LAFAYETTE, Colo. (Aug. 1, 2001)—OK dealers, we're going to take a quick, impromptu poll: All those who heavily rely on automotive service as a profit center, despite the “tire” in your dealership's name, bellow a loud, thunderous “moo.”
Whoa—the cacophony is bordering on some serious ear damage.
No matter how much they may claim that “radial” is their middle name—and selling tires is where they'd love to be—vehicle repair has, for many dealers, become the “cash cow” that keeps the ol' cash register ringing. Just a glance at some of the top retail dealerships in North America, based on data gleaned by Tire Business surveys, reveals that the average profit margin gained from performing automotive service is 63 percent. Of the 46 companies that provided data, auto service represented nearly 39 percent of sales. At one dealership that percentage hit 72 percent.
Getting to the point where a dealership has to keep milking that auto service bovine to keep profits from going south has likely been a gradual process for many. But some, like Stan Elmore, started off making a conscious effort to truly be a full-service shop with the scales tipped heavily toward repair work.
'Commodity' vs. specialty
Back in 1973—with a love of cars coursing through his veins, an interest in turning wrenches and only a year's distance between him and high school—Mr. Elmore took a hard look at career possibilities. While working with Wally Prather, a major tire wholesaler and gas station operator on Colorado's Front Range between Denver and Boulder, Mr. Elmore saw a need for a retail tire store in Lafayette, Colo. Even though his sole business experience had been working a short stint as a grocery clerk in his hometown of Lake Wales, Fla., he and Mr. Prather partnered up and Stan's Tire & Auto was born.
Busting tires and doing some of the easier mechanical jobs, Mr. Elmore learned the ropes as he earned, eventually buying out Mr. Prather's stake in the business.
Selling tires—along with some oil changes, brakes and light mechanical work—was the hook for the fledgling company. But it didn't take long to realize, Mr. Elmore told Tire Business, that “tires are a commodity, and I don't necessarily think good automotive repair is or should be a commodity.”
However, he pointed out, “if you price yourself and do your marketing on your service as some of your competitors do, you could probably make auto repair a commodity, just simply by lowballing your pricing.”
That's why today the dealership—located in the shadow of the Rockies in a fast-growing urban sprawl area—tips its balance sheet 90-percent toward auto service and is, Mr. Elmore admitted, “an example of a business that's higher priced—not inexpensive” on the repair side. Last year the company pulled $1.9 million in sales, with tires accounting for only $150,000 of that.
As the business evolved, he said, “I realized better profits and a greater future for me personally by going with a higher-tech auto repair site. It's been our main focus since the mid-'80s, and I'm not sorry I did that.”
Though that move eliminated the need to stockpile tons of tires, he added, the dealership carries Toyo and also sells some Multi-Mile and Michelin lines. And the tire side of the business opens up undercar and maintenance possibilities.
Some dealers may lament having had to turn to auto service to pay the bills, but Mr. Elmore gladly has pursued it “knowing the gross profits and pricing structure is so much better on auto repairs than it is on tires.”
With its four ASE-certified master technicians and three lube and tire techs, Stan's Tire performs tune-ups, clutch, brake, alignment, suspension and driveability repairs and specializes in computerization and emissions work. Because its staff is “very highly trained” and uses the latest—read that “expensive” equipment—“we can do things other than commodity jobs like brakes or front-end,” he said. Due to the area's mile-high altitude, emissions work is “pretty high-tech. And that, in itself, sets you apart because you're not just doing brakes and the easy stuff.”
Without denigrating his tire roots, 48-year-old Mr. Elmore said, “honestly, everybody can sell a tire. But everybody can't fix computer-controlled emission problems and do them competently.
“I make a difference by setting us apart from the competition. We make sure everything we do is different than walking into your typical shop,” whether it's a tire store or a service shop that relies heavily on mechanical repairs.
The 12-bay, AAA-approved shop has a staff of 16, including two service writers at the front counter. They're not, he noted, ex-techs, but rather were chosen for their people skills and personality.
