Strauss Discount Auto History

Company Perspectives:

When you shop at Strauss you get guaranteed low prices together with the best customer service!

Company History:

Strauss Discount Auto is a privately owned regional aftermarket automobile parts chain, its headquarters located in South River, New Jersey. The company operates 96 stores in the Northeast: two outlets located in Wilmington, Delaware; 12 in the Philadelphia market; 35 throughout New Jersey; and the balance in the five boroughs of New York City and outlying suburbs. Strauss follows the superstore concept, offering service in addition to the sale of parts. All told, the Strauss chain has 360 bays and employs some 1,700 people. Although the model design of a new Strauss superstore is 13,000-14,000 square feet in size, featuring seven to ten service bays, the company adjusts the size of its stores to fit the available space, an imperative for the chain's expansion efforts in the highly congested New York City market.

R&S Home and Auto Established in 1919

The bulk of Strauss is the result of a merger between two well-established chains, R&S Home and Auto and Strauss Auto. The oldest of the two businesses was R&S Auto, founded in Newark, New Jersey, by Herman Schlenger and Harry Roth, the initials of their last names accounting for the name of the company. (According to a New York Times obituary, however, Herman's brother Henry was considered a co-founder of the company in 1922. Whether or not the business was started in 1919 or 1922, Henry would still have been only in his early 20s when it began.) Over the next three decades, the R&S Auto chain added outlets throughout northern New Jersey. In 1954, R&S Auto opened its first superstore, a unique concept at the time, not only because it offered a service garage but also the simple amenity of customer parking. R&S Auto was led by Herman Schlenger's son, Donald, in the 1960s, a period of prosperity for the company-owned stores, and leased departments that operated within discount stores. When the national economy faltered in the early 1970s, a number of these discount operations failed, severely impacting the fiscal health of R&S Auto. In 1973, the company posted sales of $27 million, but business collapsed the following year, with sales totaling just $8.5 million. R&S Auto was forced to file for Chapter 11 bankruptcy protection, but it was not the only auto parts chain in such circumstances. Strauss Auto had also declared bankruptcy.

Not only did the Strauss family found an aftermarket auto parts chain that became a major component of what would one day become Strauss Discount Auto, it was also instrumental in the creation of a major competitor: Pep Boys--Manny, Moe & Jack. Strauss auto was founded by Issac (Izzy) M. Strauss, brother of Maurice (Moe) Strauss. Moe teamed up with Emanuel (Manny) Rosenfeld, Moe Radavitz, and W. Graham (Jack) Jackson, Philadelphia natives who became friends in the U.S. Navy during World War I and later formed Pep Boys. In 1921, they each chipped in $200 to launch an auto parts store, although at first Moe Strauss served as a silent partner because he worked at a rival store and could not afford to give up the job, having already failed twice at starting a business on his own. The partners rented a modest storefront in Philadelphia, so narrow that the shorter the name for the new enterprise the better. According to company legend, the young men were lounging in the store, drinking sodas and kicking around ideas for a suitable name, when one of them noticed a box of Pep Valve Grinding Compound, prompting the inspiration for "Pep Auto Supplies." They became the "Pep Boys" supposedly because a Philadelphia policeman made a habit of sending motorists in need of a replacement oil wick (used in the headlights of the day) to the "boys" at Pep. Moe Radavitz soon sold out his interest and Izzy Strauss replaced him as one of the partners. The Pep Boys became personalized in the early 1920s as Manny, Moe, and Jack, the caricatures of the founders becoming marketing and cultural icons. The original rendering of the trio included Graham Jackson, but when Izzy Strauss joined the business his face replaced Jack's. Because "Manny, Moe and Izzy" did not sound right to them, Jack's name was kept.

Izzy Strauss Launches Own Business in 1929

Izzy Strauss soon decided to strike out and launch his own auto parts store, but his caricature would forever link him to the Pep Boys, a future competitor of the chain he nurtured. When Izzy broke away, Pep Boys had a dozen stores in Philadelphia and were looking to expand to the growing California market, hardly competition for the business Izzy established in Brooklyn in May 1929. He started out with five stores and a warehouse. Like R&S Auto his business thrived in the postwar years, a period of unprecedented prosperity that came to a close in the early 1970s with the recession that drove both auto chains into bankruptcy. Investor Jerry Schottenstein salvaged both companies and installed Don Schlenger to run them.

