TORONTO (Jan. 14, 2000) — Canadians enjoy a reputation for civility, particularly as compared with their brash American neighbors.
In the Toronto tire market, however, all bets are off, as a large number of mass retailers, price clubs and independent dealers fight for the motorist´s dollar.
When dealers gather in Toronto Jan. 26-29 for the quadrennial convention and trade show of the Tire Dealers Association of Canada, they will be in the midst not only of Canada´s largest metropolitan area, but also what many consider to be one of the most competitive tire markets in North America.
Canadian Tire Corp. Ltd., the Toronto-based retailing giant, is the main competition in the mass tire market, Toronto independent dealers agreed. But names well-known south of the Canadian border—such as Costco and WalMart—also are establishing themselves here.
"Any consumer can phone 20 of us in this area to find out who has the best price," said Jamie Kelly, president of Ron Mitton´s Tire Service Ltd. in the Toronto suburb of Scarborough, Ontario.
"Toronto is probably the most competitive market in Canada," added Paul Hyatt, president of Superior Tire Auto Fitness Centres in Scarborough. "A lot of American visitors say it´s one of the most competitive in North America: Los Angeles, Miami and Toronto—the three toughest."
Andre Picard, co-owner of Scotia Tire Service Ltd. in Mississauga, Ontario, characterized the local tire market as "dog-eat-dog," although circumstances are slightly different in the commercial tire market, the aspect of Scotia Tire´s business that Mr. Picard oversees. "On the commercial side, independents are the main competition," he said.
Ralph Chiodo, president of Active Green + Ross in Mississauga, attributes the fierce Toronto competition to "a number of players constantly wanting to increase their market share and, in so doing, driving competitors down."
While Canadian Tire and other mass marketers have the biggest impact on competition, auto service chains such as Midas Muffler and Speedy Muffler also are starting to carry tires, Mr. Chiodo noted. Even without them, though, the market would be tight. "The quality of tires is so good, they´re lasting so much longer, and nobody is willing to lose market share," he said.
Along with the large number of players in the Toronto market, Mr. Hyatt sees basic changes in the tire industry as behind the fierce competition in his home town.
"Many of our problems are universal," said Mr. Hyatt, a former president of both the Ontario Tire Dealers Association and the Tire Dealers Association of Canada who now serves on the executive board of the Tire Association of North America. "Competition is still competition, whether in a small town or a big metropolitan area. We grew up with it, developed our own niches. Many survive and do well; some don´t."
Nevertheless, things are very different from the days when tire manufacturers served Toronto dealers directly, Mr. Hyatt said.
"Manufacturers don´t have any passion any more," he said. "It´s a different industry. I think, too, that a North American economy is developing. There will be much closer ties between Canada and the U.S., with cross-border shopping and the Internet. Tire company policies will promulgate that.
"Pretty soon, independents such as myself will be shopping in the U.S.," he added. "Instead of being cousins in the business, we´ll be brothers in the business. Today, it´s easy to plug in a few numbers and get tires shipped, whether from Akron, Montreal, Vancouver or Seattle."
Asked how they could stand out from the crowd in such a vast and rapidly changing metropolitan market, most of the dealers contacted said what Mr. Picard did: "Service, service, service—more service, better service.
"We´re a Michelin dealer, and that gives us the edge," he said. "Everybody has access to our product, but we have a sales force on the
road that stops in and checks up on accounts. Location is a big factor for us, too—we have three outlets in Mississauga."
Ken Simkins, Mr. Picard´s partner at Scotia Tire, agreed that service and inventory—the dealership carries more than 3,000 tires—are just as important for the company´s passenger and light truck business as for its commercial accounts.
"We don´t try to compete on price," he said. "Instead, we appeal to the upper end of the market. We´re in a marketplace where we can afford to do that. We´d rather sell 10 tires and make $40 on each one than $20 each on 20 tires."
For Superior Tire, "knowledge is our No. 1 competitive advantage," Mr. Hyatt said. "Between Canadian Tire and ourselves, we have all the tire brands, but they don´t have the people who know the sizes and the applications."
Active Green + Ross´ management style gives it a competitive edge, Mr. Chiodo said. Twenty-five of its 30 stores are franchises, with "hands-on" owner-managers, he said.
As for problems Toronto dealers face, most agreed that finding competent, motivated personnel is a major hurdle.
"Getting qualified people is an ongoing challenge," Mr. Chiodo said. "We spend more time on that than we´d like."
Some dealers said they deal with the problem by taking matters into their own hands. "You can´t get trained help, so I have my own training program," said Mr. Picard. "We train them from scratch—that´s the most efficient way to do it."
Mr. Kelly said he also trains in-house. "When I hire new people, I teach them my way, or else it´s goodbye," he said. "We work as a team—I don´t have one guy do one vehicle."
Nevertheless, it is difficult to get tire servicers to stay in one place, Mr. Simkins said.
"The people we hire tend to be a very transient group, not long out of school and with no families to support," he said. "We try to keep them by treating them properly and not laying anybody off. But some of them still jump to the mass retailers when they find out they can earn more per hour there. We try to explain to them that when the slow periods come in those places, they´ll be laid off—but they won´t be (laid off) here."
For Mr. Hyatt, "The No. 1 challenge is coping with change. We have regular meetings on coping with change. It´s a personal challenge to understand the relationship between dealers and their suppliers, and it´s difficult, because suppliers don´t really seem to understand it. Loyalty ceased to be an issue a number of years ago. Things just evolved that way."
If the concerns of Toronto dealers seem identical so far to those of their brethren south of the border, there is one concern that seems much less pronounced in Canada than in the U.S.: government regulation. No dealer contacted expressed any fear of government edicts, whether national or provincial.
"We´re a very clean operation, so we have no problem with regulations," Mr. Picard said. "Keeping your shop clean—I was the first one to push that. It reflects on your operation if you´re clean."
In some cases, government regulations have been an aid to business, the dealers said. A prime example is Ontario´s "Drive Clean" program, which requires certification of cars registered in the province for safety and emissions.
The Ontario Ministry of the Environment instituted the Drive Clean program in January 1999, Mr. Chiodo said. "We got on the bandwagon early, bringing new customers to our stores," he said. "All our 30 stores are licensed by the province to perform the tests and equipped with the necessary testing apparatus."