The tire dealer market offers some valuable lessons to repairers

Nov. 1, 2016
A discussion about tires can be valuable, especially since there are shops operating in markets where this business could be quite profitable.

Recall for a moment the last time you bought a suit. Odds are you gave up a big chunk of time to hang around an upscale store and wait patiently while employees measured your arms, waist, legs and inseam. You tried on jackets and pants, selected a color and a week later picked up a beautifully tailored new piece of clothing. Probably the final thing you considered was buying new shoes. Unless you had a fairly new pair, there’s a good chance you made one more purchase. What’s another $80 investment after you’ve already spent $800, right?

Compare that experience to collision repairs. After returning a vehicle to pre-accident condition, applying a fresh coat of paint and adding a top-notch detailing job, a new set of tires to replace some aging rubber can make pretty good sense. There are plenty of other reasons to ramp up or add tire sales and services. Tires are often damaged in collisions (poor tread may in fact have been the reason for the accident). There’s a convenience factor — the vehicle already is being repaired so it’s the best possible time to add one more service. It’s an opportunity for the customer to save money: if an alignment is part of the collision repair, it need not be added to a tire bill.

(Photo courtesy of Goodyear) A set of brand new tires can be the perfect way to top off a collision repair, providing repairers with some much needed revenue and customers a necessary purchase that can keep their vehicles safer.

Despite these reasons, collision repairers have shown little interest in adding tire sales. ABRN queried six owners, and all gave the same explanation for not entering this business as they would for avoiding other niche services. There just isn’t enough money to be made. “The markup just isn’t worth it,” says Shawn Moody, founder of Moody’s Collision Centers, a growing MSO in Gorham, Maine.

Still, a discussion about tires can be valuable, especially since there are shops operating in markets where this business could be quite profitable. For the rest of the industry, reviewing an auto service they may have been overlooking is a terrific opportunity to reassess and rethink their own businesses.


A first look at the tire dealer business shows a healthy, growing market with a number of possibilities. Numbers from IBISWorld record the U.S. retail tire market generating $40 billion annually with just over 26,300 storefronts and a predicted 1 percent annual growth over the next few years. Currently driving sales is a rise in consumer disposable income and the increase in yearly vehicle miles, which has significantly bumped up demand for maintenance and tire replacement. Other driving forces include the growing demand ­— fueled by federal mandates on improved fuel efficiency — for niche products such as low-rolling resistance tires, which require more frequent replacement and carry larger price tags.

Making the dealer market even more attractive is the low level of market share concentration. The top three industry companies account for just over 24 percent of revenue with the next two largest each contributing less than 2 percent. But much like the collision industry, concentration is increasing as the market’s major players continue growing by opening new stores and through acquisitions. During the past five years, the three largest companies increased their market share and continue seeking expansion.

(Photo courtesy of Goodyear) A key to selling tires is educating customers on the safety and longevity benefits of specific models.

Still, fully 65 percent of the tire dealer market remains comprised by relatively small “mom and pop” businesses. Unlike the collision repairers, these businesses have more freedom to alter their revenue models to cope with a changing market. They also don’t have the overhead in training, equipment and other expenses that could push them out of the market or convince them to sell to a consolidator. That can make them formidable competitors for anyone entering a territory looking to gain market share, especially those without significant financial reserves or a business model offering a significant competitive advantage.

Cautionary tale
Dennis Slucoch, former manager of Keller’s Auto Coach in Kansas City, Mo., learned this lesson the hard way when his shop decided to go into the tire business to raise some much needed revenue in 2009. Slucoch felt prepared for the new enterprise since he began his automotive service career at a tire shop. His shop had a number of business factors working in its favor. Keller’s possessed the necessary extra space to house a good supply of popular tire sizes (something many shops don’t). It had a dedicated bay for tire service, invested in the necessary equipment and hired an experienced technician to handle the work.

Just as important, Keller’s sat in a suburban location along a busy major route and near a number of homes, businesses and offices. Slucoch’s closest big competitors were over five miles away, and the smaller ones were mostly hidden down side streets and under old signage. Slucoch assumed start up might be slow but the readily available market would embrace his business.

