The August 2000 Firestone recall generated fallout that will reverberate for years to come. Direct effects ranged from the creation of the TREAD (Transportation Recall Enhancement, Accountability and Documentation) Act to renewed awareness of the role tires play in vehicle performance and safety.
At the top of the list -- according to major tire manufacturers, at least -- has been a "flight to quality" on the part of consumers. In other words, tiremakers claim that more buyers are choosing flag brands due to their perceived superiority and the peace of mind they provide.
The natural assumption is that if flag brands are growing in popularity, private and associate brands are being edged out of the picture. However, that doesn't appear to be the case, at least according to tire dealers.
Forty-two-percent of independent tire dealers who responded to Modern Tire Dealer's most recent Private Brand Tire Survey reported their private brand sales had actually increased. (Only 19% of the respondents said private brand sales dropped.) Furthermore, 38% of the dealers believe private brands are somewhat easier to sell than flag brand products.
At Wholesale Tire Distributors' recent dealer meeting and trade show in Salt Lake City, Utah, Modern Tire Dealer hosted a very interactive panel discussion involving five of the region's most successful private and associate brand tire dealers.
Participants, and the corresponding private and associate brands they sell, included (in photo clockwise from top left):
* Clayton Snow, owner of Clayton Snow's ACCC in South Jordan, Utah (America, Sigma, Mastercraft);
* Chip Brox, president of Chip's Grand Tire Co. in Moab, Utah (American, Mastercraft);
* Stan Slack, general manager of Rolling Rubber Inc. in Cedar City, Utah (Mastercraft, Trivant, Hercules);
* Jeff Archibald, tire shop manager of Archibald & Sons Inc. in Tremonton, Utah (Sigma, Hercules, Republic);
* Dave Daniels, president of Rimrock Tire Inc. in Cody, Wyo. (Kelly, Delta).
All five dealers also sell major brand tires. But private and associate brands are their bread and butter. "I couldn't get along without private brands," says Chip Brox, president of Chip's Grand Tire Co. in Moab, Utah. He echoed the enthusiastic sentiment of his peers. Here's what they had to say on a variety of issues pertaining to the products.
MTD: Many tire manufacturers are pushing major brands to the detriment of private and associate brands. Is this a faulty premise on the part of those manufacturers? What's happening at your stores?
Dave Daniels (Rimrock Tire Inc.): We sell about the same mix of private and associate brand vs. major brand.
Stan Slack (Rolling Rubber Inc.): Our mix has stayed about the same. No matter what, you have to sell both.
Jeff Achibald (Archibald & Sons Inc.): If (our inventory) has changed, it's moved toward more private label. Private brands are actually catching up on sizes.
Clayton Snow (Clayton Snow's American Car Care Center): There was a thing for a while after the Firestone recall where people were really conscious about, "Is this a safe tire?" But since that time, they've become desensitized.
Brox: I'm 50% major brand and 50% private label. I always start at the top with the most expensive thing I've got. If the customer leads me toward a private brand tire, that's where I go.
MTD: Do you instruct your salespeople to pitch major labels first, then private and associate brands?
Archibald: We start with the private labels.
Slack: I give them options. I tell them what I have. Generally, customers will buy what you try to sell them anyway.
MTD: Is it easy to steer customers toward what you want to sell them?
Daniels: It really is. You ask them a couple of leading questions about what they want out of a tire. Are they looking for longevity? Are they looking for traction? You find out the use.
Snow: I qualify the customer and formulate what would be the best recommendation for that customer. If I can offer them a private brand tire, they can't shop that tire anywhere else. If I offer them a major brand tire, they can shop my price on identical products at a half dozen places. It becomes purely a price decision at that point.
Slack: When you sell private brands, customers can't go to the competition across the street (for the same tire). You have exclusivity.
Daniels: It's nice to have people wander in and ask for your private label.
Snow: There can be a down side to that. For example, if your private label tire is garbage and your name is attached to it, it becomes kind of a stain for you: "Well, this is your tire." You have to be careful.
Brox: What helps the confidence level of the buyer is who manufactures the tire and where it's built.
MTD: Are your margins better on private and associate brands than major brands? If so, how much?
Snow: I'd say 15%. It comes back to that apples-to-apples comparison. When you're selling the same thing as the guy down the street, it's hard to get much for it.
Daniels: As a general rule, we make a lot better margins (on private brand tires).
Brox: The general consensus of tire dealers has to be that they can make more money on a private brand tire than on a flag brand.
MTD: When do retail customers typically buy private and associate brand tires? At first replacement? Second replacement? Further down the line?
