PORTLAND, Ore.—Tire Factory Inc. continues to rev up business in a number of member-friendly ways while its dealers struggle with how to remain relevant in an environment choked with continuing consolidation.
On a positive note, the dealer group reported that it paid out $3.8 million to its members in profits and volume bonuses last year in the marketing group's first year as a co-operative.
That amount reflects a 5-percent increase in unit sales and the addition of point-of-sale (POS) technology to help its member dealers' business, CEO John Kreidel told Tire Business.
During Tire Factory's 31st annual meeting in Portland, Feb. 20-22, the group's 483 attendees heard reports on the group's accomplishments and business direction.
As a co-op, members can buy direct in small quantities from regional distribution centers at lower group prices and earn rebates on specified purchases.
Tire Factory added 11 member stores last year but failed to reach its goal of 25 new stores, especially around the Denver area where it opened a larger distribution center more than a year ago. The group ended the year with 153 members operating 211 stores and several affiliates who take advantage of the Tire Factory services but don't display Tire Factory signage, the company said.
The network has set a goal again of adding 25 stores this year, but Mr. Kreidel said while Tire Factory offers some valuable programs and services, some independents are reluctant to add “Tire Factory” to their signage.
“I think we're unique in the member-owned front or co-op front. We're the only ones, really, that have a distribution system,” he said, adding, “I think the biggest challenge is helping the independent recognize that they don't lose their identity but they do have a co-brand, similar to an ACE Hardware.
“But what we do is hook them up with other dealers that have come over from maybe another franchise or had their own business name for however many years. So that's probably the biggest challenge is just getting over the issue of branding.
“Once they recognize all the things that are good, then they come on board. It just takes a while. The sales cycle is generally not one call. It's several and a lot of discussions with other independents in our group,” he said.
“We continue to press this year on the technology front,” Mr. Kreidel added.
Tire Factory has partnered with MechanicNet Group Inc. for its software that works with members' POS systems to provide unlimited emailing and texting and service history information to help dealers communicate electronically with their customers.
Last fall Tire Factory signed Epicor Software Corp. to supply its Integrated Service Estimator (ISE) software, which integrates with the network's Traction POS system, for members to use in their retail stores. Epicor has helped speed up repair job quotes by providing labor cost estimates and automatic parts ordering, he said.
“It makes a big difference on efficiency of the bays and bay utilization,” Mr. Kreidel said.
“We're trying to have an end-to-end solution for technology that is affordable and powerful for our member stores.”
The recent U.S. imposition of anti-dumping duties on passenger and light truck tires imported from China has forced Tire Factory to replace some of its Chinese brand lines, including its popular Trazano line from Strategic Tire Supply Group, as well as American Omni Trading Co.'s Venezia UHP tires, Mr. Kreidel said.
Some of the value brand lines from China have been discontinued, no longer available in the U.S. or are priced too high, he added.
Instead Tire Factory is turning to its so-called VIP suppliers, including Goodyear and Hankook Tire Co. Ltd., to replace the value lines. Tire Factory will add Goodyear's Kelly Edge and Hankook's Laufenn tire lines.
“It makes more sense to partner with VIP lines where they are coming out with value products,” he said.
“We've had a few sleepless nights trying to make sure we have product for our stores to sell and it's not easy,” he noted. “If economics make sense, we'll continue to support what we call our VIP partners, the ones that we promote. I think that just makes good business sense.”
Meanwhile, Tire Factory is repeating an ad campaign this spring and summer to promote its ATV and radial ST-type trailer tires. After last year's campaign, the network boosted ATV tire sales 4 percent and its ST radials 6.2 percent.
During the meeting, the members brainstormed over ideas for the direction Tire Factory should consider as it competes amid market consolidation.
“We've got to be cognizant of what's happening in the industry,” Mr. Kreidel said. “We, as independents, need to make sure we have strategy long term to remain relevant. Wholesale space is consolidated and continues to consolidate. The same thing goes on in the retail space.
“We asked members: 'If you were running the company, what would you guys do to remain relevant?'”
The members met in groups, proposing several ideas—with a common theme that they were willing to make changes to compete in the future, he said, such as possible consolidation with other groups to increase buying power or forming alliances with other companies.
No definitive strategy came out of that discussion, he said, but the main themes were, “We've got to grow, we need to be larger and we need to cover more geography.”
To reach this reporter: [email protected]; 330-865-6127; Twitter: @kmccarr