This classification comprises establishments primarily engaged in the retail sale of new automobile tires, batteries, and other automobile parts and accessories. Frequently, these establishments sell a substantial amount of home appliances, radios, and television sets. Establishments dealing primarily in used parts are classified in wholesale trade, SIC 5015: Motor Vehicle Parts, Used. Establishments primarily engaged in both selling and installing such automotive parts as transmissions, mufflers, brake linings, and glass are classified in services, industry group 753 (Automotive Repair Shops).
441320 (Tire Dealers)
441310 (Automotive Parts and Accessories Stores)
As a group, auto and home supply retailers participate in what is commonly referred to as the automobile aftermarket, a term referring to all the parts and services needed by motor vehicles after they leave the manufacturing plant. This broadly defined market includes the manufacturing and sale of fuel, lubricants, tires, batteries, brakes, accessories, and a host of other products used to maintain or heighten an automobile's performance, or simply to improve its appearance. Additionally, the automobile aftermarket encompasses the installation or servicing of these products.
This multibillion-dollar market includes various types of retailers other than auto and home supply stores, such as oil companies, rubber companies, service stations, discount wholesalers, and department stores, all of which control a portion of the automobile aftermarket. Moreover, auto and home supply retailers, as defined by the Standard Industrial Classification Manual, participate in only a portion of the automobile aftermarket. They do not generate revenue from the sale of fuel, nor do they derive the bulk of their revenue from selling and installing transmissions, mufflers, brakes, or windshield glass. These establishments generally are franchised or independent stores devoted entirely to selling, installing, or servicing a strictly limited number of automobile parts, such as the Midas brake and muffler chain, or Minit Lube, a chain specializing in lubricating automobiles.
Although consigned to a share of the automobile aftermarket, by both other retailers and the parameters of the SIC Manual, auto and home supply retailers generate an aggregate revenue measured in billions of dollars, the size of which is augmented by sales garnered from the industry's other focus, home supplies. These products generally consist of goods such as refrigerators, television sets, radios, or essentially any item a retailer believes consumers will purchase. Although the combination of auto parts and home appliances under one roof seems an odd mix, the inclusion of home supply products in auto parts retail stores has roots stretching back nearly to the genesis of the auto parts industry itself. Intended to complement the revenue realized from the sale of auto parts, home supply products historically have played an integral role in the performance of auto and home supply stores.
Within the auto and home supply industry, there are several types of retailers, some selling only one product such as tires and others concentrating on one particular segment of the automobile aftermarket, such as vehicle accessories. "Speed Shops" are an example of the latter, offering products to increase, as their name suggests, the performance capabilities of a vehicle, which also can include an assortment of decorative merchandise. Some large tire manufacturers, such as Goodyear and Firestone, also operate retail stores devoted solely to selling their products, while the same is true of battery manufacturers.
On a broad level, the fortunes of the auto and home supply industry generally are dictated by economic factors that determine the welfare of nearly all retail, manufacturing, and service industries. Increases in the amount of disposable income held by consumers will have a favorable effect on auto and home supply retailers' business, as will appreciable increases in the nation's population, which eventually will mean more licensed drivers and more automobiles on the road. Also, significant increases in the number of new automobiles entering the market will boost retailers' sales, as new automobile owners buy products to equip their new purchases.
But auto and home supply retailers also may realize higher revenue when these same conditions worsen, lending the industry the enviable characteristic of benefiting from both the good and the bad. Reduced consumer spending can increase, in certain circumstances, the business activity of auto and home supply retailers, primarily because automobile owners will be more inclined to repair their vehicles themselves, rather than paying for the services of a professional mechanic. Similarly, fewer new automobiles on the road generally means consumers are continuing to drive their existing, older vehicles.
Positioned as such, auto and home supply retailers have enjoyed steady, and sometimes prolific, growth since the emergence of the auto and home supply concept in the early twentieth century. But in the mid-1990s, various challenges portended substantial decline as the auto and home supply industry entered the twenty-first century. One concern was the increasing technological advancement and complexity of automobiles, which made them more difficult for consumers to repair themselves, thus redirecting business toward trained garage mechanics, and away from auto and home supply retailers.
A second concern was the proliferation of massive discount stores and wholesale distributorships, which led to a greater representation of these types of retailers in the automobile aftermarket, further shrinking auto and home supply retailers' customer base. To help dampen the effects of this potentially deleterious situation, more and more retailers involved in the industry began placing an emphasis on service by including additional service bays within their store format. Other concerns included the consolidation of the auto and home supply industry into just a few very large companies and the challenges presented by computers in this industrial-age business.
