February 15, 2011
Is Tire Rack your competition?
By: Bob Ulrich
The Tire Rack is an independent tire dealership. Its business model may be different from yours, but the owners have complete control over it.
Is it really your competitor? I raise the question because I have heard many dealers grumble over the years about Tire Rack. Its mail-order format makes it a tire dealer with a nationwide reach.
In that sense, the answer is “Yes, Tire Rack is your competitor.” Anyone who wants to buy a tire from Tire Rack could buy that same tire from you.
If the customer wants to buy a tire and wheel package, mounted and balanced, from Tire Rack, he can.
However, the customer still has to have the tires installed, which is an opportunity for you to make a little money. Tire Rack has a network of “Recommended Installers” that can perform the work. In my area, Akron, Ohio, they include independents such as Tire Source and Conrad’s Tire Express & Total Car Care; Goodyear company-owned stores; and a custom trim shop.
How many of you have ever used Tire Rack as a wholesale distributor, especially when you need an exotic size? That makes Tire Rack your partner.
As you can see, the line between competitor and supplier is blurred when it comes to Tire Rack.
How much competition do car dealerships bring to our market? They own 6% of the consumer tire retail market share in the United States, double what it was in 2004.
Ford Motor Co. has been particularly active selling tires, both at its franchised dealerships and Quick Lane Tire & Auto Centers chain. Ford claims it sold 1 million tires through its Quick Lane outlets in 2010.
Earlier this month, the vehicle manufacturer opened its 600th Quick Lane outlet, which sells 11 different brands.
I was at the grand opening of Hennelly Tire & Auto Inc.’s 30th store in upscale Oakland Park, Fla., last November. “In that neighborhood, we really fight the Mercedes and Lexus dealers, not Tire Kingdom and Tires Plus,” Chairman and CEO Dan Hennelly told me.
Car dealerships, then, are one of your biggest rivals, right? Not so fast. Nearly 52% of the 30,000 independent tire dealers in the U.S. sell to car dealerships, according to a recent Modern Tire Dealer survey. To some of you, like Dealer Tire LLC, auto dealerships are your customers.
The strength of mass merchandisers is not what it once was. Their market share has dropped from 18.5% to 14.5% in the last 15 years. But Sears Holdings Corp. has been working on turning that trend around.
For many years, Sears ran a huge newspaper advertising campaign focusing on tire prices at its nearly 850 Sears Auto Centers. The current campaign, while still pricey, has been watered down. The ads not only run in fewer papers, but also less frequently. And they don’t push pricing (Sears offers nine tire brands).
As a Sears rep recently told me, by running a lot of tire sizes and prices, you take the risk of alienating customers who concentrate on the price, not the size. So Sears emphasizes specials, such as “Buy three and get one free.”
Sears, under its Sears Authorized Independent Auto Centers LLC subsidiary, began its franchise program in 2010. The company says the program “offers automobile dealers the opportunity to operate licensed Sears Auto Centers, bringing the Sears brand, buying power, distribution network, systems and corporate support to automotive aftermarket businesses.”
Sears also introduced a fleet strategy last year in an effort to grow the commercial side of its automotive business.
The competitive nature of the tire industry — at all levels — continuously changes and evolves. There is one constant, however. Independent tire dealers dominate tire sales in the aftermarket.
You represent 60% of consumer tire retail sales in the U.S., and control 76% of consumer tire aftermarket distribution. You are number one.
If you have any questions or comments, please e-mail me at bob.ulrich@bobit.com.
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