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For Miami car dealer, selling new tires pays off

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MIAMI—Selling tires is fine, but what Nestor Alvarez really likes about tires is that they provide an opportunity to sell alignment, brakes and other items in his auto dealership's service department.

Mr. Alvarez is the service manager at Miami-based Land Rover North Dade. In effect, the dealership's service department borrowed the “100-percent rule” from F&I (finance & insurance) departments.

The rule says 100 percent of the customers get a sales presentation for 100 percent of the products, 100 percent of the time.

In 2012, as part of a “free multipoint inspection,” he said every customer visiting the dealership's service department got a tire tread inspection, with a technician measuring tread depth and jotting it down.

“You cannot close the ticket on the multipoint without tire readings,” Mr. Alvarez said.

Customers were notified if the results showed the tires needed replacing. Mr. Alvarez said he has always heard that “75 percent of the people who buy tires buy tires from the first person who tells them they need new tires.”

The tire sales themselves are “not a big money-maker,” he said, but tire sales have generated a lot of business in related jobs such as alignment, brakes and shock absorbers. Virtually every customer who needed new tires also needed an alignment, he added.

Mr. Alvarez said it helped that the dealership's tire distributor, Cleveland-based Dealer Tire L.L.C., threw in road hazard coverage at no extra charge, meaning damage from curbs, potholes and road debris is covered. Competing retail outlets charge $13 per tire for road hazard coverage, he said. The dealership also throws in free nitrogen inflation for the tires.

In addition, as a reward for top sellers, the dealership had a contest for a cruise.

“The upsell is the biggest reason why we do it. We probably make $20 on the tires. Basically, there are no profits,” Mr. Alvarez said, except for the labor on related work. “But if we sell two sets of tires a week, that's an extra 10 hours a week.”

In 2012, tire sales increased 125 percent at his dealership to just over 1,000 tires, Mr. Alvarez said. A companion Land Rover store, which is also part of the Warren Henry Auto Group, also more than doubled tire sales last year to around 900 units, he said. The group has six locations in Florida.

Public dealership groups have also discovered the advantages of selling more tires.

“It really is a retention program. It's not just about selling tires alone,” said Michael Kearney, COO of Asbury Automotive Group, which saw tire sales increase by 90 percent in 2012. Asbury declined to disclose its tire sales.

“The goal we set in 2011 was to double tire sales in 2012. We got nearly double,” Mr. Kearney said.

The group launched a pilot program for tire sales in 2011, according to Mr. Kearney, and rolled it out nationally in January 2012.

Meanwhile, AutoNation, Penske Automotive Group, Sonic Automotive, Group 1 Automotive and Lithia Motors all said in 2012 they were going after more tire sales.

The acid test for Asbury's tire program will be to see how much additional business those tire customers generate over time, Mr. Kearney said.

In January, he noted, the company was still analyzing 2012 results for the correlation between more tire business and more related business from the same customers. He said the early results were encouraging.

“If you look at our stores on a year-to-date basis,” he said, “83 percent of all individual stores saw an increase in consumer sales of labor year-over-year. Of that 83 percent, every one saw a substantial increase in tire sales.”

This report appeared in Automotive News, a Detroit-based sister publication of Tire Business.
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