The auto and home supply industry is a densely populated niche within the automobile aftermarket, with stores fairly evenly distributed throughout the nation. In 1980, there were 35,200 establishments in operation. That number spiraled to 46,000 in 1987. During the late 1980s, a combination of store closures and consolidations blew through the ranks of auto and home supply stores, dropping the nationwide total to approximately 41,300 by the early 1990s. Industry employment has declined in recent years, falling from 408,300 people in 1997 to 405,840 in 2001.
In 1980, auto and home supply retailers registered $18 billion in sales, a total that increased by some 40 percent to $25.2 billion in 1985, just five years later. The number increased dramatically again in the three years between 1985 and 1988, to $30.3 billion. By 1989, growth had begun to taper to $31.7 billion, which grew to $34.2 billion in 1990. The increase from 1989 to 1990 would be the last significant gain for several years, as a global economic recession negatively affected nearly all sectors of retail trade. The industry achieved steady growth throughout the 1990s, with sales totaling more than $59 billion by 1995 and almost $72 billion in 1999.
The composition of the auto and home supply industry changed during the 1980s, as multi-unit corporations increased their representation in the industry. This growth of auto and home supply chain stores followed the general retail trend toward larger stores. Larger inventories enabled retailers of all types to lower prices and, consequently, attract more customers—a concept and format auto and home supply retailers adopted with increasing frequency throughout the decade. In 1980, corporations with 11 or more auto and home supply retail outlets accounted for 26 percent of the industry's total sales, a proportional representation that increased by the decade's close, when multi-unit organizations accounted for 31 percent of the industry's total sales. By the early 1990s, firms with 10 or more establishments represented 43 percent of total sales. A poor economic climate in the 1990s exerted further negative effects on smaller independent auto and home supply retailers, forcing some to exit the business. Rapid consolidation continued to impact the industry throughout the 1990s and into the early 2000s. However, the Automotive Aftermarket Industry Association (AAIA) reported that by 2001 merger and acquisition activity was beginning to slow down.
Auto and home supply stores date back to the early twentieth century, emerging roughly at a time when automobiles themselves were becoming a common sight on American roadways. Western Auto Supply Co., the industry's first retailer to achieve widespread success, was founded in 1909 as a mail-order company, and opened its first outlet in 1913. It is fair to assume, however, that smaller, local stores were in operation before this time, though there are few existing figures for the scale of their operations.
It was a time when automobile owners purchased nearly every auto part or accessory they needed from automobile dealers. Auto parts retailers sold a limited selection of products and only products intended for use with automobiles. It would be roughly 20 years before household merchandise would begin to appear on the shelves of auto parts stores, and then only to a limited extent. Instead, retailers relied on the sale of basic auto parts and supplies, such as antifreeze, polish, and other related items. But the growth of auto supply retailers during those fledgling years was severely restricted by the overwhelming command of the automobile aftermarket enjoyed by automobile dealers, whose only appreciable competition came from automobile repair garages.
It would be several decades before any type of retailers — service stations, garages, or repair specialists—would begin to wrest control of the automotive aftermarket away from automobile dealers. Nevertheless, the small auto supply retail market already amounted to a considerable amount of money, enough that even a small percentage represented a sufficient incentive for additional auto supply stores to join the fray. Several future auto supply empires emerged in the 1920s, particularly Pep Boys—Manny, Moe, and Jack, and Gamble-Skogmo Inc., both of which began operations in 1925. By this time, automobile dealers' control of the automobile aftermarket's distribution channels had begun to slowly lessen as the number of repair garages increased. In 1920, automobile dealers commanded 99 percent of the market; 15 years later, their share of the aftermarket had fallen to 80 percent.
In the late 1930s, auto supply retailers began to sell nonautomotive merchandise in their stores as a rudimentary marketing ploy to attract customers. Because these stores catered primarily to male consumers, the nonautomotive merchandise consisted of what then were considered traditional male products, such as screwdrivers, wrenches, and other hardware items, as well as sporting goods and garden supplies. There was, however, no steadfast rule governing the selection of merchandise; retailers were merely fleshing out their display shelves to boost sales. These nonautomotive products represented roughly 20 percent of the average inventory held by auto parts stores in the late 1930s, and their product mix would become more balanced in the coming years.
By 1940, the automobile aftermarket had opened up considerably. From 1935 to 1940, automobile dealers' share of the distribution channels experienced its most precipitous drop yet, falling from 80 to 66 percent. Service stations, general garages, repair specialists, and auto and home supply stores composed the balance. By 1940, auto and home supply stores accounted for approximately 10 percent of automobile aftermarket sales, twice the percentage garnered five years earlier.
