WASHINGTON—Retail tire sales competition from new-car dealers is a growing fact of life for independent tire retailers.
Associations representing independent retailers, meanwhile, are still trying to determine how to react to this challenge.
“We're very concerned,” said Roy Littlefield, executive vice president of the Tire Industry Association. “There's a whole bunch of new competitors, which means a whole load of challenges for us.”
Statistics over the past decade, according to Littlefield, have shown tire sales from big box stores like Wal-Mart Stores Inc. decreasing somewhat, but sales at auto dealerships growing at a fast pace.
Because many, if not all, tire retailing programs among auto dealers use independent dealers and distributors as suppliers, there is no unified position among dealers regarding the practice.
“It's a mixed bag for us, because our members would be on both sides of this question,” Littlefield said.
What auto makers are doing
Among auto makers, Toyota Motor Sales U.S.A. Inc. and Ford Motor Co. are two of the most aggressive in promoting retail tire sales among their dealers.
The Toyota corporate office in Torrance, Calif., declined comment on its tire retailing program. However, Gulf States Toyota Inc., a Houston-based independent organization that claims to be one of the largest distributors worldwide of Toyota vehicles and parts, said it developed the tire retailing system that Toyota adopted as its own.
Gulf States Toyota began its tire retail program about a decade ago with Cleveland-based Dealer Tire L.L.C., according to Tim Hebron, senior manager of parts and service development for Gulf States Toyota. Dealer Tire specializes in designing and implementing tire retail operations for original equipment auto dealers, according to the company's Web site. Gulf States later decided to adopt the arrangement with Dealer Tire for its own use.
“Tires are now part of a program called 'Complete Maintenance Care,' and we are part of that program now,” Hebron said.
Of Gulf States Toyota's 154 dealers, 149 participate in the Complete Maintenance Care program, according to Hebron. He said he began a “Buy 3, Get 1 Free” tire promotion at Gulf States Toyota when he started there 3½ years ago, and tire sales have increased substantially since.
“When I started, we were selling maybe 10,000 tires a month through our dealer network,” he said. “It's gone up to 16,000 to 17,000 over the past three years, but that's still nowhere near where we want it to be.”
While Gulf States Toyota has no hard-and-fast sales goals for tires, it aims to grow about 15 percent annually in that market, Hebron said.
Deerfield, Fla.-based Southeast Toyota Distributors L.L.C., another independent Toyota distributor, has its own extremely successful tire retailing operation, according to Mashan Benbow, the company's Express Tire/Battery man- ager.
“It's a very strong, very positive program,” he said. “One of our dealers doesn't participate, but the other 172 do.”
Working with the local retailing giant Tire Kingdom Inc., a subsidiary of Palm Beach Gardens, Fla.-based TBC Corp., Toyota Southwest Distributors began its tire retailing program a couple of years before the Toyota corporate program began, according to Benbow. “We're the only Toyota distributor that does our own program,” he said.
Two of Southeast Toyota Distributors' dealers actually topped $1 million in tire sales in 2007, Benbow said. Fort Myers Toyota had $1.21 million in tire sales that year, and Stadium Toyota in Tampa had $1.05 million.
Even with the softening economy in 2008, Stadium Toyota still had $1.13 million in tire sales, he said. Fort Myers Toyota slipped just under the million-dollar mark, to $997,300.
Before the late 1990s, no auto dealer was willing to carry tires, according to Kevin McGuirk, retail channel and tire program manager for the Ford Customer Service Division.
“Ten years ago, tires were a pain for the parts manager to carry,” McGuirk said. “He was not used to doing it. But then Ford decided that if it wanted more people coming in to its dealerships and fewer people going to the aftermarket, it had better offer more goods and services.”
Today, about 99 percent of the 3,600-plus Ford-Lincoln-Mercury dealers in the U.S. sell tires at retail, according to McGuirk. So do the independently owned Ford Quick Lane Tire & Auto Centers—stand-alone operations that offer only tires and auto service. The first Quick Lane center opened about seven years ago, he said, and now there are more than 550 across the U.S., with another 100 or so opening every year.
At one point Ford dealers sold nearly 3 million replacement tires annually, McGuirk said. Now, the figure is about 2.5 million, he said.
“We are now partnering better than ever with some of the large tire distributors so that they work with our Ford field personnel to develop dealership retail selling through consulting efforts, smarter inventory management and better marketing efforts,” McGuirk said. American Tire Distributors Holdings Ltd., Tire Centers L.L.C., U.S. Autoforce, Sullivan Tire and Tire Kingdom are among the tire distributors Ford works with.
Regional associations react
While TIA has expressed concern over the competition presented to independent tire dealers by auto dealers' tire retailing, state and regional dealer associations so far don't seem overly worried.
Tire retailing by auto dealers has been a topic of concern among the Texas Tire Dealers Association members for the last 12 to 18 months, according to TTDA Executive Director Chuck Space, but it isn't a cause for alarm.
“I don't think it's a major concern to our members, though it does represent a bit of added competition,” Space said.
“We've made a small effort to have auto dealers become members of TTDA. There hasn't been too much reaction yet, but if they are going to be part of the tire business, we would like them to be part of the dialogue,” he said.
Meanwhile, some members of the New England Tire & Service Association have gone on the offense by providing tires to auto dealers, said NETSA Executive Director Dick Cole.
“If you're not going to make a retail sale, at least make a sale,” Cole said.
Other dealers within NETSA have chosen to compete on the service angle against auto dealers, since auto dealers don't usually provide the quick, personal service independent tire dealers can give, according to NETSA's Cole.
“Are auto dealers a huge concern? No,” he said. “But are they more competition? Yes. This keeps our dealers busy educating their customers on what they can do that auto dealers can't.”