November 13, 2006
On the road | Lewiston-based VIP Parts, Tires and Service tunes up its business model and looks outside Maine for growth
By Taylor Smith
A few weeks ago, online mega-retailer Amazon.com announced it would start selling auto parts on its well-traveled website. Within days, car enthusiasts could pick from more than a million parts, like a dimmer switch for a 1975 Cadillac DeVille or brake pads for a late-model Chevy Tahoe.
Company officials said amid the store's launch that auto parts was one of the last big retail frontiers for Amazon. Whether Amazon can succeed selling mufflers and windshield wipers over the Internet isn't clear, but its decision to try affirms that the retail auto parts market is a big one. Various estimates place the value of the U.S. market for retail auto parts at between $35 million and $55 million annually. The Automotive Aftermarket Industry Association, a trade group based in Bethesda, Md., is forecasting $37.8 million in retail auto parts sales this year, a 5.6% increase from last year.
In the brick and mortar world, a handful of national chains like AutoZone, Advanced Auto Parts and NAPA are the undisputed industry leaders, but experts say those companies don't have a chokehold on the market. That means plenty of room for smaller, regional retailers to take advantage of Americans' thirst for chrome mufflers, fuzzy dice and replacement carburetors. "It is a big market," says Chris Miller, senior editor of Aftermarket Business, a Cleveland-based trade magazine for the aftermarket auto parts industry. "The top market share is taken by a few companies, but I think there's always room for the local stores."
Among those regional brands is VIP Parts, Tires and Service, a Lewiston-based company that's become as well-known a name in Maine as any auto parts retailer. The company has been around since 1958, when Thomas O. Auger founded L&A Tire in Lewiston. Over the next 40-some years, Auger and his family grew the company, then called VIP Discount Auto Center, into a regional brand. But since the business was purchased in 2001 by the Quirk family, a longtime seller of tires in Massachusetts, VIP has been repositioning itself not just as a destination for parts, but for car service, too.
The company has spent millions upgrading its image ˆ and its infrastructure ˆ and expanding its presence in New England. It's added stores in Massachusetts and New Hampshire and overhauled inventory management strategies to allow VIP to fill tire orders for auto dealers in hours rather than days, among other improvements. "We're in the midst of repositioning the company from a down-and-dirty discount model ˆ which had a lot of overstock and discontinued inventory ˆ to one with knowledge," says John Quirk, VIP's president and CEO. "We're trying to bring as much knowledge into the stores as possible."
But these days, VIP is at a crossroads. The company has largely run out of space in Maine, with nearly three dozen stores from Sanford to Calais. As a result, growing VIP means growing outside of Maine in neighboring New England states. Although VIP already has 15 stores in New Hampshire and four in Massachusetts, the question remains whether VIP will have success translating the kind success it has had in Maine into those new markets.
Overnight replacement
VIP opened its newest Maine store in Gorham earlier this year and recently broke ground in Arundel, but Quirk says VIP has pretty much saturated the Maine market. Instead, he sees the company's long-term growth coming from new stores in New Hampshire, Massachusetts and Vermont. "We are opening two to three stores a year," he says. "That's about our growth rate now."
That pace is likely to accelerate in the next few years, however. Asked where he sees the company in five years, Quirk says he expects VIP's size to double, reaching 100 stores and revenues that top the $250 million mark.
But as it moves more heavily into markets outside of Maine ˆ where it's already got the benefit of name recognition and heavy visibility ˆ VIP will have less clout in its head-to-head fight with entrenched competitors like AutoZone and Advanced Auto Parts. The company also has to explain itself to a customer base that might not know, like the store's Maine customers, that you can bring your car to VIP for alignment work and pick up a carburetor and floor mats while you're waiting.
Neil Stern, a senior partner at Chicago-based retail consultant McMillan/Doolittle, says spreading a clear message is one of the hardest jobs for companies moving into new markets. "Companies well entrenched in their home market can speak to a customer in the short hand," he says. "They don't have to explain why they're special. Even if you are great, you have to learn that the communication strategy needs to be different in new markets."
The best communication strategy, says Quirk, is good service ˆ and that's been his mantra since taking over the company. In 2001, the company's turnover rate stood at a whopping 300%, meaning the company every year hired three people for every one position at VIP, from store managers to tire jockeys. And while retail has always been a high-turnover business, Quirk says that much turnover was ridiculous. Aside from the considerable administrative costs to keep track of all those employees, VIP also was throwing money at new employees for training while watching corporate loyalty walk out the door with every worker that left the company.