Following World War II, the trend toward greater parity in the automobile aftermarket continued, as automobile dealers' share dropped to 56 percent by 1945 and then below 50 percent by 1950. Meanwhile, the auto and home supply industry's share in the market increased, rising to roughly 14 percent by 1950. Consumers' voracious appetite for home appliances and other hard goods during the decade further improved the position of auto and home supply retailers. Refrigerators, housewares, toys, radios, and televisions began to appear in auto and home supply stores during this postwar economic boom era. Stores also began to attract female customers in large numbers for the first time.
The product mix of auto and home supply stores' merchandise reflected an increased demand for home appliances and related products. The two elements reached equal representation in the early 1950s, and, a decade later, nonautomotive products were more prevalent than automotive parts. As this trend developed, the types of home supply products offered became more diverse, and, in some cases, the auto and home supply stores assisted in the design of products. In 1957, for instance, Western Auto Supply Co. (the progenitor of auto and home supply stores) helped to design a portable typewriter called the Wizard, which the retail chain featured in its approximately 400 stores. Another large retailer, White Stores Inc., offered its customers sewing machines, vitamins, and more than 1,000 health and beauty products, in addition to the more traditional home supply products.
Whereas automobile dealers' market share had slipped to 40 percent by 1955, the auto and home supply retail industry experienced tremendous growth following World War II. It generated roughly $1.5 billion in annual sales during the mid-1950s, and aggregate revenue would continue to balloon, more than doubling to $3.1 billion in 1962. The competition was higher, too. By that time there were 550 retail chains operating 6,000 stores, 4,000 independent outlets, 20,000 franchised dealers, and 3,000 wholesalers and discount stores.
The proliferation of credit sales and the addition of service bays for installing automotive parts and accessories also fueled the industry's growth. In the early 1960s, retailers began offering basic installation services for products such as automobile tires—a bid to keep customers in their stores for a longer period of time. Credit purchases increased the frequency of customers' visits. By the mid-1960s, many retailers had expanded the number of services they offered, branching into brake and ignition repair, as well as wheel alignment and balancing. The addition of these services was integral to the industry's future growth. From 1960 forward, the percentage of the market controlled by service stations shrank. The same held true for garage mechanics, who saw their presence in the market begin to ebb a decade earlier.
Other factors were contributing to the industry's growth as well, notably the rising number of consumers servicing their own automobiles. The percentage of automobile owners in the United States who tuned their own engines doubled to 20 percent between 1957 and 1966, a period during which the number of automobile owners also increased. By the mid-1960s, 40 percent of all automobile owners changed their spark plugs themselves, up from 25 percent in 1957. This growth of the do-it-yourself market was indicated by other developments in the mid-1960s, such as a significant leap in the sales of Glenn's Auto Repair Manual, of which 55,000 copies were sold in 1965 and another 50,000 in the first three months of 1966. When Popular Mechanics began running an advice column regarding auto repair, the magazine was inundated with letters. The editorial board had anticipated 50 responses a month; instead, it received 400 to 500.
Accordingly, as the auto and home supply industry entered the 1970s, the potential for profit was in place, limited mostly by the fierce competition pervading the industry. By this time the automobile aftermarket was divided fairly evenly among the major distribution channels, with auto and home supply stores controlling roughly 20 percent of the market. Recessive economic conditions in the mid-1970s, however, coupled with the effects of an oil embargo, negatively affected many industries. Consumers purchased fewer new automobiles, thus creating a national pool of vehicles that were aging and in need of repair. With less disposable income to use for professional mechanics, the do-it-yourself market, and in turn the auto and home supply industry, entered a period of invigorated growth.
But by the late 1970s, other types of retail operations had discovered automotive parts as a means to help mitigate flagging sales. Mass merchandisers and supermarkets began to stock significantly more automotive parts and accessories, frequently devoting a portion or end of a display aisle to them. Moreover, these types of retailers also began selling home appliances and other related merchandise, impinging on both segments of auto and home supply retailers' market niche. But the effect of this new breed of competition on auto and home supply retailers was partly offset by several favorable developments during this time, and others to come in the early 1980s.
Tire sales, perennially the most lucrative segment of the auto and home supply business, benefited from the introduction of small, lightweight "mini-spares" by automobile manufacturers in the late 1970s. These temporary spare tires, usable for only a limited number of miles, increased the sales of conventional tires in the aftermarket. Additionally, recreational vehicles and small pickup trucks began to emerge in greater numbers, creating a new category of vehicles that required repair and maintenance, as well as auto parts and accessories to heighten performance.