Schlenger turned around both chains, became a partner in the business, and ultimately gained a controlling interest in it. In 1983, the companies were merged, creating R&S Strauss, the largest auto parts retailer in the Northeast, comprising some 70 stores that generated annual revenues in the range of $80 million. The company expanded beyond New York and New Jersey in 1987 when it acquired the bankrupt Penn-Jersey auto parts chain, in the process adding stores in Philadelphia and Delaware. A year later, Schlenger was ready to retire and sold R&S Strauss to a British holding company, Ward White, that owned auto parts stores in England. In an effort to enter the U.S. market, Ward White had already acquired the Whitlock and Rose Auto chains. Combined with R&S Strauss, the company owned 240 stores, generating approximately $250 million in annual sales.

Ward White's plans for America were scuttled when just six months after acquiring R&S Strauss the company became the victim of a hostile takeover by another British company, BOOTS, a health and beauty chain established in the mid-1800s that was branching into other retail areas. Uninterested in Ward White's vision for a U.S. auto parts empire, BOOTS soon put the three American auto parts chains on the block. Merrill Lynch Capital Partners acquired the assets, packaged them in a company named WSR (Whitlock-Strauss-Rose) Group, then put executives AL Woods and Mort Schwartz in charge.

By the early 1990s, the aftermarket for auto parts and services was a $125 billion-a-year industry. Although still very much a fragmented business, it was undergoing consolidation with a number of large chains attempting to gain a greater national presence, resulting in a highly competitive atmosphere. For Strauss, with its heavy concentration in the New York City market, this meant going up against a very aggressive Pep Boys chain, which until 1992 had not been involved in New York City but was now looking to open as many superstore locations in the area as possible. Overall, Pep Boys boasted more than 350 stores, producing annual sales in excess of $1 billion. While WSR finished 1993 with 336 stores, it generated just $370 million in revenues for the year.

Merrill Lynch Capital Partners, dissatisfied with their investment in WSR, sacked management and installed an executive who was a veteran of corporate restructurings, Clark Ogle, charging him with dismantling the company. In 1994, four Whitlock outlets located in Pennsylvania and 26 stores operating under the National Auto Supply Stores banner in upstate New York were sold to Wheels Auto Discount Auto Parts, a division of Fay's Inc., whose primary business was a northeastern drugstore chain. Also in 1994, WSR sold the Rose Auto chain of 96 Florida stores to Auckland's Limited, a Canadian auto parts distributor, which paid nearly $15 million for the money-losing subsidiary. The sell-off was completed early in 1995 when Merrill Lunch Partners unloaded the rest of the Whitlock chain, a total of 80 stores, to Apex Automotive Warehouse, a midwestern auto parts wholesaler, for an undisclosed amount. Whitlock subsequently filed for Chapter 11 protection, and the business was liquidated in 1996. What was left of WSR were the Strauss assets. Unlike the Rose and Whitlock stores, many of the Strauss units offered auto service, which allowed it to be more competitive with rival chains such as Pep Boys.

Bankruptcy and Recovery: 1998 and Beyond

In 1995, WSR, doing business under the Strauss Discount Auto banner, was now a $135 million, 121-store chain, a third of its units located in the New York metropolitan area. At this point, Ogle stepped down in favor of Luke Beshar, formerly with the accounting firm of Arthur Anderson, who initiated a downsizing and restructuring effort. He was soon replaced as CEO by Terry Patterson, a rare woman executive in the auto parts industry. In 1997, she left for the top position at lingerie maker Frederick's of Hollywood. At this point, the Strauss chain had been reduced to 111 stores but was generating $175 million in sales.

