The prophet came to Hi-Gear Discount Auto Parts back in 1980. But like most prophets, he was ignored.
This particular prophet was a free-lance writer scrounging up information for a story on Washington's auto parts business. The guy had clean hands, no grease. Just another flake with a pen and pad.
"We were so-o-o smart," said Kenneth R. Brooks, vice president for sales at Hi-Gear. The writer wanted to know if Hi-Gear -- then the top name in auto-parts retailing in the Washington-Baltimore area -- was ready to take on something called Trak Auto.
"He was talking about how Trak was planning to use a 'supermarket concept' in retailing auto parts, how Trak was going to go national with this idea, how they were going to change the auto parts business," Brooks said.
"We said, 'No way. That's not going to work. No way they're going to do that well.' But we should've listened. . . . We all missed the boat," Brooks said.
Since that conversation five years ago, Trak Auto has roared into first place in Washington's discount auto parts market. Its success shows what can happen when high-volume, mass-merchandising principles are applied to a business long characterized by its dedication to specialists -- mechanics and auto buffs who know as much about auto parts as the people selling them.
Trak's rapid growth also demonstrates what can occur when established, traditional non-automotive retail chains decide to pour money into moving the kinds of products once sold by single shops and small chains. They tend to become giants, swallowing up the competition and completely changing the shape of the market.
The Pep Auto Supply Co., founded in Philadelphia in 1925, was the first auto parts retailer to take the the chain concept seriously. "It is the granddaddy of all auto stores," Brooks said.
Pep Auto Supply became Pep Boys in 1928. In 1961, it acquired another auto parts company, Manny Moe & Jack of California, thus extending its range to the West Coast, where it is a major player in the highly competitive auto parts business in Southern California.
Pep Boys nationwide sales amounted to $233 million last year. The publicly held company employs 2,500 people. It operates four stores in the Washington area.
Trak's fast start was fueled by cash from its founder, Dart Drug Corp., which set up the company in 1979. Dart still owns 66 percent of the auto parts chain.
Dart's money and marketing expertise helped Trak speed past the local competition, including Hi-Gear, a Capitol Heights, Md., company that has been in the area since 1955.
Today, the privately owned Hi-Gear has 50 stores throughout metropolitan Washington and Baltimore doing what the company claims is $20 million in annual sales.
By contrast, Trak, officially Trak Auto Corp. since 1983, had 56 stores in the Washington and Richmond areas last year -- up from seven stores in 1980, its first full year of business. Sales at the chain climbed 28 percent in fiscal 1984, from $45.8 million to $58.6 million, and total profits rose 13.7 percent over the same period, to $4.8 million. For the first half of fiscal 1985, revenue rose to $32.6 million, from $27.7 million in the first six months of the previous year.
But Trak is running into some problems on the West Coast, where its attempts to nudge into that higly specialized, lucrative auto parts market is causing come losses.
For example, Trak's profits for the first half of fiscal 1985 were off by 23 percent from the year before. Its Trak Auto West Inc. subsidiary, formed in March 1982 in partnership with Thrifty Corp. of Los Angeles, has lost a reported $5.8 million, while profits at Trak East outlets grew 86.2 percent over the previous year, to $7.5 million. In the first half of 1985, Trak West lost $2.2 million, compared with a loss of $743,000 in the comparable 1984 period.
According to latest available records the company is required to file with the Securities and Exchange Commission, Trak West has leases for 38 stores on the West Coast.
Industry analysts estimate that each Trak store on the East Coast does an average of about $1 million a year in business, far more than the Trak West stores. Trak officials would neither confirm nor deny that report, nor would they comment on any other aspect of the company's business.
But industry observers add that the West Coast market, particularly Southern California, is more demanding than the East Coast, which tends to be a parts-replacement market for the typical car owner, which is a market more amenable to the supermarket store merchandising concept Trak relies on.
Southern California, with its good weather and penchant for innovation in car design and use of parts, still tends to attract the car-buff specialists who built up the auto parts business in the first place, analysts say. Specialists want a lot of attention that often isn't available in fast sales lines.
But in the East, Trak is setting new standards, its competitors say.
"Trak came into the market and showed that things could be done differently," said Hi-Gear's Brooks.
Dart started Trak with the idea that auto parts could be sold the same way as corn flakes, aspirin, underwear, and just about anything else customers can find in supermarkets and consumer stores. The difference was that this particular supermarket, using the same high-volume, mass-merchandising principles, would concentrate on oil, head gaskets, batteries and other parts do-it-yourselfers need to keep their vehicles running after the warranties have run out.
Trak's parts are sold at prices "generally ranging from 35 percent to 51 percent below the manufacturer's suggested retail price," the company said in its 1984 report to the SEC report. Its stores are located in shopping centers, usually next to a Dart Drug store.
The auto parts business, which really got going in the 1950s and which nationally generates some $60 billion a year in annual sales, did not traditionally work that way.
The business mainly consisted of little family-owned shops -- grimy places smelling of oil and rubber, where customers generally waited in front of counters while proprietors foraged through stacks of big and small boxes (after consulting a well-worn catalogue, of course) to find the right part.
