Little did Tennessee Ernie Ford realize so many years ago when he sang the hit ballad ``16 Tons'' that he'd be crooning what could very well be the theme song for independent tire dealers in 1995. Another day-make that year -older and deeper in debt.
That may actually be overstating the case for the majority of those who responded to TIRE BUSINESS' annual independent tire dealer survey, but the sentiment was definitely there in many of the replies we received.
Tire sales? Down for the majority. Tire-derived profits? Flat. Dealers' purchase prices on practically every variety of tire? Up. Profit margins on those same varieties? Fill in your own synonym-flat, blah, dreary, prostrate. Or settle for the all-encompassing ``distressing.''
Auto service vs. tires
In this age when more and more shops are turning to automotive service not only for profits, but for survival, the majority of respondents seemed to like the word tire in their ``independent tire dealer'' titles.
About 59 percent indicated that tire sales will be of equal importance to their dealerships during 1996; 32.6 percent said they'd be more important.
But some, like Bruce Crawford, owner of Crawford Truck Service in Bow, N.H., said tire sales will be of less importance to their businesses. There are ``no more cheap tires,'' he wrote. ``If we cannot make $$$ (selling tires), we will not do it.''
He vowed to ``push repair work,'' noting his 1995 tire sales were down 20 percent as opposed to a 10-percent increase in auto service sales and service-derived profits.
Gary Yates, manager of Eastside Tire & Muffler in Kirkland, Wash., echoed those sentiments.
``In order to compete on price, we sometimes have to sell tires at or close to cost-and I have no interest in that,'' he stated. That's why tire sales will be less important to that dealership this year.
Mr. Yates also said he's facing increased competition from two new tire store chains and an exhaust and brake outlet.
The owner of Tire Wholesale, Cheyenne, Wyo., has reached the conclusion ``tire sales are important'' to lure service sales. Thus, Don Hasvold said his auto service business will be less important because you ``need tire sales first.''
On the other hand, Richard E. Johnson wrote that ``tire sales bring service customers, (but) the profit is in service sales, not tires.'' He's president of four Dick Johnson's Tire Centers retail outlets based in Northboro, Mass.
Things are heating up in his market, thanks to increased competition from Wal-Mart Stores Inc. and the new Penske Auto Center Inc., which is taking over the former Kmart Corp. automotive service centers.
Call it realistic or call it fatalistic, but when it comes to competitors, Russell Kress, owner of Kress Tire, East Moline, Ill., takes the approach that ``there are always people coming and going in this type of business.'' And in nodding deference to that ongoing struggle for market share, Ronald S. Bennett, CEO of Service Tire Truck Center in Bethlehem, Pa., adds: ``Yes, everyone is looking for more business.''
Several respondents cited the fact they sold fewer tires because of wholesale tire dealers who ``sell to end-users at low profits.''
Some 34 percent of dealers surveyed planned to place more emphasis on auto service, and better than half said that business segment would be equally important to them in the coming year.
One of those hoping to make auto service a more integral part of his business is Micky Franklin, owner-operator of Micky Franklins Wholesale Tire Inc., North Fort Myers, Fla. Yet he admitted ``more mass merchandisers are jumping on the repair business. Even if they limit what they do to just lubes and oil changes, they still take customers away.''
He bemoaned the difficulty in ``getting customers to come in my store. I can't advertise every other day like all the big guys.''
Mr. Franklin also took the opportunity to note he believes ``none of the manufacturers are honest. They call you their `dealer' or `distributor' and then they turn around and sell to everyone.''
S.O.S.: Same old suspects
Most dealerships appeared to be riding out the economic waves by keeping hiring to a minimum. More than two-thirds reported their employee rosters remained unchanged over the past year.
Among the other ``most pressing problems'' facing independent tire dealerships, respondents listed: government regulations; competition from discounters and warehouse clubs; health insurance and welfare costs; salary increases; and that age-old nemesis, workers' comp.
And don't forget ``overtime expenses and interest on loans,'' pointed out Phil McNair, Marlow, Okla.-based McNair Tire & Alignment's owner.
One dealer in Vermont seemed to take a Pogo-esque view of the business landscape-that is, we have met the enemy and he is us. He remarked that the biggest problem confronting him is ``too many tire dealerships.''
