As the COVID-19 pandemic continues to impact the automotive industry, suppliers are offering ways for dealers to boost revenue through the tire side of their business.
Tire changeover and storage are among the few areas in automotive retail that remained relatively untouched last year, even as the season stretched past its traditionally cramped servicing periods. This is because demand continues to grow.
In 1998, only 35 per cent of Canadian drivers used winter tires, according to the Tire and Rubber Association of Canada (TRAC). That number has been steadily increasing over the years, reaching 72 per cent in 2020 in terms of national winter tire usage — more than double what it was in 1998.
“Dealerships in the past never worried about the tire business, because they left that for Firestone, Goodyear, Walmart or Costco,” said Domenic Ismaele, CEO of Tire Storage Solutions, in an interview with Canadian auto dealer. “But they’re realizing that they’re the only thing that you can really use as a revenue generator for repairs.”
TSS is an Ontario-based third-party provider helping dealers with their tire storage demand. The company is known for its web portal, mobile app, and barcode labels that enhance the overall efficiency of the process.
A TSS infographic, which gathered data from the National Automobile Dealers Association (NADA) in the U.S., reveals that 15 per cent of vehicles that pull into a dealership’s service drive-thru will need new tires, 75 per cent of consumers will purchase their tires from the first person who recommends them, and 78 per cent of customers maintain their vehicles at the place where they purchase their tires. Furthermore, 77 per cent of customers will get their vehicle maintenance done where they store their tires.
The tire changeover business can strengthen relationships with customers and generate tire sales and repair services, and seasonal tire storage can boost customer retention and create a whole new business opportunity for dealers. And yet, data shows that only 40 per cent of service department customers are aware that their dealership sells tires — despite promotional efforts from the retailer and tire displays.
Ismaele suggests that tire storage as a retention tool can help mitigate that issue, while also making a profit. “So you’re charging them $80 a season to store their wheels, but you’re charging them to come back to you instead of advertising to beg them to come back.”
“If you can get people to come back, get them back to your dealership twice a year, you have two shots to try to get some up-sell and to try to service those vehicles,” said Ismaele. “And if you retain them and you sell the tires and you hang onto the tires, that’s a revenue in itself.”
During the pandemic, TSS pivoted quickly to remote demos, installations and training thanks to its cloud-based system. The company also managed to keep the cost at the same rate, per system, and launched a new portal design that was reengineered to be more modern, intuitive and responsive — with integration improvements for a better user experience. It features new additions such as “recent activity alerts” that ensures real-time tire activity is being monitored.
A fleet and internal vehicle management system was also introduced, among other things. Ismaele anticipates a number of upgrades within the next 18 months, and said users will be alerted through the system when they become available.
“The reduction in servicing of vehicles is real. It is not going away,” said Ismaele. “If (dealers) understand that there are certain things that will retain your customers, that will keep customer retention alive. At the same time, build a revenue generating business for your dealerships, and have revenue generating services for your business.”
One way dealers can do this is by ensuring they are able to change tires as quickly as possible. This would allow the dealer to manage their resources inside their store (or service centre) more efficiently, according to John Peron, Managing Director, Hunter Engineering Company, in Canada.
“We believe that with the right technology, you should be able to do a tire changeover within the hour,” said Peron. “That’s wheels off and wheels on — that includes taking the tires off the rims, putting the new ones back on the rims, and balancing the tires out accordingly.”
Hunter Engineering offers a range of products that fit comfortably within the fixed ops department, one of which includes a tabletop and centre-mount tire changer known as the Revolution and Walkway. The company conducted an experiment on mounting and balancing a four-wheel set to see which method was faster: the old way versus the new way (its machines). A video of the experiment shows that its products are approximately 25 per cent faster because it adds capacity, and also due to autonomous demounting.
“So we say that with a normal tire changer or a traditional tire changer with a traditional balancer, that time is roughly 28 to 30 minutes, depending on the experience of the technician,” said Peron. “And we can get that down to 13 minutes.”
