Competitive Disadvantage: How Will Today’s Mom-and-Pop Shops Survive?
I have to wonder how much longer Mike and Charlene Herchick will continue to sell tires and service vehicles in Macedonia, Ohio. They have dealt with a lot of adversity since opening their doors in 1970.
But never in their 45 years of running Herchick’s Tire Service Inc. have they been so frustrated. And tier pricing is one of the reasons, Mike says.
“Tier pricing means the more you buy, the deeper the discounts. That’s all well and good, but when we have a dealer meeting with the big tire manufacturers, they always tell us ‘You smaller dealers are the backbone of the industry. You are the reason we’re so successful. We want to take care of you guys.’ In reality, they are not taking care of us.”
Mike and I have talked about this on numerous occasions. He understands tier pricing, but doesn’t think it is fair. I disagree because tier pricing makes sense in a free enterprise system. Large orders give manufacturers a lot of pricing flexibility.
That’s not the same as “predatory pricing,” which retailers use to drive competitors out of business. Mike says that goes on, too. I side with him on that. Although it isn’t illegal, it ultimately hurts the consumer when the smaller businesses disappear and the pricing rises dramatically.
He also blames the large dealers for many of the mom-and-pops that have gone out of business, as he says, “for the bodies they’ve left behind.”
National chains such as Discount Tire Co., NTB Tire & Service Centers and Wal-Mart Stores Inc. earn the discounts with large unit purchases. So does Conrad’s Tire Service Inc., which runs 34 retail stores in Northeast Ohio, including one in Macedonia. If competing against those powerful retail chains isn’t bad enough, the Herchicks also have Goodyear and Firestone company-owned stores in their selling area, plus a nearby Chevrolet dealership that promotes tire sales. In all, there are 14 tire retailers within three miles of the shop.
“Capitalism sure has its victims every day, but we need to protect ourselves from some monopolies that are being created.”
Mike used to sell up to 40 tires a day. He is down to an average of eight a day.
“I’m at the wrong place at the wrong time now,” he says. “Thirty years ago, I was at the right place.”
That brings up another problem. When a newcomer to the area offers tires at prices lower than the Herchicks can buy them, what are their customers to think? That Herchick’s Tire has been overcharging them all these years?
Fortunately, Mike and Charlene have built a strong reputation for honesty. If you walk into the store during business hours Monday through Saturday, you are likely to hear Mike talking freely with his customers, learning what’s on the minds of the young, joking with the old.
That reputation carried the dealership when the town acquired one-third of the business’ property through eminent domain. Widening the road in front of the shop took two years. Mike says they lost 90% of their business for more than a year during that time period.
Before you think Mike, who runs the day-to-day business on site, is averse to change and rants without purpose, think again. He is a good businessman who takes advantage of sales. He shops the Internet. He is loyal and proactive with his suppliers, including his wholesalers, letting them know what he needs and expects.
Herchick’s Tire also is a member of four associate dealer programs, although “hitting the numbers is a struggle.”
Sounds like a catch-22 situation if ever there was one. I don’t have a solution to the Herchicks’ problems, but I have more faith than ever in the mom-and-pop shops. ■
If you have questions or comments, please email me at email@example.com.
Want to read more of Bob Ulrich's editorials? Click: