United they stand: Tire dealers know how to get with the program groups
First in a series
If all they did was band together to buy tires at reduced prices, they would be part of a "buying group." But these independent tire dealers receive more than buying power.
Together they enjoy additional benefits such as credit card service, insurance discounts and point-of-sale material. They are, in a general sense, part of a "program group." In a more literal sense, based on what they accomplish, they are a "program distribution group."
But the interrelationship between dealerships, often spread across the United States, makes them even more than a program group. They have evolved into a "program distribution network."
There are a number of program distribution networks for tire dealers in the United States. Some are run by tire manufacturers, others by the dealers themselves.
"Building a stronger network is a benefit to all of us," says Joe Finney, CEO and president of Tire Centers LLC and its T3 program. Tire Centers is a subsidiary of Michelin North America Inc., but runs its program network independently, as evidenced by the brands other than Michelin it sells.
Michelin also has its own program network: Alliance. Goodyear Tire & Rubber Co. offers its G3 and Gemini programs to dealers. Bridgestone Firestone North American Tire LLC runs two programs: Affiliated and TireStarz. There are other supplier-run programs.
Dealer-run groups include Northwest Tire Factory LLC, American Car Care Centers (ACCC), the Independent Tire Dealers Group and Tire Alliance Groupe, also known as TAG. There are others, including franchise operations.
Terry's Tire Town, a wholesale distributor based in Alliance, Ohio, is not only an ACCC shareholder, but also a Michelin Alliance and Continental Gold program provider. In addition, it offers Bridgestone's TireStarz and Yokohama Tire Corp.'s Advantage programs, plus Goodyear's G3 in Virginia.
"Luckily, many programs can be utilized by the same dealer," says owner Will Tollerton. "A lot of our best dealers are on two or three of the programs because they have the volume to satisfy the different programs."
Terry's Tire Town distributes tires in seven states. It has no similar programs of its own in order to keep from competing with its suppliers. "We embrace all the supplier programs. Some might say too many. But if dealers are out there looking for alternatives, it's our job to provide them."
This is the first in a series highlighting the program distribution networks available to independent tire dealers -- from the dealer's perspective.
Declaration of independence
"How about the cold weather affecting these sensors?" asked Dean Whitmore, co-owner of Jerry Noble Tire Factory in Great Falls, Mont., at the "TPMS Do's and Don'ts" seminar at last month's Northwest Tire Factory Convention and Trade Show in Portland, Ore. "We had 20- to 30-below weather for 10 or 12 days and we had a problem."
The panelists didn't have a definitive answer for Whitmore, who said the tire pressure monitoring system (TPMS) problem went away when it warmed up. But as part of the group, he recently received a TPMS Training & Certificate Program module from the Tire Industry Association.
Dean, along with Jerry's son, Chuck Noble, are partners in the company's single-store dealership. (Jerry Noble passed away a few years ago.) Dean started working for Jerry before he got out of high school and has been in the tire industry 32 years.
Jerry Noble Tire became a Tire Factory group member six years ago. "They just had so many benefits," says Whitmore.
Kelly has been the dealership's bread and butter tire for years, according to Whitmore. It also offers Goodyear, Michelin, BFGoodrich and Nokian (Tire Factory offers all those brands).
"Tire Factory actually opened more doors to us to be able to have more product and offer more of a variety. Some people like certain things. But all in all, they buy what we tell them and what we show them and they take our word for it. A lot of our business is like that."
Joining the Tire Factory network allows Whitmore and Noble to remain independent. "We've always been proud to be independent tire dealers. And that's one thing the Tire Factory offers. We own the warehouse -- that's what I tell my customers. The independent factor means a lot to me, and I think I inherited that from Jerry Noble."
Outside the group, Whitmore buys light truck tires directly from Yokohama. "Yeah, I do buy some stuff from different people."
Whitmore says he has worked on a lot of pressure monitoring systems. When plus-sizing tire and wheel packages, they either transfer the existing sensors over and recalibrate them, or buy another set.
