Wholesale: New product strategy creates right 'fit'

Jan. 1, 2020
Small businesses and independent installers have a lot going for them. Many people want to do business with someone local they can trust. However, these businesses are also faced with several challenges, one of which is the recent competition from de

Small businesses and independent installers have a lot going for them. Many people want to do business with someone local they can trust. However, these businesses are also faced with several challenges, one of which is the recent competition from dealerships, which are becoming more of a competitor to the neighborhood shop. And it forces the distributors to look at how they can help their customers compete against the big name dealerships and OE parts.

Pacific Supply Company in Anaheim, Calif., recognizes the state of the industry, how they fit in and what they need to do to keep their wholesale customers competitive. Most recently, that has meant adopting a business strategy that will help them achieve a product mix that satisfies OE fit, form and function at aftermarket prices, as well as equipping their customers with tools to compete against the dealerships.

Pacific Supply Company started out more than 40 years ago as a parts store in Los Angeles run by Sanford Wayne. The company continued to grow and expand, and now owns 24 stores and eight distribution centers throughout Southern California, servicing everyone from the tip of Baja, Mexico, up to the top of Northern California. The company has remained in the family, and the president, Brad Wayne, is preparing to open their newest store soon in Cabo San Lucas.

The company’s goals have expanded beyond providing great service or competitive pricing. The leadership has looked within their customers and employees to find out more about the market and how to best compete within it. Based on meetings and discussions with technicians, the company began working on an OE connection product strategy — bringing more of OE-type products to market to give the customers what they are asking for.

Pursuing OE fit, form, function

Pacific Supply’s product mix is positioned as a step between the dealer and retail. The company sees a lot fewer do-it-yourself (DIY) customers and an extremely large and expanding do-it-for-me (DIFM) market. As this group grows, Pacific Supply will use the opportunity to refine inventory and product mix.

DIFM customers are consistently moving toward service at dealerships using OE parts, either for fear of voiding a warranty or because it has been portrayed as the easiest and most reliable option, regardless of the fact that many prefer patronizing a local shop. This competition from dealerships is relatively new, but it’s something Pacific Supply is conquering head on.

“As a do-it-for-me customer, I have not had great experiences at dealerships and would rather deal with a local shop,” says Pat Martin, director of sales for Pacific Supply Company. “But independent shop owners have to be informed and intelligent. They have to understand their customers. Most surveys show that 60 to 70 percent of people still want to go to local shops and would rather deal with small- to medium-sized business owners. To the extent installers can give them the products and services they need, and still provide a small business feel, we have a lot of shops doing extremely well.

“A lot of the feedback we’ve gotten about OE fit, form and function has driven us to seek an OE-style product. Shop owners don’t make money buying dealer parts. If we give them the aftermarket product at a better price, then we can give them a leg up. Our job is to meet their needs,” he adds.

Utilizing resources

In addition to providing products, the company works with its customers to keep them healthy and competitive. One of the benefits of their partnership with Parts Plus (now part of the Automotive Distribution Network) is the ability to bring them everything they may need — point-of-sale materials, training, technology and education. Pacific Supply also holds quarterly roundtable meetings where they discuss a variety of issues with technicians; the meetings help the company see the big picture and let the technicians know they are listening and using the information and feedback they provide. Pacific Supply aims to do whatever they can to help them compete. When that’s not possible, the company makes an effort to open a store in that area to compete with the two-step distributors and dealers head on.

“It used to be easy to be a jobber and growth was simple. A lot of companies were growing and the supply chain was there. That peaked in mid-1980s, and since then it’s become more difficult to operate strictly as a warehouse distributor. We challenge WDs to work closely with customers and the best store operators to keep them competitive and sharp so they can defend their area. Generally, our goal is to team with the strongest jobbers in California and Mexico that we can, continuing to build the Parts Plus footprint. When we cannot find partners, we’ll market our own company stores when necessary. And we’ve gotten really good at that,” Martin says.

Developing partnerships

The strongest partners for Pacific Supply are not easily defined. “It’s a little geographic and a lot personality,” says Martin. “The largest is a 10-store chain in the San Jose area. But we have many, many small jobbers that spend $10,000 a month with us. We’re looking for customer share. We want to have minimum 75 percent with them. If the personality is right, they’ll let you negotiate, help us both make money and provide the services they need to defend their territory. It’s important — finding people that fit with our company. It’s a marriage. When a business owner is writing you a check for $30,000 a month, that takes a lot of trust.”

It is this trust in their customers and in the state of the industry that has prompted President Brad Wayne to expand, both by opening new stores and by expanding the main distribution facility.

Wayne has great confidence in the aftermarket and where it’s going — the company plans to upgrade shipping, delivery, communications and technology. The geographic area has grown rapidly over the past five years, and the company sees the need to go to the next level. A new website went live this month and will serve to communicate instantly with customers, particularly when it comes to pricing. Another part of this plan is to reach the entire state, on foot if need be.

“Parts are parts,” says Martin. “The business is really built on relationships with our customers. Brad believes in salespeople on the street and it’s paying off. If someone was to ask what we do, I tell them that I sell spark plugs to anyone who needs them.”

As Pacific Supply Company has shown, if you put the right people and strategy in place — the company will find a way to go head to head with the big guy down the street.

The Vital Stats

Years in business: 43 years

Growth plans: Pacific Supply moved into a brand new facility at the end of April, upgrading to 160,000 sq. feet in Buena Park, from 95,000 sq. feet. The new building, which the company has been working on for the last year and a half, is completely new and has state of the art facilities and technology. The company is also preparing to open a new store in Cabo San Lucas.

Annual revenue: Approximately $150 million

Number of employees: 500-plus

Wholesale/retail ratio: 80/20

Snapshot of Pacific Supply Company: Founded in 1962 by Sanford Wayne, Pacific Supply Company has more than $30 million in inventory. Their core business is the wholesale distribution of automotive parts and accessories. Pacific Supply operates eight warehouse facilities in Southern California, as well as 24 retail stores mostly in the San Diego and South Orange County areas, servicing 200 jobbers. The company has also owned Fox Marine, a full-line wholesaler of marine products, for about nine years.

Affiliation: Parts Plus (which is part of the Network)

Competition: None specifically - retailers like CARQUEST, AutoZone and CSK, two-step warehouse distributors and dealerships

Locations/Facility size: Pacific Supply Company operates eight distribution centers in Southern California. Their main facility is 160,000 sq. feet.