Through a series of moves by management ˆ from revamped training regimens to more scrutiny on potential new hires ˆ Quirk says turnover has been reduced by half since he's been at the company. By the middle of next year, he expects turnover to shrink to a more-manageable one-to-one ratio. (For more on how VIP manages its workforce, see "Engine work," below)
But as the number of stores has increased to 53 and their locations have become more far flung, Quirk says the company also needed a better way to wrangle that inventory. Every day, roughly 17,000 items are picked from the 130,000-square-foot warehouse attached to VIP's Lewiston headquarters and packed on trucks that roll out in the morning to deliver parts to each store.
To streamline that process, Quirk turned to technology: The company in the last few years has invested more than $4 million in new hardware and software to help manage warehouse shipments. "We recognize that as a real paradigm shift in the industry, and we felt that if we didn't make this kind of investment in the IT and the infrastructure then it would kill us," says Quirk. "We'd be roadkill."
Today, parts bought from a VIP store on Monday won't be replenished until Wednesday morning. But that's about to change. When VIP rolls out its new replenishment strategy this month, Quirk says the lag will be just a few hours. New technology will tell warehouse workers when a water pump gets bought in, say, Skowhegan, and those workers will get that part delivered before that store reopens the next morning. "The trucks are going to go out starting at 3:00 a.m., and they'll be in Skowhegan probably by 5:00 a.m.," says Quirk.
Serving the "do-it-for-me" crowd
The automobile market has changed dramatically during the past generation. Cars with easily interchangeable parts and user-friendly layouts have been replaced by models that run on computer chips as much as they do internal combustion. That shift has made life considerably more difficult for companies like VIP. Fifteen years ago, Quirk says the average auto parts retailer managed an inventory of 50,000 SKUs. Today, that number is up to 350,000, and Quirk expects it to top 1,000,000 in just a few years.
Meanwhile, more complicated cars mean more complicated repairs. Because of that, Quirk has been working to shift the company to take advantage of what he expects to be an uptick in demand for automotive service. Although roughly 60% of VIP's 900 or so employees currently work on the retail side, with the rest turning wrenches in the service bays, "We do think there's going to be a decline of the do-it-yourselfer and that the do-it-for-me marketplace is going to grow exponentially," Quirk says. "Those that have quality people are going to gain market share in that area."
VIP's existing service business makes it well-positioned among its competitors like Advanced Auto Parts and AutoZone, Quirk says. Both companies deal primarily in parts, while VIP sells parts and tires along with as a full line of automotive service. "There are very few people that have the same model that we have," he says. "We actually look at it as being one of the single biggest strengths of the company."
Chris Miller of Automotive Business agrees, but largely because stores like VIP are likely to see a decline among do-it-yourself customers and will need to bolster its retail business with more service business. "Having that service side is a rarity in the auto parts world," he says. "It's a good business idea. We might see more of that in order for parts sellers to survive."
But being everything to everyone is a recipe for exhaustion ˆ or worse. According to McMillan/Doolittle's Stern, companies like VIP have the added challenge of trying to reach multiple types of consumers. In VIP's case, it's reaching the do-it-yourself crowd that's interested in, say, high-performance aftermarket parts, as well as the soccer mom that needs an alignment on her minivan. "On the surface, it seems great," says Stern. "But the challenge is that you need to communicate differently to both people."
For his part, Quirk admits it's challenging to tell the VIP story in so many ways. He says the company in 2001 had a reputation as a parts store, but that many customers didn't realize VIP also offered automobile service. Since then, Quirk says, customer awareness of the company's service offerings has improved dramatically. Roughly 27% of VIP's revenues currently come from auto service ˆ a big change from 2001, when service made up just eight percent of revenues. In a few years, Quirk hopes half of VIP's sales come from the service bays.
How will he accomplish that? By treating the customers right, in hopes of luring them back for more visits. If more and more people decide to put down the wrenches and leave the tinkering to professionals, Quirk wants VIP to be their choice. But to do that, he's got to convince those potential customers that VIP can do the job. "On the tire and service business, it's all about trust," he says. "That one-on-one relationship with the car owner ˆ that's what the company stands for. But that trust area is an issue where the automotive field in general has had a blemish for decades. I think everyone has a story where the guy fixing their car took advantage of them."
