I have been in this business for almost three decades and began as an A-typical auto parts store. In 2007, we purchased a three-bay service center and began to offer parts, service, and tires. Since then, we have built a new 10,000 square-foot, six-bay, 12-car service, tire and parts facility to house all of our operations.
The main reason we purchased a service facility is that many of our service and tire centers over the last 15 years have gone out of business. Much of that reason can be attributed to the economy, retirement, and general lack of qualified people. Many of the remaining service and tire centers are struggling, and have a very difficult time paying their bills, especially to me. It is not all their fault alone — there are multiple ways that I have seen the tire industry CONTRIBUTE to the demise of the medium to small independant service industry.
In general, most small- to medium-sized shops are still using outdated methods of tracking inventory, cost of products, and purchasing systems. For this reason, they are likely to falter and lose money in the same ways that auto parts jobbers did decades ago. They are also very prone to be taken advantage of and abused by accepted industry standards, for example, fuel surcharges.
Currently, if I get five days a week of tire delivery from my distributors, I will pay a fuel surcharge of $600 annually. I hate fuel surcharges because all they do is give a corporate accountant justification and a reason to brag at a board meeting. Ir may not sound like a hefty charge, but it's the equivalent to giving away three Michelin P275/55R20s.
Speaking of tire size, most of the tire or service locations affected by fuel surcharges order tires by size, not part number. This creates a substitution nightmare. In other words, I order four All-Terrain (AT) tires and get 4 All-Terain 2's, the tire's newer version. It is the same series of tire, same size and looks almost identical, but costs 12 percent more even though I sold it at the same price as the AT. This happens to the tire centers a lot, and if they are blessed to catch it, it creates more work for everyone involved, including the distributor.
A standardized part number system will fix this! Again, more lost revenue and time.
Where is the obsolesence program? This is apparently non-existent. There is no notification of anything, until I am stuck with (1) P215/45ZR17 that I will never get rid of because my tire distribution center decided not to carry that line anymore.
Where are my price sheets? If there is a price increase, why am I still selling at the old price? Why do I have to pay a company to register DOT numbers on tires when Federal Law dictates that it is the tire manufacturers duty to inform comsumers of recalls and warranty issues?
I see the tire industry at the same cross-roads the aftermarket passed through back in 1985. That's right, 25 years ago the number of independent auto parts stores in the U.S. was around 28,000. In 1980 the number of independents was at about 33,000. In a five-year period, that represents a loss of more than 15 percent of independent marketshare and the independent aftermarket began in 1985 to step up it's game by offereing more program distribution, warehouse programs, earn-back programs, education programs, automated price updating, focused marketing and turn-key business management systems. The aftermarket continued to lose numbers for a few more years, but the ones that are left are far more savvy business people.
I am sure that a few of you have been in this business long enough to remember the days when we had a wider selection of service centers in our respective towns. Like me, if you've been around for a while, you also remember when they got to the point that they could not pay their bills like they used to and many went out of business leaving you holding the bag.
How many new service or tire shops have you seen come and go? How many new tire shops are you willing to extend credit to? The extension of credit woes drove a lot of the newer guys in the tire and service industry to the large retailers because their credit program is operated like a credit card program. Exorbent interest rates and minimum payments, all the while the large retailers get their money after a small percentage deducted, of course. If the new tire shop does not qualify for credit at a large retailer, they are forced to pay cash, and will buy the absolute cheapest thing they can because they don't have adequate cash reserves to buy quality. This increases the risk of come-backs, tying up their bays doing free jobs. This when combined with trying to sell a product (tires) from a distribution system that offers no fundamental business services is the formula for disaster.
If the tire industry does not wake up and do something to provide basic business services tor their service and tire shops, maybe it's time for the aftermarket warehouse distribution system to step in and usurp their business. We already have the business model, the marketing and manufacturer programs to put in place. If we could help stave off the collapse of the small- and medium-sized shops, teach them how to be better business people, offer them a program group that has nothing to do with a particular manufacturer and help them to eliminate costly mistakes, just think what it would mean for the automotive jobber.
If we could affect the tire business in the same manner we reinvented the parts business in the 1980s, being an auto parts store might just be fun again. I have a dream that some day all of my tire shops and service centers will make money and pay their bills on time, but their largest vendors (tire distributors) have got to provide them more tools and training. It's either that, or jobbers will become the new tire shop and service center.
Ask any warehouse, the last thing a Tire Warehouse wants is an angry mob of jobbers telling them that the way the tire industry does business is ludacris. But I have a feeling, this is the way OUR industry is headed.