However, the major lament of most dealers-as it was in the previous year's TB survey-was that it's getting tougher and tougher to find qualified, dedicated workers willing to do an honest day's work for an honest dollar.
A dollar? Well, actually more than 60 percent of those surveyed said they planned to give employees pay raises in 1996, ranging from 2 percent up to 15 percent. The average was 5 percent.
Next to the culprits just indicted, one of the biggest thorns in dealers' sides is the collection of accounts receivable.
For the overwhelming majority-62.5 percent-collection rates remained the same; 27.1 percent actually saw their luck improve.
But most would probably attest it's tough going.
David P. Norman, owner of Norman's Tire & Service in Corinth, Miss., said his dealership has discontinued offering personal credit.
While his rate has remained about the same, Robert C. Murrey, general manager of Hopkinsville Recapping Co., Hopkinsville, Ky., noted, ``We have had to put more effort into collecting.''
One success story comes from Chuck Tate, operator/manager of his father's dealership, Bob Tate Tire & Service Inc. in Bartlesville, Okla.
Since May 1995, he's used a ``cash flow management system'' offered by a Texas firm. It has helped his collection rates jump by an estimated 35-40 percent.
At the end of each day, he takes the charges for all his retail and commercial accounts to his local bank, which then credits the amounts to his checking account by the next day.
Every month by the 25th, the bank does his billing, sending out invoices to customers, who can then make payments to either the company or bank.
While the dealership is still liable for the amounts, Mr. Tate said customers are ``more apt to pay better'' when they get an official account statement on bank letterhead-``it provides a little more muscle to our collection program.''
If payment has not been made after 30 to 60 days, customers receive a ``reminder letter'' from Bob Tate Tire. For accounts 90 to 120 days late, the company has to ``buy back'' the account from the bank, Mr. Tate explained.
All in all, ``it's working pretty good,'' he said, and has saved the dealership a lot of time it normally would have spent on paperwork, not to mention boosted its coffers.
Getting down to specific numbers, the survey also found:
Tire sales were up by 13.3 percent for more than a third of those surveyed, but dropped by 12.5 percent for 42.8 percent of the respondents. Those figures generally coincided with the previous year's results.
Tire-derived profits were flat for 37.5 percent of the dealerships, but either rose or fell for an equal number. The less fortunate saw those profits drop a precipitous 17.2 percent on average.
Auto service sales grew by 12.2 percent for the majority and remained flat for some 38 percent. However, they dropped 12.8 percent for one out of six dealers.
Service-derived profits rose by 11 percent for 47.6 percent of those surveyed; about 19 percent of the dealers reported those profits down by 11.7 percent.
Tires still important
While survey respondents identify themselves as tire dealers, first and foremost, most have had to do a balancing act between tire sales and automotive service in order to stay afloat.
Almost 94 percent of respondents handle passenger and light truck tires, with 41.3 percent of them seeing those sales increase by an average 10.6 percent.
As automakers increasingly fit high performance tires on their upscale vehicles, a growing number of tire dealers are realizing HP sales are a money maker; 44.7 percent of those surveyed saw their retail sales in that category increase an average 8.9 percent.
Commercial truck tire sales were flat or down for an equal number, but grew by 8.5 percent for a third of the dealers surveyed.
Like TB survey results of the past several years, custom wheel sales weren't all shiny and bright, remaining flat for more than half of the respondents; 16.2 percent encountered a sales increase averaging 7 percent.
And despite repeated reminders from private brand marketers that specialty tires are an untapped bounty for dealerships, three out of five dealers said their sales in that category were stagnant; a little better than a fourth said their specialty sales were up by an average 7.5 percent.
Price hikes passed along by tire manufacturers last year seemed to stick to some degree, as indicated by survey responses. In almost every tire category, dealers' purchase prices rose in the range of 5.1-6.7 percent, with the biggest increase-10 percent-reported for large off-the-road tires.
Perhaps illustrating dealers' wariness with the economy-locally, regionally and nationally-few were planning to purchase any equipment in 1996. Many were adopting a wait-and-see attitude.
Of those who had their eyes on new gear, service trucks, computerized wheel balancers and tire machines, alignment racks, floor jacks, lifts, and retread manufacturing equipment were the most likely purchases noted.