Company officials said amid the store's launch that auto parts was one of the last big retail frontiers for Amazon. Whether Amazon can succeed selling mufflers and windshield wipers over the Internet isn't clear, but its decision to try affirms that the retail auto parts market is a big one. Various estimates place the value of the U.S. market for retail auto parts at between $35 million and $55 million annually. The Automotive Aftermarket Industry Association, a trade group based in Bethesda, Md., is forecasting $37.8 million in retail auto parts sales this year, a 5.6% increase from last year.
In the brick and mortar world, a handful of national chains like AutoZone, Advanced Auto Parts and NAPA are the undisputed industry leaders, but experts say those companies don't have a chokehold on the market. That means plenty of room for smaller, regional retailers to take advantage of Americans' thirst for chrome mufflers, fuzzy dice and replacement carburetors. "It is a big market," says Chris Miller, senior editor of Aftermarket Business, a Cleveland-based trade magazine for the aftermarket auto parts industry. "The top market share is taken by a few companies, but I think there's always room for the local stores."
Among those regional brands is VIP Parts, Tires and Service, a Lewiston-based company that's become as well-known a name in Maine as any auto parts retailer. The company has been around since 1958, when Thomas O. Auger founded L&A Tire in Lewiston. Over the next 40-some years, Auger and his family grew the company, then called VIP Discount Auto Center, into a regional brand. But since the business was purchased in 2001 by the Quirk family, a longtime seller of tires in Massachusetts, VIP has been repositioning itself not just as a destination for parts, but for car service, too.
The company has spent millions upgrading its image ˆ and its infrastructure ˆ and expanding its presence in New England. It's added stores in Massachusetts and New Hampshire and overhauled inventory management strategies to allow VIP to fill tire orders for auto dealers in hours rather than days, among other improvements. "We're in the midst of repositioning the company from a down-and-dirty discount model ˆ which had a lot of overstock and discontinued inventory ˆ to one with knowledge," says John Quirk, VIP's president and CEO. "We're trying to bring as much knowledge into the stores as possible."
But these days, VIP is at a crossroads. The company has largely run out of space in Maine, with nearly three dozen stores from Sanford to Calais. As a result, growing VIP means growing outside of Maine in neighboring New England states. Although VIP already has 15 stores in New Hampshire and four in Massachusetts, the question remains whether VIP will have success translating the kind success it has had in Maine into those new markets.
Overnight replacement
VIP opened its newest Maine store in Gorham earlier this year and recently broke ground in Arundel, but Quirk says VIP has pretty much saturated the Maine market. Instead, he sees the company's long-term growth coming from new stores in New Hampshire, Massachusetts and Vermont. "We are opening two to three stores a year," he says. "That's about our growth rate now."
That pace is likely to accelerate in the next few years, however. Asked where he sees the company in five years, Quirk says he expects VIP's size to double, reaching 100 stores and revenues that top the $250 million mark.
But as it moves more heavily into markets outside of Maine ˆ where it's already got the benefit of name recognition and heavy visibility ˆ VIP will have less clout in its head-to-head fight with entrenched competitors like AutoZone and Advanced Auto Parts. The company also has to explain itself to a customer base that might not know, like the store's Maine customers, that you can bring your car to VIP for alignment work and pick up a carburetor and floor mats while you're waiting.
Neil Stern, a senior partner at Chicago-based retail consultant McMillan/Doolittle, says spreading a clear message is one of the hardest jobs for companies moving into new markets. "Companies well entrenched in their home market can speak to a customer in the short hand," he says. "They don't have to explain why they're special. Even if you are great, you have to learn that the communication strategy needs to be different in new markets."
The best communication strategy, says Quirk, is good service ˆ and that's been his mantra since taking over the company. In 2001, the company's turnover rate stood at a whopping 300%, meaning the company every year hired three people for every one position at VIP, from store managers to tire jockeys. And while retail has always been a high-turnover business, Quirk says that much turnover was ridiculous. Aside from the considerable administrative costs to keep track of all those employees, VIP also was throwing money at new employees for training while watching corporate loyalty walk out the door with every worker that left the company.
