Doing business in one of North America's fastest-growing cities comes with a built-in challenge: Never in its brief, 115-year history has Vancouver undergone such a dramatic shift in demographics or change in its economic base as in the last few years.
With a population of some two million -- double that of 30 years ago -- Greater Vancouver in British Columbia is busy reinventing its economy. The city founded on logging and mining is shifting its gears to hi-tech and tourism. The great pulp and paper giants that used to dominate the economy, though still strong, are no longer the household names they once were; they have been diminished by environmental concerns and diluted by diversification and globalization.
Instead, the buzz is all about companies like pharmaceutical pioneer Quadralogic Technologies and cell developer Ballard Power Systems. Where machine shops and marine yards once ruled the waterfront, glass-trimmed skyscrapers soar over one of the continent's most dazzling ocean-side settings. It is a place Vancouverites call heaven on earth.
Along with the rest of the world, Vancouver is changing -- and with it the way the city's tire community conducts its business, in almost every facet.
All in the family
Hector Irving founded one of the city's longest running dealerships, Irving Tire Ltd., in 1958. The compact, six-bay shop (two dedicated, two in tandem) enjoys a commanding view of nearby downtown Vancouver, close to the docks and on the main route to the city center.
Today, son Tom Irving runs the company, which now does business as an associate dealer of Fountain Tire Ltd. Irving Tire sells the Goodyear, Dunlop and Kelly brands (Goodyear owns 49% of Fountain Tire).
The biggest change Tom Irving has noticed in the last 20 years is in brand loyalty. Consumers no longer care as much about what to buy or from whom to buy it, hence Irving's association with Fountain Tire. "To survive in today's market, you have to belong to a chain or buying group," he says.
"Unquestionably, the fully independent tire dealer is slowly disappearing."
There also has been a radical shift in the commercial tire business. Fleet service work has almost completely disappeared with the demise of truck terminals and depots that have left the city proper for less expensive and less congested surroundings out of town. Although the company still maintains two service trucks, most of the work is on call or for emergencies.
The virtual disappearance of the commercial market in Vancouver obliged Irving to look elsewhere for revenue and cast a more critical eye on his operation. He became predominantly a retail tire dealer. Mechanical and under-car service accounts for nearly 50% of the dealership's total volume.
The operation has become more streamlined. The premises are more attractive as well, with fresh coffee, newspapers and magazines in the showroom and clean washrooms. The more pleasant surroundings are a nod to the fact that one out of every two customers is female, according to Irving.
Irving says the widespread use of credit cards has all but eliminated credit problems and collection costs that were once commonplace.
Irving still works hard to maintain the famous customer loyalty that helped build the business. He is on a first name basis with many longtime customers, and family members are strong participants in the local community.
"We're a neighborhood business that provides 'while you wait' flat repairs, and we're still happy to air up kids' bike tires," he says.
In a broader competitive context, the company's business has not been directly affected by either the Sears Tire Group or Price Costco, two retailing giants that have yet to enter the immediate area. Although that will soon change -- a Costco warehouse club will be built not more than a mile away -- Irving says he isn't worried.
"If I were just a tire shop I'd be worried. It's a real convenience to be able to go to a dealer and have the brakes done at the same time. Costco can never take the full service aspect away from us. It's just like the Internet -- you still have to put (the tires) on somewhere. The day people put tire changers in their basements, that's when I'll worry."
Hanging their hat on high performance
Many Canadian tire dealers have zeroed in on the high performance market. But few read the market as well as Circuit Tire Sales & Service Ltd., a small but thriving player in Port Moody, a picturesque suburb at the head of the inlet on which Vancouver is situated.
The company, founded in 1972 by Tony Morris, a former Dunlop employee, is still owned by Morris (though now retired) with partners Gord McMeeking and Craig Rudd. Circuit Tire is one of the few remaining dealerships that sell tires exclusively; alignment and tune-up business is directed to tenants located on either side of the building, a sort of mini-auto mall.
Circuit Tire's interest in high performance tires began with its involvement with Westwood, a nearby amateur motor-racing circuit. But when the track closed, the company had to look elsewhere for its high performance business.
Circuit Tire has developed a solid relationship with Vancouver's high-end car dealers, who send their clients' cherished Porsches, BMWs and Mercedes to the dealership for specialized tire and wheel service. Also, there are still local drag racing events, as well as a lot of sports car club meets.
