AKRON (Sept. 26, 2005) — Companies that traditionally had focused on automotive service or specialties like mufflers have made big splashes in recent years by increasing their presence in the tire retail arena.
Independent tire dealers, however, aren't quite running scared.
In an unscientific poll on Tire Business' Web site, only 4.1 percent of 147 respondents said automotive chains, like Pep Boys—Manny, Moe & Jack or Midas Inc., were their strongest competition. Mass merchandisers, huge regional tire dealers—and even other small tire dealerships—ranked higher in the poll.
John Spino, owner of Spino's Tire Service in Greensburgh, Pa., said Pep Boys and Sears Auto Centers are his toughest competition, but only on price. He said some customers try to low-ball him on price after hearing Pep Boys' advertising deep discounts, but in the end the two businesses attract different customer bases.
“The people who would never come to me are a price person,” Mr. Spino said. “…People who are going for price, they think Pep Boys is cheap-priced, so that's what they want.”
Even since Pep Boys, which operates 593 outlets in 36 states and Puerto Rico, started offering name brand tires in addition to its private labels, Mr. Spino isn't losing sleep over the competition. “I haven't had to really battle with them on price on a Michelin tire.”
While Pep Boys works on a retail revitalization plan, the Philadelphia-based firm anticipates upswings in its tire business. For years the chain's private labels—including the Cornell and Futura brands—were its bread and butter.
“Tire sales were down 6 percent as we found significant customer resistance to the tire price increases we have received, in particular with our entry-level opening price point touring tires, a historical focus for our private label program,” said CEO Larry Stevenson, while discussing the firm's second quarter results. “However, we are starting to see substantial incremental sales from our investment in branded tires launched a year ago.”
Mark Leuck, owner of single-outlet Quality Tire & Auto in Darien, Ill., shares a wall with a Merlin Muffler & Brake shop. Last fall, Merlin's Franchising Inc.—which oversees the roughly 60 franchise and 10 company-owned outlets in Illinois, Georgia and Michigan—announced a lifetime tire warranty after about 20 months of selling tires. Merlin's president and CEO could not be reached for comment about the progress of the warranty.
Mr. Leuck said he has not had significant competition from the Merlin's shop. “Not in the least,” he told Tire Business. He said some customers go into Merlin's to hear about the warranty but then come to his shop to ask if there's a catch. He said the customers often end up buying from him. “We don't go after customers looking for the cheapest price,” he said. “We don't build our business that way.”
He jokingly calls his customers the ones that “didn't just fall off the turnip trucks” because they know the value of his service and are willing to pay for it—and then return later. “Just by giving a fair price and quality work you can beat the pants off your competition,” he added.
Richard Cook, owner of Bunge's Tire & Auto Center in Elgin, Ill., for about 20 years, worries more about Discount Tire Co. and Firestone Tire & Auto Service Centers in his area than automotive service chains like Merlin's. Bunge's, which has been in business about 70 years, has formed a loyal customer base. Also, few customers go to the automotive service chains first for tires, he said.
Robert Falconi, president of Precision Auto Care Inc., said the same for Precision Tune Auto Care outlets. Precision Auto launched a tire program to its 330 U.S. franchise stores in early 2004. So far, about 80 to 90 franchise outlets are selling the tires, moving fewer than 100,000 tires a year. The company soon wants to sign on 125 to 150 shops moving 180,000 to 200,000 tires a year.
The firm's selling point to its franchise owners is the profit opportunity—not necessarily from the tires but from additional services. Shops promote tires primarily through direct mailings to current customers. “We can become that one-stop for them,” said John Wiegand, senior vice president of operational programs.
Mr. Falconi added that the franchise outlets compete in a way with tire dealers. “Yes, we're in competition with them, but we're not necessarily trying to proactively go for the tire (dealer) customer,” he said.
The main concern, he said, becomes the millions of dollars worth of unperformed maintenance annually. “We really feel strongly that the work's out there, you just have to go after it and get it.”