Pep Boys 2012 Annual Report Download - page 42

INDUSTRY OVERVIEW
The automotive aftermarket industry is in the mature stage of its life cycle and while the DIY
space is dominated by a small number of companies with large market shares, the DIFM or automotive
service business is highly fragmented. Over the past decade, consumers have moved away from DIY
and toward DIFM due to increasing vehicle complexity and electronic content, and decreasing
availability of diagnostic equipment and know-how. In addition, while this needs-based industry has a
dedicated DIY customer base, the number of consumers who would prefer to have a professional fix
their vehicle fluctuates with economic cycles. For example, a drop in disposable income during the
recession forced some former DIFM consumers to work on their own vehicles, resulting in short-term
growth in the DIY market. During this period, weak labor and credit markets depressed new vehicles
sales, thereby increasing the average length of vehicle ownership. This increase in the average age of
vehicles on the road also aided the short-term growth of the DIY industry as those owners of older
vehicles were more likely to work on their own vehicles. While new car sales started to rebound in 2011
and gained further momentum in 2012, new car sales still remain significantly below historical levels. As
the broader economic recovery continues, we expect consumers to once again shift away from DIY and
toward DIFM and to continue to do so for the foreseeable future. Consistent with this long-term trend,
we have adopted a long-term strategy of growing our automotive service business, while maintaining
our DIY customer base by offering the newest and broadest product assortment in the automotive
aftermarket.
BUSINESS STRATEGY
All of our efforts are focused on ensuring that Pep Boys is the best place to shop and care for
your car. The legacy of our founders—Manny, Moe & Jack—has inspired us since 1921 to deliver
passionate customer service. We are people taking care of people ... and their cars. More than just
words, we are moving our entire business model towards a more focused customer centered strategy.
We have added a Chief Customer Officer to our senior executive team to help guide the development
of our strategy around our target customer segments. We also recently introduced a new Senior Vice
President of Stores with a strong background in delivering world-class customer service. The following
strategies have been developed and prioritized to support our vision and, in turn, our ultimate goal as a
public company of maximizing shareholder value.
Attract, develop and retain the best people. We need the best people to care for our customers
and their cars. This process begins with their recruitment and continues throughout their tenure as Pep
Boys associates. We are constantly reviewing and improving our hiring process to include updated core
competency and positional profiles and pre-hire assessment screening. Once hired, a Pep Boys associate
has the opportunity to participate in a variety of classroom and online skills and leadership training and
to develop a career path with us. We also offer performance-based compensation programs designed to
reward the delivery of the passionate customer service that is the centerpiece of our vision.
Grow where our target customers live, work and shop. We achieve this through both our physical
locations and online presence. We have researched and developed proprietary customer segment targets
that we believe will allow us to maximize our profitability. We have begun the process of analyzing our
existing store base to ensure that our stores are located where these target customers live, work and
shop. Our store growth and any rationalization of our current store base will be designed to optimize
the proximity of these locations to our target customers. Similarly, our online presence, which we call
e-SERVE, is developed around making it easier for our target customers to do business with us.
Pepboys.com (including our mobile device version) allows our customers to learn about the breadth and
depth of our service and product offerings, schedule service appointments and purchase products for in
store or home delivery.
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