"Customers used to want service, quality and price, in that order," says Rudd, who carries Dunlop, Bridgestone and Yokohama tires. "Now they want price, quality and instant service."
Circuit Tire's experiences underscore the uniqueness of the Vancouver market with regard to the popularity of import cars, which have always enjoyed a larger market share on the West Coast. In former years, British and Australian enthusiasts raced their MGs, Porsches and Triumphs around the area; lately, Hondas, Toyotas and Volkswagens have enjoyed significant attention.
Although nearby mountains and ski hills -- such as North America's Number top-rated Whistler resort -- help to drive snow tire sales, in general the temperate coastal winter makes for little serious opportunity. (Vancouverites tend to limit their snow tire purchases to the one or two days in the year when it actually snows, which tends to make things quite challenging for tire dealers.)
Circuit Tire also has maintained its profitability by sticking to firm pricing policies. Between the competition for market share among manufacturers to price cutting among retailers, it hasn't always been easy, says Rudd. "Major chains, such as Kal Tire, OK Tire and Fountain Tire have increased the level of competition, while other significant players have also moved into the market."
Bolstered by huge brand awareness and a cross-country network of stores, Canadian Tire has a significant share of the Canadian replacement passenger tire market with its Motomaster brand alone (18.5%, according to Modern Tire Dealer statistics). Canadian Tire also sells Michelin, BFGoodrich, Uniroyal, Goodyear and Nordic tires.
All along, the partners have grown their company with a determined focus. "We have stayed in our niche market, becoming experts in tire and wheel packages, luxury fitments, and high performance racing," says Rudd. "The other keys are walk-in service delivered in first-class, clean and attractive premises, offered always with a personal touch."
Independent and doing O.K.
In a city where independent tire dealers dominate, O.K. Tire Stores Inc. enjoys prominence, with 18 member stores in Greater Vancouver. O.K. Tire President Don Blythe runs the association from its headquarters in Langley, some 20 miles east of Vancouver.
O.K. Tire traces its origins to the United States company founded in Boulder, Colo., in 1933. At one point, the association numbered 1,800 stores in the U.S. O.K.'s network of 213 stores across Canada has grown considerably since becoming an independent dealer-owned group in 1974.
O.K. uses the individual ownership of its affiliates to its maximum advantage, says Blythe. "We push the fact that you are dealing with the owner, who is hands-on and offers personal service to the customer."
O.K. dealers stress continuity in their people to help build relationships and customer loyalty. Moreover, because O.K. Tire is a totally dealer-owned organization, its members enjoy year-end rebates.
Blythe isn't convinced that Vancouver's market is different from any other. While in years past it was served by several fully independent dealers, the greatest number of dealers now belong to groups like O.K. Tire, Excel and Big O Tires (which has 22 affiliates in the area).
On the commercial side, Blythe says the big fleets, most of which have moved out of the downtown area, are getting bigger and require on-road and on-site service.
Competition is intense, so much so that Blythe says dealers must perform mechanical work to survive. Also, car dealers are selling more tires these days. Blythe suspects they have a significant market share.
Mass merchandisers have peaked, he says, with Costco owning up to 4% of the market. Canadian Tire enjoys between 18% and 19% of the total market, a formidable share, but one taken more from former company-owned stores rather than independent dealers.
Driving a good deal
In general, auto dealers are not known particularly for their prowess in the tire business in Vancouver. But Don Blythe's hunch about auto dealers selling more tires may be correct.
One of Vancouver's largest and most enduring tire retailers is Dueck Chevrolet Oldsmobile Cadillac Ltd., which this year celebrates its 75th anniversary in style. Next month, Dueck will move into its new 190,000-square-foot home on the south side of the city, making it one of the largest dealership in North America and the largest Cadillac dealership in Western Canada.
Included in the complex is a 3,000-square-foot, stand-alone tire, wheel and accessories showroom.
Dueck's love affair with tires dates from the '30s, when the company started selling Dominion Royal tires at its original uptown location on West Broadway. When Michelin came to town with its XWW for North American cars in the '70s, Dueck seized on the opportunity to aggressively convert new car buyers to radials through change-overs. Dueck still carries Michelin, Uniroyal and BFGoodrich, and is a Michelin Alliance distributor. Some 60% of its business is wholesale. In addition, the company distributes BBS wheels.
Dueck's tire program manager, Jeff Davidson, says that the controversy surrounding SUVs has changed peoples' views of tires. "They're now more conscious of air pressures and the right applications. The Ford Explorer and Firestone problems have provided additional business. We're now doing three to five Explorers a day."
