With the cold season creeping up on us, that means it’s time to talk about tires! Yes, the season for tires is already here! There are so many aspects of the tire game that often go unnoticed. Yes, they’re big and cumbersome, but they’re perfect for profitability in your parts department. If you’re a Parts Manager, you’re going to want to know how you can turn this rubbery nuisance into your shiniest nickel!
It’s funny to see how so many Parts Managers don’t even consider tires just because they don’t want to deal with them. We understand that they’re bulky, take up lots of space, and even have a funky smell to them sometimes. And the margin on them doesn’t look too hot. But that doesn’t mean tires set you up for failure. You can easily turn this “waste of space” into your most resourceful success.
What’s The Gain From Knowing The Tire Game?
You need to know how to play all of the aspects of the tire game in order to use them to their full potential this tire season. Because not only are tires a customer retention tool with the winter and summer tires, but they also open up so many different avenues of internal and external business that you can start looking into for both your department and yourself. We have to understand that it’s a great product for us to have and to sell. There’s a retention thing that goes along with it.
Really, when you think about tires, they can also be considered kind of an accessory after the sale. And if we have an alternate set of wheels and tires, that’s another great revenue opportunity. I actually believe that when you’re adding it at the time of sale it is not as competitive as what it might be when it’s a replacement tire.
So there’s a little more margin opportunity on that. I would want to let our clients know that we’re in the tire business. There’s opportunity with our wholesale accounts. You could probably have a wholesale market on tires. And if you wanted to, there’s probably some front counter opportunity in our northern states.
Before Learning The Tire Game: Is There Inventory?
Keeping an inventory is the preliminary step before learning the tire game. So let’s see what Coach Cliff says about what the best tire inventory would be to have in your shop? Is it even worth it? Well firstly yes, it very much is worth it– if not necessary! Especially, if you are trying to go into the truck market, then tires are essential to stock up on. So that means you need to open up your tire inventory.
What would you tell a truck shop that doesn’t do tires?
If you’re a truck shop that doesn’t do tires, you’re missing an opportunity. They’re missing an opportunity to take care of the customer, to sell something, and to make some margin off of that and some money. And if you’re not in it now, then you’re late to the game. Because, I mean, if it’s one thing that trucks are going to need, it’s tires.
If you go into the truck market, you can’t afford not to sell tires. Since it’s another avenue to increase things. Think of it in a sense that most people completely change their tires. They change them from its original equipment, whether they upsize when they put a lift kit on there, or whatever the case is. Think about it in a sense that you can individualize tires. A little detail that can be personalized for the customer.
What are your thoughts on the Parts Managers that don’t inventory any tires, because they just rely on same day delivery?
So in that sense, you’re missing out on an opportunity there. It goes with the fill rate in accordance with the law. I think you track tires the same way you do any other. So if you don’t have a tire you track, you absolutely have to do it as a law.
In some cases, your manufacturer is putting that into the parts tape and they can run it straight in and you can treat it like a general part number. And in other cases, maybe you need to go old school and do an actual spreadsheet and do a piece of paper where you’re writing down the items that you don’t have.
Did you use lots of spreadsheets?
Good parts guys always have a pen. By the way, every Parts Manager that I’ve ever been around has a notepad in their pocket ready to roll, because you’re writing things down constantly throughout the day. And so those are the kind of essentials. But you just got to be diversified to think of it as a stock portfolio again. And you got to be diversified on the brand and other items that you do.
The Tire Game: Competitive Tire Inventories
So once you have your inventory, you’re now eligible to compete! But the problem now is, everyone pretty much stocks up on tires nowadays. But, if you want to compete, you need to know the tire game to even play. And you don’t want your customers going elsewhere for tires because of other factors like price, types of tires, and more. So let’s review some aspects of the tire game that can make you a superstar in the competition this season.
The Tire Game: 1) Prices
People are pretty price conscious on tires. So your pricing strategy with them is super important. And because they’re pretty competitive to sell, you want to be strategic about how much you’re selling them for– and more importantly, what other parts you’re selling them with.
For example, Coach Cliff, former Parts Manager, found that he could sell other items that would provide him with a much bigger margin. Whether that was brake pads, brake rotors, shots, struts, you name it. So you’ve got an opportunity to sell something that’s got a much bigger margin for you as a Parts Manager.
You’re going to have to be strategic on your pricing. There are some purchase discounts that you could probably take advantage of. There’s some programs out there that you could take advantage of. But I don’t see it being an item that’s going to have a really large margin. And because it is such a competitive item, you’re going to have to be really strategic in the way you price it.
