Monro Inc. president and CEO Brett Ponton told analysts on the company’s Jan. 31 earnings conference call that Monro reached a key milestone during the fiscal third quarter, which ended Dec. 29, 2018. The company was able to successfully implement new operating procedures, called the “Monro Playbook” — as well as a refreshed appearance — across 31 pilot shops in its hometown of Rochester, NY.
“Our ‘Monro Playbook’ is made up of standardized in-store operating procedures that include clearly defined roles and responsibilities for our teammates, with a focus on service quality,” Ponton explained. “Our goal is to position our teammates as expert advisers who can properly educate customers about their vehicle needs and provide them with clear options so they can choose the right services for their vehicles.
“We expect that this clear and consistent selling approach — coupled with our stronger merchandise strategy across good/better/best product options — will be instrumental in driving higher in-store conversion.”
To complement its “Monro Playbook,” the company is working to establish clear standards to align the appearance of its stores and drive consistency across all of its locations, which currently include a wide range of stores and formats.
“We started the implementation of our brand standards with the re-imaging of our 31 pilot stores completed during the third quarter. All of these renovated locations now have a more consistent and modernized appearance,” Ponton said. “They look more inviting and contemporary, and are more functional. So far, feedback from our teammates and customers has been overwhelmingly positive.”
He added that, after implementing the “Monro Playbook” and completing the stores’ re-imaging, the company has seen improved customer satisfaction and conversion at these stores.
“We are currently finalizing purchasing negotiations with our re-imaging suppliers to scale this initiative, and look forward to rolling out our brand operational standards across our store base and modernizing our store portfolio over the next three to five years,” he told analysts on the call.
In the near-term, management expects Monro to refresh the appearance of roughly 70 stores in its southern markets during the first quarter of fiscal 2020 (the three months ending in June 2019).
“We are determining the appropriate scope of refresh needed for each of our stores by examining their age, size and market demographics to ensure that we’re investing an appropriate amount of capital to achieve the highest possible returns,” Ponton said. “As part of the initiative rollout, we will prioritize our newly acquired stores, as we believe the implementation of our standardized in-store operating procedures and brand standards will benefit our integration process and increase the value we realize from these stores.”
MARKETING … In an attempt to invest in higher-ROI channels to meet current and future customers where they are, Monro is repurposing its marketing dollars to invest in data-driven customer relationship marketing (CRM) and customer acquisition campaigns. As a first step last quarter, the company rolled out a data analytics-based CRM platform focused on driving higher customer retention.
“While still in the early innings of our initiatives to optimize our marketing efforts, we’re very encouraged by the strong results of the pilot campaigns we launched in the third quarter,” Ponton said on the call. “Leveraging predictive analytics, we identified and targeted customers with a higher propensity to purchase our brake and tire offerings, which led to a notable increase in conversion.”
He said the next phase will consist of leveraging customer data and insights to deliver tailored messages and service recommendations to customers based on their specific vehicle needs. “Overall, we have been able to unlock key consumer insights and are confident that our data-driven marketing approach will allow us to develop long-term, one-to-one customer relationships,” Ponton stated. “As a next step, we plan on rolling out an initiative to drive new customer acquisitions in the [fiscal] fourth quarter.”
Monro also has worked with a customer analytics firm to provide market segmentation and demographic data specific to areas around its shops in order to identify high-value potential customers and to focus its marketing efforts on directly targeting these drivers. The company also plans to leverage this market segmentation and customer demographic information to assess its existing real estate portfolio, as well as to identify key markets for acquisitions and greenfield expansion.
OMNI-CHANNEL … Ponton said management is pleased with the effects of modernizing Monro’s retail website, which debuted last quarter. “Improved content and functionality are driving a better experience for our customers online while driving traffic to our stores, as evidenced by the 32-percent increase we experienced in online tire searches that led to appointments at our stores,” he told analysts on the call. “We’re also very encouraged to see that the upgrade to a mobile-capable architecture has led to an 80-percent increase in mobile phone conversion rates.
“Our website monetization lays a strong foundation for the final phase of our omni-channel build-out, which we expect to roll out in the second half of fiscal 2020. Once completed, our customers will be able to view and purchase tires online and seamlessly schedule an appointment for an in-store installation.”
In related news, Ponton said Monro plans to expand its tire offering with the introduction of new high-margin, branded tires in the current quarter to, among other things, capitalize on additional margin expansion opportunities.
“Tires are an important part of Monro’s business, given that they represent half of our sales,” Ponton explained. “And, we want to make sure we offer the right tires at the right price points for our customers.” — Marc Vincent