From the source: Darryl Abotomey, Bapcor Limited
Darryl Abotomey has been the CEO of Bapcor, previously known as Burson Group limited, since October 2011. He led the business through an ASX listing in 2014 and the acquisition last year of the automotive retail division of Metcash. He is now responsible for a number of prominent auto-focused retail brands, including Autobarn, Autopro, Sprint Auto parts and Midas.
COMPANY PROFILE: Bapcor Limited
Formerly known as Burson Group limited, Bapcor Limited became a retailer in 2015, acquiring a range of automotive brands from Metcash. The company’s FY16 results, which reflect 11 months of trading with the new retail arm, reflected strong sales growth that has seen Bapcor’s ASX value climb consistently. The company is currently working on expanding its wholesale operation into New Zealand by acquiring Hellaby’s Holdings.
Inside Retail: You acquired a sizeable auto focused retail arm a little over 12 months ago, what have you learnt about retailing in that time?
Darryl Abotomey: Retail has significant opportunity. It has a lot of similarities with trade, but by the same token, it is very different. The type of product range, the way you go to market, promotional aspect, the importance of things like catalogue and advertising and those types of areas, which I kind of intuitively knew from my background. It really has showed just how important that whole area is to be successful in retail.
IR: How have the brands you acquired from Metcash been integrating so far? Are they doing well?
DA: Both of the main retail brands, being Autobarn and Autopro, have performed well. Autobarn had same-store sales above five per cent in the last year, and by industry standards it’s a very good performance. They have contributed well. We have started a process to expand the number of stores, which is a key part of it. It’s performing as well as we would have expected.
IR: What do those expansions look like?
DA: On the Autobarn brand, we currently have about 115 stores around Australia. Our target through to 2021, so roughly the next five years, is to expand it to 200 stores. It’s a very specific target for a very solid, viable business.
DA: Yeah. Most of those are what we would call the Autobarn format because a part of what we have in each store is a fitting bay so that things like radios and most of the products can be made to fit. That’s a key part of our service offering. No one else in the industry has that offer.
IR: What states are you going to be mostly focusing on with that planned growth?
DA: They’re all across the country. We looked at the geographic map of Australia where the population is and then plotted according to that. Certainly, we could potentially have more than that, because when you look at the key competitors, they’ve got more stores than that. But we did it based on population, based on the fact that we’ve got a lot of franchisees to grow, we think that’s about the right number.
IR: Regarding New South Wales specifically, the old chestnut with large format in New South Wales is that zoning regulations are really tight which makes it really difficult to get locations. How is that going to impact your plans because, obviously, 200 is quite a large number of stores.
DA: The store size that we look for is generally somewhere between 700 and 1000 square metres, so not as big as some of the stores others might look for. We can adapt to fit the size of what is available. So far, in the areas we’ve been looking, we haven’t hit too many hurdles, but you never know. Given we’ve already got a lot of trade stores in that area, we’re probably confident that we could find enough locations.
IR: The store expansion will also benefit your click and collect offering. What role is click and collect playing in your retail operation?
DA: Click and collect is working pretty well, reasonably well. We’re looking at other alternatives as well. Whether we go into online in an order deliver service. We haven’t made any decisions on that, but we are certainly looking at it and keeping an eye on it. We like the concept of click and collect because it does bring people into the store and from an assistance and knowledge perspective it’s a good way to do it.
IR: How are you approaching click and collect from a logistics point of view?
DA: We’ve got product going to all our stores on a daily basis and sometimes more often than that. It utilises what we already have and maximises it – rather than having to set up a complete new cost structure and infrastructure to support it, we’re using what’s already there. From that perspective it can be different to some.
IR: Your eye on New Zealand has been in the news lately. Will the retail arm of your operation follow your other investments into NZ?
DA: Yeah, once we’re in New Zealand we will look towards what the most sensible areas are. We’ve said that we’ll do a market research to see whether it’s the right opportunity and right time to look at the retail side, but we’re also looking in southeast Asia (SEA). We may end up doing something in SEA, but not in China, where it could end up being a bit of a combination between our trade and our retail business. We’ve got a few stores in Australia that we’re using to prototype some options.
IR: Traditionally, SEA hasn’t been a big car region, but its developing economies and increasing consumer demand is starting to create opportunities. Is that what’s underpinning your thinking?
