Current Issue
Published on April 27, 1998

WEIGH DEALER PROGRAMS CAREFULLY

Remaining independent is tough in today's business climate where a ``big-company'' image and marketing brawn are considered essential to success. Owners of independent tire dealerships are under pressure to trade individuality and operational independence for the presumed security of large dealer collectives or manufacturers' franchise programs.

Increasingly, dealers are warned not to ``go it alone'' in the face of industry consolidation and the uncertainty of tomorrow's marketplace.

But determining whether to take part in such programs shouldn't be based on popular industry opinion. This decision calls for careful evaluation of a program's advantages and how it answers a dealership's needs.

Time will tell whether ``joining up'' is the best strategy.

Doubtless it will prove beneficial for some dealers, but not for others.

Independent tire dealers always have considered themselves threatened—sometimes by conditions remarkably similar to those of today.

As early as 1921, dealers organizing what now is called the Tire Association of North America voiced alarm at tire makers' national accounts programs, cut-throat tire pricing by mass merchandisers and other perceived threats.

Despite such fears, many of those dealerships not only survived but prospered. Some have grown so large they're now seen as a threat to smaller independents.

This is not to suggest that all tire dealers and retreaders shun participation in marketing groups or franchise programs. On the contrary, many may find them advantageous.

But nationally recognized identity and massive economies of scale do not guarantee success—as the tire-market withdrawal of retailing giants K-Mart Corp. and Western Auto Supply Co. attests.

When all is said and done, the fate of most dealerships will rest on their efficiency of operation and perceived value to customers. That will remain the case regardless of whether they participate in such a program.

Before deciding to join any group, dealers should weigh the program's benefits against the costs—not only in monetary terms but also in freedom of operation.

Some franchise programs, for example, limit dealers' ability to expand into new markets, handle competitive products or other retreading systems. Some make it difficult to sell a business without the franchisor's approval.

Conventional wisdom says most tire dealers and retreaders can't survive independent of such franchises or marketing programs. But industry thinking on this subject has been wrong in the past. Dealers need to look carefully at the various available programs before they leap.

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