SOUTH BEND, Ind. (Aug. 13, 2002)—When Dutch immigrants Peter and Wilma Veldman founded the Tire Rack in 1979, they had no idea that their lone retail tire store in Indianapolis would one day become an industry giant that supplies hundreds of thousands of tires and wheels across the U.S.
It all started when their son-in-law Mike Joines suggested the company warehouse Phoenix Stahlflex brand high-performance tires, which at that time were popular in Sports Car Club of America (SCCA) Solo II and Autocross competition—and not so easy to find.
Mr. Joines proposed that Tire Rack ship Phoenix Stahlflex tires to interested customers throughout the U.S. The Veldmans agreed to try it and—once they had the brand in stock—advertised it in AutoWeek, a car enthusiast magazine and sister publication of Tire Business.
That business venture, according to Matt Edmonds, Tire Rack's marketing director, formed the company's premise: To have products people want in stock, ship them out quickly and employ salespeople with expertise who can answer customer questions about the products.
By the late 1980s through 1990, Tire Rack transformed itself from a retail operation into a mail-order company based in South Bend that distributed hard-to-find high-performance tires to consumers and dealers.
Today, Tire Rack has more than 450,000 tires ready to ship out from four distribution centers on any given day, Mr. Edmonds said. Many in the tire industry have assumed Tire Rack is a “dotcom” firm. However, Mr. Edmonds, who also is a son-in-law to the Veldmans, noted that the tire and wheel distributor really is a family-owned business that has succeeded in serving a niche—and doing business over the Internet only has made that job easier.
“Dotcoms are all front-end with no package,” he said. “We know the product….”
Dealer or competitor?
In the middle of South Bend's corn fields sits Tire Rack's new, state-of-the-art 520,000-sq.-ft. distribution center and headquarters, where the firm relocated to almost a year ago. Trade and automotive journalists were given a tour of the facility during a July 18 driving event jointly hosted by Tire Rack and Kumho Tire USA.
Workers in the warehouse, many of whom are in their 20s, drive loading vehicles down spacious aisles where thousands of tires and wheels are stacked to the ceiling. They scan the bar codes of orders they receive into a database, then retrieve the products from aisle numbers displayed on computer terminals.
The tires and wheels are then invoiced and loaded onto retractable conveyor belts that move the products directly to the loading docks where truck trailers wait. The warehouse itself is brightly lit and clean.
The company can reach nearly all points in the U.S.—except for south Florida—within two business days through United Parcel Service and Federal Express deliveries, Mr. Edmonds said.
Tire Rack claims to be the largest mail-order tire and wheel company in the country. Its retail customers began with enthusiasts and racers, he said, then expanded to include luxury car owners, consumers seeking specialty applications and commodity tire customers.
On the wholesale side, the company supplies tires and wheels to mass merchandisers, independent tire dealers, car dealers, specialty service providers and national and regional tire retailers. Wholesale tire prices are kept the same for all customers and are not dependent on purchasing volume, he said.
Tire Rack also is the official original equipment replacement source for Honda, Audi, Subaru and Porsche dealers in the U.S.
“We carry a broad range of product and can get the product to them quickly and cost effectively,” Mr. Edmonds said.
Porsche dealers rely on Tire Rack for all their tires, he said, adding that “it's hard for the tire manufacturers to supply all these car dealerships.”
Tire Rack carries 14 tire brands and 20 wheel brands, 11 of which are exclusive lines.
Upstairs in the building's offices, employees process tire and wheel orders that come in from the company's Web site, www.tirerack.com. Launched in 1998, the site has become a significant part of Tire Rack's business, Mr. Edmonds said, since it shows up-to-date information on tire and wheel fitments and available inventory.
Online orders are reviewed to make sure the products that customers need are appropriate for their vehicles, he said, and then the customer's credit is verified before the orders are sent to the warehouse.
If the orders are placed in the morning, Tire Rack will ship the requested products that same day, he explained. Besides South Bend, customers can choose to receive products from Tire Rack's other three warehouses: in Newark, Del., Shreveport, La., or Reno, Nev. Both the Reno and Shreveport centers are 175,000 square feet while the current Newark center is 150,000 square feet. That will change when Tire Rack moves into a 220,000-sq.-ft. building in Newark in September.
About 10 percent of Tire Rack's retail customers use the firm's approved tire dealer outlets to install and align their tires and wheels, according to Mr. Edmonds. They're told ahead of time how much the dealer will charge for labor.
