Cover Story: Agent of Change

John Zuk is not comfortable in the limelight. For years he enjoyed an anonymity of sorts among his customers. He floated around in the background, able to jump in as a delivery driver with customers none the wiser, and he liked it that way; it suited his private nature. But he realized long ago that his success was going to require more contact. Much more contact.

He’s learned that being intimately involved in his customers’ business is an effective way to secure business for his company, Automotive Trade Supply, in more ways than one. He’s initiated a garage association, organized business management training, and installed a satellite-based Interactive Distance Learning system (but more about all that later).

Automotive Trade Supply (ATS) as a company is testament to the importance of substance over style. Located in Kitchener, Ont., about an hour west of Toronto, it is located off the beaten track.

To find it, you need to drive into town, and through a mixed residential/light industrial area. Keep an eye out for the Buddhist temple, then look for the Carquest sign. Below it, you’ll see a simple identification for Automotive Trade Supply. The Carquest PBE store adjacent is located in the same 16,000-square-foot building owned by Zuk, sandwiched between the ATS store operations at one end and offices at the other.

Zuk operates his company as a Uni-Select Auto Parts Plus outlet, though there is no outward identification of it as such. At some 6,000 square feet, it’s hardly a huge store, but it is clean and organized. It is also devoid of a showroom.

If you haven’t figured it out yet, the company is not retail-oriented. In fact, two years ago, they said goodbye to what little retail business they did have and now refuse sales to anyone not holding a customer account.

“We focus our energy on our trade customers. You don’t need a glitzy place when you do that. When we cut the retail off, the biggest saving was the time. The amount of time we saved more than made up for the loss [about 3% of business].” He said that some of these savings have come from the elimination of repricing jobs: pricing a job for a retail customer, then pricing the same job again when the garage called. Then there was the pass-along from the Canadian Tire in town, which would send customers it couldn’t help to ATS. Even though they were in a somewhat higher traffic location at that time, the retail walk-in business was never substantial. “It wasn’t an effective use of the operation’s resources. We got support when we changed. One customer said that he appreciated it and his business alone made up for all our retail.”

He says that the approach for retail requires resources dedicated to those customers, resources that he would rather focus on the professional business. Increasingly over the years–Zuk has been in the business for 21, as an owner for 10–ATS has evolved from a price-based business, to one dedicated to name brands, service, and an enlightened outlook.

“I tried to learn from other people’s mistakes,” laughs Zuk. He says that the business, started by Eric Jaanus, was an outgrowth of his previous wagon jobber business. It began life as a Motorcraft distributor, then morphed into selling white box product almost exclusively by the 1980s. Consequently, it fought the price-only battle daily. “But business was different in the ’70s and ’80s,” says Zuk. “We started to change when I started managing in 1986.” It was all part of a plan to gradually take over ownership of the company, a plan that included Uni-Select membership as an integral part.

“There wasn’t a lot of time to look at the heady things we might do. It came out of necessity. Uni-Select was quite new back then and fit our plan.”

The response was immediate. “Suddenly suppliers were anxious to do business with you.” It was a revelation, surpassed only by the revelations that would come later when he and the ATS crew fired up the forgotten computer in the back room. The computer had been purchased by Jaanus, but for whatever reason had gone unused. All business had been conducted by hand, including discount schedules. They had a discount book, but counterpeople and salespeople would rely on their memories instead. Naturally, accuracy varied.

Plugging in the computer–and standardizing discount schedules as a result–revealed that the requests by garages for discounts did not seem to be based on fact. Whether accounts had moved up or down the discount scale didn’t seem to elicit any different response.

“They were always asking for a better discount. I guess that was the start of us thinking that there was something wrong with the garage business.” Further investigation showed that there was little business management knowledge among garage owners and little record keeping. They were techs first and owners later, maybe never. Many didn’t even know if they were making or losing money, and if they were losing, what that really meant for their future. It wasn’t that they were incapable of understanding, says Zuk; they just didn’t know how to get from where they were to where they needed to be.

It was a revelation that caused Zuk to seek out Bob Greenwood. “That was about 1995 or 1996. Our receivables, which had been running from 78% to 82% current during the 1980s, dropped to 58% to 62%. It wasn’t that the garages were being greedy and using our money, it was that they couldn’t pay their bills.”