On the performance side, the high performance tire (HPT) market is growing, with customers sometimes driving out of the dealership with plus one, plus two, plus three and even plus four packages. The typical HPT buyer also is beginning to accept all-season fitments as technical and compounding techniques advance.
"We're seeing more 'old' tires from the early '90s that are 50% to 60% worn on vehicles with 25,000 to 30,000 miles that require new tires due to hardening and lack of flexibility in the tread blocks," says Davidson. "People live with it and don't realize (the difference) until you put new tires on." Some of Dueck's sales and service work comes from car lease and rental fleets at nearby Vancouver International Airport.
The dealership has five delivery trucks to facilitate "very quick service" and a sales force of about 50 people to promote tire sales. It is, as Davidson suggests, "an internal, captive market."
As for competition from outside, it's limited. And it doesn't come from mass marketers such as Canadian Tire and Costco. They deal with a more price-sensitive clientele that doesn't affect Dueck, according to Davidson.
Alone downtown
The Kal Tire LTd. location on Main Street, with its "novel" drive-through layout, was originally built by Butler Tire, a one-time major force in Vancouver, in the late '60s. Longtime Butler employee Dale Parsons purchased the outlet in 1976, and sold it to Kal in 1999 (Parsons has since joined the corporate office as manager in charge of associate stores).
On the edge of the once-busy rail yards, this location is closer to downtown than Irving Tire. It has remained while the area's industrial beginnings have gradually disappeared. Today, McDonald's and Burger King dispense fast food to hungry commuters either driving past on the major east-west artery or boarding the rapid transit system, SkyTrain, a few yards from the tire store's front door.
Manager Andy Sumner orchestrates two mechanical and two tire bays (and, in good weather, a useful outside pad) which serve a "very diverse" vehicle market that ranges from older models to domestics and high-end European cars, as well as small fleets. The smart showroom strongly emphasizes wheels, with an entire wall given over to display, and features several high-end, HPT packages, often supported by an attractive promotion.
Sumner says Michelin was well-represented when Kal Tire purchased the store. However, the manager found that prices on Brand X were all-too often under-cut by competition and shifted his stock toward Yokohama, finding the return on a good Parada sale far more profitable. He also sells Bridgestone, Firestone, Nokian and others.
"Before, it was SUVs. Now it's the tuner craze," says Sumner, who, in the last year and a half, has found his younger clientele anxious for 20-inch chrome and the right HPT fitment.
As for the industrial tire business that spawned this store in the '60s, Sumner says it dried up when Finning Tractor left.
Twenty years ago, there was not a single Kal outlet in Vancouver. Advanx Tire Centres, Butler Tire, Crown Tire and D&D Tire ruled the market. All have since vanished, and Kal Tire, with 14 branches, dominates the commercial market and continues to make inroads in the passenger and light truck tire markets.
Senior Zone Manager Chris Stromdahl, who overseas Vancouver and Vancouver Island, says part of the challenge with the Vancouver market is knowing just what the numbers really are.
"We have a lot of bricks and mortar in the Lower Mainland (the name used for Greater Vancouver and its surrounding communities), which makes it very tough for someone to come in and compete." The biggest hurdle is the very cost of existence, "wages and real estate, fixed costs that would make it a marginal proposition."
Convenience is crucial. "I believe the metro area customer places a greater emphasis on time and choice when selecting the product," he says. "The pace in Vancouver is quicker."
Stromdahl is another who points out the movement away from Vancouver's core, which, unlike most North American cities, is not accessible by a freeway. The exodus of major fleets has been going on since the late '60s, he says. Depots have moved out to the east, first to Port Kells in Surrey and now much further to Aldergrove and beyond to Abbotsford, which, suggests Stromdahl, because of traffic constraints, will become the epicenter for trucking for the entire region.
Kal Tire has 107 company-owned stores, eight warehouses, 15 retread plants and 50 associate dealers stretching from Vancouver Island north to the Yukon and east into Alberta, Saskatchewan and Manitoba on the Canadian Prairies. The company's goals for Vancouver are straightforward, says Stromdahl.
"We'd like a much larger portion of the retail business, focused more and more on mechanical -- which we know from experience to be very worthwhile."
"The biggest challenge is finding young people to fill the positions we have," says Stromdahl, echoing the feeling of many dealers that good men and women that want to work in the tire industry are hard to find.