Peron said the Revolution product has the ability to automate the process, thereby turning the technician into an installer. With the right equipment and the resources, he believes dealers can maximize the amount of tire changeovers they have. But while that can help retailers boost sales, there is also the storage angle to consider — how to save space?
“There’s a stat out there that between 15 per cent and 20 per cent of tires that go into storage never go back onto the vehicles because the tires are worn,” said Peron, adding that “if there’s one thing that I could ever give advice to, it’s that you must check 100 per cent of the tires that come into your facility 100 per cent of the time.”
Peron said it’s the easiest way for a service advisor to provide information to a customer, and that if the tire has a short lifespan remaining, the dealer may or may not put them in storage. It’s also an opportunity to have the customer consider purchasing a new set of tires, which can lead into other service or sales-related discussions.
Checking the tires is the easiest way to build trust, said Peron, while also helping to promote the sale of a new vehicle by creating an opportunity to have that discussion.
Tire storage business is expanding
For dealers not yet in the tire storage game, or at least not yet at the point of building or renting a larger warehouse, it’s worth noting that for some third-party providers, business is booming.
Take Distribution Stox: the company is building a new 250,000 square-foot warehouse in the Quebec City region to bring all of its services from the South Shore and the North Shore together under one roof.
“We will have more or less 500,000 tires in inventory here to serve the people of Quebec City and surrounding areas,” said Dany Bérubé, Regional Sales Director for Distribution Stox, in an interview with Canadian auto dealer.
The company is based in Quebec, and since winter tires are mandatory during a certain period of the year, the COVID-19 pandemic has likely impacted the tire business less than in other provinces. Tire changeover occurs at least twice a year in the province. However, Distribution Stox also has a presence in Ontario, and they expanded into the Atlantic regions in 2020 — which speaks to a growing need for tire storage.
Of course, the business overall in Canada was still impacted, as people drove less frequently in 2020 due to lockdown measures and other personal and provincial restrictions, which means there was likely an impact on the tire wear aspect of the business; many people that were due to change their tires can likely run on them for an additional winter. On the other hand, Bérubé said these vehicles may have other issues or may require extra servicing from the dealership specifically because it was not driven enough in 2020.
As for Distribution Stox’s 2021 plans, Bérubé said they want to support dealers amid the crisis and be part of the solution to help them get through this difficult period.
“We want to be part of the solution by helping them — by offering services like tire storage and customer retention, but also by ensuring that all the products we offer them are the right products that result in the best possible choice for them,” said Bérubé. “We want to make sure we are doing a proper analysis of the products in terms of their profitability, versus the programs they have with various manufacturers.”
He also said that it was important for the company to remain close to dealers to offer them advice, answer their questions, and help them maximize their profitability around everything that encompasses tires.
Adding value and efficiency
While dealers are being offered a number of ways to boost profits in their tire business through technology solutions, some companies are taking the efficiency and added-value approach.
Coast Containers, for example, is adding services for the tires stored in their facility to make life a little easier for retailers; they are adding wheel washing and rim repair and refinishing, while also working on getting tires off dealership floors as quickly as possible to help their clients save space in their bays.
“We’re going to be offering the repair and refinishing of those rims within their storage network,” said Paul Taylor, Vice President, Container and Tire Operations at Make Space Inc., Coast Containers. “And wheel washing is something we’ve done in the past and we’re bringing that back as a product.”
In an interview with Canadian auto dealer, Taylor said many customers are dealing with the challenge of continuously processing tire changes, which means they end up using their own work bays to stack and manage their tires. He said they are working with dealerships on a plan that involves providing them with mobile racking to stack the tires. The wheel washing and rim repairs are meant to be an added value.
“It gets them off their floor,” said Taylor. “Having tires stacking up at a dealership is probably one of the harder things for (dealers), because they have to work around it. I’m pretty sure that they’re going to make a lot more money if that bay (is more) operational.”
Taylor said seasonal tire storage is a great value addition for any dealership, as it guarantees that there will be vehicles on the lift twice a year and it provides the potential for additional revenue during the tire changeover season.
