TORONTO—``PartSource.'' The name pretty much says it all in explaining what Canadian Tire Corp. Ltd. wants to be for thousands of automotive ``do-it-yourselfers'' and professional automotive in-stallers.
Amidst an Aug. 25 kickoff that included a satellite news conference broadcast live over the Internet, executives of Canada's largest hardgoods—and tire—retailer officially launched a national retail chain they hope will cash in on the lucrative $4 billion aftermarket automotive parts business.
For a billion-dollar-plus firm that has its corporate hand in financial services and petroleum besides the tire business denoted in its name, the execs called PartSource yet another ``growth opportunity.''
And that may be a bit of an understatement.
Save for some regional chains, the Canadian auto parts aftermarket is wide open, with none of the big U.S. players doing business there, a company spokesman said.
The Toronto-based mass merchandiser's plans for PartSource include pumping $400 million into the operation, expanding it to 200 stores within four to five years and, along the way, creating up to 4,000 retail jobs.
But it also confidently pledged that the new chain ``will become one of the country's largest automotive specialty stores.''
``PartSource represents a growth opportunity for us in the serious do-it-yourself (DIY) and professional installer auto parts category,'' said Canadian Tire President and CEO Stephen E. Bachand. ``Our roll-out plans reflect the success of the concept in our test market, and we look forward to getting to work on building a strong new force in Canadian retailing.''
While hesitant to disclose too much specific information that PartSource's competitors might use, Scott Bonikowsky, Canadian Tire's senior director of corporation communication, told Tire Business the new chain will target ``the type of customers who often rebuild engines and transmissions, rather than just change oil and filters....
It's a big part of their lives, and they typically spend a lot more than other customers.''
They are customers, he added, who don't normally shop at one of the retailer's traditional stores.
A market-by-market assessment is under way to determine which areas PartSource will focus on first. Thus far, seven test stores—three in Hamilton, Ontario, one in Guelph, Ontario, two in Calgary, Alberta, and one in Cambridge, Ontario—have been built and opened.
However, no U.S. launch of the chain is planned, Mr. Bonikowsky said. ``We see lots of opportunity right now in Canada.''
Typically featuring about 7,000 square feet of retail space, the outlets stock approximately 20,000 products, including such national brands as Bosch, Monroe, Fenco, FRAM, TRW, AIMCO and Exide. They also are geared toward professional installers because of their ability ``to deliver up to 100,000 products on a same-day basis.''
Product assortment is tailored based on regional variations in ages and types of vehicles, according to Canadian Tire. A number of ``value-added'' services are offered, such as loan-a-tool programs, brake drum and rotor turning, fuel injector cleaning and ``look-up'' systems to locate make/model-specific repair instructions.
Although the company still is finalizing PartSource's ultimate product mix, Mr. Bonikowsky said the stores don't currently sell tires, but may well do so in the future—``whatever our customers are looking for, we'll be there for them.''
To shepherd the new project, Canadian Tire appointed a senior executive team led by PartSource President Bruce Allen, a 25-year automotive industry veteran who was previously vice president, automotive, for the retailer.
In explaining the need for the new venture, Mr. Allen said busy DIY-ers and professional installers have unique demands. ``These customers want a shopping experience that provides unbeatable prices, expert staff, quality brand-name parts and a quick in-and-out experience. We deliver on all of those needs, and that will distinguish us with customers in the marketplace.''
Mr. Bonikowsky said the company has formed a PartSource commercial marketing group that will aggressively go after the aftermarket business that includes the independent repair shop sector. It expects less success, however, selling to car dealerships, which generally have their own manufacturer-run parts networks.
While PartSource grows wings and takes flight, Canadian Tire has been busy on other fronts, as well.
Since 1994, when it launched a billion-dollar new-format store program, the firm has been ``repositioning'' itself in the marketplace as a merchandiser with three specialty stores-within-a-store, covering tires and automotive, sports and leisure and home products.
In the first six months of 1999, it has kicked that project into overdrive by opening 19 new stores. The company's second-quarter financial report said it expects to exceed its target number by opening 51 stores this year—instead of the 45 originally planned—and will reach a total of 300 new-format stores by the end of 2002.
The new facilities feature a different look—much larger and brighter, and with a greater product selection—than Canadian Tire's traditional stores. Thus far, 150 have been built, and Mr. Bonikowsky said the company sees the opportunity for at least another 150.
The company currently has 430 associate stores nationwide operated by more than 390 associate dealers, whom he described as ``independent businesspeople who run the stores and own the inventory, but do not pay franchise or royalty fees.'' Canadian Tire owns the buildings and real estate.
All three of the firm's businesses—including its petroleum enterprise with 196 gasoline outlets—contributed to a strong fiscal performance for the year thus far.
For the first six months, operating earnings for Canadian Tire's retail store unit rose 12.4 percent to $86.6 million (all amounts in Canadian dollars) from the 1998 period, while the entire company posted consolidated pretax earnings of $123.4 million, up 16.4 percent from last year. Consolidated net earnings grew 10.2 percent to $80.5 million.
For the second quarter, operating earnings for the retail store unit climbed 15.1 percent to $57.7 million, due to increased shipments to its associate stores, the company said. The associate stores recorded a 7.4-percent increase in retail sales for the quarter, compared with the 1998 period.
Canadian Tire President Bachand said the firm has seen "improved year-over-year earnings for 26 quarters in a row, which clearly demonstrates the success of our retail and growth strategies."