Tire companies to blame for declining profit margins
I found the editorial ``It's time to demand fair value'' in the May 10 issue very interesting. I'd like to share my point of view with you concerning this topic.
In the editorial you wrote: ``Tire dealers, like tire companies, need to get fair value for their products, not only because profit margins are so tight and costs are soaring, but because their products and services are worth it. And it's the tire dealer-on the front lines with the customer-who can create this change most effectively.''
Who has caused this problem? The tire companies-because they have sold to Costco, Tire Kingdom, Discount Tire, etc. The issue at hand is the compromising position the tire companies have placed on the independent tire dealers.
The tire companies continue to sell their products to mass merchandisers, providing them with a higher discount than what they offer to independent tire dealers.
The mass merchandisers are bringing margins down because they can sell the product at a lower price because of the discount they receive from the tire companies.
The tire companies create a disadvantage to independent tire dealers by not offering the same discounts, thereby creating a consumer who demands the lowest price in exchange for value.
Value can only be quantified when the tire companies decide to level the playing field and sell their product to the mass merchandiser and independent tire dealer in a more equitable manner.
Understanding the basic principles of business, tire companies are going to negotiate with the mass merchandisers because of the volume of product they can sell under one company vs. the independent tire dealers.
Therefore, if the independent tire dealer cannot match the mass merchandiser's price-and it's the same product-why should the consumer buy from the independent tire dealer?
In my business, I build customer loyalty. However, I am told when my price is even $10 higher than the mass merchandiser, at that point, my customer feels like they are not getting the ``best deal'' regardless of the level of service they receive from me.
The independent tire dealer builds his reputation on qualified people and qualified service.
My senior staff has 20-plus years of experience-they are not just ``order takers.'' Typically, mass merchandisers do not have employees with this level of experience across the board.
The tire companies have created this environment-the declining profit margin and selling on price only instead of value.
Representing the Independent Tire Dealers Group L.L.C. as chairman, I know our entire organization is focused on increasing our dealer members' profit margins and selling the value of their products and services to their customers
In summary, we are all in agreement that it is always good business to sell value to our customers.
The independent tire dealer is struggling because of the reduced margins brought about by the tire companies and mass merchandisers.
Redwood General Tire
Redwood City, Calif.