DA: Exactly, and it’s changing dramatically, because historically motorbikes are probably the predominant thing over there. What we’re seeing is that it’s just at that point where our type of business could potentially make sense over there. We’re looking at some options. We could have some stores on the ground in the next twelve months.
IR: Will you look for the same type of store format, size and general feel in SEA as you have in Australia?
DA: The same type of people, absolutely. The type of format we’d use in southeast Asia could be slightly different because it’s going to be a bit more of a combination of trade parts with a bit of retail. Our prototype stores weren’t put there for Asia, but we’re looking at alternatives where there is both a goods and trade store within a combined Autopro-Autobarn store carrying both brands.
IR: Do you think that type of prototype store will be successful in Australia? Are there plans to roll any out yet?
DA: They’re more for country, smaller population areas where you can’t justify having a trade store and a retail store separate, but you could justify having one store that runs under two brands. One for trade at the back, and another for retail at the front.
IR: Speaking of Bapcor’s wholesale arm, you obviously had that before your retail operation. How has the wholesale side of things supported and benefitted your retail business?
DA: Probably early days, because we’ve added a lot of wholesale businesses over the last three to six months. We see wholesale as being our core procurement arm that can provide the products and that allows us to better penetrate home brand. It helps us get some differentiation and get some value products of high quality for wholesale, but also value products for the consumer as well.
IR: A business like Supercheap Auto is more of a traditional retailer. Does your immediacy to procurement provide you with a point of differentiation?
DA: Most retailers now, including Supercheap, are doing a lot more direct sourcing from manufacturers. In the longer term, the wholesale side really becomes the procurement arm. The more you do direct procuring, the more you get better end results from a value perspective.
IR: What’s your strategy within the Australian market moving forward?
DA: There is no doubt that there are two different areas. You’ve got a premium retail brand, which is Autobarn. Then you have the Autopro brand, which is more of a franchise brand. We support that very strongly with our full range because we believe there is a place for that. Then we’ve got our four-wheel drive brand, it has its own positioning. Then you have the, call it the workshop brands, like Midas.
DA: Yes, we will absolutely have the diversified approach because each brand services a different segment for the market. If we tried to homogenise them down to one, you’ll lose the meaning of it. For example, you go to Midas to get your car fixed. Autobarn or Autopro, you actually go to get parts and the accessories, and that side of it. To merge the brands, to us, wouldn’t make a lot of sense. Now, there may be some others that, where we’ve got multiple product brands or other things, that we would look at trying to maybe rationalise some, but not when it comes to the segmentation of the different segments of the market.
IR: What is your general outlook on the state of the economy as a retailer?
DA: From where the business has been so far this year and what we’re seeing at the moment is that the business continues to grow. The consumers have a reasonable level of confidence. Would we like to see it higher? Of course, the same as everybody would, but we don’t see it as being that it’s down in the dumps either. It is actually performing well. Certainly, the election does have an impact on most businesses, so you look at that too. When we look forward, we don’t see a lot that will change or affect our segment because most people’s second biggest asset is their car. When you look at that, people will look after it. They’ll do things to maintain it. From that perspective, it’s a little bit different to a general economic situation. It’s much more robust and less volatile.
The fundamentals of this business is that it is fairly robust. I wouldn’t say it’s recession-proof or anything like that, but it is robust. It moves as population grows – more cars, more congestion. It’s good for the business. The one thing that I would add, though, is: do we see electric vehicles and technology changes having a significant impact? Not for a long time.
IR: You don’t think pushes towards sustainability are an immediate concern for you?
DA: Not really, no. When you consider in Australia alone there is over 17 million cars, average age is about 11 years. Even if every car sold today swapped to electric, you’re talking 20 to 30 years before it really has a big impact. We know that’s not going to happen anyway. There is still opportunity for car manufacturers. There are still efficiencies they could get on engines, transmission, etcetera. I expect they’ll continue to work on those and roll them out.
IR: Worst case, you could start retailing electric car parts and accessories. Will you be looking into that?
DA: Absolutely. The industry doesn’t stay still. You look at what we used to sell 15 years ago, or 10 years ago, or five years ago. It’s very different to today in all segments. You used to see a lot more, for example, radios. Four to five years ago we would have sold a lot of sat navs as well. Now, it’s changed. Now, we’re selling more things like driving lights, LEDs and everything. You have to keep moving with this industry.