our sales staff – the quality of the people we have on board." To attract and retain this valued asset, "we provide them a good place to work and a good salary plus commission."
"We've grown 10-plus percent for the last 10 years in a row," says Heard. OEM has satellite locations in Woodstock, Rome and Douglasville, Ga., in addition to its headquarters in Marietta. "We have plans to possibly open one or two locations in 2007. We're still debating it."
According to R.L. Polk & Co., a portion of the Woodstock market posts a 56.8 percent DIFM ranking; a similar installer-friendly figure applies to Douglasville. Rome is to the west of the CBSA in Floyd County.
Less-expensive offshore parts are increasingly playing a larger role in the product mix. Heard says 75 percent of his drums and rotor line is white box, with filters and other components being added to the equation. Additional overseas items are being considered to keep up with the competition. "That's something we'll have to look at if we want to grow that business. We can sell them a white box rotor for $20," he explains. "People buy them – even the good shops."
"Fifty percent of our market is calling on the installers, the other half is car dealers," Heard says. For the dealer segment, "we sell to them cheaper than they can get it" directly from GM. Detroit may be able to get them a starter for $100 tomorrow, but "they can get it from us today for $90. The last thing they want to hear is, 'We can get it tomorrow.' We buy tractor-trailer loads (of components) and we can get a deal on it."
With the dealer market, however, "the profit margin isn't as great; they know what the price is and they expect to get it at a certain level" that discourages too high of a markup.
"You have to take care of your customers or somebody else will," observes Ward at Southeastern.
The operation has four divisions, including the two-step Auto Tech Supply with 17 locations. "We're trying to open at least two a year," says Ward. Each facility is 5,000 to 7,500 sq. feet, stocking $550,000 in inventory.
Although Southeastern's headquarters is centrally located near several freeways, the congestion throughout the region necessitates these branch Auto Tech stores to ensure timely deliveries. "The downfall of Atlanta is going to be the traffic; it's horrendous," Ward muses.
In addition to its e-commerce capabilities, Southeastern has a sophisticated telephone sales system in place. "Our philosophy is, 'One call does it all,'" Ward says.
"I have 20 folks on headsets at my local facility here." It's a veteran staff with much industry knowledge and some of them have owned stores in the past. "It's not just some guy who comes out of a Payless Shore Store."
A caller identification function allows the salesperson view the account information, including notes about what to talk about — or not talk about. If a business owner is, say, deeply religious, a joke that might be enjoyed by another caller may be considered offensive to this one.
The system, which includes walkie-talkie contact among staff members, tracks the progress of each purchase request. "They can tell you anything about your order," Ward notes
A third of Southeastern's business is conducted via e-commerce. "Our younger generation customers don't want to talk to me anymore," Ward observes. The companywide return rate hovers at around 24 percent to 27 percent, which Ward accepts in favor of expediency with the quick delivery process. "I prefer to deliver two radiators rather than have them call me back an hour later and say, 'This doesn't fit.'"
Southeast encourages techs to review their parts needs and plan ahead for several jobs. "We want our average ticket to be at least $150," says Ward. "We don't want to deliver one donut gasket. We try to get them to order two or three projects at one time."
As a member of the Automotive Distribution Network, Southeastern signed up with Parts Plus 25 years ago. "It's one of the best things we've ever done," says Ward, who counts among his clientele Ford dealers, corporate and municipal fleets, Goodyear, Pep Boys and Advance. "I'm in the distribution business and I want to sell parts to anyone who pays the bills."
"People don't want to stock anything anymore. They want you to bring everything to them; they have a car on the rack, and they want the part delivered right then."
Feeling at home
Among the satisfied Auto Tech customer base is the Roswell Auto Center along the Alpharetta Highway in Fulton County. Adopting e-commerce ordering has proven to be an especially wise move, according to Carl Hughes, manager of the 18-bay shop, which includes a quick lube facility on the premises. "It's working out excellent. The accuracy is much better! Most of the time if we get a wrong part it's because we ordered it incorrectly."
To bring in customers, "Word-of-mouth has been our best advertising," Hughes reports.
