Costco Wholesale Corp. is outfitting its 390 U.S. and Canadian warehouse outlets with nitrogen inflation systems in the hope of enhancing tire sales and improving member benefits.
Dunn Tire L.L.C. also recently installed nitrogen inflation systems in two stores, with systems scheduled to go into two more soon.
Costco will offer nitrogen fill-ups for free to its members if they buy new tires or just want nitrogen to replace air in their tires, said Robert Moyer, tire director at Costco, which is the first major corporation to install nitrogen units at all of its locations.
``We would hope that we would drive some sales off having nitrogen,'' Mr. Moyer said. ``But ultimately it was the right thing to do, when we found the better inflation option than air and nitrogen was it, we felt it was our obligation to bring it to our members.''
Dunn Tire installed the units in mid-June at two Buffalo-area stores, and its outlets in Hamburg, N.Y., and Niagara Falls, N.Y., will follow suit. A spokesman said the retail dealership will then evaluate the systems for 90 to 120 days to determine if all of Dunn Tire's 27 outlets should offer nitrogen.
``With today's gas prices, we felt it was the right time to make nitrogen available to our customers,'' Chairman Randy Clark said in a statement.
For now, Dunn Tire charges $5 a wheel for a fill-up, though that amount could change, the spokesman said. Dunn Tire also is working out the service bay logistics to quickly purge a tire's air and replace it with nitrogen.
Dunn Tire launched the systems with live radio remotes plus newspaper advertisements offering 50 percent off a fill-up. The response, the spokesman said, was ``unbelieveable.'' He said Dunn Tire primarily sees nitrogen as a way to stay a step ahead of the competition.
``New technology is brought forth, and we're going to be there,'' he said, adding he believes 35-40 percent of motorists in the next few years will fill their tires with nitrogen.
Costco is buying its nitrogen generation systems from Branick Industries Inc., which said the systems should be in place by August. Costco's order technically was for 400 units, said Phil Giallombardo, director of sales for Fargo-based Branick, but he declined to quantify the order's value.
Branick, which has been wooing Costco since November, sold the systems to Costco through Los Angeles-based distributor Westesco.
``They really did their homework,'' Mr. Giallombardo said. ``They had our unit with a stopwatch against competitors' units.''
Nitrogen's main benefits are reportedly that it maximizes fuel economy and tire life, reduces rust and corrosion on the rim and valve hardware and maintains tire pressure better. Branick also is touting a recent Goodyear bulletin to dealers that it supports the use of nitrogen in its products. Michelin North America Inc. sent out a similar announcement.
Branick CEO Duane Brasch said the deal is a windfall for his company both because of the revenue from the order as well as the marketing push it gives for nitrogen in general. He added Costco plans to promote its nitrogen systems with banners, point-of-sale materials and other materials.
``They're definitely going to push it,'' he said.
Many dealers still are on the fence about nitrogen, wondering if it will truly be a service that motorists care about.
``I'm not convinced yet that there is any significant benefit to my customers or to my tire store,'' Ed Miller, president of Ed's Tire Factory Inc., said recently in response to a Tire Business online reader question.
But Mr. Moyer at Costco said he is pretty certain of nitrogen's future.
``Every major tire retailer is testing units,'' he said. ``I believe personally it's going to be the norm pretty soon.''