In a retail environment where profit margins often are negligible thanks to discounted tires and free tire rotations and balancing, several major tire dealerships smell a profit in the air-nitrogen-filled air, that is.
Charging to fill customers' tires with nitrogen was one of several nuggets of advice discussed during the Tire Industry Association's (TIA) ``Tires at Two Seminar: Successful Tire Dealers Share Their Secrets,'' held Oct. 31 during the Specialty Equipment Market Association (SEMA) Show in Las Vegas.
A panel of six tire dealers along with comments from dealers in the audience led to a lively discussion of how dealerships can compete and improve profits.
The panelists were: Freda Boyer of Purcell Tire Co. of Potosi, Mo., who manages seven retail stores; Ed Chrisman of Big O Tires Reno with one store making $3.5 million; Sean Furrier of Western Tire Centers Inc. of Tucson, Ariz., with six retail stores and $30 million in sales; Larry Mullins of Brandon Tire & Auto Service Center of Valrico, Fla., with one store and $2 million in sales; Dana Foote of Big O Tire of Loveland, Colo., with one store and $2.2 million in sales; and Stu Zurcher of Zurcher Tire Center in Angola, Ind. The panel was moderated by Tom Wright of Wright Tire Service of Anoka, Minn., and Ron Lautzenheiser of Colorado-based College Tire Inc. in Fort Collins, Colo.
Not all the panelists offered nitrogen, but many of the dealers said they believed it is here to stay. Some dealers in the audience related their own success stories with nitrogen, including one who contacted a local newspaper and offered to be interviewed on the subject to generate publicity. Several were charging about $5 per tire for an initial nitrogen fill.
Jim Lautzenheiser, owner of five Big O Tires Inc. franchised stores in Colorado, said he rings up $25,000 in nitrogen sales alone annually, and when he opens a sixth outlet by year-end, he expects to take in $50,000 a year by charging $5 per tire.
Noting how so many tire services are done for free, Big O Tires Inc. President John Adams urged dealers to not only offer nitrogen but to charge for it, not give it away.
``Sell it and pay for the machine,'' he said. ``Everything we do is a profit opportunity. I would never give it away for free.''
Several of the panelists agreed. Mr. Foote, who has offered nitrogen fills for two years, said ``nitrogen and TPMS (tire pressure monitoring systems) go hand in hand.'' After charging $5 per tire for the nitrogen service, his shop was able to pay off a nitrogen generator in two months.
The dealer panel also addressed TPMS.
``TPMS is the biggest change in the industry since the seatbelt law,'' Mr. Zurcher said. ``But it's not different from changing tires.'' The panel concurred that training for TPMS, like any other function of a tire shop, is vital.
Mr. Furrier said TPMS training can create an advantage for a tire store ``when you quote the same product as the guy across the street.... Now we use as a promotion tool that the guys are certified.''
Some of the other topics panelists addressed included:
* Participating in manufacturer spiffs and ``Buy 3, Get 1 Free'' sales can be beneficial, according to some of the panelists. Such sales ``have been around in one form or another'' for years, according to retired tire dealer Don Olson.
``There are so many dealers that don't sign up for POS (point-of-sale) kits. It's a huge advantage if you can get people talking up a promotion or sale.... We make sure promotion signage is up alerting customers, but also our sales people, to the promotion,'' Mr. Furrier said.
Noting that September is a slow sales month, Mr. Chrisman said that for his dealership, running a ``buy 3, get 1'' sale on two lines of passenger and light truck tires had ``a tremendous success rate.... At the same time, Tires Plus also was doing a similar promotion.''
He said he experienced incremental business from increased tire volume during such sales.
Mr. Wright said his stores run such a promotion on tire sizes that hadn't been selling well.
``I think we are going to see as the next thing coming `four (tires) for $80 or four for $100,''' Mr. Adams said. ``It will impact on business. We will see a lot more of these promotions to drive more traffic. Are we going to play that game? If not, we will have fewer customers.''
``A lot of in-store promotions are to get customers into the store.... In doing that you can sell yourself,'' Mr. Mullins pointed out.
* The Internet appears to be the wave of the future for tire store advertising. The panelists said they generally spend about 3 to 6 percent of their sales on advertising.
``Advertising is changing,'' Mr. Mullins noted. ``Newspapers are not being read. We do more direct piece and use the Internet more and more. You need to make contact and then get them into the store.''
Mr. Furrier, who operates six stores, is pursuing the Google regional Internet news route. The dealership uses a specific phone number in its Internet and direct advertising ``so we know who is watching the ads by the calls.''
``There probably is less use of the Yellow Pages than in the past. People are going to the Internet for information,'' Mr. Chrisman said. Mr. Wright added: ``We discussed this last year and the general consensus is to get out of Yellow Pages'' advertising.
Even TIA is getting involved in Internet advertising by joining forces with Ebay Inc. so when someone buys tires on the Internet shopping site, a local TIA member's name ``pops up as a place they can call to get the tires mounted,'' Mr. Wright said.
* Dealers need to fatten their benefits packages to keep employees for the long term, panelists advised. ``Today, hiring people is totally different from 10 years ago,'' Mr. Zurcher said. ``You have to take time hiring people because it's an expensive process if they don't stay.''
Mr. Chrisman said his dealership offers competitive wages in its market and it hires at competitive rates. He also has a regular review process in place. ``You've got to have a complete program-healthcare benefits, 401K, IRA. If you don't have something like that to offer, you should look at it.''
``Flexible work hours are becoming an important item out there, so (employees) have time for family,'' added Ms. Boyer, who noted her dealership has three female managers.
Mr. Olson advocated staff recognition to boost retention and morale. ``Over the years I found people love and like recognition.'' When he would visit any of his 47 tire stores, ``I wouldn't dream of going into a store without taking time to go around and shake (employees') hands and chat with each employee.''
* Car dealerships are competitors to be reckoned with, according to the panelists.
``I think car dealerships are a competitor if you let them,'' Mr. Zurcher said, while Mr. Mullins said they are ``just another competitor.''
``I think they are in it to stay. We deliver to them every day,'' Mr. Furrier said.
Ron Lautzenheiser recommended dealers not forget their existing customers by doing ``extras,'' such as direct mail thank-you cards. ``Don't let the car dealership get a hold of your customer.''
Mr. Wright suggested dealers should be more concerned with large tire chains, such as Discount Tire Co. Inc. and Pep Boys-Manny, Moe and Jack. ``We need to be smarter than our competitors.''
Jim Lautzenheiser said his dealership regularly checks Discount Tire's Web site prices. ``We quote a Discount Tire price and a $1 less.'' And the elder Mr. Lautzenheiser and others agreed that dealers should never let a customer ``walk.''