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Rethink car dealer relationships?

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Often, when we ask tire dealers whether they are concerned about franchised car dealerships encroaching on their businesses through increased emphasis on tire sales, they just brush aside any concerns.

Many tire dealers say they cooperate with their local car dealers, supplying them with tires, and thereby picking up some additional sales through this relationship.

For the most part they don't view car dealerships as much of a threat.

Maybe it's time to reconsider that notion.

While car dealers generally don't view tire sales in their operations as huge money makers, they do value the ancillary benefits offering replacement tires brings.

And they've found that when they peddle tires, it can open up opportunities to sell additional tire--related service business, such as alignments, brakes and shock absorbers.

Selling service—that's where the real money is for these new- vehicle operations.

Nestor Alvarez, service manager at Miami-based Land Rover of North Dade, views it that way.

In an interview conducted by Automotive News, a sister publication of Tire Business, Mr. Alvarez said the reason the dealership offers tires is because of the “upsell.” Basically, there are no profits from tires, except for the labor related to the work, he said.

This emphasis on tire sales at his Land Rover dealership is working. In 2012, its tire sales increased 125 percent to slightly more than 1,000 units.

This relationship between tire sales and increased service business also has caught the attention of the large public car dealership groups.

Michael Kearney, COO of Asbury Automotive Group, considers tire sales a customer retention program.

“It's not about selling tires alone,” he said.

Tire sales at his retail group grew by 90 percent last year, and Mr. Kearney said the test will be to see how much additional business those tire customers generate over time.

While he isn't comfortable certifying the relationship between the growth in tire sales and additional business from the same customers, preliminary results look good—with 83 percent of his individual stores having a substantial increase in tire sales also posting an increase in sales of labor year over year.

Asbury Automotive is not alone in looking at tires this way.

Other large public car dealerships—including AutoNation, Penske Automotive Group, Sonic Automotive, Group 1 Automotive and Lithia Motors—also said they pursued more tire sales in 2012.

The question for tire dealers is this: Are you OK with helping a competitor gain a greater foot-hold in the tire business as a means of generating additional service revenue?

If not, it might be time to rethink the relationship.
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Previous | Published December 6, 2018

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