Even though you see everyone from Walmart Inc. to auto service chains offering oil changes, annual industry revenue increased slowly from 2013-2018, according to business information and market research company IBISWorld. Revenue increased at an annualized rate of 1.4% to $5.8 billion.
“The world price of crude oil was extremely volatile over the past five years, which led to fluctuations in industry demand,” says IBISWorld. “Oil prices increased in 2013 and 2017, deterring consumers from driving their vehicles.”
The fragmented auto oil change market has led some major retailers to build business with joint ventures, agreements and expansions to drive up their profits, reported Market Research Reports. That’s especially important now that automakers recommend longer intervals between routine services for their “maintenance-free” vehicles, according to a Filter Manufacturers Community report released by the Auto Care Association.
We all know that the largest independent tire dealer in the country, Reinalt-Thomas Corp., which does business as Discount Tire and America’s Tire, does not offer oil changes at any of its 1,033 (and counting) outlets. Other than that, the vast majority of the remaining independent retail tire stores do.
Does it seem crazy that you compete in an oversaturated market segment where competitors routinely undercut each other on price? Not based on the numbers.
According to Modern Tire Dealer’s 2019 Automotive Service Survey, the average independent retail tire dealer performs 214 oil/lubrication service jobs per month at an average ticket of $52.47. The average annual profit is $45,813 based on a profit margin of 34%.
“Let me use a very old catchphrase: You should do it to engender loyalty,” says Skip Viola, president and managing partner of Tire Consultants Group LLC. “That’s the most important factor in success. True loyalty is when a vehicle owner goes into an independent shop, throws the key to whoever is behind the counter, and says, ‘Whatever it needs.’ That’s what you want.”
And when customers do that, they help you overcome a significant downside to the tire business — customers don’t visit regularly. Unless you supply tires to fleets or have some extremely nasty potholes in your town, you will probably only see your customers every three to four years at the most.
So how do you grow your tire business with that type of negative? Sure, you can follow the advice of many consultants and host social events, keep your customer list updated and offer incentive programs. All of those are great ideas.
But as the numbers show, offering oil changes can bolster your business, says Viola.
There are caveats when offering the service, however. With electrical systems in today’s vehicles, performing oil changes is not as simple as they once were.
Automotive expert Richard Reina, product training director and technical expert at CARiD, explained why using the two-year-old Honda his wife drives as an example.
“The onboard computers not only calculate things like outside temperature and length of trips, but various other factors that go into the way the engine operates,” he says. “The onboard computer calculates the oil life of the vehicle. Right after an oil change, the dashboard readout for oil will say ‘100%.’ As she drives, it drops in 10% increments. The technicians reset that calculator every time they change the oil.”
For those of you who do not offer oil and lube service but are looking into it, consider testing the concept by outsourcing first jobs.
“The last thing you want is for the guy to throw you the keys and say, ‘Whatever it needs,’ and you say, ‘Yeah, we don’t do oil changes here. I don’t have time for that,’” says Viola. “No, no, no. You need to say, ‘Yes, we’ll get that done for you.’”
The overhead costs can be very high, says Andrea Bailey-Brown, a small business consultant who has owned three oil change businesses in Edmonton, Alberta, Canada, since 2008.
“Even though you are in the service business, it is also considered a retail business. With hundreds of vehicles on the road, with different makes and models, oil change businesses have to be prepared to keep thousands of dollars of oil and other products in stock. These include filters, windshield wipers, coolant and different brands of oils.”
Partnerships with other auto service providers are one of the best ways to satisfy your customers’ needs and control costs at the same time. You can each agree to refer work to each other or determine an incentive for referrals. You can also outsource the job and mark up the price when the work is done and the vehicle is back in your shop.
Viola tells about a shop that promises local contractors that any routine work they bring in by 5:30 p.m. will be completed that night.
“Why did he say 5:30? Because the local parts shop stays open until 6 p.m.,” he says. “So, he can have a mechanic look over the car, diagnose the issue, get the needed parts, and repair it. Sure, it costs overtime money. That’s why you increase your charge by 50%.”
