Distribution Models for a New Century

What is the best way to distribute goods from a manufacturer to an end-user?

But first, some history of the automotive aftermarket: Back in the day, the tools and equipment were made in a small factory or machine shop, and the owner/general manager/sales manager loaded his products into the back of his car or truck, and made a week-long trip around a territory, selling as much as possible to the shops and technicians along his route. Upon his return home, he'd either make more stuff, or his partner would have it made by the time he got there. He'd load up and start all over again.

At some point, a middle-man sprouted. This middle-man was the jobber. I'm not sure, but I think the first mortar-and-bricks jobbers were a small group of NAPA stores, and the first mobile jobber, was Cornwell. The main difference between mobile jobbers and brick and mortar, is that the mobile jobbers generally sprang from their own manufacturing facility. As their business grew, mobile jobbers added products from other manufacturers. Both types of jobbers offered the manufacturer a a benefit in the distribution channel. They could receive larger quantities of goods at a time, and take on the expense of selling them to the end-user themselves because they built in a resale margin.

As time passed, warehouse distributors sprang up across the nation, offering the manufacturer even greater economies of scale. Now the manufacturer could ship a whole truckload of goods across the country and get paid for it immediately. A manufacturer could open up brand new markets, practically without even trying. All you needed was a good warehouse distributor with a decent market of jobbers - primarily brick and mortar. In the meantime, the mobile jobbers set up their own warehouses and increasingly supplemented their manufactured hard goods with supplied tools and equipment.

This model worked great in the 30's and 40's. Interstate roads and highways were being built. Greater distances were being covered more economically than any other period in our country's history. Cars and trucks were being driven and needed to be fixed. This model worked even better in the 50's,60's, and 70's. More miles were being driven, more roads were being created, more people were being created and more cars were being sold. It was a great time to be in the automotive aftermarket. No matter which end of the spectrum - it was all good!

Then came the 70's. OPEC, inflation, return of the VW, launch of Datsun and Toyota, gas shortages, conservations efforts. (And let's not forget - flared pants with white belts that had holes going all the way around your waist.....) (ok, let's forget the belt)...

Reality: In 1979, the average car owner in Ft. Worth, TX paid $.78/gallon for gas. By 1989, that price had gone up to $1.09, and nationwide the average was $1.28. We all know where it is today.

In the 1980's, distribution changed modestly. Retailers saw the automotive aftermarket and decided they wanted a piece of it. Remember Auto Shack? Bad old Radio Shack said they couldn't use that name, so Auto Shack became AutoZone. Sure there were regional retailers - Pep Boys had strongholds on the east and west coasts, but AutoZone came in determined to go nationwide. It was about this same time that we began to see "buying groups" organize. (call them what you will, that's my name for them).

I would argue that the late 70's and into the early 1980's saw changes that dramatically affected our industry, but many people in manufacturing and distribution failed to see the significance. So the manner in which we distributed goods and services to shops and technicians at the birth of this industry, did not change much during it's "turbulent teen years".

Uh - oh - Here comes Al Gore and he invents the world wide web. Now, we add the internet to our distribution model.

We thought the markets were mature then. The question is, now that the markets are REALLY mature, and many levels of distribution have saturated the U.S., will the model from the 30's and the 60's and the 80's continue into the mid-2000's? Should it?

Part two - to come. Stay tuned.