Pep Boys 2014 Annual Report Download - page 9

service business is highly fragmented. Over the past decade, consumers have moved away from DIY
toward DIFM due to increasing vehicle complexity and electronic content, as well as 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 that 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 owners of older vehicles
were more likely to work on their own vehicles. However, as the economy continues to gain momentum
and as disposable income continues to rise, consumers may become more confident and invest in new
vehicles, and once again shift away from DIY toward DIFM and will do so at increasing rates.
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 continue to learn more from our growing set of customer data and to advance our customer
centered business model. We are focused on our target customer segments and the delivery of 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, online skills and leadership training to
develop a career path with us. All associates are also encouraged to complete tests resulting in
certifications by the National Institute for Automotive Service Excellence (‘‘ASE’’), which is broadly
recognized for training certification in the automotive industry. We also offer performance-based
compensation programs designed to reward the delivery of the passionate customer service that is the
centerpiece of our vision. Improving the overall quality of our people has allowed us to eliminate one
layer of our field management team and to increase the spans of control of our area directors resulting
in payroll savings.
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 allow us to maximize our profitability. Our store growth, and any rationalization of our
store base, is designed to optimize the proximity of these locations to our target customers. Similarly,
our omni-channel digital strategy, 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, price and
schedule service appointments and purchase an ever-expanding assortment of products (including the
addition, in 2014, of merchandise shipped directly from our vendors) for in store or home delivery. We
have also partnered with third party on line marketplaces where customers can buy product and make
service appointments at our locations. As a whole, our digital business represented 6% of sales in the
fourth quarter of fiscal 2014 and grew by 43% on a year over year basis.
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