"We used to be out in the country, but not anymore," he continues, referring to the development that has enveloped this historic community on the northern banks of the Chattahoochee River. Much tragedy occurred in this historic community during the Civil War. Sherman's troops not only sacked and burned all the textile mills, but he rounded up all of the female workers and forced them to go up north as quasi prisoners. Most never returned, as many of Roswell's men were gone – having endured heavy casualties on battlefields throughout the Confederacy.
Nowadays, this community continues to attract numerous new residents. "A lot of the growth is moving further north, but there are still a lot of new subdivisions and businesses coming into this area. We draw people from both Roswell and Alpharetta," says Hughes.
From 1980 to 2005 the number of housing units in Alpharetta rose by more than 1,000 percent, with continued expansion expected through 2025. The median household income is $71,207, compared to the nationwide figure of $44,684. Roswell's demographics are similar; both communities have Polk DIFM rankings approaching 65 percent and miniscule DIY percentages.
Hughes says new customers frequently sample the company's quick lube services before purchasing other repairs. The complex features a comfortable waiting room with WiFi (wireless Internet) capability that allows busy patrons to tap away on their laptops. An inviting gazebo presents a more relaxed setting reminiscent of the genteel Old South. "People want to know when we're going to put in a lemonade stand," Hughes quips.
"We try to make them feel at home while they're here," he continues. "We treat them like family and they know they're going to be treated fairly. We've been here 24 years."
The company's impressive Internet site, www.roswellautocenter.com, includes stereo zooming car sounds as you slide your cursor over user-friendly icons. "Once people hear about us they go to our site" to investigate further, read the positive customer reviews and make arrangements to come on by, Hughes points out.
A rewards program pushes customer referrals with a free oil change; first-timers receive the same offer. The staff also provides rides to a customer's workplace.
Pricing is set at about 20 percent below what the local car dealers charge. "Anything a dealer can do, we can do here. But we try to give them quicker service," says Hughes, who encourages others in the industry to take advantage of the many technological and educational opportunities that are available nationwide. "You have to keep up with the training and equipment or you'll get left behind," he cautions. "We stay on top of that."
From 2000 to 2004 the population of Cobb County's county seat, Marietta, grew 7.5 percent. Residents in the neighborhood surrounding Alan Cox Automotive have a median household income of $82,549 and a Polk DIFM figure approaching 50 percent. DIYers account for just 3.4 percent of the population.
Sherry Richardson, Cox's owner, enlisted a professional Web page designer to construct a highly informative Internet site that lists a multitude of customer services and testimonials from satisfied clients.
"There are a lot of good automobile repair businesses in the Atlanta area," she says, citing a need to make her 12-bay shop stand out amid a motoring public that has lots of choices.
"We've been doing some marketing, and we have new customers coming in," Richardson notes. A recent direct mail campaign has generated a good response; the Internet site, www.alancoxautomotive.com, is proving to be a useful tool for driving repeat business by providing convenience for a large existing customer base.
"My service advisor is very customer-oriented; it's very important to keep things clean, and we try to keep our pricing 15 percent to 20 percent less" than what the local dealerships are charging, Richardson says.
WORLDPAC and Advance are among her primary parts sources. "We have used these companies for years," says Cox. "They take good care of us. Most parts are delivered within a two-to three-hour period. If we need the part quicker, we can pick it up ourselves."
Accuracy in the diagnostic process is a priority among the Cox staff. "We order what we need," she says. "If a part is not available from the first supplier, we will contact another."
A big swing
At the Lilburn NAPA Auto Care Center, "We're seeing a big swing in the auto repair business now," says owner Bob Croxton.
"The cars (previously purchased new at zero percent interest rates) have enough miles on them that they now need repairs. Last year, sales were up 15 percent over 2005's sales. We're hoping to gain another 15 points this year, because I've gone after company business," he says, referring to the pursuit of corporate and governmental fleet accounts; about 25 percent of the business comes through this segment.
The attacks of 9/11 marked a significant economic downturn, says Croxton. "It drew a curtain over things, but now it's starting to lift. On the whole, the entire Atlanta market has picked up."
Of course, with more than 400 auto repair centers listed in the Yellow Pages, Hot 'Lanta's competitive marketplace has more than a few shop owners feeling the heat as disconnected telephone numbers bear stark witness to enterprises that no longer are with us.
