With strong population growth, Arizona's capital city sizzles with opportunity.
"It's bursting at the seams all over," says Bob Curtis, president of Reith Auto Stores, Arizona's largest independently owned CARQUEST distributor. "We really feed from the growth around us. The population is shifting and it continues to move outward."Arizona's capital city sits in the Sonoran Desert, anchoring a widespread region known as the Valley of the Sun.
Phoenix is the fifth-largest city in the United States, encompassing more than 500 sq. miles and geographically exceeding Los Angeles. Much of the land remains undeveloped, ripe for a prevailing pattern of scenic suburban expansion that shows no signs of cooling off.
A vast $50 billion regional marketplace supports 3.5 million inhabitants; about a quarter of them are of Hispanic origin. The Hispanic population in Phoenix-proper approaches 40 percent — up from 20 percent in 1990 — making it the nation's second fastest growing Hispanic marketplace behind Dallas-Fort Worth.
The valley's population as a whole nearly doubled during the 1990s. More than 100,000 new residents are expected to move here in the next year. By 2010, the population is projected to reach 4.1 million.
About 12 percent of the people are aged 65 or older. More than half of the residents are between 18 and 54 years of age, trending younger than the national averages.Despite all this population growth, however, technicians continue to be challenged as vehicles become more complex and drivers more demanding of proper customer service. "We're seeing a small increase in the national chains and quite a decline of the independents," says Curtis. "The decline in the number of shops has actually benefited us. A lot of them weren't qualified to bring their shops into the future; the ones that are left standing are the better-run operations."
Several shops, such as Salem Boys Auto in Tempe, report turning customers away because they're swamped with work."We are seeing a number of shops close because they cannot work on newer cars," says Mark Salem, co-owner of the 20-bay facility with his wife Ranae. In some situations there were "too many owners feeding out of the same trough, or the technician-turned-shop-owner was missing some important business skills," he observes.
As with the repair segment, management expertise, or lack thereof, has played a key role in the fate of certain retailers, says Curtis, as he recalls parts stores that failed to properly serve an increasingly sophisticated population base.
Growing smartlyAccording to a market analysis by R.L. Polk & Co., 53.2 percent of the motorists within the Phoenix CBSA (core based statistical area) are do-it-for-me customers; 12.4 percent fall into the do-it-yourself category. About 35 percent are "tweeners," those who choose DIFM or DIY repairs based on circumstance. The national DIFM vs. DIY ratio is 44 percent to 17 percent.
"It's become more of a DIFM market because of the technology of the vehicles," says Flyn Williams, general manager of the NAPA outlet in Chandler, which averages a 60-percent DIFM ranking from Polk.
The operation specializes in meeting motor pool maintenance needs for manufacturers and other businesses with high fleet traffic, including used car dealers.
Williams isn't seeing the boom that others are reporting, but he remains unalarmed because the scenario is part of a pattern that soon corrects itself. "About every five years it goes into a lull or plateau situation."
With nine operations in place and another on the way, Tri-City Automotive Warehouse is often cited as technicians' first-, second-or third-call choice.
"We have a good presence here," says General Manager Tom Hartenbower. "We've been growing rapidly and smartly. We're always striving to do better; we have ambitious plans. The influx of people is not going to slow down for a long time."
Hartenbower recounts the paths the company has taken since its founding in 1961, as the Valley of the Sun shifted from a desert outpost to a scene of sprawling suburbia. And all of these residents have car care needs.
"We try to follow the trail of installers who try to follow the trail of new roofs — wherever development is coming in," Hartenbower says. "We've opened one warehouse a year for the last three years, and we're going to open another one in '07."
The facilities, all constructed new from the ground up, average 30,000 sq. feet to 60,000 sq. feet. In April, a location was opened in North Phoenix, joining a Northwest Phoenix outlet. A site was established in South Scottsdale two years ago. A 50,000-sq.-foot warehouse is due to be erected in Mesa next year.
