January 30, 2010
Survival of the smartest
Dealers plan to boost units, jump-start sales and charge for more services in 2010
By: Mike Manges
“I’m very frustrated because sizes are out of control,” says Tom Richey, owner of Laurel Gardens Tire Service in Pittsburgh, Pa. Richey will continue to watch his inventory closely.
Without question, 2009 was one of the most difficult years independent tire dealers have faced in a long time. For many, survival was the name of the game.
As 2010 begins, most, if not all, of the same challenges remain. With that in mind, we recently asked several tire dealers:
1. What will be your biggest challenges in 2010?
2. How do you intend to overcome them?
We discovered that dealers are not holding their collective breath for a miraculous recovery this year. However, they are taking key steps to keep their numbers and margins up.
New brands, more units
Tom White, co-owner of Tire Source, a five-outlet passenger and light truck tire dealership based in Akron, Ohio, says his company faces several immediate challenges.
Number one, Tire Source has to find a product to replace Goodyear Tire & Rubber Co.’s Republic passenger tire line, which was discontinued earlier this month.
For years, Tire Source marketed Republic as a “quasi entry-level tire,” says White. It was a big seller. “Our guys believed in it.”
White and his partner, Drew Dawson, are talking with their wholesale distributor about selecting a line to replace Republic, “but we haven’t made a decision.”
They would like to keep it in the “Goodyear family,” notes White. “I understand how SKUs are going up and how manufacturers are trying to find an even balance that makes good business sense.”
Boosting unit sales will be another priority. Tire Source’s units were down double digits in November. “Part of it is the economy, obviously.”
White reports that more customers are buying two tires instead of four to save money. “I think the demand is still there, but they’re putting it off as long as they can. We’re seeing that become the norm.”
How do you spur more sales? “That used to be a no-brainer. We’d say, ‘Goodyear has a good credit card deal — no interest for six months, maybe a year.’ But people are not tuned into opening more credit cards.”
They react the same way when confronted with large auto repair estimates, he adds. “Before, if someone needed $700 or $800 worth of work, they’d say, ‘I can’t do it right now.’ We’d say, ‘We have this credit card. You can do it over time and just pay it off.’ People are just leery of opening credit cards.”
They’re also more price-conscious. “We hold our guys to a gross profit blended amount that we like to achieve. In December, we kind of knocked that down a bit and said, ‘Let’s get out there and match deals.’”
Tire Source will continue to match prices. “We’ve done it before, but not as aggressively as we’re doing it now.”
The dealership also will continue to manage its store inventory levels. “We’ve evolved almost to a just-in-time system. We have roughly 300 tires in stock per store.”
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