"A large number of them have closed up," laments Sharon Caudell, owner of Five Forks Automotive in Lilburn. "This business went down like a rock after 9/11 and it hasn't come back."
In the past, Five Forks had annual revenues of $650,000 to $700,000 with five technicians on the job. Last year, the 12-bay business – which was forced by economics to reduce its staff to just two technicians — brought in $325,000. A third technician was recently hired, but Caudell remains concerned.
"This area is very affluent," she explains, pointing to houses costing $200,000 to $800,000, "but we don't get a lot of drop-in business here." About 87 percent of the clientele is either repeat customers or direct referrals.
A mass-mailing of 1,500 letters in October 2006 offering a 10 percent discount resulted in Five Forks getting "slammed" with customers, but Five Forks had difficulty getting the work done and covering the expenses.
"Everything costs more to repair. It takes five hours of labor just to access the spark plugs. It's going to be harder for independents to stay in it," she says.
Chain stores and dealerships are posting prices "that I can't even touch" based on their ability to buy in volume. A nearby quick lube was selling transmission flushes for $99; Caudell's cost for the same amount of fluid is $65 before a single dime of overhead is paid. "I can't compete with an operation that buys fluid like that."
Lilburn has seen its population rise an eye-popping 18.7 percent since 2000. The Five Forks neighborhood in Gwinnett County has a median household income of $65,717 with a Polk DIFM percentage of 46.9 percent.
"The new people are going to dealerships. A lot of people have new cars and they think they have to go to the dealer to get the maintenance done. The dealers have made them think that," says Caudell, noting how a Five Forks focus on diesel pickup trucks has sputtered thus far.
The shop does not have an Internet presence. "I'm not very computer literate," Caudell says. "I can find my e-mail bank balance." Another direct mail piece may be going out sometime this spring.
Meanwhile, it's a different story just three-and-a-half miles away.
"For us, business is booming," says Karl Jaeger, owner of the Killian Hill Service Center. "When I bought this in '01, we were sitting in the middle of 400 to 500 acres, and now it's being developed. The city of Lilburn is just opening for development and it's going absolutely wild. There are no less than eight to 10 neighborhoods coming in — it's a goldmine. We're drawing 15 new customers a week plus all the repeat referrals."
'The golden secret'
Jaeger jokingly balks at revealing "the golden secret" behind his success before explaining how honesty, integrity and enthusiastic marketing are the keys. The strategy consists of being totally honest with your customers and not selling them anything they don't need. "If I'm out with my family I'm going to see people who come into my shop, and I want to be able to look them in the eye," he says.
A native of Northeast Ohio, Jaeger headed south secure in the knowledge that "Atlanta was booming" and career achievement was in the offing. After working 14 years as a technician in the Atlanta area, one of his satisfied customers "lent me $80,000 on a handshake" to buy the Killian's structure in 2001. The four-bay facility "fit what I needed."
At that time, the operation's annual sales hovered at $100,000, and Jaeger went to work building the business. He started out trying to beat all of the other shops on price, "and I'd scrape for every dollar." Things began to take off with the realization that "I'm worth more than that." Quality and customer service became the new mode of operation.
"I want people who want to spend money" and have their vehicles properly repaired, he explains. "We're more expensive than the chains and probably the dealers. Last year we were just under a million dollars in revenues. We're probably going to bust $1.2 million to $1.3 million this year."
Jaeger credits a series of automotive business courses he has taken. He is especially appreciative of a "marketing boot camp" presented by the CinRon Marketing Group of West Chester, Ohio.
He also takes great stock in his ability to socially relate to each of the customers: "You don't have to be a technician to own a car repair business, but you do have to be a people person."
Jaeger previously had tried mass mailings of coupons and advertisements in the local newspaper with limited success.
"I pour a lot of effort into referral advertising," he says, speaking about a strong presence on the consumer testimonial Internet site at www.kudzu.com. It currently covers Arizona, Las Vegas, San Diego and Atlanta.
Jaeger's own site, www.killianhill.procarcarezone.com, provided for free by Alldata, is another powerful marketing move. "I just looked at my e-mail this morning and I already have three estimates to do," he says.