Daniels: If they're going to buy private labels, they're going to do it at first replacement. If they don't do it at first they won't do it at second.
Slack: It depends on the customer's personality. People can be spontaneous.
Snow: Some people will come in and say, "I'm happy with the tires on my car. I want more." Other times they will say, "What else is available? Can you give us some alternatives?" More often than not, they'll go with the alternative if they realize the price of identical tire replacement is more than they want to spend.
Brox: A lot of it has to do with the outcome of their first set of tires.
MTD: What factor do vehicles play in the private and associate brand tire buying decision? Does vehicle age have anything to do with it?
Snow: Certain people with certain vehicles -- usually the higher-end vehicles -- are very brand-conscious. A guy driving a Porsche probably won't go with a private brand tire. Some people have it in their minds that they owe it to their vehicle to buy a major brand tire.
Daniels: With a major brand tire, if you're not priced competitively, they'll walk down the street. It really comes down to service.
MTD: Is there such a thing as a typical private and/or associate brand customer?
Snow: Not in my mind. Are they all low-income? No. Are they all young? No. I don't see male/female, age, etc., as factors.
Brox: If a customer is buying tires for his teenager who is driving a car that was used by his other teenagers, that customer is not going to put a major label tire on. He's looking for a budget way out. That would be a typical private brand buyer; but other than that, no.
Daniels: There doesn't seem to be one over-riding flag you can see on people that will steer them toward private label tires.
Archibald: If you qualify the guy, you can get him to go where you want him to go.
MTD: Can you exist in today's marketplace without access to private and/or associate brand tires?
Daniels: You'd have to have a real market niche. I wouldn't want to try it.
Snow: I can't think of anybody who does. The price clubs have private label tires. Nobody I can think of uses majors only. Even the company stores (like) Goodyear and Firestone -- they all have their own (associate) brands.
Archibald: There's a sense of huge competition if all you have is a (major brand tire).
Slack: You need to have a leader, you need to have a name and you need to have a private brand to sell.
MTD: Within a private label line, is it easier to sell a broad-line tire vs. a high performance tire?
Archibald: A high performance tire is going to sell to those people who will buy a main-line tire.
Brox: I would think that a high performance customer has probably done a little research before he's come into your store and is anticipating buying a particular brand. He knows what he wants and approximately what he needs to pay for that tire.
Snow: There are a lot of guys who spend their time surfing the Internet. They get so zeroed in on a product that, in a lot of ways, they know more about the product than you do! They get bent on a particular product and become an expert, at least in their own mind. That creates some difficulties in the selling approach. You have to try to convince the customer that everything he reads isn't 100% what it is.
Daniels: They look at a Web site and say, "Oh, I can get a tire for this amount of money!" They don't think about shipping, they don't think about warranties. They get predisposed to what a price should be and generally it's not high.
Slack: It actually comes pretty close to your cost!
MTD: Has the role of private and associate brand tires in your mix evolved over the years?
Daniels: It looks like we're more private label than we were 20 years ago. It's helped on margins.
Slack: In the 1980s, we were a flag brand dealer and were close to going broke. Private brands pulled us out of our hole.
Snow: My mix has evolved over the years, partly because I want to offer customers more choices.
MTD: How is the industry-wide trend toward large diameter tires and more sizes affected private and associate brand sales?
Brox: First of all, why are (tiremakers) doing it? If you live within 25 minutes of a warehouse, it's probably not a big deal. But when you live five hours from a warehouse, it's difficult for a small guy to have that stuff on the shelf. I think my customers get somewhat upset because I don't have their size sitting there.
Daniels: But with private brands, they (cost) a little less, so you can stock a little bit more of that size.
MTD: Why do you carry private and/or associate brand tires? What's the most important reason?
Snow: For me, it's (product) uniqueness and exclusivity more than price. It's having something different than the guy across the street. Having your own private label legitimizes you as a dealer.
Brox: I echo that statement, though I use my private brands a little differently in that I don't use them as "go to" tires. I start at the top and offer a "good-better-best" situation, and I have a private brand tire that's usually (positioned) in the middle.
Slack: It's exclusivity -- not having that competition across the street.
Archibald: I'm fourth-generation in this business. Our clientele has been virtually the same for 50 years, the same families. You have to convince customers your service is better.
Daniels: Most tires are round and black and hold air. It's like gasoline: Most gas goes through the same pipeline to Chevron, Exxon, etc. It's up to us to define our tires. It's a perceived difference you have to get into your public's mind.