Randy Clark has plenty of perspective on the tire industry. As chairman and CEO of Dunn Tire Corp., he presides over a 30-store retail and wholesale chain that sells all the major domestic brands. His empire outside Dunn Tire's Buffalo, N.Y., stronghold extends from Erie, Pa., to Syracuse, N.Y., and a move into Canada is not outside the realm of possibility.
His business is divided into three major operations: He retails tires, wholesales tires and supplies tires to car dealerships. And he juggles his suppliers depending on the operation, which explains how he can be a MAST (Michelin Americas Small Tires) Alliance dealer, a G3 (Goodyear) dealer and a member of American Car Care Centers (ACCC).
Clark also is former CEO and president of Dunlop Tire Corp. However, he says his strength always has been in sales and marketing. "I'm not sure that actually having been in the manufacturing side has a great relevance on the retail side."
He adds being a supplier gave him direct contact with retailers across the United States. "It's been useful to see how other people approach their given markets."
When Clark left Dunlop in 1991, he said he might consider entering the retail tire business. Five years later, he proved himself right by purchasing Dunn Tire, then a 16-store retail chain.
MTD: You have practically doubled the size of your company. What is the biggest problem you face in expanding?
Clark: The biggest challenge I think is people. It is very, very hard to get good caliber people to run the stores. And it is hard to staff the tire technicians. There is a tremendous amount of turnover. Now, in recent times, as the unemployment rate has grown, that has tended to ease the situation.
MTD: What do you do to keep people?
Clark: I think we have a pretty lucrative incentive system. We are always looking at ways to get our people to stay. We have very little turnover at our assistant store manager level. Most of our turnover is at our salesmen level and at the tire tech level. In fact, last year we invested $100,000 in a company-wide training program.
MTD: For what purpose?
Clark: Well, first off to try to sharpen our skills with the customer, but just as importantly to try to make some career opportunities for these guys to try to minimize the level of turnovers. It is hard to find good folks.
We basically have store managers, assistant store managers, salesmen and tire techs. Most of the people in our store formats go out and change tires as well. So they are front-shop guys, but they are often in the back shops as well.
MTD: What kind of incentives do you offer your employees? Competitive health insurance? 401(k) plans?
Clark: Yes, we have health insurance and 401(k). We have a pretty lucrative incentive plan based on achievement of sales and contributions. We have an incentive plan based on the number of tires fitted per man-hour. We tend to classify our stores in three size groupings. When we (set up) any of these incentive programs we don't compare the high-volume stores to the low-volume stores because, obviously, a high-volume store has a higher productivity than a lower-volume store.
We try to promote from within. Most of our salesmen and assistant store managers have come out of the back shop. And the back shop is very important to us because Dunn Tire is a tires-only format. We have to get the people in and out of our store in less than 45 minutes. We do alignments to sell and service tires, but that's it. So we are not in the service business.
MTD: If you find good potential employees and don't have room for them, do you hire them anyway?
Clark: We do, because we are expanding fast enough and we have a normal turnover rate that makes positions available. Having said that, we are not a highly staffed organization.
MTD: Being both a MAST Alliance and G3 dealer, how does American Car Care Centers fit into your business plan?
Clark: ACCC is a program we use to try and help the smaller dealers market to the consumers. So ACCC plays a larger role, frankly, in our non-retail business, the 15 wholesale accounts that we have. From our point of view, we have received some real value in ACCC.
MTD: But you also push the ACCC name and some of its programs in all of your retail stores...
Clark: Yes. Nationwide warranties, credit cards -- all of those elements are in our retail stores. As you probably know, when Merchant's was in ACCC, they used ACCC programs outside of their retail stores. They had the two totally separated. We, too, are separated by product, but use other elements of American Car Care Centers in our own stores as well as in our dealers'.
MTD: Are you looking to increase your number of wholesale accounts?
Clark: We would like to have about 25 accounts. We wholesale to them and then they retail the tires. For example, one of our wholesale customers is Broad Elm Tire, which is a chain of seven stores in and around Buffalo. So they fly the ACCC banner, as do our own stores.
MTD: Why only 25?
Clark: The whole purpose of ACCC is to provide the resources that an independent needs in order to be profitable. And we do not want them stepping on each other. So when we sign up somebody, we look pretty carefully at how much market coverage there is.
MTD: If I may ask, exactly how do you satisfy the buying requirements of your supplier programs?
Clark: We really have three components of our business. For example, our retail alliance is based on a percentage of the tires that strictly go through the retail side of our business, not the car dealer business, not the ACCC business.
Goodyear doesn't have a percentage requirement. Goodyear tends to have a goal that they would like G3 dealers to meet. This year, goals are a little tough because business is down.
MTD: Do they understand that?
Clark: Well, that remains to be seen. No one wants to admit it, but the fact of the matter is in all the time I have been in the tire business, I don't think anybody has seen a decline like September. I don't remember a 16% decrease anytime, anyplace, anywhere. So I think the dynamics of the industry have everybody on the manufacturing side and the retail community assessing where they are and where they are going and how fast they want to go forward.