The TPMS seminar opened his eyes to some of the other problems. "When you're putting on a 20-inch wheel from a 16-inch wheel on a pickup, the air pressure goes up and those monitors are set at a certain pressure. I thought they measured the fluctuation of all four tires on the vehicle. So I learned something."
The metropolitan Great Falls area is one of the largest in Montana, with a population of 120,000 people. Whitmore estimates there are a dozen tire dealers in the area, including a Wal-Mart Tire & Lube Express, Sam's Club, Sears Auto Center and fellow independent Tire-Rama Inc.
"One big advantage of the Tire Factory is supply is within a week away at most. And if you need tires sooner, two days UPS." A nearby Six Robblees' warehouse supplies other automotive accessories.
And TPMS sensors? "We've been going to the dealer. They're expensive, and usually they haven't had them.... When we know ahead of time that we will need them, say, when ordering snow tires for a changeover, we order sensors, too." Whitmore keeps close tabs on his inventory -- and his suppliers' -- with the help of his computer system. That allows him to order tires on a daily basis and keep ahead of a shortage. "I don't have a lot of backorders because if I see them backordered I don't order them."
And where did he get the POS software? The Tire Factory.
Brothers in arms
Brothers Vince and Dwight Pridemore had been working for the Great American Tire and Auto Service Centers chain for more than 10 years. Then the bottom dropped out, and the 14-store dealership went under in 2005.
"We were out of jobs," says Dwight, who was a store manager.
"We had shut down all the stores but two," says Vince, who was the company's controller at the time. "We knew Great American wasn't going to stay around just to operate those two stores, so we got our minds together and thought, 'What the heck. Let's buy them!'"
The brothers had helped open the stores, located seven miles apart in Littleton and Centennial, Colo., so they were familiar with their markets. They signed a five-year lease on the stores last October, and opened Pride Auto Care.
"We had to put up our houses for collateral," says Dwight, 36. "And sign our lives away!" says Vince, 40, who admits the move was scary.
"But to be honest with you, there is something to be said for working for yourself."
The bank takes good care of them, say the brothers. So does TCI. "Great American had only had the T3 program two months (when it closed)," says Vince. "We decided to stay with the program because it offers a lot more for the small businessmen than it does for the larger ones, like the advertising that it gets you and the co-op money that's available.
"They make it a whole lot easier for us. They do all the hard work. We just get them some of the info we want to run. And the '90 days same as cash' is huge, too."
"To be a small business and have the kind of buying power and nationwide warranty that we get (from the T3 program) is why we signed up," says Dwight. Both stores offer the Michelin, Uniroyal, BFGoodrich, Hankook, Riken and Trivant brands. The brothers buy from outside the T3 program, but not very often, says Vince. "We have, I would say, upward of five different suppliers that we use. Our first call is always Tire Centers."
They joined Michelin's Alliance program two months ago. "We finally are in a position where we can do the fleet work... which both of us take advantage of." They also offer full automotive service, including air conditioning maintenance and major engine work. "We do it all," says Vince. Dwight even has a fast-lube bay at his Littleton store.
Inventory levels are low, according to Vince. "Financially speaking, we didn't want to stock a lot, but I would say we have upward of 300 tires per store. We would like to get more, we just can't afford to have that much in stock right now. We can't tie up the working capital. Money's a little tight for a new business at this time of year." The Littleton store has room for 500 tires, the Centennial store, 700.
Just-in-time delivery from TCI's distribution center some 25 miles away is crucial, says Vince. "And they deliver two times a day."
Neither Vince nor Dwight can imagine surviving without being part of a program a distribution network. Vince says being on Michelin's call list for warranty work brings in a lot of business. "If we didn't have T3, we wouldn't have a tire and automotive service business," says Dwight. "We would sell tires, but only wiper blades, alternators and tires. And without a good program you can't sell tires. You can't compete with the big boys."
"And not with the expansion that we would like to do. We'd like to acquire some stores out there," adds Vince.
"One more at least," says Dwight. Having two stores "is kind of like a bar stool with two legs. We need the third one to really set it."
