Pep Boys Courts Wider Audience
Small beginnings can lead to big things. That’s certainly true in the case of Pep Boys, which was founded in 1921 by four Navy buddies who pooled together $800 to open an auto parts store in Philadelphia. Today, with some 750 stores across the United States and Puerto Rico, the Philadelphia-based company is one of the nation’s leading auto supply and service providers. Balancing its rich history and changing customer demographics, Pep Boys is pursuing a more focused customer-centered strategy — one that includes an emphasis on service — to stand out from the competition.
Chain Store Age editor Marianne Wilson spoke with Pep Boys’ senior VP and chief customer officer Tom Carey about the company’s changing customer base and new updated customer experience. Carey, who joined Pep Boys in August 2012, previously served as senior VP and CMO for Orchard Supply Hardware.
Your position is new. What does the job entail?
The position was created by Mike Odell (CEO and president of Pep Boys). Mike recognized that to truly drive a customer-centric philosophy across the entire company, he needed to create a senior position that was exclusively dedicated to doing so.
The job, at its core, is about crafting the strategy of how we change our “go to market position.” Since the company had decided to take a customer-centric approach to getting there, this position had to determine which customers we wanted to target, and develop a comprehensive understanding of their life — not just their cars. Then we had to push that understanding into all aspects of strategy and execution, including store design, customer service, product, marketing and the like.
Has Pep Boys’ customer base changed in recent years?
Our customer makeup has changed. As we grow the service side of our business, we are seeing a much more balanced male and female customer base.
In our DIY business, we still see a predominantly male audience. But while that side of the business still accounts for most of our transactions, it does not represent the majority of our revenue due to the average sale on the service side being so much larger.
How important are maintenance and repairs to Pep Boys’ strategy going forward?
We see the service market as our biggest growth opportunity. It is a much larger market than the DIY market in terms of expenditures, where it is four times as bigger, and also has a bigger potential customer base. It’s also the fastest growing market of the two, as DIYers shift to “do it for me” customers and as cars get more complicated. Summing it up, the service arena is a market where we feel there is ample opportunity for a player to get it right and distinguish themselves with consumers.
Let’s talk about Pep Boys’ new store concept in Tampa (see page 62). What was the thinking behind it?
It was our effort to take all our customer thinking, learning and strategies and put them into a real market. We referred to it as a learning market and store because we want to see how our brand re-positioning would work. It’s important to point out that while the physical look and feel of the store changed considerably, this wasn’t just a store remodel. It is a complete brand remodel in that every aspect of how we go to market was turned on its head and re-imagined.
How does the Tampa store differ from Pep Boys’ existing store format?
Both the exterior and interior were completely changed. For the exterior, the architecture was completely redesigned to increase our curb appeal and make it welcoming to our target audience. It was also designed to be uniquely Pep Boys from a brand presence.
Some key elements are the distinctive color schemes, the use of stone and wood accents, and most of all, the soaring red monolith with the newly redesigned Pep Boys logo.
The interior was equally rethought. We set up customer neighborhoods with products that shoppers were most interested in. The customer service area was completely overhauled to create a rich, welcoming and warm environment. And the entire layout and signage hierarchy were changed to make it easier and more interesting to shop, navigate and explore the store.
Is the brand’s history reflected in the new store design?
Very much so, especially in the interior. The company’s rich history and authenticity is reflected in various graphical elements. A notable is the huge monotone picture of a Pep Boys 1930 Vintage Art deco storefront, which owns the wall behind our customer service area. Also, there are various framed pictures of the company’s 90-year-plus history throughout the customer lounge area.
How is the Tampa store doing sales-wise?
It is exceeding expectations. Our prototype remodel requires a 13% comparable-store sales lift in year one to produce a 15% after-tax internal rate of return. The results to date are a lift in comparable-store sales that is more than double that.
Pep Boys is converting six existing locations in the Tampa area to the new concept. Are more in the works?
Yes. Our plan based on the success we have seen with this one store is
to now roll out the changes to our entire store group in Tampa, as well as our new stores across the country.
What are the expansion plans for this year?
