Tire sales might not generate as much profitability as other dealership sales, but experts agree they play a vital role in customer-retention management.
It's the reason why more and more dealerships are turning to tires, says dealership management consultant and Ward's columnist Lee Harkins.
“More than anything else, it gives the customer no reason to go anywhere else than the dealership,” he says. “Dealerships are getting in there and slugging it out with the tire stores and doing a darn good job. In a lot of cases, they're winning.”
Dennis Gillaspie, parts manager at Burt Buick Pontiac GMC Truck, Inc. in Littleton, CO., says his department started selling tires in September.
“We wanted to keep everything in the dealership, instead of sending customers out,” says Gillaspie, who stocks Michelin and Firestone brands. “We had been doing tires from an independent tire shop down the street, and we are now just as competitive as he is.”
Although exact numbers are not available, Gillaspie estimates they he more than 90 tires for the month of May.
However, Harkins says dealerships can get in trouble when they try to make too much money on tire sales.
“A lot of them don't understand it's not about the tires, it's about keeping customers,” he says. “I'm not saying give the tires away — make $5 or $10 a tire — but it's all the other things that come along with the tires.”
Things such as ball joints, brakes, tire rod ends, wheel bearings and realignments could be the result of a tire sale.
“You have the car on the lift and you can look it over and recommend any needed business,” Harkins says. “And the key word is ‘needed’ business. It should not be considered an opportunity to go out there and start squeezing them to buy stuff they don't need.”
Thom Peebles, director of sales-North American Car Dealer Channel at Michelin North America, says as more dealerships turn to tires, their business is becoming “a very key channel for growth in our industry and our organization in particular.”
“We look at it as long-term productivity,” Peebles says. “What we've found in most cases is when tires are purchased they're purchased with other parts and services. We think tires are a very important part of building that very important point of loyalty to the dealer.
“If you're able to make that a 1-stop shop, you're conditioning the consumer to come back for other maintenance-type items.”
Scott Jackson, fixed operations manager at Peterson Autoplex in Boise, ID, believes there are advantages for his customers buying tires from his store. A key selling point is safety.
“People at the dealership have a much higher level of training in a lot of areas vs. some of the tire stores that hire high school kids,” Jackson says. “I really think the risk is not as great at a dealership.”
John Ballard, service advisor for Van Chevrolet of Carrollton, TX, says his department competes with most prices from their largest competitor, Discount Tire. The dealership decided to sell tires 15 years ago to “make it a 1-stop shop.” Van Chevrolet carries 20 different brands of tires.
“The only danger would be the cost of inventory, and that's not really a danger It's more of an expense,” he says. “When you buy 100 tires and have them waiting for people to come in and buy, it's expensive to have that merchandise just sit.”
Harkins says there's a simple solution to storage woes.
“You can stock some tires just to let everyone know you're in the tire business, but the manufacturers can get the tires there quickly,” he says. “Within hours, in some cases, or the next day.
I would stock the tires that are the most popular, and I would stock a couple different grades of them,” Harkins adds. “Go to the manufacturers and get the sales history.”
Harkins also suggests dealers give customers the option of three tire brands.
“The good, better, best approach,” he says. “Unless they come in and ask for a specific name brand.”
A good product and the simplicity of saving a customer a special trip are the key ingredients to creating customer loyalty, says Peebles. “It will reflect well not only on the dealer but on the product as well,” he says.