Mid-Year Report: Northwest Tire rebounds despite issues

BISMARCK, N.D. — Northwest Tire Inc. in Bismarck has rebounded from a "terrible" first half in 2020 as the local populace preps their cars and RVs for vacations that were sidelined during the pandemic.

"I think people have had enough of the pandemic and everybody wants to travel," Northwest President Dan Pearson told Tire Business.

"It seems like everybody is getting ready for a trip and they are buying campers and they are buying boats and all the outdoor recreational stuff. Consumer confidence is good."

Overall sales last year fell 6% from 2019, he said, but 2021 sales are on pace to increase 22% above 2020 and 10% above 2019.

"I think, because people wants to travel, they are more apt to spend money fixing their cars. All the people that worked from home, sat at home for over a year and their cars sat at home. And because people didn't travel, there's a little bit more disposable income," he said.

The dealership, which operates 23 retail and commercial locations in Minnesota, North Dakota and South Dakota, plans to add two stores in 2021 toward year-end.

About 65% of the dealership's sales comes from tires, and Mr. Pearson said the dealership has been increasing its inventory of all-weather tires — designed with the attributes of an all-season tire along with winter driving capabilities to earn a Three-Peak Mountain Snowflake designation.

"There's been a big shift the past couple of years from all-season tires to all-weather tires," he said, noting that people don't seem to understand the difference between the two types.

"It's kind of a tough first sale, but a very easy second sale."

About a quarter of Northwest Tire's tire sales are all-weather, he said, noting the dealership has been increasing its inventory of all-weather tires every year.

Keeping tire inventories up, however, has been a challenge this year with low fill rates plaguing the industry.

Mr. Pearson said he expects shortages of tires and auto parts to continue through year-end.

"We've added more vendors than ever before, and we've kind of changed our buying habits. We buy tires more by size than by brand. That'll be temporary," he said.

"When all the manufacturers get full, we'll go back to the ones that we want to support."

The tire shortage issue is compounded by multiple price hikes issued by major tire manufacturers this year.

Customers don't seem upset about rising tire prices, Mr. Pearson said.

"They know everything is going up in price. It's not just us. They all seem to accept it. And because of the price increases, the shift to Tier 3 or Tier 4 has not been seen in sales. It's the same percentages as Tier 2 and Tier 1."

Inflation in the overall economy presents a business management challenge, Mr. Pearson said: "With everything going up in price, absolutely everything is going up in price, making sure we have the proper capital to make sure we keep our inventories full and continue to move on."

Another challenge this year: "We have a tremendous labor shortage up here," he said.

Northwest has been aggressively advertising its job openings.

"We are promoting hiring on everything you can possibly think of. Every social media, every website. Our on-hold for our company on the phone, we've advertised for help."

It doesn't seem to help, he said, even though the dealership's entry-level wage exceeds the minimum wage.

"There are just so many job openings in our area. You can get a job anywhere. We're doing OK, but it's a struggle every day."