Through a series of moves by management ˆ from revamped training regimens to more scrutiny on potential new hires ˆ Quirk says turnover has been reduced by half since he's been at the company. By the middle of next year, he expects turnover to shrink to a more-manageable one-to-one ratio. (For more on how VIP manages its workforce, see "Engine work," below)
But as the number of stores has increased to 53 and their locations have become more far flung, Quirk says the company also needed a better way to wrangle that inventory. Every day, roughly 17,000 items are picked from the 130,000-square-foot warehouse attached to VIP's Lewiston headquarters and packed on trucks that roll out in the morning to deliver parts to each store.
To streamline that process, Quirk turned to technology: The company in the last few years has invested more than $4 million in new hardware and software to help manage warehouse shipments. "We recognize that as a real paradigm shift in the industry, and we felt that if we didn't make this kind of investment in the IT and the infrastructure then it would kill us," says Quirk. "We'd be roadkill."
Today, parts bought from a VIP store on Monday won't be replenished until Wednesday morning. But that's about to change. When VIP rolls out its new replenishment strategy this month, Quirk says the lag will be just a few hours. New technology will tell warehouse workers when a water pump gets bought in, say, Skowhegan, and those workers will get that part delivered before that store reopens the next morning. "The trucks are going to go out starting at 3:00 a.m., and they'll be in Skowhegan probably by 5:00 a.m.," says Quirk.
Serving the "do-it-for-me" crowd
The automobile market has changed dramatically during the past generation. Cars with easily interchangeable parts and user-friendly layouts have been replaced by models that run on computer chips as much as they do internal combustion. That shift has made life considerably more difficult for companies like VIP. Fifteen years ago, Quirk says the average auto parts retailer managed an inventory of 50,000 SKUs. Today, that number is up to 350,000, and Quirk expects it to top 1,000,000 in just a few years.
Meanwhile, more complicated cars mean more complicated repairs. Because of that, Quirk has been working to shift the company to take advantage of what he expects to be an uptick in demand for automotive service. Although roughly 60% of VIP's 900 or so employees currently work on the retail side, with the rest turning wrenches in the service bays, "We do think there's going to be a decline of the do-it-yourselfer and that the do-it-for-me marketplace is going to grow exponentially," Quirk says. "Those that have quality people are going to gain market share in that area."
VIP's existing service business makes it well-positioned among its competitors like Advanced Auto Parts and AutoZone, Quirk says. Both companies deal primarily in parts, while VIP sells parts and tires along with as a full line of automotive service. "There are very few people that have the same model that we have," he says. "We actually look at it as being one of the single biggest strengths of the company."
Chris Miller of Automotive Business agrees, but largely because stores like VIP are likely to see a decline among do-it-yourself customers and will need to bolster its retail business with more service business. "Having that service side is a rarity in the auto parts world," he says. "It's a good business idea. We might see more of that in order for parts sellers to survive."
But being everything to everyone is a recipe for exhaustion ˆ or worse. According to McMillan/Doolittle's Stern, companies like VIP have the added challenge of trying to reach multiple types of consumers. In VIP's case, it's reaching the do-it-yourself crowd that's interested in, say, high-performance aftermarket parts, as well as the soccer mom that needs an alignment on her minivan. "On the surface, it seems great," says Stern. "But the challenge is that you need to communicate differently to both people."
For his part, Quirk admits it's challenging to tell the VIP story in so many ways. He says the company in 2001 had a reputation as a parts store, but that many customers didn't realize VIP also offered automobile service. Since then, Quirk says, customer awareness of the company's service offerings has improved dramatically. Roughly 27% of VIP's revenues currently come from auto service ˆ a big change from 2001, when service made up just eight percent of revenues. In a few years, Quirk hopes half of VIP's sales come from the service bays.
How will he accomplish that? By treating the customers right, in hopes of luring them back for more visits. If more and more people decide to put down the wrenches and leave the tinkering to professionals, Quirk wants VIP to be their choice. But to do that, he's got to convince those potential customers that VIP can do the job. "On the tire and service business, it's all about trust," he says. "That one-on-one relationship with the car owner ˆ that's what the company stands for. But that trust area is an issue where the automotive field in general has had a blemish for decades. I think everyone has a story where the guy fixing their car took advantage of them."
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