MASTERPARTS: Masterparts in Fast Lane on Growth Plan

For South Africa’s automotive industry, the Covid-19 pandemic has driven new challenges and seen a race begin for the opportunities that have remained in the market. As showrooms, repair shops, manufacturing facilities and garages were forced to close, and even roadblocks put in place to enforce the rules, car wheels stop rolling.

And, as companies got to grips with the pandemic, parts of the country descended into chaos with riots and looting destroying businesses and creating uncertainty.

It’s hardly a recipe for confidence and growth. The National Association of Automobile Manufacturers of South Africa (naamsa) said in July that export sales declined by 33.1% and a combination of physical damage to assets and property, lost sales orders, and subsequent cancellation of new developments in the country’s auto sector would cost SA more than R3 billion.

For a sector that contributes 6.4% of SA’s GDP, the automotive industry’s importance has never been in doubt. But, together, the pandemic, looting, pricing, taxes, environmental concerns, and demands of SA’s road network make for an atmosphere where the average driver has more to consider.

Thankfully, there are some robust businesses in the industry that will continue to lead the industry onwards and upwards. Some of the big international OEMs have committed long-term to the country, and some of the national chain stores have benefitted from this vote of confidence.

Masterparts, a leading supplier of car engine parts and automotive accessories, has kicked into top gear, accelerating with a strong growth strategy which sees it busy opening a new centre in KwaZulu-Natal while managing to avoid the macro challenges that have affected so many others.

“We’ve got three stores in KZN, but thankfully none were affected, even though the chaos was incredibly close to us.  A neighbour to one of our stores supplies power tools and unfortunately they were broken into and had all of their stock stolen,” says Managing Director, Chris O’Carroll, discussing the recent unrest in the country.

For this second-generation family business leader, turmoil in the province could not have come at a worse time. Masterparts opened its shiny new warehouse, 10 miles north of Durban, in June. “I thought, gosh, we’re trading for a month and they’re going to charge and burn it down.”

The nearby supermarket and strip mall had been cleaned out by looters, and O’Carroll had seen customers businesses decimated, but Masterparts was fortunate.

“When people are looting for food you can understand, but when they’re just being destructive it’s devastating to the community. Things are getting back on track, but obviously there’s still some disruption. One of our suppliers had their warehouse burnt down, which has forced us to look for an alternate source, at least in the short term. These kinds of issues will still be felt for months to come.”

HISTORIC JOURNEY

Masterparts has been serving the South African automotive sector for 46 years and currently has a range of more than 50,000 parts for 4000 vehicle models. With more than 500 staff active across 10 branches and a large distribution centre (DC) in Cape Town, this is a business that knows how to navigate the peaks and troughs of the economy.

“We started in 1975 and were sourcing from local suppliers, agents and warehouses,” says O’Carroll. “As the company has grown we have been able to source directly from international suppliers in various markets in order to achieve our aim of having an extensive range with good availability.

“We have one store in Windhoek, six in the Western Cape as well as the DC, and we have three in KZN.”

The opening of the new warehouse in KZN was to support the company’s strong growth in the region and optimise the movement of stock around the country.

“We planned to start in February 2020 and then we started hearing the rumblings about Covid. It was questionable whether we would go ahead or wait to find out what impact Covid would have. We decided to go ahead in late February and on March 27^th we went into a lockdown,” explains O’Carroll.

“There were a lot of knock-on effects which resulted in the project taking 16 months to complete, instead of the planned 11 months.”  

This new warehouse has a retail offering built in onsite and will support the other outlets in the region.

“Engine components can be heavy or bulky. A brake disc can weigh 20kg, there are a lot of suspension items which are cast iron and bulky and radiators are physically big, So the aim is to try and cut down on stock movement and make the handling process as efficient as possible.

There are also logistical benefits of a new warehouse site. Many Masterparts suppliers send products into the company from international markets and most come in through the Port of Cape Town. The warehouse at KZN means that suppliers can send containers into the Port of Durban – the largest in sub-Saharan Africa – for a more streamlined approach into Masterparts outlets.

“We buy from about 20 countries,” details O’Carroll. “We have suppliers in North and South America, Asia and a number of countries in Europe. That scope enables us to cover the full range of makes and models in our market.”

It reduces the amount of picking and paperwork to be completed in Cape Town and lowers the transit time for goods moving from port to DC. It also reduces time on road between Cape Town and Durban.

“A lot of the focus for us is on how to minimise the manual labour in the logistics process,” admits O’Carroll.

“It was a reasonable capital investment and resulted in us adding 45 staff. That number should increase as we build on the early foundation but adding a large staff compliment in one go has been challenging for our HR department.” he adds.

COVID CRASH?

For those on the hunt for engine, transmission, steering, electronic, suspension, timing, exhaust, filtration, brake, wheel, cooling parts, or part across many other automotive zones, Masterparts has, for more than four decades, offered one of the largest selections in the country, and has made it easy for customers to walk into a branch and pick up what is required. But with the pandemic, and the lockdown, the nature of the retail operation changed. Today, many argue that a traditional retail model is gone for good. But at Masterparts, following the relevant guidance and ensuring the safety of staff and customers has resulted in a reasonably seamless process with business allowed to continue without the major disruption faced by many.

