From employee recruitment and retention to the rising cost of — well, just about everything — stacked on top of many other issues, the nation’s largest tire dealerships are not immune to the challenges that impact their smaller counterparts.
Leeanne Bolger, director of marketing for CJ’s Tire & Automotive, an 18-location dealership based in Birdsboro, Pa., echoes the concerns of many MTD 100 dealers when she says that supply chain, while improving, remains a challenge.
“It’s definitely gotten a lot better since COVID-19, specifically when we're talking about imports, but at least in our area, we’re still having issues with everything that's going on in the Red Sea” and other parts of the world, she explains.
“One of our biggest issues is we have so many tires that we’re having to hold them at port, which is costing a lot of money. We have so many tires on order, we're unable to take them.
“I know it's not just us,” she continues. “We have a lot of other tire companies calling us and saying, ‘Hey, we have too many tires and we can't facilitate them in our warehouse. Would you be willing to take any?’
“We're retail and wholesale. We’re hybrid. So we have a lot more tires coming in.” (In addition to its 18 retail stores, CJ’s Tire & Automotive has “seven-and-a-half" distribution centers, including a busy mixing warehouse, notes Bolger.)
Consumer trade-down to less-expensive tires is another trend that has changed how CJ’s Tire & Automotive does things.
Due to budget constraints and other issues, “typically, the tier-one customers coming in are shifting to tier-two and we see a lot of tier-two customers shifting to tier-three. That presents a challenge for us,” specifically when it comes to achieving targets set by bigger suppliers’ “share of account” programs.
“It makes it harder to hit the programs when consumers are coming in and tiering-down to tier-two or tier-three,” says Bolger.
Ever-evolving vehicle technology has emerged as a significant challenge. Bolger says vehicles are becoming more complex and technicians need specialized training to work on them.
This includes electric vehicles (EVs) and cars equipped with sophisticated advance driver assistance systems (ADAS.)
CJ’s Tire & Automotive has been able to obtain training for its technicians, “but it's costly.”
The dealership also has invested “in an ADAS machine,” which came at a significant cost, says Bolger, who adds that ADAS service is “expensive for the consumer, as well.”
Another challenge for CJ’s Tire & Automotive is employee retention. “When we get ahold of employees, we try to build careers for them. We don’t have a high turnover rate for salespeople or techs.
“We fully pay for their training — any type of training they want. We do tool allowances. We have all types of incentives. We’re also trying to make sure they're being paid correctly. But I think the main thing we try to do is that when they start here, we build a career path for them, so they know this isn’t a dead-end job.”
Finding new technicians is also a challenge for Holyoke Tire Group, a 15-outlet dealership that’s headquartered in West Springfield, Mass., especially as veteran workers “age out” into retirement, according to Pete Kearing, the company’s longtime president.
“Replacing the aging workforce is a big problem right now,” he says.
Holyoke Tire has lost “several key guys” over the last few years. “A lot of guys, as they hit their late-50s and early-60s are bailing when they can. And we’ve put in good retirement systems, so they can.”
Kearing, who says he has no plans to retire, is finding replacements by “bringing guys up through the ranks. But it’s still a tough, tough business. It’s a lot of work.”
Managing employee turnover is a universal concern, says Daniel Horn, vice president of sales at Wilkes-Barre, Pa.-based McCarthy Tire Service Co. Inc.
He cites road service as being a particularly tough job, as technicians are “typically working in either hot environments or cold environments, rain, snow — you name it. And it's a job that takes a long time and (a lot of) onsite training to get techs up to speed on how to do it and how to do it safely.”
Price hikes and in some cases, decreases from tire manufacturers have had a consequential impact on McCarthy Tire Service's business over the last few years, according to Horn. Supply fluctuations have proven to be challenging, too.
“When you compare it to prior years, there were pricing changes and pricing realignments and that made it difficult to operate,” he explains. “When prices go up, you don’t have to worry about it as much because the average cost is lower, but when prices come down, your average price is higher than what you’re buying it at. That creates a lot of challenges for us as dealers to try to create sellout to customers.
