THE GRAND STRATEGY
30 auto-repair garages will be placed with AutoZone locations along major highways to allow the company to personally enter into the DIFM market and capture higher market share.
WHY DIFM MARKET?
Although AutoZone holds an industry leading 16.6% market share in the auto parts industry, it is significantly behind in commercial sales, holding only 14% of the market share in that segment.
The Future of the Market
- AutoZone is almost 40% behind its 2 major competitors AAP and O'Reilly in the commercial segment
- DIFM services are only expected to increase as cars become more complex
- Average age of cars on the road is 11.6 years
THE NEXT BIG STEP FOR AUTOZONE
Implementing this strategy will significantly improve AutoZone's total revenues, improve its points of difference among its competitors, and also increase employee retention through workplace enrichment.
SO WHAT'S THE COST?
Projected Cost for 30 Garages-$22.5 million
- Land- $200,000
- Contracted Labor- $200,000
- Materials- $50,000
- Architect & Contractor- $40,000
- Equipment- $254,000
- Staffing Mechanics- $6,000
- TOTAL COST PER STORE- $750,000
- NPV 3 Year Outlook- $77.6 million with 30 garages
- EPS 2017- 1% higher EPS than without strategy
- EPS 2018- 2.4% higher EPS than without strategy
- EPS 2019- 2.8% higher EPS than without strategy
The Bottom Line...
- The ROI is significant with only 30 garages. After 1 year, expansion of garage locations is a valid option to further growth and revenue
- This will not harm commercial sales already in place with Non-Compete Clauses
- AutoZone's consumer perception will differentiate from competitors to improve brand perception