In the early 1980s, the industry's position was further buoyed by a depressed automobile manufacturing market, in which production levels descended to historic lows, and by the attrition of service stations. Due in part to the energy crises in the mid-1970s, the number of service stations (which generally sold batteries, tires, and automobile accessories) had dropped by 75,000 during the mid-and late 1970s, leaving 150,000 in existence by the early 1980s—many of which had discontinued the practice of selling automobile parts. In 1981, new automobile production plummeted to the lowest level since 1961, and in March 1982, to the lowest monthly output since 1948. As in the past, this situation meant older automobiles were populating American roads, automobiles that required more replacement parts than newer automobiles. During this time, the average age of an automobile in the United States was 6.6 years, the highest since 1952.
In the mid-1980s, a relatively new segment of the automobile aftermarket, the automobile security industry, recorded a growth rate of roughly 30 percent per year. As more and more automobile owners protected themselves against car theft by purchasing security systems and alarms, car alarms became a business estimated at $155 million to $200 million a year. This enriched auto and home supply retailers, who generally concentrated on lower-priced security systems, giving them an additional $30 million worth of business nationwide.
But technological strides in automobile manufacturing had, by the early 1980s, made the automobile a complex piece of machinery replete with electronic components, thus causing the do-it-yourself market to lose some of its vitality. By the late 1980s, this development became a pressing concern for retailers involved in the auto and home supply industry. To make matters worse for auto and home supply retailers, the same technological strides that had spawned more sophisticated automobiles also made many types of automobiles virtually maintenance-free for significantly longer periods of time. Consequently, as industry participants entered the 1990s, questions arose as to whether they could successfully compete in a dramatically changing market that threatened to keep dwindling.
Emerging from the recessive economic conditions of the early 1990s, the automobile aftermarket represented a $200 billion annual business, employing 2.5 million persons in approximately 500,000 establishments (auto and home supply stores operate in only a part of the aftermarket and thus represent a fraction of these figures). The period from 1988 to 1992 had seen a shift of $3.9 billion of product volume at the user level in the automobile market. This volume was not lost but simply redirected into different distribution channels, such as Wal-Mart and other large nonautomotive stores that now marketed some auto supplies. Industry pundits in the early 1990s anticipated another shift between 1992 and 1996, this time of $7.3 billion.
According to predictions, by 1997 there would be dollar changes in distribution-channel volume greater than the growth of the aftermarket itself, which would mean a more intense battle among competitors for the existing market, rather than for the growth of the market. The traditional channels of distribution, in which auto and home supply retailers are included along with parts manufacturers, warehouse distributors, and jobbers, was expected to increase its aggregate sales total by $500 million during this four-year period. But it also was expected to cede market share to other distribution channels at the same time, giving up $2 billion.
The predicted shifts in the market seemed to be materializing in the latter part of the 1990s. Companies were becoming bigger, and stores were increasing in size. Hence, Aid Auto Stores, a strong competitor in the New York City and Long Island markets, announced the opening of a warehouse superstore in 1996. It pioneered a new concept in auto parts sales, one that had already shown itself effective in selling items as varied as groceries and stereo equipment. Symptomatic of the fact that department stores were entering the auto parts market was the announcement by Target Stores in February 1996 that it had entered into an exclusive agreement with Car and Driver brand to sell its products, which included oil and antifreeze.
A report in Discount Merchandiser magazine in February of 1997 compared the numbers of outlets in various segments retailing products in the automobile aftermarket and analyzed the shift in numbers of outlets from 1980 to 1995. According to the study, between 1992 and 1995, the automobile aftermarket had a number of losers and very few winners. Auto parts stores, for instance, had seen a decrease in their numbers, as had tire stores, service stations, and new car dealers. But discount stores, drugstores, and especially warehouse clubs had seen an increase in the number of outlets marketing auto after-market products. With even drugstores getting in on the act, traditional auto and home supply retailers were bound to suffer.
Companies that could not roll with the changes in the market did not last. In August 1995, one of the industry's former leaders, Nationwise, filed Chapter 11 bankruptcy and sold a large portion of its stores to Western Auto, which in 1998 was owned by Advance Holding Corp. Pep Boys CEO Mitchell Liebovitz remarked that the automotive aftermarket was starting to experience the effects of consolidation. Even successful players such as his own company had to adjust. Thus, Pep Boys realized that it had perhaps overcorrected in accordance with market shifts and was missing out on a large market segment that still worked on their own cars. In 1996, it opened 50 new establishments under the name Parts USA, geared toward less affluent consumers who still did their own repairs. As of 1999, AutoZone Inc. also catered to a market that performs their own repairs, as well as to professionals.