“If you go back to the end of 2022 and the beginning of 2023, product became much more available. Tires that we had ordered (long before) started showing up and if you didn’t catch it quickly enough, you had a lot of product in stock that wasn’t moving at the clip it had been.
“Manufacturers would come in and (do) what they called ‘pricing realignments’ and would bring certain SKUs and sizes down. And as much as that helped to a certain point, you’re not protected on the backside. So we now had product in our inventory that was substantially overvalued. It was just one of those headwinds.
“This year, everything kind of tightened up,” which means the McCarthy Tire team has had “to just get back to the basics of Sales 101,” says Horn. “Just because you answer the phone and have the product doesn't mean you’re going to sell the tire anymore."
Looking back on the first half of 2024, “I think every dealer would agree that the first quarter was not the best quarter. It wasn't bad — just not what we’ve come to expect over the last couple of years. I think we’ve seen a little bit of an uptick” since then, “but still not where we need it.
“Also knowing that it’s an election year, there always seems to be a little bit of a lull,” says Horn, who also cites “the threat of tariffs and how that’s going to shake out” as additional concerns. “We’re very optimistic that we’ll have a good year as a company and as an industry. It’s just not at the increased rate we’ve seen over the last couple of years.”
“The market has been soft,” says Adrian Rodriguez, vice president of marketing and retail sales for Commercial Tire Inc., which is based in Meridian, Idaho, and has 52 outlets.
“Our expectation is that it will pick up. Whether that makes up for the first half of the year, I think that’s to be determined. As we talk to our accounts, I think one of the challenges they have is uncertainty, not only in the market, but because of the election year.
“We’ve talked to some of our big accounts and they’ve said, ‘We’re going to do maintenance-level purchasing until we know what’s next,’” he says.
Fortunately, the region where Commercial Tire operates “is still growing, so we have an advantage. People are moving to Idaho. People are moving to Utah, which is putting in what they call ‘inland ports’ — basically, massive distribution hubs. So there’s a lot of opportunity,” especially on the commercial truck tire side of the dealership’s business.
“We’ve seen an uptick in (sales of) Bandag retreads. And that value proposition is looking a lot better... the (ability to) retread a tire two or three times.”
Like other MTD 100 dealerships, Commercial Tire has witnessed a consumer “downshift” to less-expensive brands, “from tier-one to tier-two and from tier-two to tier-three. I think there’s more flight from tier-two to tier-three.
“What we’re seeing in our market — and all of this is market-specific — is that if you're a tier-one buyer,” you will continue to buy tier-one tires, “but tier-two buyers are downshifting to tier-three," he notes.
“The thing that has supported that shift is the quality of tier-three tires. The quality has come up so much that the lines are blurred between tier-one, tier-two and tier-three, in my opinion. We’ve definitely had to reposition our product line to meet the market.
“Previously, we didn't sell a lot of opening price point tires,” says Rodriguez. “We didn’t have a big product line offering. But as we’ve seen that shift, we have now brought in a broader line to meet those needs and in fact, for us, that’s been a big win. And when you look at tire units, we’re actually up year-over-year.”
Like many of his counterparts, Logan Wilks, vice president of Wilks Tire & Battery Service, an 11-outlet dealership that’s based in Albertville, Ala., is keeping an eye on the general political situation, including this November’s presidential election.
“A lot of people say they could care less but at the end of the day, it’s affecting the stock market,” he says. “It’s affecting investment. It’s even affecting the central bank and how it’s manipulating money. It’s a big deal and it just trickles down to us, the companies we sell to and even to the end user.”
Trucking fleets, in particular, are carefully managing their expenses. “What we’re seeing now, especially the large fleets that have the resources, is that their finance people are putting their thumbs down on some stuff. They’re not doing the big bulk purchases that they were a year ago. They are managing their tire programs more stringently.
“A lot of fleets sometimes forget that casings have value, but now they want to make sure they have accountability on their casings. That’s something we didn't see during the fast-paced years of 2021 and 2022.”
Other economic factors, like inflation, are influencing Wilks Tire & Battery’s expansion plans. In the past year, the dealership acquired two stores and built a new one. All required substantial capital investments.
“We’re not sitting on a bunch of cash. We’re blessed to be in a good financial position, but we still have to go to the bank when we want to grow.”
“Inflation has put the brakes on things just a little bit. It’s also making us more conscious of our inventory. Our philosophy is ‘If you don’t have it, you can’t sell it.’ We still believe in keeping things in stock, so it’s causing us to watch our inventory a little more closely.
“Obviously, commercial tires cost a lot more than consumer tires. The vast majority of over-the-road fleets” that Wilks Tire & Battery services “are not buying that tier-one product anymore. They just can't pay $600 to buy a steer tire. In the commercial world, it’s becoming very challenging to push the top-tier products.”
Marc Pons, president of Chapel Hill (N.C.) Tire, which has 11 locations, says finding opportunities for new locations is an evergreen challenge.
“We’ve been trying to expand as aggressively as we can for the last eight years or so and our preference is to do it by acquisition. There’s a lot of baby boomer (tire store owners) out there with no succession plan and it’s a great opportunity for us.
"But the challenge is the private equity guys have gobbled up a lot of folks with maybe three stores.”
Another problem is that “a lot of businesses, owners said 10 or 12 years ago, ‘I’m not putting another dime into it,’” says Pons. “Because of that mindset, the facilities have gotten away (from them) and they don’t have much to sell.
“When you do an acquisition, a lot of times you’re buying that customer base and the goodwill that's been built up over the years. But when (exiting store owners) haven’t done anything to differentiate themselves from a professional standpoint — maybe they’ve offered cheap oil changes or low-cost alignments — that’s not a great customer base to be buying. And the mindset of their staff has been degraded,” in some cases. “It’s more, “Let’s just hold on,’” instead of “striving for excellence.”
Pons says he stays connected with specific dealers who might want to sell. “We reach out. We do emails and letters. If someone’s not interested” in selling at the moment, “but has a great business, I might ask them to get coffee or lunch and say, ‘I know you’re not thinking about selling now. But if you are in the future, please keep our name in the hat.’ The last two acquisitions we did took two years, from initial contact to them being ready to sell.”
In addition, building stores from scratch has become very cost-prohibitive, according to Pons. (Only two of his stores were new construction. The rest have come to Chapel Hill Tire via acquisitions.)
Before the COVID-19 pandemic, “we were geared up to do more ground-up locations. But post-COVID-19, inflation just took off, plus materials, labor and the cost of projects. It’s (also) going to take at least 18 months to get something through with municipalities and the development process — permits and those things.”
Pons also spends a great deal of time and energy on refining his dealership’s culture.
This includes strengthening the sense of accountability for its success among employees, he explains.
“Accountability is an incredibly complex topic. We’re a 71-year-old family business and I would say that family part has played a big role — so big sometimes that we were afraid to have tough conversations about performance” in the past.
“We had a habit of recognizing that maybe an employee or a location wasn’t performing well, but it was more comfortable to sort of divert our eyes and change the subject. We all wanted to be friends and that hurt the business.
“Everyone has a different definition of accountability,” says Pons. “To some people, accountability is an incredibly negative term. It means punishing people and firing people.
"So we’ve worked a long time on getting a common definition of what accountability means at Chapel Hill Tire.
“One of the things I’m really proud of, though, is that the Chapel Hill Tire version of accountability is very supportive. We want to help each other get over our obstacles.
"What it requires from the individual is vulnerability — saying ‘I’m stuck and I need help.’ That’s where we are in the process now — getting the team to say that ‘I’m stuck’ is an act of courage and strength.”
Pons has put resources in place to help. “It can be in the form of paid training. In a lot of cases, it's bringing in someone who's either dealt with what (struggling employees) are dealing with” or someone who “can see the problem differently.”
