The strength of the single-location, mom-and-pop store cannot be underestimated, but it often is. Maybe it’s because growth and consolidation among the national and regional chains gives everyone the impression that as the big get bigger, the small get smaller.
That is not the case with single-store owners in our industry. Based on Modern Tire Dealer’s circulation list, there are 30,000 independent tire dealer locations in the United States. Of that total, 60% are single-store owners. And it has been that way for a long time.
On the surface, you might think that sounds impossible. We’ve all read about how Walmart supposedly has destroyed Main Street U.S.A. because small stores can’t compete with the pricing.
I’m not exactly sure why that is the case. Walmart can’t match the specific inventory any specialty store has, unless there is such a thing as an inexpensive watch store. Yes, general stores are no more thanks to Walmart, but that’s only because Walmart is a big general store.
Unless the difference in price is outrageous on either end, book stores, toy stores, grocery stores, etc., should all be able to hold their own against Walmart.
If I were to hazard a guess, I would say Walmart’s one-stop shopping concept must be the reason many consumers don’t frequent specialty stores as much as they used to.
That brings us back to single-store tire dealers, who probably know their customers as well as anyone. Maybe better. In their local markets, they are neither gone nor forgotten. Far from it.
Despite the proliferation in tire sizes (more on that in a minute), they continue to generate repeat business through personal service. And unlike book stores, they don’t have a competitor like Amazon with the potential to take away all their business. Car owners can’t have their tires mounted and balanced online. Or their vehicles fixed online.
So small, family-owned businesses remain the lifeblood of our industry. What has changed is how they get their tires.
Originally, tire dealers stocked what they needed at their own stores. They purchased their tires directly from the manufacturer in many cases.
Size proliferation helped change that. There were too many sizes and SKUs to inventory. When tire manufacturers stopped direct delivery to the smaller dealers, the wholesale distribution channel grew quickly and dramatically.
The Rubber Manufacturers Association (RMA) has tracked that trend for years from the perspective of its members. In its annual “Passenger Tire Shipments by Channel Type” chart, the RMA breaks down channels as follows: general merchandise (such as Walmart and Sears Auto Centers), company outlet, national dealer, regional dealer, local dealer and “other.”
The national, regional and local tire dealers are classified as independent. Here’s how the RMA defines each.
National: tire dealers with more than 40 outlets spread over at least three of the nine census divisions (New England, Middle Atlantic, South Atlantic, East North Central, East South Central, West North Central, West South Central, Mountain and Pacific). Exceptions include “National Internet Sale” companies such as Tire Rack, or tire wholesalers with fewer than 10 wholesale outlets but serving at least three census divisions.
Regional: tire dealers with more than 10 outlets spread over at least two census divisions, or 20 or more outlets within one census division.
Local: tire dealers with 10 or fewer outlets, or in which all outlets are confined within a single census division.
By studying the charts over the last 10 years, you can pinpoint when tire manufacturers began a concerted effort to focus less on distributing to the local dealers and more on letting large wholesale distributors do it for them.
In 2004, local dealers accounted for 45% of the factory-direct shipments. That dropped to 29% in 2007, as tire manufacturers realized the benefit of eliminating distribution to the smaller and/or out-of-the-way dealerships. It was simply too expensive to ship tires to Cullman, Ala., or Devil’s Lake, N.D.-
The percentage dropped in each of the next five years. As of 2013, local dealers represented only 18% of the direct shipments. Not surprisingly, regional and national independent tire dealers have, in turn, steadily increased their share of direct shipments.
Those trends will continue. But they won’t undermine the importance or survival of the single-store owner. ■
If you have any questions or comments, please email me at firstname.lastname@example.org.
Want to read the entire June 2014 issue of Modern Tire Dealer? See our digital version here.
See more of Bob Ulrich's editorials here: