At Miami store, selling new tires is just the beginning
Selling tires is fine. But what Nestor Alvarez really likes about tires is that they provide an opportunity to sell alignment, brakes and other items in his dealership's service department.
Alvarez is the service manager at Land Rover North Dade, a Miami dealership. In effect, the dealership's service department borrowed the "100 percent rule" from F&I departments.
The rule says 100 percent of the customers get a sales presentation for 100 percent of the products, 100 percent of the time.
In 2012, as part of a "free multipoint inspection," he said every service customer got a tire tread inspection. A technician measured tread depth and jotted it down.
"You cannot close the ticket on the multipoint without tire readings," Alvarez said.
Customers were notified if the results showed the tires needed replacing. Alvarez said he has always heard that "75 percent of the people who buy tires buy tires from the first person who tells them they need new tires."
He said the tire sales themselves are "not a big money-maker," but tire sales have generated a lot of business in related jobs such as alignment, brakes and shock absorbers. He said virtually every customer who needed new tires also needed an alignment.
He said it helped that the dealership's tire distributor, Cleveland-based Dealer Tire LLC, threw in road hazard coverage at no extra charge, meaning damage from curbs, potholes and road debris is covered. Competing retail outlets charge $13 per tire for road hazard coverage, he said. The dealership also throws in free nitrogen for the tires.
In addition, as a reward for top sellers, the dealership had a contest for a cruise, Alvarez said.
"The upsell is the biggest reason why we do it. We probably make $20 on the tires. Basically, there are no profits," he said, except for the labor on related work. "But if we sell two sets of tires a week, that's an extra 10 hours a week."
In 2012, tire sales increased 125 percent at his dealership to just over 1,000 tires, Alvarez said. A companion Land Rover store, which is also part of the Warren Henry Auto Group, also more than doubled tire sales last year to around 900, he said. The group has six locations in Florida.
Public dealership groups have also discovered the advantages of selling more tires.
"It really is a retention program. It's not just about selling tires alone," said Michael Kearney, COO of Asbury Automotive Group.
Asbury was No. 7 in the Automotive News Top 125 Dealership Groups for 2012, with 2011 new-vehicle sales of 68,770. Tire sales increased for Asbury by 90 percent in 2012, he said. Asbury declined to disclose its tire sales.
"The goal we set in 2011 was to double tire sales in 2012. We got nearly double," Kearney said.
He said the group launched a pilot program for tire sales in 2011 and rolled it out nationally in January 2012.
Meanwhile, AutoNation, Penske Automotive Group, Sonic Automotive, Group 1 Automotive and Lithia Motors all said in 2012 they were going after more tire sales.
The acid test for Asbury's tire program will be to see how much additional business those tire customers generate over time, Kearney said.
Kearney said in January that the company was still analyzing 2012 results for the correlation between more tire business and more related business from the same customers. He said the early results were encouraging.
He said, "If you look at our stores on a year-to-date basis, 83 percent of all individual stores saw an increase in consumer sales of labor year-over-year. Of that 83 percent, every one saw a substantial increase in tire sales."