Some economic forecasts predict modest growth in the U.S. economy in 2003; others are still waiting for the economy to bottom out. But amid the varied opinions, the consensus among several economists is that tire dealers should focus on boosting their repair business for the foreseeable future.
``(Businesses) should look at 2003 in a cautious way,'' advised Michael Walden, an economics professor at North Carolina State University. ``We're not going to pick up where we left off in the late '90s.
``Think of an economy that is growing but at a much slower pace,'' he added. Other economists expect the economy to improve closer to year-end.
Consumer confidence is good, according to Mr. Walden, as long as the economy improves and labor rates rebound. But, he added, two things could put a monkey wrench in the optimistic forecasts: another terrorist attack on U.S. soil and a war with Iraq that goes awry.
But Edward King, director of small business services at Wayne State University in Detroit, is not so optimistic, predicting that the economy hasn't bottomed out yet. He said the stock market has a six-month lead as an indicator of economic conditions. But he noted a slow economy is not necessarily bad news if businesses learn to adjust. As for the tire business-``When the economy slows down, the repair business goes nuts,'' he said.
When times are tough, people buy cheap tires or used tires and try to keep those tires running, Mr. King noted. Businesses need to be creative and adapt to consumers' needs, such as marketing used tires or low-priced tires and promoting tire repairs. He advised tire dealerships to expand their repair service by adding mufflers or shock absorber service, for example, because ``if there is one magic word, it's `repairs.' ''
Recent incentives from auto manufacturers caused people to buy new cars in the past year, but Mr. Walden expects that to change.
``I would think we will get into a situation in 2003 and 2004 where the incentives will disappear as the interest rates increase,'' he said.
This will prompt people to keep their vehicles running longer, which in turn will create a surge in the repair business in the latter part of 2003 and into 2004.
Therefore, tire dealers should go after the market that exists, Mr. King said. ``Advertise that you sell cheap tires. Advertise that you sell mufflers, shocks, repairs. Say, `We'll work within your budget.' Even offer financing. Compete on price, repairs, selection.''
Consumers expect deals and lower prices, Mr. Walden added. In addition to being price-competitive, ``in the long run the best thing businesses can do is service. Provide consumers with honest, consistent service. Follow through on your promises and be viewed as a vendor that can be trusted.''
Businesses need to stand out from the pack, he said.
In a flat market, the businesses that are still growing are businesses that are unique, said Randolph St. John, a counselor with Service Corps of Retired Executives, a resource partner with the U.S. Small Business Administration.
There are businesses that are well established and take very good care of their trade-and they seem to be the ones that continue to grow, he said.
``There are a lot of businesses out there, and there are a lot of businesses not being done well.
``Garages that have certified technicians, that take care of customers, that don't try to (cheat) the customer, that make customers for life, are doing very well,'' Mr. St. John said.
``I'd stress `back to basics.' Do your job better. Get more involved in marketing,'' he said. ``Go to your customer, don't wait for them to drive in.''
He urged dealerships to ``market, market, market.'' That involves advertising and direct mailings and building a strong database of customers. ``Send reminders that maintenance is due instead of just putting a sticker on the windshield.'' He also suggested dealers offer coupons for free oil changes, free engine checks and free tire rotations to attract customers.
But while competing on price, ``don't sell yourself too cheap,'' he added, suggesting retailers ask for a 50-percent margin on parts and a 50-percent margin on labor. He admits that in some cases that's hard to do, but dealerships can justify this to the customer by explaining that, unlike mass merchandisers, the dealership can professionally install parts and service their vehicle.
As for capital improvements, Stephen Smith, professor of agricultural and regional economics at Pennsylvania State University, said risk takers could take advantage of the low interest rates. ``If they can get financing then they would be ready for the next upswing.''
However, others advised holding off on capital improvements unless the equipment is cost justifiable and there is the potential for increased sales. If anything, businesses should consider upgrading their computers and related equipment once their sales have recovered, Mr. Walden said. ``There are a lot of good deals on the latest business technology out there.''
Labor is another area where dealerships need to weigh sales expectations against desires to hire additional employees. Dealerships should be confident their sales are sufficient to support extra personnel, as labor is always the most expensive component of a small business.
Mr. St. John stressed the importance of employing certified technicians but noted there is a shortage of qualified mechanics. To counter this problem, he said dealerships would be wise to have a couple of apprentices on staff who are working on their certification ``because that is where you get the new ones.''
He acknowledged that one of the weaknesses of small shops is not paying trained employees a competitive wage, but added: ``If you treat people right and pay a competitive wage...they'll stay.''