The real story is not what Penske was losing when it went out of business but why it was founded in the first place. The deal favored a distraught Kmart with Roger Penske buying 860 Kmart auto centers that Kmart had long mismanaged. This effort was compounded by the lack of its automotive retail efforts. Tom Swoboda, Kmart’s automotive division manager from 1990-95 and now owner of his own automotive consulting business, said, “For a long time Kmart could not decide if it was in or out of the automotive business. It never fit the Kmart target customer –– the busy-budget housewife.”
With 60 percent of car repairs being obtained by women, it’s clear that Kmart didn’t know who a housewife was.
Let me be blunt, Penske should have seen it coming. Penske bought damaged goods from a company that needed cash. Then Penske itself, added to its problem by relying on uncommitted and disoriented Kmart to market the Auto Centers.
Fortunately, the Penske business will be absorbed by other capable players. Unfortunately, there’s something brewing right now that could affect the business of every automotive retailer, jobber and WD.
It actually happened with little fanfare and almost slipped by most media. That is quite amazing since it concerns Wal-Mart, the country’s largest retailer. Believe it or not, Wal-Mart wants to sell used cars. It is currently test marketing five Houston-based “Price 1” used car stores with its partner, Asbury Automotive, the nation’s fifth-largest dealership chain. Wal-Mart leases part of its parking lots to Asbury but doesn’t have a financial stake in the company — yet.
Although Wal-Mart did not return our calls, a Wal-Mart spokesperson was quoted in USA Today as saying, “This is consistent with our program to provide one-stop shopping. You can get your hair done. We have banks, optical and now we are looking at getting cars as well.” Gee, he forgot to mention groceries, clothing and gas.
If Wal-Mart wants to sell cars (yes, through someone else for the moment), won’t they want to fix them, too? And if they fix them, is Wal-Mart the type of company to buy parts from other suppliers or is it more likely to buy direct from manufacturers? We really don’t know how Wal-Mart’s automotive efforts will develop. But if Wal-Mart deems the car business worth developing, then there’s little doubt that the retailer will develop it. Wal-Mart is in a league that it created and now it looks like the retailer might be expanding the league –– for itself.
You don’t need to push the panic button and get measured for the familiar blue smock, but you don’t want to take this news at face value, either.