After reorganization and restructuring, the industry was stable and growing. In 1999, the industry was again on the upswing, with all of the major companies experiencing tremendous growth in both sales and number of employees.
According to U.S. Census Bureau figures, overall retail sales for auto parts, accessories, and tire stores increased throughout the 1990s, peaking at $73.6 billion in 2000. However, in 2001 sales dropped to $72.7 billion. This decline was partially due to weak economic conditions that impacted both commercial travel levels and consumer spending. On a retail basis, the Automotive Aftermarket Industry Association (AAIA) reported that total automotive-related aftermarket sales exceeded $178 billion in 2001. Less service repair revenues of $122.9 billion, this figure amounts to $55.9 billion and includes $29.1 billion in "do-it-yourself" (DIY) parts and accessories, $20.6 billion in tires, and $6.2 billion in DIY chemicals and lubricants.
One factor hindering industry growth is the proliferation of higher quality parts for both new and used vehicles, which has required drivers to replace parts less frequently. Although growth in the automotive aftermarket as a whole has slowed down, the aging of the car population and the rise in miles driven bode well for industry's future, according to industry analysts and the AAIA. The Freedonia Group forecast North American aftermarket manufacturer-level (wholesale) sales would reach $53 billion by 2006 and indicated that Mexico would outpace the United States and Canada in terms of retail aftermarket growth. A decline in automotive leasing was another positive factor for the aftermarket industry in the early 2000s, because this trend will likely increase levels of vehicle enhancements and repairs. Another positive sign was that, despite a challenging economic environment, industry leader AutoZone, Inc. planned to open 150 new stores by August 2003.
Gone are the days when local, independent stores can generate sufficient revenue to be included in the upper echelon of their field. This holds true for many retail enterprises and particularly for auto and home supply stores, considering the enormous inventory required for them to operate successfully. The increasing number of foreign-manufactured automobiles driven by American consumers has created a commensurate increase in the number of different automobile parts and accessories an automobile owner may need, which only well-financed conglomerates are able to provide. As illustrated in Automotive Marketing Online, in 1987 the top 100 chains owned 2,771 stores. However, by 1999 the top four chains owned more than 6,000 stores.
In the early 2000s, the industry's leading firms included AutoZone, Inc. of Memphis, Tennessee, with $5.3 billion in 2002 sales, a growth of nearly 11 percent from the previous year. AutoZone reports more than 3,000 outlets and 44,179 workers. Close behind is Advance Auto Parts, Inc. (formerly Advance Holding Corp.), which took over former number-two company Western Auto in 1998. This acquisition caused Advance to increase its sales by 44 percent and to nearly double its workforce. In 2003, Advance was rated number two in the industry, with Advance Auto Parts, Western Auto, and Discount Auto Parts (acquired in 2001) stores. Genuine Parts Co. had $8.3 billion in 2002 sales (which includes other products) and 30,700 employees. Pep Boys reported $2.2 billion in 2003 sales and 22,201 employees. Finally, CARQUEST Corp., a Raleigh, North Carolina-based automotive parts distribution group, had sales of $2.5 billion in 2002.
During the 1980s, total employment by auto and home supply stores increased, keeping pace with the growth of the industry's aggregate sales. In 1980, auto and home supply stores employed 225,000 people. Then, as the number of establishments in the industry increased, the workforce total responded in kind, expanding to 286,000 by 1987 and to 298,000 two years later. In 1990, 305,000 people were employed in the industry's 43,400 establishments. But by 1992, the figure had dropped to 269,069. The industry was on the upswing in late 1999 when there were an estimated 408,300 employees. However, by 2001 levels had declined again, reaching 405,840.
In 1980, employees involved in retail trade earned $4.88 per hour, whereas members of the automobile aftermarket paid their employees an average of $5.66 per hour. In 1990, employees in the retail trade earned an average of $6.75 per hour, whereas a typical retail employee in the automobile aftermarket earned $8.92 an hour, bringing the industry's total payroll to $5.1 billion and reflecting a greater wage disparity between the two segments than existed a decade earlier. By 1992, the average retail employee made $12,107 a year, and employees in the auto and home supply industry made $17,405. In 2001, the industry's average hourly wage was $12.49.
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