Another turning point came two-and-a-half years ago when Jaeger hired Joe Otto to be Killian's service advisor. Prior to coming on board, Otto had no auto experience; he had worked at...a pet store! "I saw that attitude from day one," says Jaeger, citing Otto's ability to relate to people. "There's no smoke and mirrors. He's a real person. He's not BSing you and he doesn't sell you things you don't need – it is what it is."
If an especially vexing mechanical problem comes up when dealing with a customer, a technician or Jaeger is summoned to explain the situation. "I've pretty much been pushed to the side," Jaeger reports with mock irritation. "People come in here all the time and ask for my service writer – and it doesn't bother me a bit."
Citing his desire to be with family, Killian's is closed on weekends. "I do not like working on Saturdays."
As might be expected from the eighth-largest American metropolitan marketplace, Atlanta's vibrancy and world-class sophistication embodies the progressiveness of the New South. Yet, a number of repair shops here are achieving success by serving up a heaping helping of traditional Southern hospitality as they compete against ubiquitous price-based chain operations and gleaming service-oriented dealerships.
They're also keeping current with the industry's technological advances by staying on top of the latest training, attracting customers via the Internet and implementing electronic ordering procedures.
Dismissing the notion of upping the ticket once a car is on the rack, these shop owners say they're able to thrive because they purposely avoid selling unneeded repairs — concentrating instead on offering reputable service and clean, comfortable facilities aimed at encouraging repeat customers who, in turn, actively make positive referrals among friends, family and new acquaintances.
A driving force
Referrals appear to be a driving force throughout the Atlanta battleground. Several shop owners marvel at how this below-the-radar strategy gleans a better response than Yellow Pages listings, direct mail campaigns and newspaper advertising. This tell-a-friend tactic is further enhanced among shop owners who are embracing the reach of Internet sites to spread effusive customer commentary about the services rendered: Make a referral and you get a free oil change, discount coupon or similar perk.
"This garage has been here since 1954, and all our customers are word-of-mouth," says Buddy Boutelle, a mechanic – not a technician – at the three-bay Ed's Auto Service in Avondale Estates. The company does no advertising.
"It's just neighbor talking to neighbor," Boutelle explains. "We run it like an old-timey garage. If you live in the neighborhood and you have a flat tire, we'll come over, jack it up and fix it."
Located in DeKalb County, where much of the Civil War's decisive Battle of Atlanta took place, Avondale hosts a scenic lake surrounded by a population of 5,382.
Future growth appears to be static, but those already who have arrived enjoy a median household income of $70,625.
Polk's DIFM ranking for the community is 65.4 percent; DIYers account for just 3.8 percent. Two shops have closed during the past few years, but Boutelle says they made a profitable exit from the scene. "Developers wanted the land, and opportunity only knocks one time," he observes. "They recommended that all their customers come to us."
Ed's did have to make a few adjustments, however, to adequately serve the influx. "The new people coming in here couldn't believe that we didn't take credit cards," Boutelle recounts, noting that this key operational option was implemented two years ago.
Being nimble enough to adjust to your local marketplace can be critical, according to Robert Brantley, owner of Mount Zion Automotive in Carrolton. "In the automotive business you have to be versatile," he says.
Way back when, Carroll County was the site of a significant gold rush. Nowadays, there's increasing value of a different sort in metropolitan Atlanta's western boundary as rich farmland gives way to encroaching development.
"A long time ago there was nothing out here — now we're on the Carroll Corridor. They're building 286 houses right nearby and 540 houses down the road," Brantley reports. "We knew they were coming out here, so the investment has paid off."
With five technicians manning 13 bays, Mount Zion has built up a positive reputation for integrity and mechanical competence over the past 17 years at this location.
"We do the whole nine yards," says Brantley, referring to his pursuit of fleet accounts that includes servicing all manner of vehicles such as school buses, garbage trucks, big semi diesel rigs and passenger cars. "We'll even fix your farm tractor."
Reflecting a shifting marketplace, Carrollton's several ZIP codes post both the highest Polk DIFM rate (87 percent) along with a near-high DIY ranking exceeding 27 percent.
Median household income is on the low side at $27,559, although that is certain to rise with the influx of new residents.
This trend has not gone unnoticed by Heard at OEM. "It's a possibility," he says, that the company may consider moving into the area.