He acknowledged that getting the first 200 independent tire dealers on board to service Tire Rack's customers was a challenge. But that all changed when dealers realized they could gain a repeat customer by agreeing to install tires and wheels ordered from Tire Rack.
Now, the company gets so many offers from dealers willing to partner with it that Tire Rack carefully monitors which dealerships can participate in its service network, he said. If Tire Rack receives multiple complaints about a particular dealership, the firm automatically drops that company from its recommended list.
For the past five years, Tire Rack has offered dealers an interactive wheel fitment guide called Pitstop for their customers. The program comes with a computer kiosk and CD-ROM that's updated monthly, Mr. Edmonds said. Tire dealers pay $1,295 for the complete system or, if they use their own PC, $119 for a year of CD-ROM updates.
Tire buyers can browse through the different wheel sizes that would fit their vehicles. Just this past June, Tire Rack updated Pitstop to include tire size recommendations, Mr. Edmonds said.
To date, Tire Rack has sold 180 of the first version of the kiosk and 100 of the second version, he said.
All in the family
Tire Rack's beginnings could read like a classic story of two immigrants in pursuit of the American Dream.
Peter Veldman came to America in 1949 from war-torn Holland to work on farms around the Midwest and see more of his new country, Mr. Edmonds said. He was unexpectedly drafted into the U.S. Army and served a tour of duty in Korea while “the whole time, Wilma Zents was back in Holland waiting for him,” Mr. Edmonds explained.
In 1952, Mr. Veldman returned to Holland to marry Wilma. He then came back to America to pursue his dream of building a business and a home for his new family. That vision began to take shape in 1956 when he leased his first service station in South Bend.
Mr. Edmonds said the Veldmans moved to a larger service station in 1960 and focused on the automotive business, which naturally branched out into tires even before Tire Rack was launched. From 1982 on, the Veldmans shifted the company focus to a mail order business on the suggestion of Mr. Joines, but continued to operate the Indianapolis store until 1990 when they opened the Reno warehouse and chose to concentrate on wholesaling, Mr. Edmonds said.
Today—with the company situated in the shadow of the University of Notre Dame—the whole Veldman family is active in managing Tire Rack's operations. Mr. Veldman still comes in to take tires off cars and run the warehouse while Wilma works in credit and accounting, Mr. Edmonds said. Their daughter, Connie, works in customer service while her husband, Mr. Joines, handles purchasing and vendor relationships. Their other daughter, Sharon, who is married to Mr. Edmonds, also works in customer service.
The Veldmans also have two sons: Tom is responsible for legal and financial issues while Mark works with the company's Web site.
Mr. Edmonds jokingly refers to himself as the “outlaw” rather than an in-law who in 2001 urged the Veldmans to leave their former 440,000-sq.-ft. headquarters building for the current facility. He added that the Veldmans work hard to create a family-like atmosphere that's “neat and fun” for Tire Rack's 350-plus employees. As a result, he said the company has low turnover.
In a garage adjacent to Tire Rack's South Bend warehouse, a few workers sell sets of tires and wheels to local residents and perform alignments. Outside the front of the building, an eight-acre test track is used by the company's sales representatives to test all tire brands under real-world conditions.
All of Tire Rack's 79 sales reps are required to spend an average of 80 hours per year in the company's classroom learning about new products, tire technology and seasonal issues affecting tires in order to know which brands to position with which vehicles, Mr. Edmonds said, noting that “there are no bad tires.” In addition to the test track, the reps also use South Bend's community ice rink to test drive winter tires.
Not only does Tire Rack train its salespeople rigorously on product knowledge, but it also monitors sales calls to ensure they know what they're talking about, he explained. All of this meticulousness is how the firm ensures customer satisfaction—something that managed to catch the eye of J.D. Power & Associates.
In 1998 and 1999, J.D. Power called Tire Rack the “Best Passenger Vehicle and Light Truck Tire Retailer in Customer Satisfaction.” The research firm introduced the tire retailer category in '98. It later revised its criteria for tire retailer to dealerships having a physical building where customers can walk in, buy tires and have them installed on-site. That eliminated Tire Rack's chances of ever winning the award again, Mr. Edmonds said.
Consumer Reports has mentioned Tire Rack as a mail-order place where tire buyers “may be able to save considerable money.” Those endorsements from Power and CR highlight why Tire Rack has been successful in its niche: It puts the customer ahead of the product.
“People want choice,” Mr. Edmonds said. “They don't want one manufacturer. They want multi-brand options. That's the beauty of what we do. We tell you that this tire fulfills your needs because it does, not because it's a certain brand.”