Some people say customers aren’t loyal anymore, but Dick Hedahl, president and CEO of Hedahls Auto Plus, thinks differently. “People say there’s no loyalty, but that’s because they haven’t earned it,” he insists. “We have customers who are really awfully loyal to us. Their sales volume is very consistent year over year. They call us when they need something, and we chase it down and find it. People buy from their friends, whether going to a favorite hardware store or a car dealer. And they know they can count on us to take care of their shop and equipment needs. You develop friendships in the business, and that’s where you go for your support. I think there is good loyalty, but you have to earn it.”
Hedahls Auto Plus has been earning that loyalty for three generations since its founding in 1906 in Mercer, N.D. It now has 23 auto parts stores and three automotive equipment stores throughout the upper Midwest in both Dakotas, Minnesota and Montana. The company serves commercial and retail customers with all their automotive service needs for cars and trucks, including paint and body products, engines, replacement parts, windshields, bumpers and equipment to repair and service vehicles.
Recently, the company has been riding the oil boom at the Bakken Shale in North Dakota, Montana and Canada. “We are extremely busy with tremendous economic growth due to the oil exploration that is going on here,” Hedahl says. “Nine of my stores sit right on top of the Bakken region.”
Hydraulic fracturing of the shale rock and horizontal drilling have unlocked oil previously unreachable in the region.
“Those two technology breakthroughs in recent years have allowed the oil down there to be extracted economically,” Hedahl points out. “All of a sudden, this has become the hottest place in the country for oil development, and our stores are right in the middle of that development.”
Although Hedahls Auto Plus has expanded its locations through acquisitions – in 2005 it added six stores by acquiring Mann’s Automotive, and in 2007 it acquired L& L Auto Supply in Yankton, S.D. – the company is concentrating on the oil business. “The real focus of our attention now is taking care of this new economic activity that oil has brought,” Hedahl emphasizes.
Oil companies have trucks that pump fluids into their wells to force oil out of the shale. “Those trucks will be out on the job for two weeks and then go into the shop,” he notes. “They’re working 24/7, so they need a lot of service. They tear them down, replace all the components that need it, do a complete fluid and filter replacement and send them out. That’s the kind of thing we’re supplying components for.
“We’re also doing more than just auto and component parts – we’re doing whatever supplies they need. We often have sources for them.”
A recent example is Hedahls’ sale of fluid-capturing mats that are placed under an oil service company’s semi-tractors. “We sold $160,000 of these in one sale to this company that was just coming into the market and needed them for all their trucks,” Hedahl recalls. “They have lots of trucks. We saved them a bunch of money.”
The mats are used to keep well sites clean. “Oil companies are highly regulated, and they’re trying to do a good job of keeping the site clean when they drill these wells,” Hedahl explains. “So they need to keep track of all the fluids that are involved in the process. If any of them are escaping, they need to contain them and deal with them, and that’s what these mats do.”
Hedahls Auto Plus also provides parts and service to the coal mining industry in western North Dakota and other industries in the area including agriculture. “Our traditional market is very agriculture-based – that’s the economic engine that has traditionally run the economy in these states around here,” Hedahl points out. “The market pricing for agricultural products is pretty good. So we’ve got some pretty good economic activity, even in the non-oil-producing areas. It’s a good balance.”
He reports that same-store sales are up 18 percent over the previous year. “So we’re showing some real nice increases,” he says.
Being diversified in customers’ industries and store locations helps Hedahls grow, although managing stores that are up to 850 miles apart can be challenging. Improvements in computer technology have enabled Hedahls to centralize its back-office operations.
“Each store is operated as a selling unit,” Hedahl reveals. “They don’t do backroom or accounts payable or receivable. That’s all done at our headquarters in Bismarck. So we’re very aware of what’s going on, and keep our costs down at the store level. The stores take care of the customers and not the business administration side.”
Inventory control also is centralized in Bismarck. “We have an inventory control system on our computer that calculates the appropriate amount of inventory to be held at each location,” Hedahl explains. “We have buyers within our organization in Bismarck that determine the part numbers that should be on the shelf. Once the determination is made here for the part numbers we need on the shelf, the system takes care of making sure it is always there. Buyers tweak it to the right level as much as possible.”
He emphasizes that deep inventory is a competitive advantage of Hedahls Auto Plus. “Boy, we’ve got inventory,” Hedahl says. “That’s one of the things that really marks us as a good supplier for our customers. We’ve got what they need when they need it.” The inventory burden is eased through Uni-Select, an auto parts distributor based in Montreal that Hedahls and other independent auto parts dealers formed a joint venture with in the late 1990s.
“They wanted to come to the United States, and we wanted a national partner, so we formed Uni-Select USA,” Hedahl explains. “Our primarily supply warehouse is the building we had built in the 1990s in Mason City, Iowa. That’s where our big stores get product every day by common carrier freight.”
Unlike in furniture, the auto parts and equipment industry does not take a month or two to deliver products. “That’s not how this industry works,” he stresses. “I need it today, and the worst case is I have to have it tomorrow. We do that every day in every store. We’re getting replenishment all the time. That allows us to have a thin inventory in that it’s not big quantities of any part. We have a very broad inventory with lots of different part numbers, but when we sell one today, we can have it back tomorrow.”
Hedahls has all of the same national auto parts competitors that any other auto parts chain does, in addition to the growing number of mass retailer competitors that are adding basic auto parts departments to their locations. “Everybody’s got delivery, parts and a building, everybody’s got all the stuff we‘ve got – computer access to information – but what I have that no one else has is the Hedahls folks,” Hedahl asserts. “We have people who have worked in this company all their careers.
“One of our store managers bought a house in his town and filled out the application, and the bank called him back and said he didn’t put in his former employer,” Hedahl remembers. “‘I don’t have a former employer,’ he said. ‘This is the only company I’ve ever worked for.’ That is very common. He has worked for Hedahls for almost 40 years.”