AKRON (Nov. 5, 2001)—Despite the growth of medium- to large-sized retail chains in North America—100 dealerships with 10 or more stores, including 52 with 20 or more—the 15,000 to 20,000 small independents with one, two or three stores still depend on independent wholesalers for the bulk of their wares.
In order to service these accounts, independent wholesalers today seek more and more to offer their customers exclusivity or other value-added benefits, according to representatives of wholesalers.
Exclusivity on the one hand can mean a proprietary private or imported brand, or territorial integrity for an associate or affiliate brand. Value-added benefits range from daily deliveries to advertising/marketing support to point-of-sale assistance.
By its broadest definition, wholesale would include the ranks of the nation's leading private brand firms—TBC Corp., Del-Nat Tire Corp., Hercules Tire, Treadways Corp., etc.—and some of the independent importers of off-shore brands, such as China Manufacturers Association.
“The major private brand companies are the only true national wholesale companies,” said Kenneth Dick, executive vice president, sales, for TBC. “We offer customers complete lines of tires, and we offer them the chance to be the exclusive retailers for these brands in their respective territories.”
By controlling the rights to their labels, private branders can sell nationally and restrict distribution to maintain exclusivity, Mr. Dick said. Memphis, Tenn.-based TBC derives the bulk of its wholesale business from the sale of its Cordovan, Multi-Mile and Sigma private labels and Fulda imported brands.
Operating parallel to the national distributors are what could be termed regional warehouse distributors, characterized by companies such as Area Wholesale Tire Co. in Louisiana, U.S. Tire & Exhaust Co. in Wisconsin, Dapper Tire Co. and Interstate Tire Co. in California, or any of the nation's major retail dealers who also wholesale.
Heafner Tire Group, which operates 73 warehouse distribution centers in 18 states, and Dunlap & Kyle Inc., with 12 warehouses in seven states, or Kauffman Tire Inc. with nine wholesale facilities in five states, could be considered multi-regional warehouse distributors, since their territories are not necessarily in contiguous states.
As far as carving out a niche, Charles Potter, president of Area Wholesale Tire (AWT) in Lafayette, La.,, said his company follows a simple principle: stay away from major manufacturers' brands, latch onto a good, solid associate brand or two, and deliver the goods to customers in a timely fashion and at a price that enables them to make a decent profit.
“Easier said than done,” some might respond, but AWT has been following this strategy since the Potter family took over the Baton Rouge, La., Dayton Tire & Rubber Co. warehouse in 1961. AWT now services dealers in six states primarily with the Mastercraft and Remington lines from eight company-owned and three affiliate warehouses in Louisiana, Texas and New Mexico.
Being able to offer 24-hour delivery on orders is a must in today's business climate, Mr. Potter said, so the company maintains a fleet of 47 delivery trucks.
At one time in the not so distant past, it was an accepted corollary that “no retailer is too small to wholesale, and no wholesaler is too big to retail.”
It certainly still holds true among the nation's largest independent tire retailers. According to Tire Business' latest survey of North America's largest tire dealerships, 30 of the 75 companies profiled derive at least 10 percent of their annual sales from wholesaling, with 10 of them reporting wholesale revenues last year of $20 million or more.
The largest independent wholesaler, Heafner Tire Group, returned to its core wholesaling business earlier this year by selling its retail assets—Winston Tire Co. and T.O. Haas Tire—only a few years after acquiring them.
To a certain degree, tire manufacturers depend on the independent wholesalers for sufficient coverage.
Bridgestone/Firestone Inc.'s Tire-Starz program, for instance, uses regional wholesalers to help it recruit and supply small dealers with goods and services. Michelin Americas Small Tires counts on a number of wholesalers in its Alliance program to help it distribute its Michelin, BFGoodrich, Uniroyal and associate brands.
In its fiscal 2000 10-K filing with the Securities and Exchange Commission, Heafner said it believes the independent wholesale business has room to grow because “certain tire manufacturers have reduced their supply to small independent tire dealers due to the inefficiencies of supplying small quantities of product to a large number of locations.”
“At the same time,” the statement continued, “manufacturers have in-creased their supplies to independent wholesale distributors,…who are able to deliver…with greater efficiency.”
One strategy that's been gaining momentum is that of creating a regional marketing cooperative to tie customer dealers together under a common identity. Depending on geography, one hope of this strategy is to allow small dealers to participate in more extensive consumer advertising than they could on their own.
Examples of this approach are Bauer Built Inc.'s Tire Shop or Royal Tire Inc.'s Tire One programs in the upper Midwest.
Consolidation has been part and parcel of the wholesale industry of late, although at a much slower, more controlled rate than among retailers.
Some of the more prominent acquisitions recently include:
· U.S. Tire & Exhaust's purchase of some assets of Team Tires Plus Ltd.'s distribution center in Burnsville, Minn.
* K&M Tires Inc., Delphos, Ohio, acquired Berry Tire Co. Inc., a 75-year-old dealership considered one of the Chicago area's largest tire wholesalers; the deal expanded K&M's reach beyond its Ohio and Michigan distribution areas. K&M also doubled the size of its Detroit area warehouse.
* Sullivan Tire Co., Norwell, Mass., bought Northeast Tire Co. of Bangor, Maine, one of the largest tire wholesalers in New England.
* Bauer Built Inc. took over Fulton, Ill.-based U.S. Wholesale Tire Inc., expanding Bauer Built's customer base in Iowa, Nebraska, Illinois, Kansas, Minnesota and South Dakota, and boosting wholesale revenue by $12 million.
* Silver State Tire Co. Inc. purchased four warehouse facilities from Greenball Corp.—three in California and one in Oregon—in a deal that effectively doubled