The secrets to car dealer success
For over a decade, the car dealer channel has been on the rise. Once barely an “also ran,” the channel has steadily increased retail market share in the U.S. from 1% in 1998 to a respectable 7% in 2012. That puts car dealers within closing distance of company-owned stores which stayed at 7.5% share in 2012 and within shouting distance of warehouse clubs that posted 8.5% (from Modern Tire Dealer’s Facts issues).
For those who can remember the lay of the land before the new millennium, this steady climb would have seemed unlikely if not impossible. Car dealerships generally had one response to tire inquiries back then — a finger pointed toward the tire dealer down the street.
Now that car dealer is turning into the bully on the block. And while car dealers may have been pick-pocketing market share under the noses of unsuspecting tire channels for a few years, they have accumulated enough now that it’s time to take notice.
Still, a dose of perspective is in order. The independent tire dealer channel has made up approximately 60% of the retail tire market since 1998, according to MTD research. It’s obvious that the traditional tire store concept continues to work well, but that doesn’t mean that there is nothing to be learned from other ways of going to market.
Let’s look at the things that drive car dealer tire business and determine how each can drive success at your locations.
The average car dealer service department writes 14,140 repair orders per year (NADA Data 2012). That is a lot of opportunity to sell tires and service. Warranty service is responsible for many of the customers who populate those service lanes.
And while a tire dealer doesn’t have the advantage of warranty service intervals for new customers or vehicles, they certainly can take advantage of current tire customers. Building loyal customers builds future traffic. So it is important to keep your customers coming back.
Offering free rotations or inspections to new customers can turn non-customers into future customers. Tire safety seminars for teen drivers, or for the general community near your store(s), can build awareness, customers and loyalty.
The car dealer is also blessed with the reputation for expertise. “No one knows your vehicle better,” the advertisements ring out to the receptive ears of your would-be customers.
While there is truth in the argument that the car dealer is the expert for the vehicles they sell and service, there is also opportunity for the tire dealer. Expertise is gained through education and repetition. Your family doctor is probably highly educated and very familiar with your personal health, but will still recommend you to an ophthalmologist when needed.
Since we know that 60% of the tires sold at retail are sold through independent tire dealers, it is probable that a tire dealer has installed more tires on BMWs, for instance, than the local BMW dealership. No doubt in installing all those tires the staff has learned a great deal about which tires customers prefer, as well as techniques for installation and service that are specific to BMW. Make sure customers understand that you are a tire expert and use that to your advantage.
While this might not immediately seem like a car dealer advantage over a traditional tire shop, a sharp car dealer with a focused inventory can cover a lot of ground and give a potential customer no reason to shop elsewhere.
While a tire shop needs to be concerned with inventory for Ford, Chevy, Nissan and Kia, etc., a car dealer need only be concerned about inventory for one car line. With the right SKUs a car dealer can cover OE matching as well as sets for most of the vehicles in their service traffic with a fraction of the inventory a tire dealer needs to carry. A tire dealer may not have the space or means to stock all the OE fitments, but it is wise to research your market and make sure that you have size coverage at a minimum as well as some popular OE stock on location or at a servicing warehouse.
There is a good chance that advertisements for your tire store(s) are not playing on cable TV this weekend, but there is a pretty good chance you could see one for the Ford Tire Sale. There is also little doubt that Ford’s buying power and frequent advertisements with TV personality representation are reinforcing brand image as well as helping more people recognize that car dealers are now players in the tire business.
While few tire retailers have the budget for prime time network spots, determining your strengths as a business and reaching out to your market has to be a priority. You need a message that conveys why customers need to see you.
Don’t get discouraged by trying to compete with the budget or scale of auto manufacturer advertising. Most people know that Domino’s makes pizza, but they probably found their favorite pizza by clipping a coupon from the penny saver or got a recommendation from a friend. When your potential customers need tires make sure you’ve got an effective message out there and treat your customers in a way that they’ll recommend you. Make word-of-mouth your promotion advantage over the big budgets.
New vehicles are continually updated with new technologies that are meant to improve the value and safety of the vehicle. It wasn’t so long ago that tire dealers did not have to worry about run-flat tires or tire pressure monitoring systems.
Although the car dealers will always be on the front lines of these improvements for their vehicles specifically, being quick to educate your staff on the emerging technologies can help set you apart from other dealers and build your reputation as a service leader.
As hinted at previously, the car dealers’ unique service and parts relationship really separates car dealers from tire dealers. This relationship often takes priority over any cohesive pricing strategy. Some car dealer programs are supported by distributors that assist in pricing direction, and some manufacturers outline suggested retail pricing, but often the individual auto dealer determines his own price.
By treating the service and parts departments like individual profit centers, market-driven pricing takes a back seat. So, making sure your location(s) have a well-defined, market-driven pricing strategy will set you up to maximize your opportunity in all market conditions, and provide you with a clear advantage.
Listing expertise as both an advantage and disadvantage is probably a bit confusing, so I’ll clarify by stating that “perceived” tire expertise based on vehicle knowledge ultimately takes a back seat to actual tire expertise based on experience.
The growth of tire sales in the car dealer channel has surely brought the overall expertise up a notch during the growth period, but I’ll wager that an employee-to-employee comparison of a car dealer service advisor to a tire dealer service advisor is an unfair fight.
The depth and range of expertise a tire dealer needs to be successful will always trump the narrower needs of a car dealer. The big differentiators are focus and problem resolution. A car dealer service department’s first job is to handle warranty work. With the main focus placed elsewhere, tire expertise will always lag behind. With regard to tire problems: Handling balance and vibration issues, mileage warranty claims or radial run-out are usually outside the comfort zone of the car dealer service department. The willingness and ability for tire dealers to handle these problems is another clear advantage.
While most car dealers have robust websites for car shopping that can also direct potential customers to the service and parts departments, trying to find out about available tires and prices can be a chore if not impossible. If not for a few coupons and national promotions, you have to work pretty hard to discover that buying tires is even an option on most auto manufacturer and car dealer websites.
The convenience of shopping for tires online and the educational information available on some of the best tire dealership websites is again a clear advantage for the tire dealer.
Not so secret
So maybe the reasons the car dealer channel has grown steadily over the last 15 years is not so much a collection of secrets as it is a collective motivation to take advantage of the sales potential inherent in their channel. As new car profits eroded over the years and better manufactured vehicles required less warranty work, they were forced to change with the times. They decided to sell more to the customers they already had in the service lane, promote their vehicle expertise and their desire to perform more aftermarket service on their technologically advanced automobiles. In the process they found momentum that has turned the channel from one to ignore into one to watch.
The retail market share that the car dealer channel gained since 1998 has so far not come at the expense of the independent tire dealer. But, one could argue that it has come at the expense of the growth of the independent tire dealer.
By learning from the successes of the car dealer and putting them in play in your own business as well as endeavoring to stay ahead where advantages already exist, maybe the burgeoning bully can be kept out of the pockets of the independent tire dealer for more years to come. ■
Robert Abram has worked in the tire industry since 1992, most notably with Dealer Tire LLC and Yokohama Tire Corp. He is B2B product manager for Tire Intelligence LLC.