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August 07, 1995 02:00 AM

DEALERS SERVE VITAL ROLE: INDEPENDENTS OFFER COMPETITIVE PRICING, DIVERSITY, EXPERTISE NOT FOUND IN OTHER CHANNELS OF DISTRIBUTION

Liz Cherry
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    Without independent tire dealers, North America's replacement tire market would be much less consumer-friendly, many industry experts believe. In such a market, ruled by mass marketers and manufacturer-owned tire stores, buyers would miss out on the knowledgeable service, competitive pricing, and variety of tire brands and types that only independent tire dealers can deliver.

    Independent tire dealers can take pride in the role they play in assuring buyers of the widest possible selection of products, competitive prices and capable service, industry proponents as well as critics agree.

    ``We love 'em (independent tire dealers),'' said Clarence Ditlow, executive director of the Center for Auto Safety, a consumer advocacy group not known for making such statements lightly where the tire industry is concerned.

    ``In all markets, including the tire market, the independent distributor's consumer function is to provide competition and good service,'' he said.

    ``They're the essential link between manufacturers and the ultimate consumer,'' noted Thomas E. Cole, president of the Rubber Manufacturers Association. ``They understand what product is best suited to the customer.''

    Observed Harry Millis, an analyst with Fundamental Research Inc. in Cleveland, ``Independents tend to carry a broader line and pricing spectrum, as well as more customer service offerings.

    ``But the key is that the independent tire dealer is a local businessman, attuned to the community. He's in business for himself. It's difficult to instill that kind of work ethic and customer awareness in someone who is salaried, or even salaried plus bonus.

    ``As a member of the community, the independent gets to know his customers' needs-when to carry snow tires, what kind of high performance tires are required etc. He (the dealer) is closer to the mark and generally a harder worker,'' Mr. Millis said.

    Collectively, independents account for the largest share of replacement tire market, purchasing 64 percent of the passenger tires shipped by manufacturers to the replacement market in 1994 and retailing 56 percent of those tires to the end-user, according to a TIRE BUSINESS' estimate.

    Moreover, it's difficult to imagine how the replacement tire market would look without independents, these observers admitted.

    ``Independents have been the cornerstone of the tire market since it began,'' explained Ed Kalail, director of communications and marketing services for Continental General Tire Inc. ``They were entrepreneurs long before the word came into being.''

    ``I don't see anyone who could fulfill customer needs as well as the independent tire dealer,'' added Mr. Millis.

    Illustrating his point, Mr. Millis cited the restaurant business, where McDonald's and Burger King have taken over a lot of the market. However, ``the upscale restaurants-the ones people talk about-tend to be local organizations who know the market and can serve a special lunch. They've found a niche and filled it, just as the independent tire dealer has.''

    Using a similar analogy, another observer pointed out that independent tire dealers are similar in function to independent insurance agents who can offer their clients a variety of policies from different insurance providers. If one insurance vendor can't meet the customer's needs, the independent agent can locate another company that will.

    Because of independent tire dealers, consumers enjoy a greater variety of options in terms of tire types, brands and prices, these experts pointed out.

    The competitive muscle of independent dealers has strong-armed many tire makers into producing lower-cost, alternative tire brands, according to some industry analysts.

    Private label distributor brands, such as Hercules, Reynolds, Delta and National, and some associate brands probably wouldn't exist were it not for independent tire dealers and their collective buying power.

    Dealers are attracted to these brands for their higher profit margins and market exclusivity. Meanwhile, consumers find them attractive for their somewhat lower price tags and the attractive warranties often available on these tires. And much the same can be said of the lower-priced associate labels marketed by tire manufacturers themselves, observers pointed out.

    ``Obviously, the price-sensitive part of the market-about 50 to 85 percent-is the lion's share,'' said Mr. Millis. And in order to meet that price-sensitive portion without diluting the equity in their major brands, the manufacturers came up with lower-priced associate labels, he pointed out.

    Were it not for independents, few-if any-retreads would be sold, noted Harvey Brodsky, the Tire Retread Information Bureau's managing director. He estimates 99 percent of the 6.4 million passenger retread tires sold last year in North America were channeled through independent tire dealers.

    Tire company-owned stores and discounters usually don't offer retreads, Mr. Brodsky said, rather they focus on new tire sales.

    ``By offering retreads, the independent brings larger choices to the consumer and saves the buyer money,'' he pointed out.

    As for the 26.2 million truck, aircraft, off-road, farm and industrial retreads sold in 1994, independents are believed to be the dominant marketing force as well.

    Commercial tire businesses and others catering to truckers-those most likely to offer retreads-tend to be independently owned, although the precise impact of the independent dealer on the truck retread market is not known, industry experts said.

    In his market area covering Missouri and most of Illinois, Phil Berra, president of Community Wholesale Tire, estimates as much as 90 percent of commercial, farm and industrial tires and tire services are sold through independent tire dealers.

    ``Generally, it's the independent offering road and fleet service to trucks and farm fleet service to farmers,'' said Mr. Berra. ``He can offer more variety, more brands, more services, and more specialty applications like custom wheel packages than a company-owned store can.''

    In contrast to other venues of tire sales, independent dealers offer stability and a generally higher level of expertise, some observers pointed out.

    Compared to other tire retailers, independent dealers receive high marks from consumers. The most recent J.D. Power & Associates Replacement Tire Study found that independent tire dealers, as a group, were a close second to service stations in overall consumer satisfaction in the tire-buying experience.

    ``The independent tire dealer is a category killer as it relates to tires,'' said James Faught, president of the National Tire Dealers & Retreaders Association and owner of Northwest Tire & Service in Flint, Mich. ``The mass merchandisers only do price.

    ``We, as independent tire dealers, all have our expertise, and that expertise is in tires. We don't devalue our time with cameras, clothes and the like. Our strength is our expertise and our ability to execute customer needs-to totally understand his or her needs,'' Mr. Faught said.

    ``Look at the mass merchandisers-Sears, Wal-Mart etc. If it's not on their shelf, you don't get it. Whereas the independent tire dealer is quick at implementing options in order to make a delivery.

    ``His product knowledge and training are far more indepth than what you would find in other channels. His real strength, though, is the ability to execute a need,'' Mr. Faught said.

    Tire dealers have asserted their independence and dominance in North America in contrast to automotive aftermarket distributors in Europe. Both Group Michelin of France and Continental A.G. of Germany have massive company-owned distribution networks in Europe, yet neither has chosen to have company-owned operations in North America.

    General Tire, for example, divested its 95 company-owned stores soon after the company was acquired by Continental in 1987. The move was particularly appropriate, according to CGT's Mr. Kalail, in that it represented a return to the philosophy embodied by General Tire's founder, the late William ``Bill'' O'Neil.

    Mr. O'Neil, who had been an independent tire dealer himself prior to founding General Tire in 1915, was staunchly committed to marketing the company's products through independent tire dealers, since they ``know the market better than anyone.''

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