Very thoughtful post. Genuine Parts is very difficult to explain, but you raise the million dollar question. Recognizing the profitability and growth they have achieved still leaves one wondering HOW they do it. It all starts with cheapskate management. The next thing you have to recognize is that they don't make their money competing with Pep Boys, although they are moving more and more into that DIY retail market. Their franchise is a different market (distributing to service stations, fleets). Autozone has been trying for five years now to compete with NAPA in that business, and it just isn't working.
Picture this. There are something like 250,000 distinct auto parts on the road. If I run a service station, I don't know which one the next car to enter my shop is going to need. And I need it soon. A Pep Boys or Autozone might stock 30,000 SKUs. So I can't rely on them. NAPA has a nationwide hub-and-spoke logistics and warehousing system, they are incredibly efficent operators, and they have the experience to know how much of what to stock where. You really want to compete with them?
The industrial parts and office products businesses are harder to understand the profitability in because here there is no monopoly. They have direct competitors in each and are not the biggest player. They are making twice the profit margin of their competitors though, which tells me that here GPC has a cost advantage.
Paul, I'd be interested in how you came up with $13 - or were you just pulling my chain? The company earns about $2. |
