'We Need Some Help,' Dealer Tells MTD
Dealer Caught in Price-Inventory 'Pickle' Asks For Relief
Ever see a runner caught between two bases during a baseball game? The situation is called a “pickle” and the goal of the runner who finds himself in this tough spot is to make it safely to the nearest base without being tagged or thrown out. The opposing players on either side of him apply pressure to stop this from happening.
Theoretically, the scrambling baserunner should never win in a pickle. Most don’t.
Ever feel like you and your business are in a similar position? An independent tire dealer whom I’ve known for many years - and who requested anonymity - recently admitted to me that he does.
Like a desperate ballplayer stuck between second and third base, his multi-location dealership - which also does some wholesaling - has been ping-ponging back and forth between high inventories and escalating tire prices.
At the same time, he says he’s watched some competitors snag better sell-in deals on products that he already committed to buying at higher prices.
Throw in a few other factors - such as inflation and a recent slump in tire demand - and his business is feeling the squeeze. I suspect he isn’t alone.
“Inventories are at record highs - both dollars and units,” he told me. “All the price increases that have happened over the last few years have just compounded the situation. A tire today is 30% more expensive than what it was even a year-and-a-half ago.
“Just imagine if I’m sitting on top of $1 million of inventory - which is not much these days - and how much more cash it takes just to operate. That’s a huge, huge cost, especially for independents who are trying to stand on their own.
“We don’t have bottomless pockets and neither do our customers,” he continued. “All of the excess money” doled out to people during the COVID-19 pandemic “has dried up. And with inflation, people don’t have as much disposable income anyway.
“Sellout is down. Among the people I’ve talked to, I’m hearing it’s down between 6% and 8% over the last two months. But we can’t afford to be down because of our cost structure.
“Think about how much it costs to run trucks right now. Think about the cost of equipment. Our personnel costs have gone up. Imagine you’re a dealer who’s having all these things happen, yet also are dealing with a drop in business.
“We have to be profitable.” But with all of the previously mentioned factors in play, “there’s not much of a gap right now,” he said.
I asked the dealer, “What can be done to help? What would you like to see?”
After a pause, he mentioned various things. And more assistance from tire manufacturers topped the list.
That help starts with understanding the value that independent tire dealers deliver to suppliers, he said. “Sometimes they see us as someone who’s just selling tires. But we’re the ones who market their products. Do they think consumers come in asking for a specific brand?
“We’re the ones who go the extra mile. We’re the ones who are investing in their future. We’re helping them a whole lot more than they realize.
“It can’t be all about quantity. It has to be about the value you add as a dealer. You need to offer intangibles. You have dealers all across the country who do it right and add value to the transaction.
“We need more support for the independent channel and the people who have helped (suppliers) build their brands. If I bought tires at a certain price three months ago, I need to be protected on that inventory because I made the commitment at a higher price.”
Despite high prices and inventory levels, the dealer told me his business continues to move plenty of units for its suppliers, all of whom he likes and respects.
After all, he fully understands that tire manufacturers also have to make a profit. He wants them to be as successful as possible.
But the independent dealer, he told me, plays a pivotal role in making that success happen, which should always be top-of-mind.
“The suppliers need us to sell and deliver their tires. They need us to bolt tires on. We need some help to keep our margins up and keep our business and other independent tire dealers healthy for the future.”