Why they couldn’t, Zuk learned, was a question they couldn’t answer. “These were good garages with good customer relationships suddenly finding themselves in trouble.”

It was the start of a long path to rectifying the situation, a path that he and the rest of the staff at the company walk together.

“My salesmen go to every course and I go to every course. The bond is there. We have now a relationship with our customers that is different than just a supplier.” He says that the trust has built over the years with customers, to the point where they’ll ask his advice on their profit and loss statements. They focus on the business. They put their door rates where they need to be and stop trying to be the cheapest guy on the block.

“There are 20% that really grab on to [the new way of managing business], the other 80% do a variation. They all certainly changed something about their business.” The greatest revelation for garages, says Zuk, is that their customers don’t go there for their door rate. He says that showing garage owners how little is to be gained by shopping for price as compared to what can be gained by getting door rates up has paid dividends.

“A two-bay garage that’s really smokin’ might buy $7,000 to $9,000 a month. That’s $85,000 a year. If I gave him 10%, which I can’t anyway, he gets $8,500. If he raises his door rate by $10, he’s made $25,000 a year. Suddenly the discount means so very little.”

Still, he doesn’t bring a cookie cutter approach to market. Each customer is unique.

“Each garage is an individual. Each has a different way of looking at their business. You have to be flexible.” Still, it’s an approach that is not without its challenges. Sometimes, he says, it’s hard to keep talking “profit, profit, profit” when there are 16 other salesmen in town talking “price, price, price,” but he and ATS’s sales staff persist.

“You have to prove it one at a time,” he says. “We try to look long term. If the guy below you isn’t successful, how can you be?” He wonders aloud how many jobbers would continue on the discount road if they realized how little difference it makes to customer buying patterns.

The same goes for technical training. He’s had to threaten to close down his Interactive Distance Learning connection twice since he installed it two and a half years ago. He downsized so that only three techs at a time can participate, but has enough monthly subscribers to keep it going. Yet it’s still a battle to get them to use it. Zuk is not content to cover his costs on the initiative. It’s there to be used and continues to push for better utilization. It’s working, but it’s not easy.

An important part of his approach has been to f
oster increased communication. This motivated him to initiate an ad hoc garage association that invites customers and non-customers to talk about industry problems. It got its genesis during the early days of Ontario’s Drive Clean emissions testing program, when there were too many questions and too few answers, but has continued onto a wider set of topics since. A meal and business talk for an hour, plus a presentation afterward is customary.

One important piece that came out of it was what Zuk calls the “price menu.” It was really just a survey of what average prices the different shops were charging. What came out of it was the realization that the shops charging below average for one service were charging above average for others.

“They realized that the guy sitting across the room was not the guy you’re fighting, it’s yourself.” He’d like to see that concept expand across the industry. “There needs to be more communication and responsiveness up and down the chain. We know there is a problem at the installer level.” He says garages should be a part of the Automotive Industries Association of Canada, which he supports. ATS is a long-standing member and salesman Tim Knight serves on the Southern Ontario Division board. Service providers are currently barred from membership by association by-laws and lack a common association for communication. His belief that improved communication among all aftermarket players would build improved respect.

“Profit has been a dirty word in this industry for too long. The whole industry has to understand that everyone has to make money.”

He tells of one garage that lost money for two years straight. He told them he wouldn’t sell them anymore until they got their business in order. They raised their door rates, got their finances in order, became profitable, and are now a solid customer. “That’s what makes it worthwhile: take a guy losing money and make him profitable.

“That kind of stuff gives you faith that things really can change in this industry.”

Automotive Trade Supply

KITCHENER, ONT.

FOUNDED: 1970

OWNER: JOHN ZUK

AFFILIATION: UNI-SELECT AUTO PARTS PLUS

MEMBER: AUTOMOTIVE INDUSTRIES ASSOCIATION OF CANADA

LOCATIONS: KITCHENER, 6,000 SQUARE FEET; WATERLOO (DEPOT), 3,500 SQUARE FEET

STAFF: 16 IN TOTAL (4-1/2 COUNTERPEOPLE; 5-1/2 OUTSIDE SALESPEOPLE, SHIPPING, OFFICE; AND 6 DELIVERY DRIVERS).

TOP LINES: TEMPERATURE CONTROL, BRAKE PARTS, SUSPENSION PARTS, DRIVE LINE PARTS.

BUSINESS SPLIT: 100% WHOLESALE.