Small contractors don’t balk at the price, he says.
“Say you’re a plumber and you have three trucks, three plumbers and three assistants. What are you going to do if you have one truck out of service? Send two plumbers out with one assistant? Send two assistants out with one plumber? And how will you complete all the jobs you have scheduled?
“It’s a big deal to have a truck out of service. The plumber will lose a lot more money by waiting to have the truck fixed than by paying the extra charge.”
Oil change intervals
Many oil change shops advise drivers to return after they’ve driven for three months or 3,000 miles, says Reina. Although changing your car oil that often won’t harm your car, it may not help it, either.
And suggesting such frequent oil changes may put you at risk for a lawsuit. In 2012 Jiffy Lube was hit with a class-action lawsuit seeking $5 million in restitution for misleading customers on oil change frequency needs.
The problem is that different cars and driving conditions necessitate different oil needs. And some of those intervals have risen over the years, thanks to vehicle technological advancements.
The mileage norm for the first new car oil change is 7,500 miles or 12 months, according to multiple sources, including a report by IBISWorld. After that, vehicle manufacturers generally recommend oil changes every 15,000 miles, according to the IBISWorld report. Owners of diesel and turbocharged engines are advised to have their vehicles’ oil changed at more frequent intervals.
What many consumers don’t know is that oil change needs change depending on driving conditions.
A past Automobile Association (AAA) survey found that only 94% of respondents thought they drove under normal conditions. (The Car Care Council defines “normal” as steady driving in non-extreme weather or environments.)
Yet when AAA analyzed the type of driving respondents did, it found 62% drove under severe conditions. AAA defines “severe” as:
- driving on short trips of less than five miles in normal temperatures or less than 10 miles in freezing temperatures.
- driving in hot weather in stop-and-go traffic.
- driving at low speeds of less than 50 miles per hour for long distances.
- driving on roads that are dusty, muddy, or have salt, sand or gravel spread on the surface.
- towing a trailer, carrying a camper (if a pickup truck) or transporting items on a roof rack or in a car-top carrier.
Yet even those driving conditions might not necessitate oil changes at 3,000 miles.
Ford Motor Co. advises owners of Ford F-150 trucks that are 2008 or newer to change their oil every 7,500 miles or six months, whichever comes first. Ford F-150s that are 2007 models or older should have their oil changed every 5,000 miles or six months, again whichever comes first.
Owners of Mini Coopers are advised to change their oil every year or 12,000 miles. If a more frequent change is needed, though, the car is programmed to alert the driver.
Many quick change places compete against tire dealers based on convenience, says Reina, who has worked with companies launching oil change services.
“So how does a customer choose where to go? It’s more than just price. You want to know that you’re buying quality and value for however many dollars that you’re spending.”
At the very least you should match what the quick lubes offer.
In addition to the proper tools, popular oils in different viscosities, filters, and proper disposal containers, you should employ technicians trained in proper oil change techniques.
“I’m not putting down any mechanic. I did this work for a living many years ago,” says Reina. “But don’t presume that your tire change guy knows how to change oil.”
Reina can recite countless stories of people who have returned home from an oil change only to find their oil low or come out in the morning and found an oil stain on the driveway.
“The devil is in the details. If that happens, you’re not going back there,” he says. “These are the simple things that require training. You have to make absolutely sure that the work is done right the first time. Otherwise, you’re wasting your time even setting up for this work.” ■
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Customer service: The multi-point inspection begins immediately
Even before you change your customer’s oil, your multi-point inspection should be underway.
Open the hood and check the car’s fluids, says Richard Reina, product training director and technical expert at CARiD. That includes brake fluid, power steering fluid and windshield wiper fluid. Alert the owner if any of the fluids are low.
“Pop the lid off the air filter cover. Eyeball the air filter. These things literally take a minute or two. Offer the service if it legitimately needs to be done.”
Missteps can be avoided if you keep a service file on your customers’ cars or ask them questions about their service, he says. That type of record also protects you if a customer declines service and then returns and asks why you didn’t recommend it.