In 1998, holding company WSR was sold to a group of private investors headed by Dan Gillings, a 30-year auto industry veteran. Almost immediately, in June 1998, the company filed a voluntary petition to reorganize under Chapter 11 of the U.S Bankruptcy Code. Maintaining that the goal was to position the Strauss chain as a regional market leader with fiscal stability, Gillings explained, "After an intense review of the company's capital structure and financial commitments, we have determined that this reorganization is necessary so that Strauss can have a solid foundation on which to grow. ... Daily operations will continue as usual, store hours will stay the same, and all aspects of the business will go on as before the filing." According to Automotive Marketing, however, "There are those that say the bankruptcy was simply a ploy to escape years of debts and bad management decisions." Gillings brought back Al Woods to run Strauss during this transitional period.

In February 2000, Charon Investments LLC and Schottenstein Bernstein Capital Group, led by Charon's Glenn Langberg, made a successful bid to purchase the Strauss assets out of bankruptcy. After Woods resigned as president and CEO in July 2000, Langberg became chairman and CEO of the company. More experienced in real estate, he soon elevated a Strauss executive vice-president, Joe Catalano, to the job of president and chief operating officer to help him run the company. By now, the chain had shrunk to 90 stores, but having regained its footing Strauss was poised to once again open new stores. A newly created business plan envisioned the chain adding six to eight stores within the first year, all located in the company's current area of operation. Moreover, Strauss already had under construction two new superstores that would replace existing units in Blumfield, New Jersey, and Wilmington, Delaware, and also serve as a prototype for future expansion efforts. These stores, as large as 14,000 square feet in size with seven to ten service bays, extended the service department into the retail area. With new funding available, Strauss was also able to enhance its commercial business program for fleets. The company was soon able to sign up a major car rental agency as well as a number of livery services.

Because service was contributing as much as 40 percent of its sales, Strauss was interested in growing this segment of its business and management was committed only to opening stores that could at least offer light service business. In the New York City market, with its strict zoning laws and the scarcity of parcels of land large enough to accommodate a superstore, some flexibility was necessary. A store that opened in 2001 in the Canarsie section of Brooklyn, for instance, was limited to just two bays and light service, primarily mounting tires and installing batteries.

The new management team at Strauss undertook a number of initiatives to grow the business in 2001. It signed an agreement with an emergency auto roadside assistance service, 1-800-TOW-TRUCK, whereby the towing service would urge customers to have their vehicles taken to the nearest Strauss Service Center. In turn, all Strauss outlets would use the 1-800-TOW-TRUCK network for all their emergency roadside needs on an exclusive basis. Also in 2001, Strauss inked a deal with Wrenchead, Inc., an e-commerce provider, to maintain an electronic catalog service to be used in all of the stores. This initiative was part of a larger effort to use technology to make the chain more "customer-centric" and enhance the service business.

All of the Strauss stores were now linked by a high-speed Internet connection and shared a database that included as much in-depth information on a customer's car as possible, including the vehicle identification number, which could provide the vehicle's repair history. Not only would it enable Strauss mechanics to better service these vehicles, the system allowed the company to produce personalized marketing, such as reminders that a vehicle was due for maintenance. Strauss also relieved the customer of record keeping, retaining all information and providing receipts for customers as needed. In addition, Strauss turned to the Internet for marketing, buying banner ads on America On-Line, for instance, and offering online coupons that were gaining greater acceptance with customers. With a number of new store openings in the offing in the summer of 2003, Strauss was well positioned to enjoy another period of prosperity.

Principal Competitors: Advance AutoParts, Inc.; AutoZone, Inc.; The Pep Boys--Manny, Moe, & Jack.

Further Reading:

• Greenberg, Lisa, "Strauss Discount Gets 'Customer-Centric'," Aftermarket Business, May 2003, p.1.
• "Strauss Auto Files Chapter 11," Discount Store News, June 22, 1998, p. 6.
• Willins, Michael, "Strauss Discount Emerges From Bankruptcy with Equity Partner," Aftermarket Business, September 2000, p. 12.

Source: International Directory of Company Histories, Vol. 56. St. James Press, 2004.

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