A big proponent of on-going training, no matter where it's available, Mr. Elmore has sent staffers to California, even to Chicago for Dale Carnegie courses, numerous customer service skills and phone etiquette classes and mechanical instruction.
“I don't think there's any classes we haven't been to,” he said. “It's very, very important that when people walk in the front door, they feel, 'Wow, this is a nice, professional place.'”
“We want everyone to be wowed,” he continued. “…(P)eople go back to places where they have a touchy-feely, good experience.”
That means having a spotless showroom and waiting area, he noted, and bathrooms that are five-star-restaurant clean.
Marketing's a key
While some similarities exist, there is a difference between marketing a business as a tire store—with its reliance often on beating a competitor's tire pricing—as opposed to primarily a service shop. “We're image-building marketers,” Mr. Elmore explained. “I haven't run an ad with a price for 15 years. That's not what I concentrate on.”
The company has almost no presence in the Yellow Pages and only runs an occasional small newspaper ad. Instead, it leans toward cable TV ads that typically feature “very powerful,” mostly female customer testimonials since women comprise nearly 65 percent of its business “and we do a good job of catering to them,” he said.
When Stan's Tire opened, Lafayette was a town of 4,000 that now has grown to about five times that size. The dealership draws from a trade area of some 60,000 persons.
“We've capitalized on new people moving in by using (marketing) sources that reach them, to let them know who we are in the community,” Mr. Elmore said.
The company uses several means to reach newcomers: Potential first-time Stan's Tire customers receive coupons for a free oil change via a local “Community Welcome Wagon” service that hits 25 to 30 homes a month or through Moving Targets, a new-resident direct marketing firm that sends out customized letters. Once Stan's gets a potential patron in the door, no high-pressure tactics are used, Mr. Elmore said. “It's up to us to make that visit pleasant, set the tone for that customer and make them want to come back.”
No matter the type of shop, he said dealers still must “build relationships with customers, reach out and be involved in their communities.”
While customer referrals are the dealership's top source of new customers, it also picks up an average of a half-dozen new ones per month each from the cable ads, AAA referrals and a personal message marquee in front of the outlet. Direct mail and the community Welcome Wagon provide many more—all tracked on a monthly basis via computer software that indicates where these customers are coming from.
Depending on the season, the dealership's new-customer count ranges from a low of 48 to a high of 90 per month.
“I'm extremely happy when I look at my new-customer report at the end of each month and see the numbers I'm bringing in,” he said. “I have to say we're doing something right when we have that many new people walking through this door.”
That's despite competition from a Goodyear outlet down the street, a Big O Tires Inc. store a mile away, a new Great American Tire store three miles away, and three medium-sized independent repair shops, a couple of smaller ones and several car dealerships nearby. “I make a difference by setting us apart from the competition, making sure everything we do is different” from a typical shop, he said.
“Our challenge is to make sure they keep coming back.”
To make its site more appealing, Stan's Tire recently underwent a complete exterior makeover—its first since the 1980s—with a stucco fascia applied to its 7,500-sq.-ft. metal building. Meanwhile, to keep the business “on the leading edge” technologically, Mr. Elmore's son, Scott, just joined as special projects manager, with responsibilities for communications and Internet issues.
Value of maintenance
The dealership's real bread-and-butter revenue, according to Mr. Elmore, comes from capitalizing on regular preventive maintenance work.
“When you get your service people capable of explaining the value of maintenance to your customers, you become a maintenance shop instead of a break-down shop,” he explained. “You can control scheduling a lot easier instead of your schedule controlling you…. With maintenance, you can stay booked days, weeks in advance. Customers then begin to understand the value of that.”
The shop has nine networked computers providing access and information for all technicians. Front-counter staffers print out for customers their vehicle's 30,000-, 60,000- or 90,000-mile maintenance schedule. They also get mailed—eventually they will be e-mailed—regular service reminders. That helps level out the peaks and valleys so common to shops during those often fallow January and February months. A new Web site—www.stansautomotive.com—just went online as a promotional tool.
