5 November 2008
The Business Environment
Business Sense for 2008
 The world is changing—perhaps more quickly than we’d all care to admit. 2008 brings with it a retail environment that’s been transformed by the recent surge in the value of the Canadian dollar, as well as the economic uncertainty within our borders. And while customers are more informed than ever before, they’re also more demanding. Will you be able to keep up with the changes the new year brings with it?
All changes bring with them risks and opportunities. Those who know how to harness change and take advantage of it will come out on top; those who don’t risk losing out.
If you haven’t given any thought to how you’ll face new challenges and changes this year, it’s not too late to make adjustments and set priorities. The new year has just begun and business owners still have enough time to refocus their efforts and fine tune their strategies in order to assure that 2008 will see them succeeding in this rapidly changing business environment.
Canadian dollar
The rise in the Canadian dollar presents tire dealers with a good news/bad news scenario. The good news is that buying, equipment and supplies manufactured by our largest trading partner has suddenly become more affordable. If you’ve been thinking of buying a tire balancer or other equipment for your shop, take advantage of the strength of the Canadian dollar and the increased buying power it affords.
The bad news is that your customers might expect you to do the same—lower your prices to match what American retailers are charging their customers. What will you do? The answer to that question depends on what percentage of your customers ask about a price cut, and how likely they are to actually shop abroad for tires.
While some tire dealers may choose to lower their prices (even slightly), others will opt to stand their ground. Which approach is better? Ask yourself: Have your costs decreased? We all know it costs more to operate a business in Canada vs. the U.S.
If the price issue becomes a real concern at your shop, and you decide not to give in to customer demand, consider increasing the level of service you offer your customers. After all, price is not the only deciding factor. This may convince your customers that they’re getting more bang for the buck, and the added value may be just what they’re looking for.
However you decide to address the issue, make sure all your employees know where you stand and that they have a well-prepared answer to offer customers who come in asking why they can’t buy tires from you for the same price they’ve seen advertised in the States.
Economic uncertainty
The “R” word (recession) is in the news in the United States and experts say Canada can also be affected by the downturn in the American economy. The question is, how will our economy fare? Pessimists see a further downward trend in the growth of the U.S. economy seriously affecting our exports, while optimists look at unemployment in Canada being at an all-time low, and for the first year since 2002, growth that outpaces that of the Americans.
If we’re anticipating a slowdown in the economy, why not plan ahead for it now? For starters, make sure you and all your employees are especially eager and willing to please your customers and that your shop goes above and beyond the call of duty when servicing their tire needs.
Although there are no guarantees, going the extra mile may help you hold on to existing customers, and keep your shop top-of-mind when your customers’ friends ask them, “Do you know of a good place to buy a set of tires?”
Keep in mind that a recession is felt across the board and that the companies you buy from will feel the need to keep their customers (namely you) happy as well. That means you can expect them to offer better customer service, work on their relationship with you, and offer you a “valueadded” experience.
That’s what makes a recession a good time to negotiate. Interest rates are generally at their lowest, making it an especially good time to lock in low rates on long-term leases—whether you’re looking for extra warehouse or retail space, or shopping for expensive equipment. Lock in during a recession at the lowest lease rates you can negotiate, and profit from the deals when the economy recovers.
Internet presence
If you’ve been putting off investing in a Website with the hope that “this whole electronic fad will go away,” it’s time for a wakeup call. Today’s savvy consumers choose the Internet over the Yellow Pages when shopping for pretty much anything, including tires.
True, the brands you carry have their own Websites, and that’s likely where your customers will begin the shopping process. They’ll log onto a manufacturer’s Website in order to research the tires that interest them. Then, they’ll likely key in the name of those same tires into a search engine to see what others think of the brand and the tires.
Once they find a tire they want to spend money on, they’ll use the Internet to find a shop in their area that sells it. If your shop doesn’t have a Web presence, you might lose out on the sale.
If you already have a Website, perhaps 2008 will be the year you upgrade and update it in order to make it more appealing to Web-savvy consumers.
Portfolio analysis
If you don’t know which tire brands are making you the most money, now is the time to find out. The truth is, you likely carry more brands than you really need to, and some brands are just taking up space. They’re the ones that aren’t making you money and are not worth stocking.
If you’re like most tire retailers, you likely want to carry the same brands the other shops in the area do. But if everyone is carrying Brand A, wouldn’t it make more sense to be the only one in the area with Brand B and C? The retail experts certainly think so, so why not listen to their advice?
Naturally, if Brand A is making you the most money, then you’d certainly want to keep it. But if it’s not, then don’t get caught up in price wars. Instead, invest in the brands others don’t carry and set the prices you want to without worrying about what the shop down the street is charging.
Determining which brands are keepers also has to do with knowing your customers. If you cater to the high-performance modified sports car crowd, you know you’ll want to stock certain brands, as well as certain sizes.
But if you specialize in truck and SUV tires, then the brands and sizes would be completely different. So
figure out where you’re making the most money, and which type of clientele you’re attracting. That’s the only way to cut overhead costs associated with buying and warehousing dead stock.
Business continuity
Contingency plans are a must. It’s often been said that if you fail to plan, you plan to fail. And although you may not want to plan for unpleasant “what-ifs” like a terrorist attack on Canadian soil, a gas leak that shuts down your building for the day, a flood that destroys all your stock, a computer virus that destroys all your customer and accounting data, the death of a business partner, or the possibility that a key employee might win the lottery and quit the next day, if you don’t have a plan in place, you may find your business suffering long- or short-term losses.
Not sure where to start? Experts recommend putting together a team representing all key areas of your organization. This team should get together to look at worstcase scenarios, develop strategies for dealing with them, and then test the strategies to see if they’d actually work in the real world.
You might also want to look outside your organization for professional help. Get your accountant involved to find out how much capital you’d need to keep things afloat if an emergency scenario were to cripple your business. Ask your lawyer what rights and obligations you’d have to consider before making drastic changes to your company during an emergency.
Final analysis
As you look forward to the challenges and rewards 2008 is sure to bring, remember that change is inevitable and that flexibility is the cornerstone of all successful companies. Just as inner tubes and whitewall tires gave way to low-profile rubber and run-flat technology, your business must keep up with demand and continue to evolve in step with market demand.
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