The Tire Game: 2) Sources
The next thing is that I’m going to have to approach it in a couple of different ways. Because it is a relatively competitive item. And in many ways, I’m going to have to reach out to many different distributors. So a lot of the manufacturers have realized now that it’s a really big thing, and so they have their own programs. But I’m going to have to go different avenues. I’m going to have to reach out to some distributors. And I’m going to have to reach out to some local places. I’m going to have to broaden that out a little bit more.
Counterintuitively, most stores don’t just use what the manufacturer recommends. But I think the ones that work really well and work the programs find that they’re going to use a bunch of different avenues, whether it be a local distributor. And really, really good Parts Managers are going to use their inventory. Not only are they going to use their inventory to match theirs but it’s going to be a complement of theirs. And so if I only want to stock one or two deep on that, I have somebody that’s local, that’s going to have a lot more depth to their inventory.
The Tire Game: 3) Brands
There are some exceptional brands out there that aren’t as mainstream as some of the more popular names. You’ve got to take the time to do some research, of course, but we’ll give you some good brands to start with here!
Are there a couple of brands that you’ve done really well with over the past?
Kumho brand was a good one for us because it used to be a really cheap tire. But it’s not as cheap as it used to be and it’s on a lot of the manufacturers. So I think Kia uses Kumho. I’ve seen it on Nissan’s before too. Hyundai uses it as well. I don’t remember if Honda and Toyota do but I’ve seen it on several. The Pirelli did well early on, Pirelli actually had a decent nose. A scorpion are really, really good SUV tires.
What do you think about parts managers that keep one tire in stock?
You’re ruining yourself– you’re setting yourself up for failure for the customer to go elsewhere. That’s running the risk of becoming obsolete. So the thing is the tire. You’re just waiting for someone to get in. So that brings in a little bit of other elements to it, too, of reasons why and why not. It’s a nuisance as far as rotating the inventory.
The Tire Game: 4) Inventory Rotations
Now manage that inventory differently. Of course, managing that inventory definitely helped me understand that. So the theory is if you buy at different sell at different or stock at different than you manage it different, so I want to source that in its own source. Not to mention in most cases, the taxing is different. There’s disposal fees that go along with it. So I need to count for all of that stuff. And so by sourcing it differently, you can manage that differently.
Healthy Relations With Distributors!
There’s another conversation of proper binned counts– running my bins multiple times to see where stuff is. But there doesn’t need to be a thing on rotating it. Think about that for a second. If a tire is out of date, it becomes a liability. I can’t sell those tires when they’ve had them on the shelf. Like the D O T numbers too old or whatever it is.
So I need to get a domain. Somebody who’s going to come in, and have a good relationship with my distributor. That’s the way that always worked well for me. By having that relationship with the distributor, so that they would come in and help me rotate my stock. And then they did the returns for you, as long as you didn’t catch it too late. Developing that relationship with that distributor and multiple distributors is going to assist you with that.
The Tire Game: 5) Storage
Some places won’t let you store outside. Some places will. However, if you look at it, if you get involved with some of the distributors out there, they’re gonna give you the bins.
They’ll give you the setup, the layout, and the racks. They’ll give you the merchandising tools that you can put at your front counter, and make sure that your customers are aware. And in a lot of cases, it’s the best-kept secret. So I do think there has to be some merchandising.
I’m not offended by there being the tire racks outside. I just like a nice controlled inventory. And I would want to keep them inside, even though I know that there are locks and all that stuff. But I think that looks a little trashy, in my opinion, with a chain and you get to the class ball through there. I just felt like I had better control over it when it was inside the parts department than outside the parts department.
Too often when I see external racks, the counter people forget that that’s an inventory. They go and they look at the internal inventory that’s in the parts room, and then they don’t see it, so they adjust the inventory. And then there’s the tire sitting out on the outside. That’s another thing that I see with hiring mentors is that it looks like it’s a mess, because you’ll have a small tire next to a big tire. And it’s like one here and then there’s three on shelf one, one on shelf two.
I think random storage would be okay. Like storage, off site storage, storage containers, stuff like that. But I think that you hit the nail on the head about the labeling.
Storage Organization– The More Organized, The More Likely You’ll WIN
So I think that too often, when I go into a parts department, their bin location on tires is called tire. I’ve seen just T one, I’ve seen T two. I’ve done T one T two. Also, I’ve done a rack thing I found that to be the best way is rack and then go down the shelf.
So you have 10 racks. You call them numbered one through 10. I always like to have mine kind of organized together. So I might have my 225 66 teams together, I might have my 265 68 teams together. And then on my bottom shelf, I’d have my 275 5020s.
Training your people right and having them do the right thing. Having a good shipping or receiving clerk that’s going back there and checking that stuff for you. Running your perpetual inventory accounts to keep that stuff in control. Like there’s multiple ways to kind of control that. But just having some organization to it and having it in some kind of numerical order does help and assist in tires. Tires are a little bit different than parts in that sense. I can’t put all my parts numbers the same and lay them out, but I could certainly do that with my tires.
