Brands stand trial in test auto stores; Sears focuses on big ticket tires

Brands Stand Trial In Test Auto Stores

Sears Focuses on Big Ticket Tires

CHICAGO -- The future of Sears automotive sales and service is riding on brand name tires.

Michelin, Pirelli, B.F. Goodrich, Gooodyear, Bridgestone, Yokohama and Fulda. Name the brand, and the chances are good that Sears is testing it somewhere in its 803 auto centers. Sears is determined to make tires one of its "power formats."

Drive into a Sears automotive service center in Richmond, Va., or Milwaukee for a peek at what Sears automotive offerings could look like, if the four store tests in each market prove successful.

If you need a headlight changed, your engine tuned up, a noisy muffler replaced or your oil changed and car lubricated, you'd better keep on truckin', because the centers no longer offer such low-cost services.

And, if you need to buy a set of spark plugs, a quart of oil, or windshield wipers, head for the hardware department of a Sears store across the parking lot from the auto center, or drive on to the nearest auto parts store. The test auto centers no longer carry such "nickel and dime" merchandise.

Instead, Sears is focusing on big ticket tires and tire-related services: brakes, wheel alignments, and shocks and struts, along with branded batteries and related electrical services such as alternators and starters.

Sears' acquisition last year of the Western Auto chain provided the impetus for wheeling out a merchandising strategy based on branded tires. Along with 295 Western Auto stores, Sears also got 115 Tire America and NTW tire specialty stores, chains that Western Auto recently had acquired.

Following those acquisitions, Western Auto began developing branded tire programs and moving away from its exclusive reliance on private label tires. In a cross-merchandising move, all Western Auto stores now carry Sears DieHard batteries. In addition, a small number of Midwest stores are testing sales of Sears Craftsman hand tools.

In Richmond, Tire America is supervising the four test stores as a joint venture between Sears and its tire subsidiary. Store workers and managers are Sears employees. Sears has renamed the test centers Tire America by Sears, which served to introduce the Tire America name to the Richmond market.

The centers follow the austere merchandising format of a Tire America store. In place of merchandise-filled gondolas, a row of tires sits on the floor under the windows at Tire America. Displays of shocks and batteries line part of the back wall. A small rack of custom wheels is the only display on the selling floor. A customer counter takes up the rest of the rear wall.

In addition to its private label Guardian and RoadHandler Plus tires (made by Michelin), the centers carry such branded labels as: Michelin, B.F. Goodrich, Goodyear, and Fulda, a West German brand. If customers don't find their size in stock, they can special order tires from among the 57 tire lines that Tire America handles.

Delco Batteries Available

The center also offers two or three popular sizes of Delco brand batteries in addition to Sears DieHard batteries. In shocks, Sears has added the Monroe brand to its own Easy Rider line.

The tires displayed on the floor carry no prices. But a bulletin board offers for customer comparison the newspaper ads of Tire America and three of its major competitors.

Tire America offers a lowest price guarantee and will pay 125 percent of the difference between its price and any lower. Sears has had to pay a handful of customers only a dollar or two on that pledge in the first four months, said store manager Roy Burden.

The tire installation foreman for the Price Club warehouse unit in Richmond conceded that Tire America matches its prices. But he said Price Club beats Sears on ancillary items, such as free rubber valve stems, against $2 at Sears, and $2 for metal valve stems, compared with $4.99 at Sears.

When shifting to the Tire America concept last October, Sears also slashed prices on its private label tires by as much as 50 percent.

On the popular RoadHandler Plus 195 75/14 size, for example, the Tire America everyday low price last month was $58. Sears claims its RoadHandler Plus, made by Michelin, is identical to a Michelin XA4 tire, except for tread design. In the same pricing region, the everyday price at a conventional Sears auto center in Fredericksburg, Va., was twice that, or $115.99. In a typical Sears promotion, it was on ad last month for $79. The new price is $74.93. Overall, Sears reduced tire prices by about 30 percent in the Fredericksburg pricing region.

In Milwaukee test stores, the same tire is carried at $59.10 every day, and at Chicago area stores, Sears had cut the everyday price to $63.19 in January. That move preceded the overall price cuts on Sears merchandise that took effect March 1.

In a different pricing region, the everyday price at the Middletown, N.J., Sears was $109.99, on ad for $77.99. The tire is now priced at $69.93

In another attempt to emphasize brand-image, Sears is advertising its RoadHandler line as "Made by Michelin. Backed by Sears." Prior to its reformatting, Sears kept secret the names of its private label manufacturers.