Today, some 68 percent of the nation's 38,000 auto parts shops are small operations and independently owned, according to the Automotive Parts & Accessories Association, which is based in Lanham. The other 32 percent are owned by chains such as Trak, Pep Boys, Auto Shack and NAPA (National Auto Parts Association), but the chains are growing rapidly, APAA officials say. NAPA owns four local stores
In fact, the 33 percent growth in the number of auto parts stores between 1980 and 1983 -- an increase of 9,400 from 28,600 -- primarily is attributable to the growth of chains, said APAA president Julian C. Morris.
"Drug stores have been particularly aggressive in entering the automotive aftermarket" -- the industry name for automotive parts and services, Morris said. "Today, 30 percent of all drug stores carry some automotive products," he said.
In all, auto parts can be found at about 518,700 outlets across the United States, 41.5 percent of which are classified as "full-line" because they carry at least three different categories of automotive goods. An "outlet" is distinguished from an "auto parts store" in industry parlance, inasmuch as outlets may sell a variety of items (toothpaste and bread) and provide any number of services (wash your car, change your tires.)
But because many service stations have been reduced to stop-and-go fuel pumps, and because more vehicle owners themselves are doing at least minor car repairs, the fiercest competiton in the automotive aftermarket is among auto parts stores. And that has people like Brooks worried.
"In the beginning, for example, Trak could afford to spend a lot of money on designing its stores and it could afford to lose money on tremendous discounts because it was backed by Dart," Brooks said.
Many traditionally non-automotive businesses who are getting into the lucrative auto parts business "realize that they basically have two directions in which to go," Brooks said. "First, they can open up new chains, which a number have done. Secondly, they can buy an existing business and use it as the core of an expansion effort beyond the region in which the stores are located.
In the past four years, the gobbling up of small chains has gone on at a prodigious rate. And this is where the national impact of what Dart has done in the Washington area "begins to play its part," Brooks said.
APAA officials, who represent single auto parts stores as well as chains, nonetheless agree that the small chains are good takeover targets. Most of the single auto parts stores probably will go the way of the friendly, may-we-check-your-tires gas stations over the next decade, APAA officials say.
"But a lot of us don't want to be bought up," Brooks said. Hi-Gear, run by the families of the company's founders -- Murray Friedman, Abe Shuster and Stan Love -- will fight to remain an independent regional company.
"Independent small businesses are a ball," Brooks said. "You can go downstairs and fight with your father-in-law, instead of fighting with someone in some corporate headquarters in Cleveland." Brooks is a son-in-law of Friedman.
Hi-Gear, as a result, has gone on a marketing binge -- spiffing up stores, increasing advertising, retraining personnel and getting rid of people "who don't understand that a key part of our business is service."
Hi-Gear has torn another page from the Trak Auto book.
Trak's "merchandising philosophy is to develop strong consumer recognition . . . to promote a broad selection of products at low prices," Trak says in its report to the SEC. Trak's blue-and-white logo is an eye-catcher in shopping centers, and its emphasis on uniformity of appearance of the inside of its stores also is a successful part of the plan, Brooks said.
Accordingly, Hi-Gear has put its workers in uniforms and is using floor layouts that are consistent from store to store.
And Hi-Gear is going after the women, Brooks said. "We noticed that in a lot of our stores, women are coming in, either to get something to fix their own cars, or because a husband or someone sent them," Brooks said. "So, we're putting in women managers in a number of places." He would not say how many women managers the company has named.
Brooks said some Hi-Gear people questioned the wisdom of installing women managers in what is often construed to be a heavy-metal, male, macho environment. "They said: 'Women don't know anything about cars.' I said: 'A lot of men don't know anything about cars either, but that's never stopped us from hiring them.' "
The manufacturers who make the products that Trak, Hi-Gear and other auto parts companies sell also may fight for the independence of the small chains and single stores, Brooks believes.
"Many of the manufacturers are small themselves. They are getting nervous, because the disappearance of small chains could put them at a marketing disadvantage in dealing with the bigger retailers" who have more clout in pricing. If the big retailers spurn the small manufacturers, or push for prices that barely cover the cost of production, the small manufacturers "could wind up with fewer and fewer accounts," Brooks said.
The auto parts stores that will survive in the dramatically changing auto aftermarket will be those who understand that their business involves selling more than widgets, Brooks said. "The people who continue doing business the way it was done in the 1950s just aren't going to make it," he said.
Ironically, that is nearly the same thing the peole who run Trak Auto said about Hi-Gear and other established competitors five years ago. CAPTION: Picture 1, Philadelphia-based Pep Boys (Manny, Moe and Jack) seems to be less affected by Trak Auto's success than Hi-Gear Discount Auto Parts. Picture 2, Hi-Gear's Rockville manager Linda Jones shows off her store's new, less-cluttered look -- an attempt to compete with Trak Auto's supermarket concept. Picture 3, Hi-Gear, founded in 1955, has 50 stores in the D.C.-Baltimore area. By offering a large variety of items, it has boosted sales to $20 million a year. Picture 4, Pep Boys, the granddaddy of auto parts chains, merged with Manny, Moe & Jack of California in 1961. The retailer operates four stores locally. Picture 5, Key chain with Pep Boys logo. Picture 6, Hi-Gear worker stocks cans of GTX motor oil.