Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
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A P R I L 2 0 1 7 / S C T 17 able to provide them in short order." Amazon.com is certainly turning up the competitive pressure, though it remains to be seen how effective this effort will be. The online retailer already sells a variety of auto parts and accessories, and is now making a bigger push into the sector. It was reported in January that the company had made deals with several major auto parts suppliers to expand its online inventory. Auto parts retailers may not be entirely Internet-proof, observes Coradini, but they do seem to be sufficiently Internet-resistant. Commercial auto repair shops want to receive immediately the part they need for that vehicle they have got up on the lift. Thus, even Amazon's same-day delivery may not be fast enough for the harried mechanic eager to get that part within the hour. Similarly, a DIY customer is less likely to order online a replacement part needed right away, such as a battery, a windshield wiper or a brake light. To be sure, that DIY buyer for whom car repair is a hobby and whose task might be less time-sensitive, could choose to shop online for some specialty item or to order through Amazon for a better price, Coradini says. "But when it comes to critical components of the car, I don't believe there is going to be a huge wave of demand for e-commerce of auto parts," he argued. Auto parts retailers also offer valuable in-person advice and expertise regarding not just what type of air filter to buy, say, but also how to install it onto a particular make and model of car. "There is always a guy there that says, 'Do you really want that type of oil?' or, 'The type of windshield wiper you really need is this,'" said Bomar. As cars get ever more complicated, he notes, everybody needs that little bit of extra service. n to consumers rather than to other auto businesses, is a low-growth or no-growth category, according to Bret Jordan, a managing director at global investment banking firm Jefferies. Consumer demand for auto parts is a countercyclical proposition, meaning that the demand is greater, not less, when the economy is tight. Now that the economy is improving, sales of new cars are up, and people are more willing to pay someone else to do the work. Then too, as vehicles have become increasingly complex and more reliant on computer systems, DIY repairs have gotten more difficult for the typical car owner. These retailers are not relying entirely on the DIY customer, however. To be sure, that customer remains an important part of the business, but auto parts sellers are working to build up their commercial, or B2B, side. "The number-one shift within this industry is the brick-and-mortar guys pushing the volume on the professional installers," said Jordan. In this regard, some retailers have more work to do than others. AutoZone is concentrated the most heavily on DIY customers, with 80 percent of its revenue coming from them, and 20 percent from the commercial side, notes Jordan. O'Reilly generates 55 percent of its sales from the retail customer, while Advance Auto records 40 percent. NAPA is at the directly polar opposite end from AutoZone, with only 20 percent of its revenues coming from the retail customer, and 80 percent from the commercial side, according to Jordan. Auto parts retailers are expanding their inventory beyond such essentials as brake lights and oil filters, and they now sell a variety of accessories and ancillary goods, including apparel, tailgating-party supplies and remote- control toys. "If you are going in to buy a quart of oil, you are probably going to walk out with five other things that you really didn't need," said Spencer Bomar, an Atlanta-based principal of retail advisory services with Avison Young. There is no doubt that there is fierce rivalry in the auto parts sector. The four major chains boast a sizable aggregate store base in North America and continue to open stores. Based on the most current data, NAPA (a division of Genuine Parts Co.), has roughly 6,000 independently and company- owned stores in the U.S. and also operates NAPA Canada. AutoZone has 5,313 stores across the 50 states and in Puerto Rico, 488 stores in Mexico and eight stores in Brazil, plus 26 IMC branches, for a total of 5,835. Advance Auto Parts operates 5,058 stores and 127 WorldPac branches. O'Reilly Automotive operates 4,712 stores across 45 states. There is consolidation as the bigger chains acquire competitors and especially regional or local chains. Last year Advance Auto Parts completed the $2 billion acquisition of General Parts International, owner of the Carquest chain. That deal, announced last October, included 1,246 company-operated stores and 1,418 independently owned Carquest stores across North America. O'Reilly purchased Bond Auto Parts, a privately held, 48-store chain operating in Massachusetts, New Hampshire, Vermont and New York, late last year. Given the roughly 43,000 auto parts suppliers in the U.S., some might say the industry is already saturated. Even so, said Geno Coradini, an executive vice president of retail at JLL, "it is less about saturation and more about a few components that differentiate one retailer from another, and it is a constant race to provide the right parts at the right price, and being