Auto Service World
News   May 8, 2003   by Auto Service World

Slow Deliberate Growth for AutoZone Best Bet In Fragmented Mexican Market

AutoZone is learning as they go in Mexico, says its executive in charge of the Mexican business.
"The [Automotive Aftermarket Industries Association] estimates is that there are 15 million light vehicles in the Mexican market," said Bob Olson, senior vice-president of AutoZone’s Mexican business unit. "That clearly is a sizeable population. In addition, though, the study indicated that there were 40,000 parts stores in the market." By comparison, the Canadian vehicle market, which has approximately the same number of vehicles on the road, boasts fewer than 3,000 parts stores.
"It is," he says, "a very fragmented market."
Speaking at the Global Automotive Aftermarket Symposium in Dearborne, Mich., he told attendees that AutoZone, which is the largest retailer of auto parts in the U.S., entered the Mexican market in 1998 when it noticed that a significant number of Mexican nationals were crossing the border to shop in its stores. It has since expanded its store count to a total of 43.
"Our involvement has largely been in the border states. There are different logistic and regulatory challenges. We are moving very slowly to build the organization that can address this very different business environment."
"The vehicle mix is becoming very different. We entered the market with a mix based on the southern U.S. We are finding that is not satisfactory. It took us to a certain level but as we moving into interior markets, we are having to adjust."
Olson says that one of the unexpected challenges was geographic. Used to dealing in a highly compact U.S. market, getting parts to the stores and customers in a large country like Mexico, is more of a challenge than initially thought. With border stores, this is less of an issue; expansion "in country" exacerbates the issue.
"Getting the right product to the right stores at the right time is a challenge; something more difficult than what we have experienced in the U.S."
The expansion into the interior of Mexico poses other challenges for the auto parts chain.
"Right now we’re in the border markets where the AutoZone name is known. As we expand in country, the awareness of the AutoZone brand is much less. We have to be more thoughtful and creative in how we create awareness in of the AutoZone name."

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