The shop ran into some unexpected problems right away because it lacked any brand or name advantage. Potential customers couldn’t see past the body shop name.

“When people need tires they want to go to a National Tire and Battery, Pep Boys and Sears —places they assume have the best prices. Or they go to an independent who’s been around for a while,” says Slucoch. “We had to drop a lot of money into advertising just to get our name out there.”

(Photo courtesy of Goodyear) Examining tires for wear and damage is relatively easy and a necessary part of any estimate. Results can be shared with customers for upselling tire sales.

The shop also saw very little revenue at first since it had to offer increasingly steep promotional discounts to bring customers in. When business did pick up, the single tire technician was quickly overwhelmed. The shop tried to move over other employees to help, but that practice began affecting collision repair schedules, so it was suspended.

Eventually, employees stopped buying in. They couldn’t accept the responsibilities added by a new business they saw as a distraction that sapped more important resources away from body repairs. Even upselling to collision customers eventually seemed not worth the effort.

“We just couldn’t make it work. Either we had too much business, which we struggled to handle or so little it seemed like a big waste,” says Slucoch.

“We eventually found that if we wanted to even have a chance to succeed we had to go all in and try to build a dedicated tire shop with a new team of employees. That wasn’t happening.”

After 18 months, Keller’s shut down the tire business to concentrate solely on collision. Slucoch stands by the decision but still believes collision and tires can work hand in hand under the right circumstances. Namely, competition needs to be manageable, and the shop has to have a firm business plan that allows it to give sufficient attention to both businesses and, when possible, use each to promote the other. 

A day in the life

The business plan Slucoch speaks of will need to encompass many areas, but the key, he says, is constant focus on selling. The technical side of repairing/replacing tires is minor in the face of the larger challenge of sales. All shops service tires the same way. Earning customer business is the great variable.

(Photo courtesy of Goodyear) Put tires on display in front of your building and in customer areas to help remind customers that you also perform tire services.

There are steps shops can take if they move into the tire market to grab and grow business:

Step 1: Market heavily. Invest in advertising and signage that brings attention to the business. Change the “face” of your business. Put up displays of stock tires in front of your business and in customer areas. Visit a tire dealer and note their displays. Create brochures and sales pieces you can send home with collision customers to keep your shop in mind when they need tires.

Step 2: Educate customers. Consider again how collision work gives new life to a vehicle. Customers can extend that life further with safer tires that also benefit fuel efficiency. Better tires also last longer and over time can offer significant savings.

Step 3: Maintain a wide inventory. This probably will be one of the toughest hurdles for repairers to leap since available shop space is often at a premium and might be better used to expand collision operations. If customers have to wait for you to order a specific tires size, there’s a good chance they’ll walk out your doors and directly to a competitor. Do your homework with your vendor and keep a large supply of popular tires for your area, along with some hard-to-find sizes to give customers options.

Step 4. Offer the best value. You’ll want to be prepared to price match and/or offer deals that include savings on balancing, alignments and installation. Keep in mind that many customers will call around for quick quotes or receive quotes from dealer websites. They’re going to have a good idea of what their final expense will be. In these cases, being cost competitive while also offering terrific customer service and other extras — warranties and road hazard protection — can make the difference.

Step 5. Keep your employees motivated. Slucoch found that workers balk at new businesses if they don’t see any benefits right away. Consider getting your staff on board with incentives and bonus programs. Get everyone involved, not just estimators. Your techs, painters, helpers, detailers and admin staff can all receive bonuses for referring or capturing tire sales.

(Photo courtesy of Goodyear) Pass along informative brochures and marketing materials to collision customers to keep your shop’s name in mind when they need to invest in new tread.

Since carving out a place in the tire market is difficult and the rewards not terribly enticing, it’s easy to dismiss this work. Keep in mind the same thing could have been said about collision repair over the past decade when shops were closing their doors and many owners couldn’t interest their children in some day taking over their businesses. This industry came roaring back with new business structures and operational models.

The same kind of that made that happen could take a new view of tires and create a portable model that blends the two markets. It just takes one repairer with the right idea.

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