Kal Tire looks for new employees in one of the most obvious places -- in its showrooms. The company's "Jobs, Career Track" pamphlet talks about the benefits of working for the major tire dealership, which features a 50% profit-sharing program. It sits there in the literature racks, right next to the hottest tire and wheel brochures.
Kal Tire's Andy Sumner (who "stars" on its cover) says the pamphlet seems to be working. But the company also works hard to attract new career employees through job fairs and on-campus contacts.
Stromdahl says attracting women workers is still a challenge. "It's still a male-dominated business. In terms of marketing, we haven't gone specifically in that direction. But if you're doing business in an ethically and morally right fashion, hiring is an asexual issue."
Outside of the city, Kal Tire is developing "superstores." But close to Vancouver's urban core, that format is "an economic question mark," according to Stromdahl. "To build an Alberta-style superstore would cost four times as much here as it does there. The potential is just huge. But you have to carefully and strategically locate yourself."
He points to "a severe aging of the classic tire dealer in a market in transition" as a catalyst for change. "Overall, the independent dealer in the Vancouver market is going to have to change or die. It's painful -- and it's a metamorphosis that we ourselves are going through."
Fountain Tire -- the challenger
Taking a run at Kal Tire Ltd.'s supremacy in British Columbia is Alberta-based Fountain Tire Ltd., whose British Columbia regional office and distribution center (as well as one of nine retread plants) is located in Kamloops, four hours drive east of Vancouver.
Fountain Tire's British Columbia experience dates only from 1992, and it was not until the mid-1990s that the company made major acquisitions in the Lower Mainland as part of Goodyear Canada's realignment of its company stores.
"The provincial (British Columbia) economy has been very poor in the last eight years due to the government in power, but we're very optimistic since the (2001) change in government," says Vice President Laurie Maxwell. "However, the one area that has held on and been our strongest card has been the Lower Mainland, in all facets of the market."
In addition to nine retail operations, Fountain Tire now has three very strong commercial centers that cater geographically to industrial needs in Port Kells, Tilbury and Abbotsford. The company also has an association with Irving Tire in Vancouver. "With our joint relationship with Goodyear, we handle a number of large fleets through Goodyear's Truckwise program," says Maxwell. "It's a very big part of our business."
"There's no question our strength is in Alberta. But going into a new marketplace -- and Kal Tire's backyard -- has been a rewarding challenge. When you start with no business and work your way up to what we have accomplished, we're very pleased to this point."
Straight from the Pacific Rim
Another of Vancouver's fundamental shifts has been in its citizenry, which is becoming more multi-cultural and sophisticated by the day. One big reason is the influx of Asian immigrants, which started in 1984 when Great Britain announced it would return Hong Kong to China.
(Approximately 35% of Greater Vancouver's population is foreign-born; about 26% is under the age of 25.)
So Vancouver finds itself poised between a European past and an Asian future. The city is well connected to the Orient, and the Pacific Rim has become part of its psyche.
Almost one fifth of the population lays claim to a pan-Asian heritage; many of these immigrants arrived within the last two decades under the Immigrant Entrepreneur Program. The program offered a two-year stay in Canada (leading ultimately to citizenship) in exchange for significant investment and job creation.
Vancouver also proved attractive to the expanding Japanese tire industry in the 1970s. Bridgestone Corp., Toyo and Yokohama established offices in Canada, and found plenty of opportunities to court independent dealers.
Many young Asian buyers are avid "tuners," willing to spend serious dollars on the best-looking tire and wheel package, says Andy Sumner, manager of Kal Tire's Main Street location. He insists, "You have to look after the Asian market." It also helps having someone on staff who can speak the language (as Sumner does), because many customers prefer to deal in their mother tongue.
While youngsters are inclined toward sporty Hondas and other Japanese makes, their parents gravitate to Volvo, BMW and Mercedes and are generally very brand conscious. They like Michelin in particular -- and don't want to be talked out of it, says Sumner.
Dueck Tire Program Manager Jeff Davidson says the Asian-Canadian buyer has had "a definite effect on the 'tuner' market" by buying vehicle performance upgrades and high performance tire and wheel packages. The challenge for the auto dealer is to convince potential buyers to cross the bridge from nearby Richmond (50% of whose population is now of Asian background).
"It's a very strong segment of the market," says Kal Tire's Chris Stromdahl. "With the Hong Kong issue, a lot of money came into Vancouver, and there was plenty of opportunity."
