The Bottom Line:Where do mass merchants fit in?

Jan. 1, 2020
And I would agree that Wal-Mart and Costco are more likely to sell cabbage rather than carburetors. But as I have said before, I will be leery of Wal-Mart until they close their increasingly busy repair bays and stop experimenting in the sales of use

With terrorists, SARS, monkeypox and a host of reality TV shows to worry about, you’re probably not too concerned with the mass merchants stealing your business. According to one in-the-know Wall Street analyst who spoke at the 8th Annual Global Automotive Aftermarket Symposium, you’re probably more likely to be taken hostage by space aliens than having to seriously combat Wal-Mart, Costco, Home Depot and Lowe’s. Well, he didn’t say it exactly like that, but that’s pretty much what he meant.

David Schick of Legg Mason, who follows AutoZone and several mass merchants that sell or could sell automotive parts and accessories, says the big retail push in the ’90s was to whittle down the categories to the ones that really matter, i.e., categories that can score the biggest margin and generate a lot of turns.

Although he says that’s still the case, we are going to see a reversal of that. Instead of the mass merchants trying to carve out some additional automotive business or other slower turning inventory businesses, the mass merchants are turning to food as the fuel to feed their profits. Apparently, they’ll take the sure thing over car repair that can be neglected if need be.

According to Schick, Home Depot had a big push on automotive consumables but has dropped that approach except in selected stores. And I would agree that Wal-Mart and Costco are more likely to sell cabbage rather than carburetors. But as I have said before, I will be leery of Wal-Mart until they close their increasingly busy repair bays and stop experimenting in the sales of used cars. In my opinion, the only thing that keeps Wal-Mart from becoming a full blown aftermarket competitor is that it hasn’t quite figured out how to attack the market. It would be a mistake to write them off as just another mass merchant that just dabbles in the automotive business. They have the business philosophy — one-stop shopping — to drive them to this decision eventually. And it has the financial wherewithal to do what it wants to do when it wants to do it. 

Anyway, consumers are attuned to the merchandising practices of the mass merchants. So what works in those situations may very well work in yours. Check out our Special Report on in-store merchandising (“Drawing from big boxes”) to see what I mean.

nnnA few weeks ago you may recall that Alan Greenspan, head of the Federal Reserve Bank, muttered that he was worried about falling prices. So what’s wrong with falling prices? Well, we’re not talking about Wal-Mart’s concept of saving consumers cash on their Tide, tweezers and Twix bars. Rather, a steadily falling price scenario from an economist point of view means that companies would make less profits and, in turn, workers — the lucky ones who would keep their jobs — would take home a smaller paycheck. And if deflation was sustained over several months or longer, a vicious cycle would be set in motion in which companies would be forced to continue to cut jobs, leaving consumers with less money to buy products and services. Undoubtedly, full-blown deflation would force motorists to spend less on car repair and maintenance and concentrate on basic needs such as food. Perhaps Wal-Mart and Costco know something that we don’t.

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