With a national inflation rate of nearly 8.5%, you would be hard-pressed to find a consumer product that has not gone up in price. That includes tires, which remain the subject of price increases - resulting in sticker shock for some consumers who have been out of the market for several years.
Jim Baxter, owner and president of Neighborhood Tire Pros & Auto Service, a four-store chain based in Atlanta, Ga., says sticker shock among his customers is “more prevalent now than before.”
The challenge, he says, is working around this reaction so his dealership doesn’t lose the sale.
'Looking for other options'
Baxter says people usually come into his dealership every three to five years to buy new tires. (His business has experienced a 40% to 50% increase in tire prices since February 2020.)
“The core of our sales approach has not changed. We still try to get the best product for our customer. However, we don’t really get into (discussing price increases) unless the customer raises an issue about it.”
If a customer does express shock, Baxter says his team steers them to other products that would be a good choice, but maybe not as expensive.
“The number one thing that’s happening is customers who historically would purchase top-of-the-line tires are now looking for other options,” says Baxter.
This has changed Neighborhood Tire Pros’ stocking and inventory strategy. The dealership keeps a higher inventory of what Baxter calls “middle of the road” or “middle-value” products.
Relief on tire pricing seems to be a little ways off, according to Baxter. In fact, he believes the “worst” will happen before the situation gets better.
“In my opinion, the pricing situation will not calm down until a full-blown recession hits,” says Baxter.
In the meantime, Baxter and his team are “squeezing margins” to offer a competitive price. “We want to sell a premium product because I want to make sure the customer gets the best product for their dollar.”
Trust makes the sale
At No Time Flat in Jenison, Mich., Dustin Nienhuis, the dealership’s owner, says even though tire prices have “gone up a ton,” he’s relying heavily on his sales training to steer conversations with tire shoppers.
It boils down to “building trust with the customers. None of them are coming in here like it’s a big box store. They’ve been referred here for our good service or (they) read about us online.”
Nienhuis says he and his team happily work with customers who walk in with a price from another tire retailer. He’ll pull up that competitor’s website, put tires in the shopping cart and show how the initial price a consumer spotted usually climbs when installation and other fees are added to the bottom line.
Neinhuis and his team then close the deal with a promise to handle any tire issues the customer may encounter. And he reminds them that his store will be there when it’s time for the next replacement.
As prices have gone up, Nienhuis has had to remind his sales staff not to make assumptions about what a customer will pay or what kind of tires they can afford.
And he says if a customer needs four tires, sell four because the buyer is not going to be satisfied otherwise. That doesn’t mean he wants to oversell. “I’m not pushing Michelins on a college student. I qualify (the customer) way before I offer a product.”
Questions about who drives the vehicle and how the vehicle is used are essential. “We offer (customers) the product they’re going to like and want. You have to believe in your product more than customers want to keep their money.”
'Out of our control'
Brian McCartharn, manager of Oxford Auto & Tire in Washington, N.J., says some of his customers are “realizing (sticker shock) and some aren’t realizing it, but most people see what is going on in the world and expect things to cost more.”
McCarthan and his team tell customers that price increases are out of their control.
“We’re trying to explain to them that the increases are not on us,” says McCartharn. “It’s from the manufacturers."
The complaints he does receive are from people “who are starting to run out of money” due to the increasing cost of everyday living.
Fortunately, McCartharn reports that tire prices are starting to stabilize at his single-location dealership. “Honestly, I don’t know why,” he says. “Hopefully, it’s a new trend that sticks!”
This could be a welcome development as Oxford Auto & Tire’s sales have slowed down a bit. “This year, I don’t think we will see growth. I am really just hoping to keep it the same.”
Up-front with customers
Anthony Blackman, president of Atlantic Tire & Service, which is based in Cary, N.C., says the majority of his customers have accepted tire price hikes. “Most customers are very aware of the effect inflation has had on our economy and expect to pay more for tires than they did when purchasing tires maybe three years ago.
“If a customer is troubled by the price, they will usually opt for a lower-tier tire. Initially, they may come in looking for a Michelin, but due to pricing (will) choose a less expensive brand or a private label.”
Blackman says his approach is to give customers several options and he will match online pricing to make sure a customer doesn’t “walk.”
His sales team is up-front with customers about price increases, but is negotiating with customers more than in the past.
“To help us absorb the reduction in margins on our tire sales, we have placed a higher emphasis on add-ons like road hazard protection and tire pressure monitoring system sales,” says Blackman.
“We have been able to do this with very little resistance from the customers, which says a lot about our sales staff. Our wheel alignment sales have increased dramatically, as well.
He believes that tire prices will not come down anytime soon, but he does expect some stability to return if the Russia-Ukraine war ends. However, transportation costs will continue to “haunt” the tire industry, says Blackman. “It’s a very exciting time to be in the tire industry, but equally challenging."
Getting used to it
Dan Nothdurft, president of Sioux City, Iowa,-based Tires Tires Tires, says “there is no sticker shock anymore” among his customers.
“They’re accustomed to the fact that everything has gone up.”
On the rare occasion a customer balks at price, Nothdurft’s salespeople will suggest “a lower-tier tire. And the customer just goes, ‘OK.’
“We’re not immune” to some customers expressing concern about higher prices, according to Nothdurft. “But for the most part, they’re buying the tires they want.”
However, he says, “anytime prices go up, your margins generally don’t follow that trend. I think a saturation point will be reached and then our prices will start flattening out.
“I’ve never seen them come down,” he adds with a laugh. “I’ve never heard a company say, ‘We have a price decrease headed your way!’”
Despite ongoing price hikes, business at Tires Tires Tires’ four locations “has been pretty steady,” says Nothdurft. “I don’t think we’ve lost any customers over price. But you know, when you’re in the tire business, you’re kind of recession-proof. People aren’t buying new cars. Consumers are definitely putting on tires.”