A firm believer in empowerment, Mr. Elmore said Stan's Tire employees are involved in the shop's day-to-day operation, freeing him to do planning and management rather than work on vehicles. They helped set sales goals last year of $1.8 million, then beat that. This year the “ultimate goal” is $2 million, he said, “and we're on track to hit it.”
The company is growing in double-digit percentages every year “and that's pretty awesome for a 28-year-old business.”
Employees, likewise, are rewarded for their expertise, hard work and loyalty. He's had two longtime workers retire from the dealership in the last three years—a tech and a bookkeeper, both who were with the company from the late 1970s.
“I've got a great staff. They're good, they're loyal, and I pay them well,” he said.
The technically complicated work done at Stan's Tire requires expensive equipment, a higher level of training and, thus, higher payroll costs. “Good driveability technicians are going to make big bucks,” he said.
Mr. Elmore has had pension and profit-sharing plans for employees since the early '80s. He also pays 75 percent of group health care costs—and that includes workers' families. Among other benefits, all employee training is paid for by the dealership, as are costs for ASE certifications, and Mr. Elmore also furnishes workers with uniforms.
To be known in the community, you have to be a visible part of it, Mr. Elmore believes.
His dealership—a block from the local high school—sponsors numerous activities. “There are dozens of organizations in that school. Not just athletics, but math, science etc.,” he said. A volleyball team, for example, did a carwash fundraiser at Stan's Tire recently.
“We're kind of (visible) here, and as a leader in the community I don't turn (anyone) down. That's marketing. We put a lot of money back into our community in helping out and people recognize that, which makes them come back to us.”
Ironically, perhaps the biggest attention- and customer-getter for the dealership has been a large marquee-type sign alongside the four-lane highway in front of Stan's. One day in the early 1980s Mr. Elmore put a message to his wife on it: “Happy Valentine's Day Donna, love, Stan.” Public response was “incredible,” he said.
“That changed everything about what we do here.”
For at least the last eight years he has kept a daytimer calendar on the front counter to keep up with people's message requests. The sign now is changed almost daily, carrying anything from what he calls “neat, positive messages” to community-related events such as 5-K runs, pancake breakfasts and Boy Scout activities.
“Every week there's someone out here in front of my sign with a camera and their kid in front getting a picture taken. It's been awesome marketing—we get so much free press from that, it's incredible. And we never advertise ourselves on that sign. We only do it for other people.”
“I love talking about business, and I get really excited about it,” Mr. Elmore said almost apologetically because, as he put it, “I'm not burned out—I still enjoy the business because I don't have the burden of having every problem on my shoulders.”
He praised his “great staff” for allowing him the freedom to do some traveling—in May he left for three weeks and returned to zero problems.
Mr. Elmore looks at himself as “support staff and marketer” for them, “and they know everything else is pretty much up to them from there. It doesn't have to be the drab, dreary deal that a lot of people think business has to be.”
Apparently others agree.
Stan's Tire won the 1993 National Carquest Auto Parts Excellence Award as the No. 1 service shop in the nation, based on varied criteria including the number of certifications, level of training, appearance, and industry and community involvement. It was a top-10 finalist in 1992, the year the award was launched.
Reflecting on how “strange” it was in 1973 to start a tire store even though he'd never fixed a tire in his life, Mr. Elmore said he's been “fortunate being in a small town. What I lacked in business knowledge and skill in working on cars, I made up for in ability to build relationships with customers and the integrity I had when I started this business. People liked us and wanted to come back….
“I was young and wanted to do it,” he continued, “and was in a time when, if you made a mistake, it didn't break you or kill you, and you went forward. A little more business management training and I would have been much more successful sooner.”
For about the first 10 years, Mr. Elmore said he worked his tail off—and was successful—but wasn't making what he felt he should have been. “And there's still a lot of guys working very hard, but not necessarily working smart.”
As always, the secret to a successful business is “keeping customers happy and wanting to be here—and it takes a lot of skill to do that,” he said.
But many owners don't or can't keep their eyes on the prize if they're knee-deep in the trenches turning wrenches.
“If your focus is just fixing cars everyday,” Mr. Elmore warned, “you're not focusing on all the other issues in the business.”