“The pandemic has changed our attitudes and certain habits. We’re wearing masks and ask our customers to do the same. We have hygiene stations and ensure our staff have risk awareness, but from a business perspective we have managed to weather the storm so far.” explains O’Carroll.

“Initially it was a big change but after 18 months, the various protocols and practises have become way of life now and you just accept it and move forward.”

Initially, the pandemic had a draining impact on Masterparts thanks to the strict lockdown in place in South Africa from the end of March. Trade was lost and employees had to deal with navigating the economy without picking up the virus.

“Unfortunately South Africa doesn’t have a reliable and safe public transport system.
Combined with the country’s general economic factors, this leads to favourable business conditions in our industry no matter what the general climate is at the time. After the lockdown in April 2020 we opened with half of our usual staff compliment but within two weeks we were back to full staff because the demand was there.”

The company introduced a night shift, splitting the team in half to ensure that if the virus did run through the business, there would be at least half a team to continue working.  

“Previously we were an 08:00 to 5:30 company but Covid forced us to re-think various strategies. One was to split the warehouse staff and run a night shift in order to mitigate risk. If somebody on one shift contracted Covid it would mean fewer staff having to go into isolation.”

But, even with protocols and contingency in place, with an employee base of more than 500 spread across a large geography, in hot spot areas some disruption was inevitable.

“We’ve had to shut down all of our stores multiple times to fumigate after a staff member has tested positive. It’s a huge disruption but one of many issues Covid has brought with it, that businesses have had to accept.” says O’Carroll.

However, the demand from customers has been high, especially as many are looking to fix up and repair cars rather than investing in new vehicles during times of uncertainty.

“When economic times are difficult, the average age of vehicles rises as people undertake ongoing maintenance to extend the life of their vehicle and they turn to the aftermarket because of pricing. 

“When times are good, vehicle sales increase and the vehicle park grows. Vehicles are sold to new road users, so our potential market increases. So, we are fortunate to have fairly steady business whether the economy is on an upward or downward trend.

“There is less traffic on the roads due to many businesses allowing staff to work from home and less holiday travel due to various restrictions,” O’Carroll says.

By sticking by its core principle of stocking a vast number of products, Masterparts has become a go-to for those in the industry. Asked about the company’s success, O’Carroll talks of the key factors. “We want to be synonymous with range and availability. When you lose an entire month of trading, it affects cash flow and creates challenges. After overcoming those we found other knock-on effects of Covid such as steel shortages and also a shortage of shipping containers, which has led to higher prices on both products and freight. It’s become a minefield of issues to navigate.”  

PEDAL TO METAL

In the future, as the country emerges from the grip of the pandemic, and as the automotive industry regains confidence as freedoms are universally restored, more people will take to the roads, more cars will be purchased, more cars will be repaired, and people will begin venturing into stores in real numbers again. Masterparts is not waiting to be prepared, it is already on the move.

“Thankfully we are growing,” smiles O’Carroll.  “We have added stores in order to reduce pressure on existing stores, so that we can maintain high levels of service.”

In 2019, local government announced that the auto sector in KZN was thriving with a number of major international brands present in the province and a number of assembly operations helping to create opportunities. With the new Masterparts warehouse, stock could not be easier to come by for these clients and potential clients.

“Now that we have the warehouse in Durban, we can service that region more efficiently.

“The pandemic and riots have subdued the appetite for risk slightly but we’re still on the lookout for new opportunities,” says O’Carroll.

Currently, the automotive components industry in KZN employs around 17,000 people and there are around 40 members of the Durban Automotive Cluster which is funded by the municipality.

There is no question that Masterparts has engrained itself into the DNA of South African automotive sector and is now a key part in this engine that drives so much economic activity. By applying long-standing, sound business principles and being well-prepared to deal with uphill challenges, this is a company that will continue to find opportunities, wherever they may be.

“By mid-2020 we started to see shortages in the market caused by the financial strain of the lockdown. We were able to capitalise because of our availability and even though we lost April as a trading month, we finished the year about 4% up. Given the sudden and unprecedented challenges, it was good to be able to provide stability for our staff when so many businesses were having to manage redundancies,” says O’Carroll.

“It’s a huge responsibility to have hundreds of staff and their families dependant on our business for their livelihood and then be faced with the challenges of the last 18 months. But we’ve managed to maintain that momentum and I feel it will stand us in good stead going forward,” he concludes.

The Masterparts mission is to continue providing the widest possible selection of car parts – including hard-to-find items – and to maintain technical ability and a depth of knowledge greater than competitors can offer. For decades, this mission has been achieved, and the result is a business that is now stronger and more resilient than others – even in the post-pandemic climate. Masterparts is sitting in pole position with opportunities in front of it. O’Carroll is confident the company can power onwards, achieving more growth and more success.