In other moves into branded tires, Sears began carrying last year a limited offering of Pirelli tires at all of its auto centers and Yokohama performance tires at 75 centers in California, Florida, Illinois and Wisconsin. This January, Sears initiated a chainwide rollout of a limited line of Bridgestone high-performance tires.

The Milwaukee test stores also are merchandised around branded tire strategy and service focused on tire-related services, along with batteries and battery-related electrical services.

Unlike the spartan displays at the Richmond test stores, the Milwaukee stores display tires on islands divided into three categories: passenger, light truck and performance. The Milwaukee stores offer "a richer mix of non-tire merchandise and service" than do the Richmond test units, said a Sears automotive official. "It's less plain vanilla than Tire America," he said.

In batteries, the Milwaukee stores offer both Delco and Motorcraft brands, in addition to Sears private DieHard and Monroe and Gabriel shocks and struts.

Sears is running the Milwaukee test itself and is attempting to see if Sears and Tire America can compete in the same market. Tire America operates two stores in Milwaukee but none in Richmond. The Tire America by Sears test was an attempt to introduce Tire America into the Richmond market, said Garry Bowman, Tire America district manager.

In both Richmond and Milwaukee the rest of automotive parts and accessories, such as limited selections of spark plugs, oils, filters and tools are relegated to the hardware departments of the Sears stores associated with each auto center. In the Richmond test, Sears stores carry only a token selection of automotives in hardware. The consumer electronics department of each store also carries a small selection of automotive speakers, radios and cassette players.

Freestanding Auto Center

In yet a third automotive venture, Sears is testing a freestanding automotive center that is not associated with a Sears store. Last fall, Sears opened the first in a former auto dealership in Naperville, Ill., near Chicago.

The Naperville freestanding center, named Sears RoadHandler Car Care, also emphasizes Sears' commitment to make tires a "power format." It, too, focuses on brand tire merchandising and cut-rate everyday prices on RoadHandler private labels. Its price on the 195 75/14 RoadHandler Plus was $63.19, the new everyday price for that tire in all 803 auto centers.

The Naperville unit offers only a limited line of tire and battery-related services, compared to conventional Sears auto centers.

Including Western Auto, Tire America and NTW, Sears will control 12 percent to 14 percent of passenger car tire replacements in 1989, estimated Modern Tire Dealer, a trade magazine written for independent tire dealers. That puts it in the same league as the 12 percent market share in 1988 for Goodyear and Firestone company-owned stores, the trade magazine said. Independent tire dealers handled 56 percent of all replacement tires last year.

As of January 1988, the Sears RoadHandler label was the fourth-largest in the nation, with a 7.5 percent share of the replacement market, the trade magazine determined. That compares with Goodyear, 16 percent; Firestone, 8.5 percent; and Michelin, also 8.5 percent.

The tire business is very competitive and margins are low, said Ed Kauffman, a partner in the Lindsay-Kauffman Co., a marketing consulting firm based in Tenafly, N.J.

Modern Tire Dealer estimated that gross margins on tires fall in the 20 percent to 25 percent range (compared to 36.6 percent for Sears overall in 1988). Tires produce a profit of 1.5 percent of sales, the trade publication estimated. In 1987, Sears merchandising profits equaled 5 percent of sales. Profits plunged to 1 percent in 1988, because of a $712.4 million pretax write-off related to restructuring.

Yet, tires are big ticket items, Kauffman said, and produce heavy revenues.

Even though the advent of longer-lasting radial tires slowed the replacement business, "there is market share to be had," Kauffman said. "Sears has so many outlets, it can get business just by accident, even if it throttles back."

In yet another automotive move, Sears is negotiating with Tidy Car to lease service bays in Sears Auto Centers for car cleaning and waxing service, Discount Store News has learned. Based in Boca Raton, Fla., Tidy Car operates 189 franchised car centers and one company-owned unit.

Tidy Car would lease from Sears one or two service bays in an undetermined number of auto centers and operate the car care service itself. In preparation for that, Tidy Car has opened a larger headquarters building in Boca Raton and added new staff.

The first Tidy Car center in Sears could open within the next couple of months, a Tidy Car official said.

PHOTO : Sears Strengthens Hard Lines Consumers walking into the Wichita, Kan., everyday price test

PHOTO : store will be struck by the discount store-type merchandising touches. Above, ice chests

PHOTO : are bulk-stacked on floor entering the sporting goods department. Sears will enhance its

PHOTO : already strong hard lines image with new power departments containing a broad selection of

PHOTO : name brand products in automotives and hardware/DIY, but the retailer has yet to clarify

PHOTO : its future in sporting goods. In toys, the chain hints at adopting a regional strategy,

PHOTO : avoiding markets where there is stiff competition.

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