Advance Auto Parts, the national auto parts retailer that officially moved its corporate headquarters to Raleigh last year, plans to take up seven floors in Kane Realty’s newest North Hills tower.
The tower, scheduled to be completed in the latter half of 2020, will be renamed the Advance Auto Parts tower as part of the agreement with Kane Realty.
The company currently calls a campus of office buildings off East Millbrook Road home, where it leases around 177,000 square feet of space, according to a filing with the U.S. Securities and Exchange Commission.
In total, it will now take up 218,000 square feet at the North Hills tower, taking the under-construction building to 85% leased, John Kane of Kane Realty said.
For Advance Auto Parts, the move is all about helping the historically brick-and-mortar-focused retail company attract the kind of tech talent it needs to compete in a retail world that is now dominated by digital sales, said Advance Auto Parts CEO Tom Greco.
It also will give the company room to take on the hundreds of new employees it promised the state it would hire in the next five years.
Last November, the state announced that it would give Advance Auto an incentive package worth more than $9 million, if the company transferred its corporate headquarters from Roanoke, Virginia, to Raleigh and added 435 news jobs here over the next five years.
The company had already become more aligned with Raleigh before it agreed to the deal with the state. In 2014, the company began moving employees to the city, when it acquired its Raleigh-based competitor General Parts International for $2 billion.
Then, in 2017, Greco and the majority of the company’s management team moved to Raleigh.
Greco has been with Advance Auto since 2016, when he came to the company after leaving his post as CEO of Frito-Lay, a subsidiary of PepsiCo.
Attracting the right type of worker
He said the current campus, in an isolated part of northeastern Raleigh, just wasn’t up to the standards the company is setting for itself going forward.
“We weren’t confident we would be able to attract the type of person that we need to drive our agenda with this location (on Millbrook Road),” Greco said in an interview in his office.
“You talk about downtown versus this particular part of Raleigh, or even North Hills,” he added, “a lot of the younger, up-and-coming ... employees want to live in those areas.”
North Hills gives employees a location with a plethora of entertainment and living amenities.
“There’s lots of restaurants, there’s gyms (and) lots of facilities, like hotels, for us to leverage,” Greco said. “Whereas out here, you’re kind of out on your own.”
North Hills has been successful in attracting companies because it has made itself so distinct from the classic suburban office setup, like Advance’s current offices, Kane said.
“People want to work in a live-work-play environment, even though that is an overused term now,” Kane said. “We have 50-plus restaurants, hotels and there are plenty of places to live.”
Greco said the company has already tested out this hypothesis to success.
At the Duke Energy Tower downtown, where the company has temporarily leased space, it has found it easier to recruit members to its digital marketing team.
Going forward, all of Advance Auto’s Raleigh employees — except for those at a distribution center on Millbrook — will be consolidated into the North Hills tower. Advance will try to find subletters for the rest of its leases in the area, Greco said.
The consolidation will have what Greco called “tough to quantify” positive effects. Rather than having teams separated between buildings, sometimes miles apart, everyone will work from the same space.
That will allow him and other team members to form more connections and ideas organically, like when employees run into each other while getting coffee or a sandwich, rather than relying on traditional meetings and communicating via email.
“When you have a building with everybody in one place, you’re going to see people that you don’t normally see,” Greco said. “And that, by itself, fosters collaboration.”
E-commerce has become an all-important focus for Advance Auto, with about 80% of sales in the auto parts category now starting online, Greco said. The company had about $9.6 billion in sales in 2018, a 2.2% increase from the year before.
So, many of the company’s new hires will be software developers and engineers as well as digital marketing.
“You’re talking about figuring out how to make your website more attractive to your customer base, improve the online shopping experience,” Greco said, pointing toward a poster board leaned up against the wall of his office.
It exhibited research of how people shop for things like windshield wipers and seat covers to car batteries and alternators. For many shoppers nowadays, he noted, when a problem arises with their car, consumers go straight to Google or YouTube to figure out how to fix it, rather than to an auto store.
More and more, the challenge for Advance Auto is how it can meet potential customers where they are.
“The online experience is now part of the (shopping) experience no matter what,” he said.
Competition and challenges
It’s important that Advance Auto nails down its e-commerce plank, especially with how competitive the auto parts space is. Even Amazon, which has seemingly sought to disrupt every retail business in the world, has started venturing into auto parts.
“We take (Amazon) very seriously, we take all of our competitors very seriously,” Greco said. But “I think that it’s harder for them to penetrate auto parts than it is other categories.”
Greco thinks products like starters and alternators won’t do well in a Prime Now warehouse, where Amazon typically puts items that are high frequency sellers.
He also believes that Advance Auto, which has 4,380 stores, can still beat Amazon on speed.
“You can get (a product) in 30 minutes in our store and you’re talking about, at best, next day, maybe two-day delivery,” he said. “They certainly don’t have convenience, because if it’s the wrong part, you’re going to have to return it and that’s not easy if you’re doing it through an online retailer.”
On top of that, Greco said, Amazon can’t replicate online the experience and advice of the thousands of Advance Auto technicians that work in nearly every market across the U.S.
“They’re an extraordinary company — they’ve got, you know, the most powerful loyalty program in the world,” he said. “But all that said, we’re going to execute our own agenda and we think we like our chances.”
Notably, Advance has also recently launched an in-store pickup initiative for online orders as well as a loyalty program.
Greco is also having to navigate the current trade war between the U.S. and China when making his business decisions. He was in China a few weeks back to visit suppliers at time when tariffs are being increased on goods made there and exported to the U.S.
For Advance Auto, that turns out to be quite a lot of products.
“We buy close to 20% of our goods from China,” he said. “Now the thing is, so do our competitors, so we’re all on a level playing field there.”
As an example, Greco pointed to brake rotors. The vast majority of the global supply for rotors is coming out of China, so it is affecting everyone that sells rotors. But that extra cost from the tariff is being passed on to the consumer here in the U.S.
“Historically, we’ve been able to pass the price increases that we experience on commodities or tariffs or anything else into the costs,” he said. “... We’d rather not have to do that with the tariffs, but, you know, it is what it is and we’re responding appropriately.”
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work. Learn more; go to bit.ly/newsinnovate