How to make money from tyre sales

Britain’s replacement tyre market is worth approximately £1.2 billion annually, yet according to the 2008 Castrol Professional Car Service & Repair Trend Tracker, franchised retailers secure just 16.4% of the business with the fast-fits grabbing a massive 58.5%. Why?

It isn’t price. Check it yourself. The budget ranges of some big national fast-fits may be a cheap loss leader, but their branded tyres are normally as much – if not more – than what you can sell them at a good margin for.

Selling tyres properly and efficiently can add tens of thousand of pounds to your profits. They are also easy incremental sales that have no serious adverse effect on your workshop efficiency, margin or recovery rate.

However, to exploit the opportunity you need to ask some questions and decide upon some strategies. These should be considered in turn:

Supply chain
Where will you buy your tyres? Some manufacturers have a ‘scheme’ and some are pretty good where they count towards annual targets and offer a returns policy, etc. But do compare them to what you can obtain independently – not just on price, but also on the supply of equipment and training, the weights and other consumables.

Also, check out delivery lead times and service levels. As one service manager put it recently: “I cannot expect my service advisor to assertively upsell tyres when she has no idea when they are likely to come in, and I certainly don’t want to leave a customer in our loan car for an extra day while we wait for a couple of tyres”.

You will need a core stock of significant brands, but will not be able to hold every conceivable tyre. So, emergency order delivery times of less than 90 minutes are what you should seek from a local supplier.

Storage and stocking
Dealerships often say they don’t have the storage space for tyres. But in my experience most should be able to find the relatively small space needed, which should always be in the parts department. With improved stock order lead times and frequencies for most franchises today, less space is needed for conventional bulky parts – particularly glass and body panels.

Whether you keep upmarket premium or go for budget is for you to decide, given your market position, but certainly you should use the budget tyre price to upsell into what you consider to be the right tyre for a particular car.

Pricing policies
Don’t not make the mistake I encountered a few months back. This dealership’s parts department quoted £49.76 for the tyre (which I thought was a good price), but then promptly added that the labour was 0.3 hours and that the weights would have to be costed and VAT added on top. That’s not customer-friendly pricing!

Always quote a total VAT-inclusive price and set it to be competitive with (but not necessarily cheaper than) the local fast-fit.

“For each service you perform you should sell two tyres”

Why will they choose you?
The answer is relatively simple. More people now have cars with alloy wheels. Given the choice, I would feel more comfortable having the technician and garage who services and looks after my car to be the one removing and refitting a tyre and balancing the wheel.

Also, as a discerning driver, I want the weights to be discretely hidden on the inside of the wheels and not to mark the outside or cut my hands when I wash the wheels.

Moreover, if I have to wait for this service I would prefer the warmth and comfort of your showroom or reception with its coffee, TV and ambience to the noisy, drafty shed with a greasy plastic chair and a dog-eared copy of yesterday’s paper.

Captive customers
Of course, many of your customers will buy out of convenience. The car is on the ramp already and you have identified the need to replace the tyre either then or at some identifiable point in the future.

You have the first selling opportunity. Even if you do not sell that day, you should set up a robust system for forward-booking this work so that, in the one or three months’ time when those tyres will need to be replaced, it is a quick confirmation call that brings the customer back in.

Staff attitude
Make it easy for your staff to sell tyres and they will. Give them a reliable supply chain, good breadth and depth of stock, and a simple pricing structure with an ability to price match to agreed levels or a supervisor/ manager to refer to.

Give them simple ‘words and phrases’ training to be able to assumptively ask for the business, and give them a simple to understand bonus they can participate in.

Upsell opportunities
Wheel balancing is normally included in the deal, but alignment checks can be easily sold by a competent adviser.

It won’t help your customer retention if they pay £200 for two tyres only to find that they wear unevenly due to alignment errors – notwithstanding the potential handling compromises.

Accounting and measurement
Tyre retailing is an incremental profit stream and should be accounted for separately, to identify the sales and profit made.

Moreover, as you can establish a relationship between service work and tyre sales (both are a function of mileage) you can even set up simple benchmark tyre sales KPIs relative to your service business.

In simple terms, as a starting benchmark, for each service you perform you should sell two tyres. Anything short of this and a performance opportunity can be identified.

Management review
With KPIs, benchmarks and separate lines within your management information, the viability and return on your investment can be clearly quantified.

As fast-fits have been creaming this business for years, it stands to reason that it is capable of achieving a good ROI. If you have not yet assessed the viability of such programmes, I urge you to do so now.