How Tire Sales Can Increase Your Gross Profit

The profit from a tire really comes from the work around the wheel. You know, inspection processes for years have been flawed because you couldn't motivate a technician to pull the tire off the car unless you sold the rotation. And then they didn't find the work. And if you did and you sold tires and got the wheels off, now all of a sudden you see the scored rotors, you see the brake pads that need to be replaced, you see all the work that's there. And if you ran a report, which we've done in dealers, and you probably have done this as well, how much gross profit is on an RO with tires sold versus the gross profit on just a regular repair order with no tire sold? We see it anywhere, depending on the brand, anywhere from 150 to 300 bucks more in gross profit because not from the tire. If you looked at revenue would be way higher because tires are expensive, certainly in the highline stores. But it's the gross. You're selling more work as a result of selling the tires. So you got to look at it in a holistic approach instead of saying, boy, my parts manager won't stock tires and my dealer tire only delivers once a day, so I can't sort of meet promise times consistently. There's challenges. Don't kid yourself. This isn't easy for them to just flip the switch because for years they just sent the guy down the road, oh, you need tires, go to Goodyear up the street. So how do we sort of claw that work back? Starts with identifying which tires need to be sold. Not every dealership does that, even through a multi point inspection. There was a recent lawsuit for what, $12 million because we told the customer the tire was great, it was an accident, the guy died. And when NHTSA went and did the investigation, the pictures were online, the cords were hanging out of the tire, but the multi Point inspection said 8, 30 seconds. So we have to fix that, right? There's a few pieces of this that make it a lot easier. Identify your opportunities because then they'll know whether you're doing a good job or not. Assume you don't make any money on tires, and I don't want to get into that argument. You could make money if you had the right pricing strategy.

But if you identify you had 400 tires and you're the biggest, best tire guy in your district and you sell a hundred, you're using the wrong gauge. You know, if you're comparing yourself to the other guys who are selling 25 tires a month and just because you're number one makes you feel good. You just threw away 300 tire opportunities to the aftermarket. Because that's the one thing about tires that people don't realize they're getting replaced no matter what you say. Whether they age out because they've lost their shelf life from guys sitting in the garage in Florida and they're six or seven years old and the sidewalls are all cracked and the thing's starting to lose air, or they just run out of tread and lose the ability to hold air. You have to replace the tires. So there's some things that we can do if we provided them more data. Hey, you had 400 tire opportunities, but you only closed 100. Do you care? Do you want to go to 200 or 300 or 400 tires a month? Here's what you might need to do. You might need to stock more tires. You might need to look at your pricing model. You might need to look at your technicians and see if they really do want to replace tires. Or do you need to go up the street and steal the guy from discount tire at 10 bucks an hour, and that guy just runs around your shop putting tires on all day. Pretty simple solution there. Especially when you can't find people. You don't want an L1 certified tech putting tires on at 35 or 45 bucks an hour doesn't make sense. So there's a whole bunch of things we can do and imagine. Think about this, Chris. If we could show you a heat map of all the customers that are out there in your DMS that need tires replaced immediately. And by immediate, I mean within the next week or so, what would you do with the information? Would you reach out to Chris and say, chris, you're due for tires? We've been talking about this for a little bit. Now it's time. Come on back in for another analysis. We've got the right tire in stock. We've got price match guarantee. We'll finance your tires. If you need help, we'll give you 90 days, same as cash, we'll come and pick up your car. I mean, dealers are great at marketing stuff. They can come up with the right message, but they don't have the data. If we could give you a predictive model that says, here is the five people today, seven people tomorrow, nine people the next day that all need tires replaced. Could you give it to the BDC and drive more visits? Because if you don't hang on to the customer, Our data shows from those 28 million cars we've scanned that the average age of a car in a dealership service department is four and a half years old. But the aftermarket is servicing eleven and a half year old cars. So you wonder how they're making a bunch of money. Well, you've got a 40,000 mile vehicle versus 140,000 mile vehicle. You and I both know that the revenue possible maintenance and repair skyrockets once you hit about 100,000 miles. It's about five fold on average what a car under warranty spends, right? It's about 80 bucks a visit for the first few years of ownership because nothing goes wrong. And even an oil change happens in BMW's case, 1.2 times a year.

There's no money in that stuff. But that's where all the incentive money is. On the early end, it should be at the back end. Hey, you hold on to a customer into 100,000 miles, we're gonna reward you.

So how do you sell more tires? Our opinion is you need the data on the tire, right? You need to know which tires need to be replaced, number one. Number two, you need to have the ability to do the work. Either have the stock available, and if you have the right SKUs, you can probably get away with 85% of the requirement with seven or eight SKUs.

Sell the tire, do the work around the wheel, and then manage the next set of tires for the customer. Because either the date and the mileage and the tread depth now you can look at the next, scan the tread depth, the date and the mileage and very accurately predict when that customer needs tires and reach out exactly when he's due. Instead of using 5,000 postcards a month with a 3% return, you probably want a high return rate. And you would get it if you were target marketing exactly when the tires are needed, especially if you've educated them along the way. So how do you sell more tires? It isn't that complicated. And you probably have lots of customers you work with that sell lots of tires. But in this industry, across the board, nine and a half percent penetration, they've got to compete with the Goodyears and the Pep Boys and even Amazon for that matter. People are ordering tires on Amazon and Discount Tire and Tire Kingdom and Les Schwab, the list is pretty long. Even Jiffy Lube, you wouldn't think, are they selling tires? Why are they doing that? Well, their business is drying up because oil changes are not every 3,000 miles like when we were growing up. They're once a year. So what do they do? They supplement their work with tires. And people in Jiffy Lubes are using our technology to help them sell more tires. How about Midas Muffler? They've completely changed their entire business model and built a 90,000 square foot tire warehouse in Buffalo. And they have 1400 locations now. It's tires plus or whatever they call themselves because mufflers made out of stainless steel now and they don't rust and they don't go bad. Their business model dried up underneath them.

Their business model is actually every six years they add something else to the name. So it started out like Midas Muffler, then it's Midas Muffler and Brake. Then Midas Muffler brake suspension. Next is Midas Muffler brake suspension, cup holders.

Yeah, sure. And they've got to find things to sell. The dealer is no different. Right. They got to find some things to sell and they just haven't done that. They ignore the tire. And because of that, the big gross item in their shop is alignments. And they, they do a terrible job of alignments.

Thanks so much for watching this clip of Service Driver Revolution. We're uploading new stuff every day, so make sure you subscribe and click the bell icon so you don't miss out. If you have a question you'd like us to answer on the show, call 8333 Ask SDR and we'll answer your question on the show. That's 8333 Ask SDR. For special deals on our books and training, head over to offers.chriscollinsinc.com now that's offers.chriscollinsInc.com I'm Chris Collins and I'll see you in the next video.