Less than a year ago, Salt Lake City grabbed the international spotlight as the host city of the 2002 Olympic Winter Games. Now the metropolitan area has caught the attention of several major tire dealership chains bent on expanding their market presence.
And that has some local tire dealers stumped.
``Salt Lake City is such a cutthroat market. Business is limited. Everybody is going after a limited market,'' noted Colby Ellis of Colby's Tire, which recently saw a Les Schwab Tire Centers Inc. store open up nearby.
The city has been experiencing a boom in general retail construction and the increase in the number of tire stores, in particular, has fueled price-competitive conditions.
``It's an ugly tough market-for the last 15 years-and it gets worse all the time because of the additional competition coming in,'' said David Early of David Early Tire. Asked what he thought was the sudden attraction for the large retailers: ``I have not a clue.''
According to Big O Tires Inc., which has been a major player in the city for years, and for Northwest Tire Factory and Les Schwab Tires, which are establishing footholds in the market, their expansions are just outward developments of their western markets.
``It's a natural growth for us,'' said Brian Capp, director of sales and marketing for Les Schwab, which plans to open its fourth store by the end of October. ``We're in most towns in the states we're in. It's just timing. We grow by 15 to 20 stores a year, and we're slowly growing outward.''
Big O Tires President John Adams said the Salt Lake City market is no more competitive than the rest of the U.S. ``The entire country is more competitive. Everyone is chasing the same dollar.'' However, he noted that Salt Lake's local economy is doing better than the rest of the country.
Salt Lake City is the largest metropolitan area in Utah, which, according to the 2000 U.S. Census, is the fourth fastest growing state and ranks 34th in the nation in population with 2.23 million people. Nearly half that population resides in Salt Lake County, one of four populous counties that make up the metropolitan corridor known as the Wasatch Front.
Within that concentration of populace are rising incomes that are drawing higher-end retailers into the market, according to Valuation International Ltd. of Atlanta, a real estate consulting and appraisal firm. It ranked Salt Lake City as the most lucrative retail market in the country.
Other retailers seem to agree. Big O's Mr. Adams noted that his company is competing with drug stores and fast food restaurants for the limited-and high-priced-prime real estate locations in the area.
The growth in population has been attributed to migration into the region and a high birth rate, according to the Salt Lake City Chamber of Commerce.
That high birth rate may contribute to the fact that Utah has the youngest population in the country, with a median age of 27.1 years in 2000.
``There are very large families here,'' Mr. Early said. ``People have to budget their money more. It doesn't make sense for the proliferation (of tire stores).''
Gary Lloyd of G&D Tire & Service also described his fellow citizens as very financially conservative. ``In the past, people lived beyond their means. People are coming to grips with that.''
But Big O sees the potential of such demographics. ``They have a lot of vehicles and they drive quite a bit. If they leave Salt Lake to go to other communities, it's a day's drive. That puts a lot of miles on the vehicle,'' Mr. Adams said. He also described the residents as outdoor enthusiasts who drive long distances to ski resorts or other attractions. ``And that's good for the tire business.''
Overall, Mr. Adams doesn't think Salt Lake consumers are different from others around the country-with a mix of those who want to pay the least amount for a tire to those who desire the top-end tire.
Big O has a major market presence with 54 locations in the region. It was strengthened recently by its franchisees' acquisition of the Dick Morrison Tire Co.'s chain of nine Grandma's Tires locations. Englewood, Colo.-based Big O said its room for growth is limited in the market but it may add one or two stores per year.
David Early Tire, the largest locally owned dealership with 16 Salt Lake City area stores, has no immediate plans to expand. The chain is a Bridgestone/Firestone Affiliated Dealer, but it also sells the BFGoodrich, Michelin and Pirelli brands. Last year it expanded northward, buying out the two-store Hansen Tire in Logan, Utah.
Discount Tire Co. of Scottsdale, Ariz., is established in the Salt Lake market with seven stores, but the company did not comment on its plans for the region.
Les Schwab Tires, based in Prineville, Ore., just moved into the market a year ago and intends to open an undetermined number of stores during the next year. ``Our areas of growth will be in the California and Utah area next year,'' Mr. Capp said.
Meanwhile the newest entrant, Northwest Tire Factory of Portland, Ore., signed its first member dealership in Salt Lake City in September-TBH Tire Factory-with a second store set to open in November. The dealer group, which provides distribution and marketing programs to independent tire retailers, plans to have six to eight more locations flying its banner in the next year or so, according to CEO Nick Hodel.
He said Tire Factory's growth in the western states has expanded now into the Salt Lake area. And he is not concerned about the competitive nature of the market. Unlike other markets Tire Factory operates in that are usually dominated by a large retailer, ``the (Salt Lake) market is not owned by anyone right now.''
The Salt Lake City market also has a myriad of other tire retail chains, such as warehouse club Costco Wholesale Corp., Sears, Roebuck and Co. and Pep Boys-Manny, Moe and Jack. But according to a 2001 market survey commissioned by two local newspapers, the top five market leaders, in order, were Big O, Discount Tire, Costco, Goodyear (represented by as many as a dozen local independents) and David Early Tires.
Combating the onslaught of the big retailers could appear daunting to small dealerships. But for some the weapon of choice is customer service.
``The big guys help me, in my opinion,'' said Colby Tire's Mr. Ellis, who has remained busy with two service bays. ``I stick to my customer base. With the bigger stores, they don't get near the personalized attention.'' He explained that his customers deal with the same service people every visit while, due to employee turnover, customers might deal with someone different every time at the large stores.
G&D Tire is located on the east side of the city where there's not much property left for new-store construction. So while owner Mr. Lloyd has noticed the influx of big retailers, ``so far this year it has not impacted us. We've had an increase in sales and in tire sales.'' One factor helping revenue is the availability of low-priced tires offered by his Goodyear supplier. ``Seventy-five percent of my sales are lesser-priced tires,'' he said.
Big O is his biggest competitor, along with Discount Tire and Pep Boys. Big O has a strong advertising presence, he said. So his dealership emphasizes service. ``We concentrate on service to the public. We make sure they are happy when they leave the store.''