For 2013, we have stated that our plan is to open about 30-plus new stores.
How would you describe Pep Boys’ competitive positioning?
We saw from our customer research that there was a huge opportunity gap in our industry. On one end, the consumer sees the dealers as delivering good service and engagement but at a high price. On the other end of this continuum, consumers see most aftermarket providers as deal-oriented and not delivering a particularly great customer experience.
Our new positioning is based on giving customers the same type of experience they get from a dealer model, but with a better value price tag.
Our new format in the Tampa area gives customers the best of both worlds. And based on preliminary feedback, they really like what they have seen and experienced at the store.
How is technology impacting the company?
Technology is impacting us across the board, from the digital space and marketing plan to the way we diagnose car issues and enhance the customer experience in the store. All are moving at an incredible pace.
The challenge we have is the same as other companies: deciding which of the many tech opportunities will best be used and appreciated ultimately in the engagement with our target customer. No one can afford to do tech just for tech’s sake. One area we have truly embraced this is in our industry leading online, E-serve program, which gives customers the easiest and best way to go online to set up service appointments for their vehicles in real time.
“As we grow the service side of our business, we are seeing a much more balanced male and female customer base.”
H-E-B has registered its new store in Austin for LEED certification and Austin Energy Green Building certification. Apart from using a propane refrigeration system, the store includes a number of other green “firsts” for H-E-B, including the use of 100% LED lighting, radiant floor cooling, a chilled water system that supports the store refrigeration and HVAC systems, chilled sails/beams for cooling, a wood building frame and roof deck, a ceramic-based roof coating and extensive use of photovoltaic panels.
“The store was designed to use a maximum amount of daylight,” said H-E-B’s Bill Triplett. “For the most part, during sunny days, very little supplemental lighting is needed — certainly not in the sales floor area.”
The store was designed to use 79% less energy when benchmarked against a “like” store H-E-B has been currently building. About 10% of the store’s electricity needs are provided by photovoltaic panels mounted on the roof of the store.
Other sustainable features include:
- Doors on refrigerated display cases, reducing their energy use by 70%;
- Special shades on open-front refrigerated cases are pulled down when the store is closed to help reduce energy usage by 6% to 8%;
- Control system dims LED lights according to how much daylight is coming through windows and skylights; and
- Low-flow toilets and faucets; and
- Prep areas are washed with a pressure washer that uses significantly less water than a conventional hose and spray nozzle.
“The store was designed to use 50% less potable water than baseline values,” Triplett said.
Mobile Commerce accelerates as holidays approach
Total m-commerce spending is poised to exceed $25 billion this year following a 24% surge in second quarter smartphone and tablet enabled sales that pushed estimated spending to $4.7 billion, according to digital measurement provider comScore.
The firm said m-commerce spending in the first half of the year totaled $10.6 billion, representing 10% of total digital commerce during that time. With the expected seasonal surge coming in the fourth quarter, m-commerce spending could surpass $25 billion for the full year, according to comScore’s estimates.
“While mobile devices are already extremely influential in the overall buying process, they are also beginning to drive a meaningful percentage of digital commerce,” said comScore chairman Gian Fulgoni. “One out of every ten consumer e-commerce dollars is now spent using either a smartphone or a tablet, and growth in this segment of the market is outpacing that of traditional e-commerce by a factor of 2x, which itself is growing at rates in the mid-teens. Any channel shift has the potential to be disruptive to established revenue streams, and it would appear that m-commerce spending has reached enough of a critical mass that key stakeholders must begin to address this new market dynamic today or risk losing competitive advantage.”
According to the firm’s data, the product categories with the highest m-commerce penetration rates were apparel and accessories (9.7%), consumer electronics (5.5%) computer hardware (5.4%), consumer packaged goods (4.3%).
ComScore’s data indicates smartphones drove a considerably higher share (6%) of total digital commerce than tablets (3.5%. While smartphone users outnumber tablet users by a factor greater than 2x, the average spending per device owner is actually 20% higher on tablets. This is likely a function of the platform’s higher income demographics and its greater similarity to the desktop experience due to its larger screen size, according to comScore.