According to R.L. Polk & Co., Mesa's motoring public posts do-it-for-me rates ranging from 35.6 percent to 63.8 percent. Mesa's annual household income is $41,773, compared to the national average of $44,684. Since 2000, its population has increased more than 14 percent.Scottsdale is a hotbed of DIFM activity, with Polk percentages exceeding 82 percent; the lowest DIFM neighborhood is just over 28 percent. Annual household income is $41,361; since 2000, its population has increased more than 13 percent.
"That brings in a lot of automobiles for maintenance and repair," says Hartenbower. "We want to be within 45 minutes of each cluster of installers."
The trends are relatively easy to discern in such a hot market, especially because the growth goes onward in all directions.
"There's a lot of business out there to be had," concurs Chuck King Jr., co-owner with his brother Jeff of Star Distributing.
"One of our goals is to get more company stores going," says King. Currently in the marketplace with three stores and several satellite warehouses, Star outshines the competition through hotshot delivery."We service all the Auto Value jobber stores in Arizona, and any other independents," he notes. "We go every hour all over the city." Frequent delivery runs are made far and wide, including Mesa, Tucson and on down to Mexico.
'Really fine competitors'
Operating under the Parts Plus banner, Tri-City aims for solid coverage in each of its territories. The main goal is serving the available technicians rather than fretting over the competition. "We look at the market rather than individual operations," Hartenbower says.AutoZone has 62 stores within a 50-mile radius, according to the Yellow Pages; Checker lists 73. Its parent company, CSK Auto, is headquartered in Phoenix with a distribution center. Since last December, three new Arizona stores averaging 7,250 sq. feet have opened, heightening the chain's reach to 1,288 retail outlets in 22 states.
"They've always had a presence here, so they've always been a factor here because they're interested in the wholesale market," says Hartenbower, who is complimentary to each of the other players in town. "There are some really fine competitors here."
NAPA, CARQUEST, Pro Auto Parts (a member of the Pronto Group), Factory Motor Parts, Arizona Jobbers Supply and USD, Inc. (distributors of Ford and General Motors parts) are all saluted as being good companies, along with WORLDPAC and One Source. Tri-City employs two courier firms to screen and supply its array of 120 to 130 delivery drivers. Sales personnel are carefully selected for their mechanical knowledge and customer service skills. Good pay and incentive programs are provided. "We try to get and keep the best people," Hartenbower reports.
Electronic commerce has proven to be successful. "We probably do 20 percent of our business electronically. We're connected with many customers, and have been for a long time," he says. Tri-City also offers technical and business training for shops.
Tri-City rates first-call from the gleaming All Night Auto of Pueblo Anozira. NAPA is No. 2 on the telephone list, followed by Pro Auto Parts.
All Night Auto has been open for a year and a half in Tempe, where the median cost of a home is $336,000, according to analyst Bert Sperling, president of Sperling's Best Places, a Portland, Ore.-based demographic research firm. Tempe's cost of living is 24 percent higher than the American average, and the DIFM rate here tops 88 percent.
"We get $100,000 Mercedes and I get a bunch of do-it-yourselfers with projects that they've started and can't finish," reports A.J. Demarte, service center manager.
"We're open 100 hours a week," he says. Contrary to its moniker, the franchised operation does not run a graveyard shift. Business is conducted from 7 a.m. to midnight Monday through Thursday, with slightly shorter hours on Friday, Saturday and Sunday.
"We accommodate anyone's schedule," says Demarte. "It's a one-stop repair center," complete with an automotive concierge service. "People don't have to find rides at 10 at night to get their cars."
And "it definitely is" a moneymaker for the company, he points out. For an appropriate fee, All Night workers will pick up a customer's car and take it to a dealership for complex repairs, or handle the hassles of subcontracted specialized services such as window glass replacement and tire purchases. Tires are an especially good mover; hot pavement punishes the rubber here.
"We're getting a tire machine, and when we get that we won't have to sub that out anymore," Demarte says.
At the Tempe location, which has six bays and six employees, parts can be hard to come by after traditional business hours — a situation that dictates leaving the more involved repairs until morning.
"We get quite a few oil changes, mostly small stuff, in the evening," says Demarte. "We send out fliers to the surrounding areas, but word-of-mouth has been our most effective method. Most of (the clientele) is from within 5 or 10 miles, but we get some from 20 to 30 miles away."