MTD Survey: Business Remains Down for Dealers During COVID-19
Nearly one month after MTD first surveyed independent tire dealers about the impact of the COVID-19 crisis on their businesses, a consistent theme remains: dealers are still experiencing revenue loss.
But dealers are coping and have taken action to keep their companies open and both customers and employees safe.
That’s what MTD’s second Coronavirus Study, which was conducted on April 24, reveals.
This time around, 22% of respondents told MTD that their gross revenue was down by 24% or less, with 38% of respondents reporting a 25% to 49% drop. These percentages are less dramatic from what was reported in the first study.
Consumer vs. commercial
MTD asked dealers to break down their percent of revenue change in nine categories: retail consumer tire sales, automotive service, commercial truck tire sales, ag tire sales, OTR tire sales, wholesale consumer tire sales, wholesale truck tire sales, wholesale ag tire sales and wholesale OTR tire sales.
The biggest declines in revenue came in retail consumer tire sales and automotive service, and in equal measure. Twenty-nine percent of dealers said they had seen a revenue drop in this area of between 25% to 49%, and another 20% reported a decrease between 50% to 74% for consumer tire sales.
The commercial truck tire segment was faring better, with 23% of respondents stating that business was off between 1% to 24% and only 21% of respondents reported more substantial decreases. Similarly, the ag tire and OTR tire business appeared to be holding up even better, although still showing a slowdown.
Among those respondents who expect to experience further decreases in gross revenue – anywhere from 1% to 24% -- nearly 40% expect the biggest decline will occur in retail consumer tire sales. Twenty-five percent of respondents expect to see declines in commercial truck tire sales in the 1% to 24% range, moving forward.
Only 23% of respondents foresee ag tire revenue eroding even further, with most of that being in the 1% to 24% range, while 27% expect the same of OTR tire sales.
Supply has been a major concern. Fifty percent of respondents said they were experiencing consumer tire supply issues, with 26% reporting supply problems with auto parts and 21% seeing disruptions in the supply of truck tires. (Nine percent said they were having OTR tire supply problems and 6% reported experiencing ag tire supply issues.)
One respondent said his dealership “was down to one delivery a day, which is ok, based on (decreased) customer flow.” Another reported that delivery routes have decreased.
Tires and auto parts aren’t the only items that are in increasingly short supply. Twelve percent of respondents reported having problems getting needed office supplies. And one cited “shop supplies – especially gloves” as being more scarce than usual.
Still communicating and promoting
Many of the respondents are actively communicating their dealership’s coronavirus response policies to their customers. Sixty-six percent report that they are doing this over the phone and at the counter, with 52% having signage around the dealership.
Half of the dealers are using their websites, with 49% using social media to convey this important message, while 30% are using traditional more traditional methods. A full 10% are using radio and television for this purpose.
When asked “What proactive actions have you been taking to minimize financial damage, if any?” 55% of respondents said they had halted or suspended new tool and equipment investment. Forty-five percent said they were postponing new hires, while 38% said they were postponing advertising spends.
New tire orders took a hit as 35% reported that they had halted or suspended inventory replenishment purchases. Twenty-eight percent of respondents said they were halting or suspending expansion of existing locations and 25% said they were using the situation as an opportunity to negotiate new terms with suppliers.
Respondents also have adjusted staffing and compensation, with 24% deciding to reduce pay, commissions and/or benefits for existing employees, 21% deciding to cut staff and 20% deeming it necessary to reduce technician headcount. (Fifteen percent took the option of furloughing technicians and 14% reported they had put other staff members on furlough. Nine percent had furloughed store managers.)
Eighteen percent of respondents reported they had put new location expansion projects on hold. Fifteen percent said they were “streamlining” their product screens, which, in some cases, entailed dropping certain brands. And 12% were forced to suspend or halt certain services.
In sharing verbatims with MTD, one respondent said his dealership had invoked “force majeure” against waste disposal, cable/internet services and other service providers to save money. Another dealer “immediately reduced payroll by 60% within two days of the first stay-at-home order” in his home state of Louisiana.
Another has pursued economic relief through the Paycheck Protection Program (PPP) provided by the CARES Act, which has proven to be a popular option for struggling dealers.
Interestingly, 24% of the respondents had not yet applied for, or received any government relief. Nearly 70% of respondents to MTD’s latest survey said they were pursuing a PPP loan. Twenty-one percent were pursuing an Economic Injury Disaster Loan.
Seven percent said they were pursuing relief via the Families First Coronavirus Response Act. And 24% reported they were pursuing “none of the above.”
When asked “What percent has your total workforce been furloughed or laid-off as a result of the virus?” 58% reported that they had cut their workforce by between 1% and 25%, while 22% said they had decreased the staff by 26% to 50%.
Fourteen percent decreased their workforce by 51% to 75% and 3% went even further by shrinking their staff from 76% to 99%.