The Future of Discount Tire
When he joined Discount Tire in 2001 as assistant vice president of strategic planning, Michael Zuieback focused on “capturing the values of the company,” as he puts it.
Some might say he was over-qualified, having served as treasurer of the Asia Pacific region for Johnson Controls Inc.; senior manager of foreign exchange and international finance for Sara Lee Corp.; and credit analyst at First American Bank.
Founder and Chairman Bruce Halle had been trying to convince his stepson to join the business for years, but to no avail. Eventually he relented, choosing to greatly reduce a wicked travel schedule in order to spend more time with his family. As the new century was beginning, he felt it was time to see what he could accomplish at the close to 450-store retail chain based in Scottsdale, Ariz.
Since then, he has continued to move the company forward, first as president, then as CEO. In an exclusive interview, Modern Tire Dealer sat down with Zuieback and Halle late last year to discuss their vision for Reinalt-Thomas Corp., which does business as Discount Tire. With more than 900 stores and 18,000 employees, Discount Tire ranks No. 1 on the Modern Tire Dealer 100 list of independent tire store chains in the U.S.
Although both were careful not to reveal any specific plans for Discount Tire in the future (“for competitive reasons,” said Halle), they seemed happy to address everything else asked of them. In doing so, they indirectly gave us a little bit of insight into how they do business. As Zuieback said, “We stick to our own knitting.”
MTD: Does your company operate under a five-year plan or 10-year plan? Or do you set your goals on a year-to-year basis?
Zuieback: We look at the three-to-five-year time horizon, and have some goals based around that. But as Bruce has said for years, it’s a good thing to deviate from those plans as things happen.
Halle: You need a plan. If you don’t have a plan you’re not going any place. But again, it’s adjusted as we go.
MTD: Have the tariffs on Chinese consumer tire imports had an effect on your business?
Zuieback: Our people have been very proactive on that issue. A lot of our suppliers have moved out of those areas and are producing in other places today. It hasn’t been a big issue for us.
MTD: How would you describe current tire pricing?
Zuieback: I think everybody is in a deflationary market, with commodity prices dropping across the industry. Certainly that always makes it more of a challenge in a deflationary market. But we’ve been able to manage on that, stay ahead of the curve. That’s always something you’d rather not have, but I think we’re probably bottoming out, and it won’t be long and we’ll start to see some raw material prices start to pick back up, and inflation start to show itself a bit.
Halle: Pricing is quite cyclical. The industry has been that way forever.
MTD: Would you say our industry is somewhat recession proof?
Halle: I think so. People still have to use tires in a recession, although we don’t do as well in recessionary periods as we do in up periods.
MTD: Is sports marketing an integral part of your marketing strategy? In the past, you’ve sponsored the Arizona Diamondbacks and the Phoenix Suns, and you are a Team Penske sponsor for NASCAR’s XFinity and Sprint Cup Series.
Zuieback: NASCAR is the main focus. Beyond that we don’t really do a lot of sports advertising. Baseball and basketball was a fringe thing. (To see how Discount Tire partnered with the Suns in 2013, check out the “Road Trip with the Suns” television commercial at www.youtube.com/watch?v=ltVPDTa0ytQ.)
Halle: The NASCAR sponsorships are great for us because NASCAR has fans, both men and women, all over the country where we have stores. When we have a race car outside the store, everybody stops to look at it. Parents put the kids in it and take pictures. It’s a great attraction, and we think the marketing cost is reasonable.
Zuieback: It relates and is relevant to our business.
MTD: Looking at your overall marketing budget, does your NASCAR sponsorship represent the biggest chunk?
Zuieback: No. The biggest expense is probably the Internet space, like most companies today. The Googles of the world have it figured out.
Halle: If you look at all the different media, we advertise through a lot of them.
MTD: How is Discount Tire dealing with social media?
Zuieback: We embraced the Internet many years ago, and were early adopters in the social media space as well. You experiment with it, learn a bit, find out that one’s not so good, but this one’s good. You find your way through it. Everything is always over-hyped.
Halle: We keep trying to take our message somewhere it hasn’t been, and make it clearer for everybody. We’re working on that constantly.
MTD: Do you have goals as to how many stores you’d like to open?
Zuieback: If you look at our past five years or so, and continue down that road, I’d say between 30 and 50 stores a year. It has been working well for us.
MTD: Has the volatility in the real estate market died down as we’ve fought our way out of the recession?
Halle: It’s starting to pick up around the country. For a while it was soft and we were able to buy land a little cheaper. But it’s coming back up now. Most of the places we look at are getting close to where it was a few years ago before the downturn.
MTD: Do you still personally check out every site, Bruce?
MTD: How about you, Michael? I would think with your financial background, you would be heavily involved in business development with Bruce.
Michael: I used to go on all of the trips, but now with my other responsibilities, I don’t have the opportunity to do that as much. We sit in on real estate meetings together and review that information, but he’s been doing it very well for 55 years, so what am I going to add? Not a lot. I sit there and learn.
MTD: Given your size, do you bring outside consultants in on a regular basis to take a look at how you are running your company?
Zuieback: No. We’ve never brought in a consultant for the operational side of the business.
Halle: We’ve been successful all these years without outside counsel. So why do we need it? Let me put it another way. Years ago when we were a much younger company, and had 10 or 15 stores, no capital and were on the brink of being in business or not, no outside people were running in to advise me and help me. But after you get big and successful, they all want to.
MTD: Does anything that happens in the tire industry surprise either of you?
Halle: It doesn’t surprise us, but it’s interesting to see how the vendors are trying to get online now and go directly to consumers. That’s not a big surprise, it’s just happening and it will continue.
MTD: But that makes them competitors of yours.
Halle: Yes, it sure does.
Zuieback: It changes some of the dialogue from time to time.
MTD: Is there anything you want to add about your goals at Discount Tire, Michael?
Zuieback: The gist of it is Discount Tire has been a very successful privately held company. We are going to stay the course. I have been blessed to be a part of the family and to help carry that on for all our wonderful people across our company. This is my responsibility. ?