Dealership groups are pumped up on tire sales
DETROIT -- Asbury Automotive Group Inc. wants its dealers to get back to selling and installing tires.
COO Michael Kearney says a program running at all Asbury stores will help its dealers do just that.
"For every dollar of tire sales in any given shop in the United States, the consumer spends $1.50 in additional sales," Kearney said in an interview. "You need to be in the tire business."
Asbury, of suburban Atlanta, ranks No. 6 on the Automotive News list of the top 125 U.S. dealership groups with retail sales of 67,232 new vehicles in 2010. Asbury has 79 dealerships in 18 U.S. markets.
Kearney says dealers decades ago created a market for independent tire shops because many dealers didn't want to devote space to tires, which often yield small profits.
"We want to bring that industry back to us," Kearney says.
To do that, Asbury began its program as a pilot late last year and rolled it out nationally in January. The dealership group has invested in technology to install tires at each of its stores.
The company negotiated with distributors to get daily, as-needed tires so stores can deliver same-day service. Asbury advertises that its dealerships will beat any competitor's price by 5 percent and is dedicating part of its marketing budget to tire sales.
Other dealerships have targeted tires, too. It's a way to win service business that has declined with improved vehicle quality. Dan Muggli, manager of Land Rover Portland in Oregon, says he pushes his staff to "watch for a very careful examination of tires and tire wear and be sure we offer full-service tire replacement at a competitive cost."
Muggli, chairman of the Land Rover Business Operations Council, adds: "It's hard work now to make sure we can get every bit of business available to us."
Likewise, Ford Motor Co. promotes tire sales at its dealerships. It ran spots during two periods in 2011. Those spots are not running now, but Ford plans to air more this year, a spokesman said.
At AutoNation Inc., the nation's largest dealership group, tire sales have doubled from a year ago because of a program it piloted in late 2010 and rolled out early last year. The program centered on training staff about tire knowledge and sales skills. AutoNation also created tire displays in each store, brought inventory to levels each store could handle, touted best pricing, value and performance in its marketing and established goals and objectives at each store, said an AutoNation spokesman.
Penske Automotive Group Inc., the nation's second-largest dealership group, also has been running a similar tire sales program since the recession started in 2008, says a Penske spokesman.
Penske earns about $1.4 billion from service a year. Tire sales are a small part of that business. For that reason, Penske is studying software to get more customers to consider getting new tires at their dealership. He declined to discuss specifics.
In 2007, Lithia Motors Inc., the ninth-largest U.S. dealership group, started Assured Tires. The program offers services such as free tire rotation and free repair or replacement of damaged tires, as well as a guarantee to match the price of any competitor, says Ron Stoner, Lithia's vice president of fixed operations in Medford, Ore.
Lithia reached agreements with some of its major tire distributors to stock its 85 stores with the appropriate inventory.
Lithia's goal is to get a customer serviced within an hour.
When Lithia started the program, the dealership group was "lucky" to sell about 2,000 tires a month at all of its stores combined, Stoner says. Now, Lithia sells well over 10,000 tires a month, he says.
And those tire sales lead to other business.
"Over 30 percent of the vehicles we replace tires on, they need brakes and then suspension work and alignments and it leads into a lot of different things," Stoner says.
Asbury piloted its tire program starting in October in Greensboro, N.C.; Jacksonville, Fla.; and Richmond, Va., Kearney says. Before the national rollout, Asbury developed a message that resonates with consumers to take business from the independent tire service centers.
Asbury has earmarked about 10 percent of its marketing budget to promote what Kearney calls a simple message: "We will beat any competitor's price by 5 percent tire-to-tire. That is a guarantee and we will have the tires for you the day that you show up or your next tire is free."
Asbury's marketing budget was about $36 million in 2010, an Asbury spokeswoman says.
Asbury also plans to run other service and parts pilot programs, which Kearney declined to discuss. For now, he's focused on tires.
"If we do it the right way, which we are, why would the consumer go anywhere else? They can get everything they need to get done in one place," Kearney says. "It's convenient, it's fast and priced as competitively as anybody out there."
• 10% of Asbury's marketing budget earmarked for tire ads
• Tire distributors to supply as-needed delivery to stores for same-day service
• Asbury guarantees its stores will beat any competitor's price by 5%.
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