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Tire Factory signals a change in strategy

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Tire Factory signals a change in strategy

Tire Factory Inc. added tire brands, unveiled digital marketing technology and distributed $3.8 million in profits and volume purchase bonuses at its annual dealer meeting in Portland, Ore., Feb. 20-22, 2015. The cooperative’s management team also signaled the need for a change in strategic direction to its members.

New value brands

The new brands are Goodyear Tire & Rubber Co.’s Kelly Edge A/S and Kelly Edge AT and Hankook Tire Co. Ltd.’s Laufenn brand. The A/S is available now and the LT will be available in the fall. Hankook introduced the Laufenn brand in November 2014, and it will be available later this year.

Goodyear and Hankook are two of Tire Factory’s largest vendor partners, according to CEO John Kreidel.

“With what’s transpired in the market with antidumping and the tariffs, we think Hankook is showing some wisdom there and so is Goodyear. There’s going to be a slot here in the value segment that we think we can fill with both those lines. They’re both quality tires, and the members should embrace them.”

Exclusive premium brand

In addition, Yokohama Tire Corp.’s Tornante, a premium all-season touring tire, will be available exclusively to Tire Factory members in their marketing areas.

The Tornante is available in 32 sizes for passenger, CUV, minivan and SUV applications. The tire will have a free 30-day trial and a high mileage warranty. It will be part of Yokohama’s spring consumer rebate program.

Digital marketing program

Tire Factory announced a partnership with the MechanicNet Group to offer a digital marketing program aimed at retaining existing customers through email and text messages as well as direct mail.

“We’re helping the stores market much more efficiently and embrace technology like texting,” said Kreidel. “MechanicNet is a great way for stores to stay in contact with their customers with very little labor.” The MechanicNet communication program integrates with a store’s POS system.

“For an independent dealer, technology is a great equalizer. If done right it allows us to interact with a customer in a very favorable way,” said Kreidel.

First patronage dividend

“Patronage dividend” is a term for splitting up profits among members of a cooperative, according to Kreidel. Tire Factory’s patronage dividend for 2014 totaled $1.5 million.

“The more you buy from Tire Factory the bigger the (piece of) pie you get of our net profit or patronage dividend,” Kreidel told members. A cooperative is required to pay out profits pro-rata to members’ purchases. Under Tire Factory’s previous partnership structure, payouts were based on stock ownership rather than purchases. “One of the beautiful things about our organization is being a clear co-op now,” said Kreidel.

In addition, Tire Factory paid members volume bonuses of $2.3 million for 2014 along with the patronage dividend. Total payout to members was $3.8 million.

Tire Factory had a 4% increase in units of tires shipped in 2014 versus 2013. The cooperative’s members, which operate in 15 western states, had retail sales of $300 million in 2014.

Strategy to stay relevant

Tire Factory added 11 stores to end the year with 149 members, 198 locations and 15 members called affiliates who are transitioning from other programs. Despite that growth, Kreidel hinted at the need for a change in long-term strategic direction.

The challenge for Tire Factory is to remain relevant to manufacturers in an industry that is consolidating on the wholesale and retail sides. Kreidel cited the growth of Monro Muffler Brake Inc. and American Tire Distributors Inc., which operate more stores and purchase more tires than Tire Factory members.

“Is the sky falling? Absolutely not. We’re profitable and we have a really strong balance sheet, but we need to be cognizant of what’s happening around us. The market’s moving much faster than we are in our growth, and we’ve got to remain relevant to the manufacturers,” Kreidel told members.

He presented options the Tire Factory board is considering to grow purchasing power and market presence. They are: create a global purchasing consortium, acquire and aggregate existing buying groups, and join existing dealer groups.

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“In order to remain relevant we’ve got to come up with a plan to put us in a much larger market presence which will mean better buying power, bigger scale,” said Kreidel.

“We’ve got to look at things differently. Whether that means consolidation and partnerships with other groups around the country, whether that means starting up an international purchasing consortium where we bring together a whole bunch of independent dealer groups, we just recognize it.”

Tire Factory solicited ideas and opinions on a new strategy from members in small group sessions during the meeting but did not provide a time line for decisions or plans.

“We asked our members to put on a board hat for an hour or two and give us feedback and think strategically about ways in which we could make Tire Factory much bigger than it is today,” said Kreidel.

Store owner Ryan Hazelbaker operates Cascade Tire Factory in Salem, Ore. He said the cooperative is getting ready to run.

“First you crawl, then walk, then run. We’re getting to the point where we are ready to run. Independent tire dealers are not special because we sell tires anymore. Lots of people sell tires. Tire Factory does so much to make us a viable longtime player in the marketplace.”

For information on becoming a Tire Factory member, visit www.jointirefactory.com.   ■

Tire Factory dealer will deliver training in 10-minute ‘bursts’

Eric Gill, owner of Gill Tire Factory Group, is rolling out a cloud-based training tool that delivers content in 10-minute “bursts” that can be viewed on a smartphone, tablet, laptop or PC to employees at his 13 Tire Factory stores in Oregon.

The training platform will enable his employees to keep current on existing technologies and to quickly learn new ones. Gill is adopting the training platform because all-day or half-day training seminars are too few and far between. “The industry is moving so quickly that we can’t wait until the next annual meeting.”

Gill, who also chairs the Tire Factory board, is not trying to recreate a training video on how to install a tire. “That’s not where we have a lack of knowledge or resources. We have a lack of resources on training our employees on what’s important for us.”

Gill is using technology offered by MobilePak LLC, a Portland, Ore., company, to create content to address specific training needs. The Tire Factory employee developing the training finds or creates relevant content and uploads it to MobilePak‘s platform. Sources for content range from YouTube to manufacturer product and training information to videos recorded on smartphones by employees themselves.

Gill’s managers are creating content now, and he expects to have the first set of modules completed by the second quarter of this year. Any type of file – video, PowerPoint, PDF, audio, graphics – can be uploaded to the MobilePak platform.

How much time is needed to create a module? Gill recently spent an hour making a presentation on team building. He uploaded a free video from YouTube, entered four key points into a template, and added some follow-up questions on how to build an effective team. The program tracks viewers and quiz results. “Now that hour of my work will be repeated hundreds of times without costing anyone any money,” says Gill.

Gill’s managers like the new training resource because their employees will not have to take hours out of their schedules for training. “In the retail world, there are always peaks and valleys and you don’t want somebody gone when all of a sudden you’re slammed with customers. But you’re always going to have that half-hour window,” he says.

There’s a “cool” aspect, too. “You can get brief points across in a chic or cool way that younger people relate to,” says Gill.

“We realized we had lots of tools to take the technology piece and make us smart at that, but we had not done a good job training our employees on how to use all those tools. MobilePak is a modern way to train on any topic you want.”

Tire Factory introduced the MobilePak technology at its 2015 annual dealer meeting. It is available at no charge to members.

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