SAN ANTONIO, TEXAS — Aftermarket Auto Parts Alliance is celebrating its 30th anniversary this year. Alliance President and CEO Dick Morgan talked with aftermarketNews.com about this important milestone while attending the recent Global Automotive Aftermarket Symposium in Chicago. Join us as Morgan looks back at the evolution of the group and also tells us what lies ahead for the Alliance and the industry as a whole.
Q: The Alliance has reached a major milestone this year – five years as the single biggest program group merger, and overall the 30th anniversary of the individual groups that merged – Auto Value, All Pro and Bumper to Bumper. Can you give us a brief history of how the past 30 years have played out – from the Alliance’s beginnings as three separate entities to becoming one of the leading program groups in the industry?
DM: The Alliance was incorporated on Jan. 1, 2000, when two already successful program distribution groups, Auto Value Associates, Inc., and All Pro/Bumper to Bumper, Inc., joined. All Pro/Bumper to Bumper was formed in 1992 when All Pro and Bumper to Bumper merged.
Before becoming president of the Alliance, I had served as president of Auto Value, since 1994. Auto Value was founded in 1976, as was All Pro. Bumper to Bumper was formed a few years prior, in 1973.
It is important to remember that by the mid-1970s, it became clear that many of the leading WDs were beginning to affiliate themselves with one of the emerging program groups that were being formed, to better compete with mass merchandisers and chain stores, among others. These groups came to represent large blocks of purchasing power with the potential to negotiate prices and terms that many non-affiliated WDs could not.
Throughout the years, the Alliance has developed a very profitable and well-balanced mix of national brand products and private label, specialty brand products. In some instances, we are the first or second-largest customer of national brand manufacturers because of combined purchase volumes.
Q: Now, having looked back at the history of the Alliance, what lies ahead for the group?
DM: Looking back at the history of the group, we really anticipate more of the same. We will continue to lose members through acquisitions. For example, O’Reilly just bought Midwest Auto Parts. We will continue to add members, but we’ve never gone out looking for members for members’ sake. But we will add members strategically. Most likely they will come from other groups.
Q: Taking that question to an even broader level, what do you think the future holds for the aftermarket as a whole?
DM: I’m very bullish on the aftermarket. It just keeps changing, but it’s a very resilient group of people. The types of parts we sell will become different and more expensive, so I think the aftermarket will continue to grow. As long as automobiles run on four wheels, we are going to have something to sell. It may be something completely different, but we will have plenty to sell. The guys that are doing it right are going to continue to prosper and grow. I’ve got a lot of shareholders that are just getting bigger and bigger. The ones that don’t do what is necessary — especially in electronic communications and handling – will likely sell to the ones making necessary changes.
Q: During the past year, the industry has witnessed a number of mergers and consolidations taking place within the distribution segment. How does this impact the Alliance and your strategy, and how does it impact the market overall?
DM: Well, this is just a dynamic that’s going to happen in all industries. It’s happened in industries before ours. Our industry is one of the last ones to get started. If you look at other industries like groceries, hardware, plumbing supplies, the consolidation happened much sooner.
You really can’t make a strategy for it, other than to keep a running list of prospects, so that if you lose one company, you’ve got a list of others to take its place.
Q: The Alliance is among what the industry is calling the “Big Four” leading program groups. What qualities, in your opinion, make the Alliance such a successful organization?
DM: It’s the members. We have good, strong members. If you look at many of the speaker panels that take place at different industry events, there are usually Alliance members among them. They are just good businessmen.
Our little office in San Antonio does one thing: Whatever we can do to help our members be successful, because the membership is what makes the organization. The organization doesn’t make itself. It’s the membership.
Q: The Alliance is one of a small minority of distribution groups to actively pursue growth in foreign markets, with members located in Canada, Mexico and Europe. Why is the international market important for the Alliance?
DM: I think it’s extremely important. The world is becoming a global market. Merchandise is coming from all over the world. If you don’t have connections around the world you don’t know what to do to stay competitive. It’s very important to know how things are done everywhere. Although you may not be able to do them that way, you at least have options and ideas.
Q: Can you tell us specifically what the benefits are for a foreign distributor to be a part of the U.S.-based Alliance? What benefits does this international membership offer to U.S.-based Alliance members?
DM: It’s really the exchange of ideas and benchmarking. It’s the sharing of ideas that we can use that will make us all better and stronger.
Q: Are there plans to expand further in Europe or deeper into South America?
DM: The European group TEMOT is a member of the Alliance. TEMOT has definite plans to grow. TEMOT has added new members in countries as they enter the European Community.
As for South America, I’m in contact with people in South America today. However at this point there is not much I can do to make it valuable for South American companies to become members of the Alliance. But, the day will come and my contacts are already made. I’ve been to South America as a guest speaker at industry functions and I have called on several of the larger distributors. When the time is right, the Alliance will have members in South America.
Q: You are known as a veteran of the industry and have been recognized as one of the industry’s top leaders. What has your experience in this industry taught you? What do you hope that you have contributed to the industry – what do you hope will be your lasting legacy in the aftermarket?
DM: You hope that people will think you’ve treated them fair. I try to be honest. In fact, sometimes I’m brutally honest, but it’s never intended to be hurtful. You can’t take business personally. I can be hard to get along with when I’m defending my shareholders or my people, but come five o’clock all business issues are set aside. I really don’t care if I am remembered as a popular person. I’m more concerned about being remembered as fair and honest.
What, in your opinion, are some of the most significant changes that have taken place over the past 30 years in the distribution segment?
The transitions have been numerous, but really probably the biggest transition has been from redistributing jobbers to pure warehouses that sold nothing but to jobbers to two-steppers. It never bothered me that people did distribution differently. It’s just free enterprise at work.
Someone buys a product for one price and sells it for another. It doesn’t matter how many steps of distribution are in there. If you can make a profit with three steps, fine. If it takes two steps, fine. If it takes one step, fine. There’s only so much (profit) in there, and people need to know how to share it to keep the chain of supply healthy and prosperous.
Other significant changes include the advent of private label product and the involvement of people from the retail and grocery businesses. They have taught our industry a lot and forced us to become better business people.
Q: We’d like to close with a very important question. You’ve accrued a wide range of experiences during your professional career in automotive parts. Tell us, how did you make the transition from professional baseball to the automotive aftermarket?
DM: My baseball career was so short that there wasn’t any real transition. I started calling on body shops, selling re-chromed bumpers part time in high school and college. So, calling on car dealers, service stations and garages with AC Spark Plug in 1962 was a natural transition.
I learned early on that you did not need to know how your product worked, you just needed to sell 10 to 20 percent more than they asked you to sell. I also learned early on that all a salesman has is his word. You have to have the trust of anyone you deal with to be successful.
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