Scott Mueller has an eye for art. A recent acquisition installed at Dealer Tire headquarters is a sphere that resembles a rolled-up parking lot, created by New York artist Lars Fisk.
Dealer Tire has tangible strategies to attract and retain top employees. The headquarters include varied workplace amenities such as an upscale employee cafeteria and a high-tech gym with an indoor track.
The company gives its dealer clients the same sort of personal attention. And Dealer Tire's efforts to help dealers capture market share from tire stores, which dominate the replacement tire market, are paying off.
Last year, U.S. sales of 236 million car, SUV and light truck replacement tires yielded an estimated $25 billion to $29 billion in retail sales, according to U.S. Tire Manufacturers Association shipments data and pricing calculations.
New-vehicle dealerships' share of the U.S. market has grown to an estimated 8.5 percent in 2016 from 1 percent in 2000.
Higher tire sales are key to increasing fixed ops profits and boosting service customer retention, according to Jim Lang, an analyst who tracks the auto parts industry.
"The Mueller boys have a good point," Mr. Lang said. "Tires are not a loss leader. They are a relationship builder with the car owner."
The auto industry is coming off seven straight years of annual increases in new-vehicle sales. Although that streak likely will end this year, the demand for replacement tires should be strong in coming years even if the economy cools, Mr. Lang added.
That represents a big opportunity for franchised dealers. If they capture 20 percent of the replacement market by 2032 — short of the Muellers' projection of 25 percent — they would still sell 47 million tires annually. That total would more than double the 20 million they sold last year.
'Off your butt'
The Muellers' retail roots inform Dealer Tire's selling strategy for dealers. That plan calls for service advisers to inspect a vehicle's tires on the service drive, in the customer's presence.
"You need to get up off your butt and walk out to the car, hopefully with the customer," Dean Mueller said. "And you need to bend over to inspect the tires.
"Amazingly enough, that is still not necessarily common practice. Some dealers are pretty good at it. Some aren't."
The point of the walkaround, he says, is to "plant the seed in the customer's mind that if you need tires, call us. We're competitive. We're experts. We have the tires. And we can get them put on in a competitive way."
Car dealerships have a major advantage over competing tire retailers, if they choose to exploit it: They need only sell tires that are identical, or have equal speed and load ratings, to the original equipment tire fitted to the car or truck at the factory.
That greatly reduces the inventory dealerships must carry. Dealer Tire, which has 39 warehouses across the country, can deliver tires to a dealership several times a day in many of its markets, which also allows the car dealership to keep its inventory lean.
Retention tool
Scott Mueller said dealerships should tailor replacement tire options to the way customers drive and how they use their vehicles. With such an approach, he says, "most people — literally 85 percent of the people — will get the tires."
Margins on tires are usually far lower than on other common wear and repair items, such as oil filters, alternators and water pumps. But that's not the whole picture, Dean Mueller said.
"People who buy tires at a dealership will buy 2.5 times more service over the life of the vehicle," he says. "They'll visit dealers three times as much.
"Tires are the first defection point," he added. "If you ignore them, customers go down the street to a Firestone or a Belle Tire. And they are not coming back."
Scott Mueller noted that tire sales are extremely profitable if they occur in volume.
"What you are selling at a service business is time and space," he said. "How much profit you can make per bay hour? That is a magic formula."
Online sales channel
In addition to the information and training it provides dealers, Dealer Tire produces marketing materials for tire brands and individual dealerships.
The company also operates RightTurn.com, a website that helps consumers buy tires installed at new-vehicle dealerships.
Consumers enter their vehicle's year, make and model, answer questions about their driving styles, and are given several choices of tires. They can order the tires online and set an appointment at the dealership from the web page.
The company is experimenting with placing the RightTurn.com platform on car dealers' websites as well. To check out an example involving a Toyota dealership, go to: autonews.com/rightturn.
"The consumer can buy the tires online at the dealer's website, schedule an appointment online and have the tires installed," Scott Mueller said. "That helps dealers make their customers aware they sell tires and gives them an integrated tool to close the deal."
Dealer Tire also offers what it calls its Dynamic Retail Selling Guide, which gives dealers competitive information about tire pricing that is specific to their markets.
"We analyze 10 million tire prices a month in different markets," Dean Mueller said. "The dealers, if they follow certain guidelines, are more than competitive."
The Muellers conceded that their efforts to help dealers sell more tires won't work unless service directors maintain a clear sales process and train service advisers to follow it.
"Training is something that never ends," Dean Mueller said. "It always evolves. One of the challenges the industry has is just getting qualified people in the service drive."
The brothers said it's OK with them that the Dealer Tire name is not well known outside of the industry. More important, Dean Mueller said, is that "consumers know the dealer can serve them."
"The best thing we see is when you buy a new car, the salesman takes you back to the service department and introduces you to the service adviser, and he said, 'Whatever you need, including tires, I can help you with.'
"I can tell you when I started calling on dealers in the 1980s, that sure as hell didn't happen."
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Richard Truett is a reporter with Automotive News, a Detroit-based sister publication of Tire Business. He can reached at [email protected].