We are looking at our stores, whether there are under-performing stores that we ought to close, and are asking ourselves how fast we want to expand in an uncertain environment. I think that it is fair to say most of the manufacturers find themselves on uncertain ground.
MTD: Is that exciting or depressing?
Clark: I guess it depends on how you look at it. I think you can look at it both ways. Certainly, the manufacturers have tremendous earning pressures. They are jockeying for position with the original equipment community.
On the other hand, change makes for opportunity. So we are trying to look at it very optimistically. Having said that, our retail business suffered in the last three or four months.
MTD: What is your growth plan on the retail end?
Clark: On the retail end, we opened three stores this year, so now we have 30 retail stores. We are looking at perhaps one or two more stores in our market area. Beyond that, our growth aspirations will be to expand our market area, probably going down the freeway toward Albany, N.Y.
We have also looked at the possibility of going to Canada. If you look at the Ontario portion of Canada, most of our media covers the crest -- the southern area of Canada from Hamilton down. We would not go as far north as Toronto.
We have a store in Niagara Falls, but we could also have a store on the Canadian side of Niagara Falls. One of the complexities of going to Canada is that most of the suppliers run an American organization and a Canadian organization. You tend to get entangled in supplier commitments on the Canadian side. So you can't just assume that you have a supplier even though you sit in Buffalo, N.Y., and you can drive across the bridge. Supplier arrangements stop at the border. That has been a complication for us.
MTD: Do you plan to expand in Pennsylvania?
Clark: If we go further into Pennsylvania, we would probably head south into Pittsburgh.
MTD: How about south into New Jersey?
Clark: No, we have not really thought about venturing that far. We are going to grow meticulously, because our whole distribution system basically runs out of our stores. We sold our Buffalo warehouse earlier this year, so everything will be shipped store direct and/or through large hub stores where we can carry inventory to supply satellite stores. For example, we have four stores of the 12 stores in Buffalo that can handle probably three times as many tires than they need for their own use. So, in fact, there are stores with mini-warehouses as backups. That works pretty well.
All of the G3 products go store-direct. All of the MAST products go store-direct. And the Mastercraft product currently is going through the warehouse, but next year will be going through the hub stores.
MTD: There has been a very intimate relationship between Dunn Tire and Dunlop over the years. In fact, a couple of your stores used to be Dunlop stores. You also are a Goodyear dealer. How has the integration with Dunlop and Goodyear gone? John Polhemus (Goodyear's president of North American Tire operations) has admitted that it is not going as fast as the company had hoped.
Clark: Yes, I would say that it has gone slower than I think everybody expected. I think they are trying to find a positioning for their brands.
Probably half of our business is Kelly and Dunlop. So it is important to us in that we have obviously positioned the brands and are anxiously waiting to see how Goodyear is going to position Goodyear, Dunlop and Kelly.
That is not dissimilar to the portfolio of brands that Michelin has positioned. Michelin, I think it is fair to say because they have been at it somewhat longer, is more mature in their brand positioning than Goodyear. I also think it is fair to say that the whole industry is plagued by cross-channel marketing of its own making.
MTD: What is the strength of the independent tire dealer channel?
Clark: At the end of the day, you have to provide, in my opinion, world-class customer service. You have to have knowledgeable people who professionally sell the product. That's what differentiates an independent from the rest of the distribution channels.
In fact, we very formally call it the "sustainable competitive advantage." That's what runs our company. We believe that if we do five or six things better than anybody else, then our business is secure, and if we don't then customers should shop somewhere else.
MTD: How would you sum up the current state of the tire industry and where it is headed?
Clark: We don't know where the industry is going. I have never seen so many dynamics in the business as we have going on right now. Obviously, we have retailers like Wal-Mart trying to make it in the business. They have all-new product lines and ranges, at least in our area, so you have a lot of cross currents. The smaller independents are struggling, and the price clubs are trying to take a piece of the market.
You have Wal-Mart and Sears trying to go after each other. And in the middle of that everybody is trying to decide what happens to the Firestone business. How did the recall affect all of this? I just have never seen so many crosscurrents in the business in all the time I have been in it.
MTD: Have you been affected by the Firestone recalls?
Clark: We took on Firestone just before the recall. And there have been problems with that. So today we have done very little with Bridgestone/Firestone.
We have done some Bridgestone advertising. I don't think the recall has affected the Bridgestone name. It certainly has left a negative taste for Firestone, but not for Bridgestone. Even though it gets connected, I don't think the consumer public connects it.
We have had some customer aversion to Firestone. We found about 60% of the people said Firestone-brand tires are fine and the other 40% wouldn't buy them.
MTD: That's interesting. Even with all that is going on, 60% of the Firestone purchases are influenced by the dealers themselves.
Clark: Oh, I think so.
MTD: We think it's higher than that, normally.
Clark: Even with the recall, people really put their trust in the dealer. That is one advantage that the dealer community has. How can you trust a Wal-Mart when there is nobody there, when you just walk in and almost literally take the product off the shelf? You can't.
MTD: Thanks, Randy.
