Most dealers still view tires as low-margin, slow-moving, profit-draining headaches.
“And until recently, that wasn't far off the mark,” says Ted Fellowes, vice president, supply chain solutions with OEConnection LLC, a provider of web-based technology for auto makers and dealers.
But developments in technology, combined with stronger auto maker incentive programs, are turning tires into a profitable business for a growing number of dealers, says Fellowes.
A successful dealership tire program depends on having the right tires in stock at the right time. Parts managers estimate that at least 85% of their tire sales result from point-of-sale upsells. If the dealership doesn't have the right tires in stock, that customer likely will go elsewhere.
So how does a parts manager stock the right tires without adding inventory that ties up capital, time and space?
One way is by using technology to automate daily tire replenishment, with one or more distributors, based on previous day's sales. The result is a leaner, more marketable, just-in-time inventory mix based on what's selling at an individual dealership.
Serving over 17,000 dealerships, collision repairers, and fleets, OEConnection claims to be the industry's largest ecommerce parts exchange. It uses online analysis to market, manage, move, and purchase original equipment parts, including tires.
Here is how it works:
OEConnection's Tire Replenishment Tool uses an Internet-based system with nightly tire inventory data collection of auto dealerships and authorized tire distributors.
Dealerships can use the replenishment tool to purchase distributor tires as needed — with set replenishment levels so orders are created automatically or manually or for hot-shot orders.
Set up as an automated ordering system, it integrates with daily inventory updates from the dealership-management system.
It recognizes tire stock-out or low-stock thresholds set by the parts manager. Once the dealer's tire inventory hits those thresholds, the tool automatically creates an overnight stock order with the dealership's preferred supplier for delivery of tires that morning.
Ford has linked its tire incentive programs to OEConnection's replenishment system.
OEConnection says an Indiana Ford dealer has increased his tire sales four-fold in a little more than a year since he started using it. Tires now bring in over $80,000 in incremental annualized revenue.
“Auto dealerships hold just a small share of the $18.4 billion U.S. tire replacement market,” says Fellowes. “But the good news is that the dealership channel has quadrupled its market share in the last 10 years and today represents the fastest-growing channel for tires.”