Ripley, believe it or not
Jilanna Swann knows her customer base inside and out. The average customer of Swann's American Car Care Centers in Ripley, W.V., is married, owns a home and has an annual income of $43,000.
Ripley is a rural town of 6,000 people. It is located in the southwest part of the state, halfway between two metropolitan areas, Charleston and Parkersburg. Swann knows that some of the people in Ripley commute to work.
"People are going to buy tires either close to where they work or close to where they live," she says. "My competition may be Sears or Wal-Mart in Charleston because it's closer to where they work."
Swann and her father, Walter, are co-owners of H&M Tire Service Inc., which does business as Swann's American Car Care Centers. They joined ACCC 17 years ago to help their single-store dealership compete with retailers near and far. The relationship has paid off in more ways than just being able to buy tires at a competitive price.
"My customers have a credit card with an open credit line with my name on it and they can only use it at my store," she says. "I have a private brand tire that affords me the opportunity to make a premium profit because (customers) can't compare pricing for the American Platinum at Wal-Mart. It's unique."
The Swanns keep 3,500 tires in stock. In addition to the American brand, manufactured for ACCC members by Cooper Tire & Rubber Co., they inventory the Michelin, BFGoodrich, Uniroyal, Continental, General, Bridgestone, Firestone and Goodyear brands.
"We stock a large number of tires because we don't get deliveries every day.... I'm in a rural area." (Fellow ACCC member Terry's Tire Town delivers to Swann's twice a week.)
She says ACCC's nationwide membership acts as a support staff. "If I have a customer whose daughter goes to the University of West Virginia in Morgantown and she needs help with her car, I can send her to an ACCC dealer."
Swann's is also a Michelin Alliance dealer. Swann says she uses the co-op money from both programs to buy radio advertising. When potential customers hear her voice over the airwaves, they are often in their cars and light trucks, "which is where they need to be when they think about tires.
"I'm customer driven. My customer is somebody who wants the tires from me."
Greg Carlson distributes tires to 850 customers in Montana, Washington, Oregon, northern Idaho and North Dakota as vice president of Lisac's Inc. in Butte, Mont.
"In the metro markets like Portland and Spokane, we delivery twice a day (by way of a sister company, Spokane, Wash.-based C&L Tire Distributors)," he says. In Montana, however, it's a different story.
Montana is the fourth largest state based on land mass. But it only has a population of one million people. "In Montana, we deliver to every part of the state once a week. We have three routes that are in excess of 800 miles each."
It is difficult for some of his dealers to handle the proliferation of sizes and SKUs on their own. "It's difficult for us as well. Our inventory costs have gone up 35% in the last few years because of emerging SKUs."
Carlson is an ACCC distributor with four warehouses: two in Montana, one each in Portland and Spokane. The dealership recently increased the warehouse in Portland from 20,000 to 64,000 square feet. Lisac's and C&L Tire own 20 24-foot van box delivery trucks.
"It's very challenging," says Carlson. "We've seen a lot (of distributors) come and go."
Lisac's also runs five retail stores. "It gives you insight into the concerns dealers have -- their frustrations and challenges at the retail level -- that some wholesalers might not understand," he says.
"Most wholesalers don't understand competing against car dealerships, warehouse clubs, retailers like Wal-Mart. They don't understand because they compete against other wholesalers."
He says buying habits and some of the demands of retail customers has changed over the years. "Number one, I think they are looking for product that performs but also product they have confidence in. And (they want to) have it serviced no matter where they are at."
Levels of service have changed as well. In the northwestern part of the country, free flats and free rotations are the norm. "Definitely Les Schwab in the Northwest has had a major influence. If you don't evolve with the mega-retailers... your customer is going to Les Schwab. You're going to lose them."
Carlson says his customers are not as brand conscious, and part of that influence also stems from Les Schwab Tire Centers. "It seems like in the Northwest major brand product has a tougher time getting market share. That's a great thing for us, because private brands are (accepted) in the Northwest. The problem is fewer and fewer manufacturers manufacture them in the U.S."