Pep Boys

PEP BOYS1As the nation’s leading automotive aftermarket service and retail chain, Pep Boys already had a strong legacy. The company has continued to evolve since the first Pep Boys store opened in Philadelphia in 1921. Now Pep Boys is embarking on a journey that should take the brand to even greater heights. 

“We are excited about the launch of our new service and retail experience,” says Joe Cirelli, senior vice president of development. “Our vision is to be the best place to shop and care for your car.” 

Pep Boys’ footprint currently consists of 795 locations; 575 are supercenters and 220 are service and tire centers. The company operates in 35 states and Puerto Rico. 

With approximately $2.1 billion in sales and 19,000 employees, the company serves several different customer types. One customer segment consists of those in need of service on their cars. Another segment is made up of do-it-yourselfers looking for parts. The final segment is commercial customers. About 53 percent of Pep Boys’ sales come through its service business, while 36 percent is do-it-yourself and 11 percent is commercial. 

Hub and Spoke

The company has been closely monitoring the changing retail property environment over the last few years. When the country was in the throes of the recession, the company was able to pick up existing properties and convert them. Now, much of that space has dried up and about 80 percent of the company’s footprint growth has been focused on new construction. 

“Although that costs more, we can put stores exactly where we want and build them exactly to our specifications,” Cirelli says. 

Pep Boys has embarked on a primary growth strategy focused on the development of service and tire centers within its existing markets. The idea is to build a hub-and-spoke model in existing markets by building service and tire centers around its supercenters. A Pep Boys service and tire center tends to be 5,000 to 7,000 square feet with six or seven service bays. They tend to be located closer to residential areas. “They are convenient and a great alternative to a dealer,” Cirelli says.

“If we need a supercenter to support the service and tire centers, we add one,” Cirelli says. “For example, in 2009 we had eight supercenters in Orlando. Our old program was focused on supercenters, and we would have added two or three of those and the market would have been done. Instead, we added 23 service and tire centers and two supercenters. This model will make our existing markets more efficient.”

The Road Ahead

In addition to its focus on the hub-and-spoke growth model, Pep Boys has been testing a new market concept called The Road Ahead. The testing took place in Tampa, Fla., and was designed to enhance the store experience based on the shopping habits of its target customer segments. 

The goal with The Road Ahead is to deliver a customer experience that is equal to or better than high-end car dealerships. The company believes the format will help it fill the void in the marketplace created by customers’ perception of the gap between the price and convenience of the aftermarket providers and the quality and experience of the dealerships. Pep Boys wants to be the best alternative to the dealer, and the company feels The Road Ahead concept will help it do that by improving everything from its full-service maintenance and repair service to its automotive product assortment and shopping experience.

This process began at the company’s West Hillsborough, Fla., location in late 2012 and into early 2013. Elements of The Road Ahead include the use of wood and stone in décor, a new logo and enhanced landscaping. The customer lounge is designed as the main focus of the interior of the store, with amenities such as free Wi-Fi and flat screen TVs for service customers. “We want the customer to have a great experience while they are waiting for their car to be serviced,” says Cirelli.

Customers entering the store are greeted individually, and the store is set up much like a car dealership with individual pods that are well suited for one-on-one conversations rather than having to approach the traditional long counter. 

The Road Ahead also has a store-within-a-store merchandising concept, setting up the Pep Boys interior in a way that creates neighborhoods based on customer type. People coming in for service are likely to congregate near the lounge, and near to the lounge are automotive accessories that would appeal to everyone. Then there is the speed shop, which is home to high-performance parts and accessories designed for car enthusiasts. These are just two of the store-within-a-store neighborhoods Pep Boys is building as part of The Road Ahead model.

“The concept is designed to serve customers in the way that they are most likely to shop, and we try to make it easy for customers to navigate the store,” Cirelli says.

The initial customer satisfaction and sales data indicates that The Road Ahead is an economically viable model. Pep Boys has remodeled all of its 11 stores in the Tampa market based on The Road Ahead concept. The remodel includes extensive customer care training. In the years ahead, the company will bring the concept to other markets around the country, beginning with the San Francisco Bay area. In addition, all new stores that Pep Boys builds or acquires will be developed according to The Road Ahead format.

The major challenge ahead for Pep Boys is to ensure that it can smoothly transition from a business model that is transactional to one that is focused on building relationships with customers. The company understands that it must attract, develop and retain the best possible employees while striving to be as efficient as it can be within its current markets.

“Our goal is to attract more customers from our targeted market segments,” Cirelli says. “We also want to capture a larger share of their annual spend in the automotive aftermarket. We think we can do that by being the best alternative to the dealer.”

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