It’s more about the control of it than on the outside storage.
To inventory control. What I would consider the standard of organizing winter tires is you have a stack of four tires, and a copy of the arrow between the third tire and the fourth tire.
I would probably do something where I had a larger piece of paper, maybe with a sharpie. Or they have label makers nowadays that you can actually attach like a sticker right to the tire. But I like the idea of adding a sticker to the tires. I would wrap it certainly around, and then I would actually label the outside. I would double it up, even if it seemed redundant, because I think there’s something to it too. Let’s say that a customer comes in to get their tires. And they see that it’s labeled Lafferty and it has the date and all that stuff. They’re like, “Okay, so they took good care of my tires.”
The Tire Game: Customer Retention With Winter Tires!
But thinking holistically as the dealership, as a business, or the independent shop as a business, tire storage may be the best retention tool on the planet. If you have their tires, you have their business. That’s kind of how I think about it. Especially if you owned a shop that was in a cold weather state that had tire swip switches? Some provinces in Canada actually require it? Which is one of my favorite things in the world to have? And maybe how would you monetize it? And what do you think of it as a business model?
From the parts perspective, I would certainly have to figure out some kind of method to have it labeled correctly. I have a label with the customer’s name on it, the ARO that it was on, and then I’m going to do a wrap around that. I have them organized together and I want to be able to find them. As a parts manager, I don’t want them out everywhere throughout the service department or in sales or stuck in some random storage. If I’m responsible for them, then I want them under my control and in my house.
The Tire Game: Profitable Sales With The Service Department!
There’s an opportunity for the parts guy to let the service department know about the tires running too long or getting out of date. Or if their weather cracks and if the measurements are poor, then it gives an opportunity as a parts guy to increase your revenue. So, I would definitely be all in on the storage fee. And not to mention, if I’m going to have to manage and take care of tires, then I want to save money.
What you’re charging for is not just a store. When you’re talking about having packages with rotates, alignments, and then like sending them a picture of what the wrap looks like, then it’s all of a sudden, “Oh, you’re taking really good care of my stuff.” And then just because somebody might do it for 50 bucks a year or whatever, they don’t get the same service. And now we’re talking about exchanging value instead of just competing on price, which is the main reason people don’t like tires anyways. I just want to look for a place to keep them secure and safe.
For Parts Managers, it’s an opportunity because we all do the same thing. We’re looking for little areas and little places where we can increase our revenue. This is a way to do that for the storage aspect of it. I’m storing these tires for you, and I’m going to take care of them. Now, on the other side of that, I can’t stick a label up under a couple of tires and expect the customer to be willing to pay. But if they see that it was taken care of, they’re willing to pay.
What about a revenue stream for that?
There could even be a subscription fee to store the tires. And you could also work that in. I mean, this is about parts, but service could get a revenue with us too! So you could do a thing where you’re doing tire storage, looped in with an annual alignment. And let’s say rotations. So let’s say it’s 300-400 bucks a year, and that includes that beautiful wrap job that was just talked about. We store the tires, and then we kind of take care of them all throughout, and then they don’t go anywhere else. But then the other thing that’s great is that when we’re storing tires, we get to sell the tires as they’re coming off, not as they’re going on.
So if I’m a Parts Manager, I might be looking at that and just measuring that the service technician is taking it off. And he’s just gonna throw it wherever because that’s just what they do. So I would organize it, put it together, measure the tires, and then let them know where that stands. Then we just store their new tires.
So then it’s almost like an instant inventory relief even though we keep the tires. So we’re like, “Okay, which tires do you want? You can have this one.” I would guess at that point if we’re their captive audience if we’re storing them every year, and so you might have margin opportunities. And then we literally order the tires, get them in, wrap them, store them, and they’re off the books.
Now You Know All The Tire Game
Coach Cliff is pretty much saying that tires don’t have to be a necessary evil. It can be a welcome opportunity. As we start to think about that, there’s a level of organization and inventory management that we probably are not doing as well, industry wide, that we could be doing.
Finally, winter tire storage can be its own business. At the end of the day, it’s a wonderful idea. To try to keep the customer, we suggest you package everything together, along with the service department, so that both get the retention and the customer service makes a little bit of money. Parts can really make their money on this thing. And we get rewarded for the work that we do in the stores that we do.
But for tires in general, and especially if you’re in the heavy duty trucking industry, if you’re not on the tire board, you might be too late already. Because there’s a lot of tires on a truck and I would want to have a captive audience and try to absolutely use them. With that being said, I really want you to kind of go into the tire thing with an open mind. And to just look at it in a way as more of an opportunity rather than a thorn in the side.