RENO, Nev.-The word ``commodity'' got beaten up pretty badly at a recent California state tire association convention. It was not only blamed for causing plummeting profitability, but it also took it on the chin for helping provoke the California Tire Dealers and Retreaders Association-North (CTDRA-N) into changing its name.
That may be overstating matters only somewhat.
During the CTDRA-N trade show and convention attended by more than 800 May 18-20 in Reno, association President-elect Dave Redfern said ``tires have become a commodity that many consumers feel they can pick off a shelf, like a can of coffee or loaf of bread. We have all suffered reduced profit margins because of this phenomenon.''
So to better reflect dealers' gradual drift toward providing more automotive services-and to expand its geographic boundaries-the CTDRA-N will now be known as the ``Western States Tire & Automotive Service Association.''
``The fact is, for many of us, a large portion of our business, therefore our profitability, comes from automotive service, and not just tire sales,'' said Mr. Redfern, owner of Redwood General Tire Service Inc., Redwood City, Calif., who will assume the presidency in November.
The expanded association-which recently severed most ties with its sister group in Southern California-hopes to draw new membership from western states including Washington, Oregon, Utah, Montana, Nevada and New Mexico, most of which already have dealer associations.
The California Tire Dealers & Retreaders Association-South also recently changed its moniker-to ``Southern California Tire Dealers, Retreaders & Automotive Services Association''-to better reflect its constituency.
The ``commodity'' theme came up repeatedly during a ``tire industry leadership'' forum featuring: John T. Lampe, president of Bridgestone/Firestone Tire Sales Co.; John Fahl, president of Cooper Tire & Rubber Co.'s tire operations; Lee N. Fiedler, Kelly-Springfield Tire Co. president and CEO; John McAndrew, vice president of Sumitomo Tire Corp.; David W. Schaub, Michelin Americas Small Tires (MAST) president and CEO; and Earl Knoper, vice president, sales and marketing, Toyo Tire Corp.
Fielding questions from the dealer audience, panel members covered a wide range of ``hot button'' subjects, including profitability, industry image, distribution channels and training.
Tires are ``one of the great bargains of today,'' Mr. Fahl affirmed. ``This industry is selling a lot more than just a `commodity.' Independent dealers provide a service like no other in the country-putting the safety and lives of our families on the line every time they sell a set of tires.''
The time has come, he urged, ``for us to stop talking about the `commodity' we sell, and start talking about the service and quality of the products we sell.''
Echoing that sentiment, Mr. Fiedler later said every time the industry comes out with a new tire, ``we. . . then drive it into the consumer's mind as a commodity, the way it's advertised in the papers. So manufacturers alone can't get out of the commodity thing, and dealers can't either.
``But together we have to break that notion. . . It's the whole experience of going out and having to buy new tires. . . We need to make tire buying something more.''
Mr. Schaub restated a point he's made often about the consumer who buys three sets of sneakers at $150 per pair, ``then bitches like a banshee to pay 30 bucks for a tire. I do not ever understand that. . . .''
Newspaper ads for tires ``tell everybody in your market what you are doing, including how much you sell tires for,'' Mr. Schaub pointed out. ``If you're not the lowest price on every tire in the ads, then you're spending your money-and some of ours-to tell consumers, `Don't come shop at my place of business.'
``I think we've got a lot better things we can do with our money. . . . We've got to do a different kind of job in presenting this product-and your business-to the consumer.''
Mr. Fahl noted that some 70-85 percent of a dealership's traffic results from repeat business captured by word-of-mouth advertising.
Every manufacturer on the panel pledged greater efforts to enhance training opportunities not only for dealers, but for all employees in order for them to become well-versed in the operation of the owner's business.
In regard to greater profitability through the sale of high performance tires, Mr. Schaub urged dealers to ``identify for consumers that your shop is the place to go for performance tires,'' then train an employee to be a ``performance specialist-and pay him more.''
The key part of any tire maker's customer programs is helping dealers with store image, displays and advertising, according to Mr. Lampe, who admitted: ``I don't think we've done a good job at all in portraying the image of our industry. . . ''
Mr. Knoper concurred, telling dealers they spend ``far too much money'' on newspaper advertising, and should ``spend more advertising money telling customers what you're about-your entrepreneurial spirit in your store'' that many big marketers can't match.
Small dealerships worry too much about competing with clubs and are ``losing focus,'' he said. They should instead look inward at what they can do to make their operation better.
While no one prophesied the demise of warehouse clubs, panelists said those marketers are on the wane, with Mr. Fahl saying the clubs ``seemed to have peaked out at 8-9 percent of the market.''
Dealers replied with thunderous applause when Mr. Fahl vowed: Cooper's ``flag brands will continue to be provided to its independent dealer network only.''
Although he declared that he's ``not against club business,'' Mr. Schaub said MAST will market its flag brands ``primarily where consumers go to shop''-independent tire dealerships-and has developed strategies that ``put some distance'' between dealers and other channels via product differentiation.
On the other hand, he warned dealers of other competition, specifically new-car dealerships selling tires-a trend beginning in Canada.
Consumers come to tire dealerships for the service, selection, credit programs and advice they provide, Mr. Fiedler said-things clubs don't offer. Rather than concentrate on the clubs, he recommended dealers recognize other, ``more serious'' competitors, including other independents, as well as mass merchandisers like Sears, Roebuck and Co. and Western Auto. ``Those are the people you have to worry more about and plan how you're going to compete against them.''
Future of wholesalers
The ``old-time tire broker''-or ``brokerage wholesaling,'' as Mr. Schaub described it-is on its way out, replaced by ``controlled distribution wholesaling'' where tire makers are building dealer networks based on service, co-op advertising, adjustments: ``all the things a rubber company does. That's building value,'' he said. ``I see tremendous opportunities in that method of distribution in the future.''
And to a query about how big a dealership must be ``before it gets any attention'' from a major tire supplier, Mr. Schaub answered:
``We build (tires) one at a time, very carefully. We like to ship them 1,200 at a time, and you sell them four at a time. So we'll take any part of that rotation.''