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Spare Change

Norman Harper found a bonanza when he let customers do the dirty work.
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A bargain is a bargain, but even discount retailers can push a good thing too far. Who, for instance, would willingly jack up a car, unbolt the four wheels, roll each one into a workshop, wait about 15 minutes, roll them back, and remount them -- all to save $8 on a set of tires? Apparently, enough New Englanders would do just that, to gross $15 million this year for Tire Warehouse Central Inc., of Keene, N.H., and boost the independent merchant into the top 3% of the trade's revenue producers.

Not only can the up-country folk put aside a penny, but in an industry notorious for price jockeying, so can Tire Warehouse's 22 outlets, which are dotted around the six New England states. By inducing customers to do the dirty work -- promoted attractively as "Semi Self-Service" -- the business saves on the labor that traditional tire retailers have to employ. A Tire Warehouse outlet can get by with only two people: the salaried manager, a low-pressure salesperson who books the orders; and a minimum-wage "tire buster," who fetches the goods and mounts them. "The payroll of a full-service store is three or four times ours, minimum," avers Norman Harper, the scheme's flinty 61-year-old creator. Because its labor costs are so predictable, Tire Warehouse dares to publish its deflated prices months ahead of time, taunting bigger operatives to beat them and survive.

It can be a rough ride for those that try. But slashing tires an additional 5% (in rounded terms) for consumers willing to eschew credit as well as comfort, Tire Warehouse sparks instant cash flow. "Our cash mustn't stop working," acknowledges Harper, who regards tires stacked darkly in back-room racks to be as unspendable as wampum. Thus, he tolerates little capital being tied up in receivables. Often, retail sales are deposited weeks before payables to vendors are due, and either the idle cash draws interest in the interim, or it is used to strike even better buys with manufacturers. Blessed by Dun & Bradstreet's highest marks, this year Tire Warehouse bought an average of 13,600 new tires per outlet from domestic and overseas tire makers, allowing it to claim the rank of the industry's fastest inventory turner. And because every turn of a tire swells the company's cash flow, few competitors can hope to keep up -- particularly since Tire Warehouse's advertised prices are protected against acts of man and God alike. Ingeniously, its fleet of trailer trucks is designed not only to serve as backup warehouse space, but also to haul product in the event of a transportation strike.

The sort-of-do-it-yourself concept was born in 1971, when the key employees of a tire store that Harper owned suddenly quit to take jobs with bigger outfits. It dawned on him that his enterprise had become "the finest little auto-shop school around." Rather than scout for yet more students, the disgruntled Yankee threw open his then-grungy warehouse to the public, promising fellow natives deep discounts -- if they didn't mind changing their own tires. In three months, the humble cash-and-roll operation grossed more than the retail store had in a year. Now, Tire Warehouse premises are built to evoke that casual bargain-in-a-barn look, neatly cleared of he discards that commonly signal tire-changing sites.

And it is unlikely that key employees will up and leave. At first, would-be entrepreneurs could open their own store by investing in a one-third share through Tire Warehouse Central, the parent unit that controls operations. But fractional ownership didn't inspire the customer-pleasing devotion that Harper demanded, and the company has since reacquired the shares. Today, a store director is hired at $23,200 a year in straight pay, and bonuses from the stor's pretax net can inflate the take-home pay. One Tire Warehouse director earned $45,000 in his second year. The once-stung-twice-shy Harper didn't pay out the bonanza immediately, however, but in weekly increments to the following year's salary, calculated to induce continued attendance. "That kid may be worth every dime," states Harper flatly, "but he's not going to take the money and run."

Last updated: Jul 1, 1985




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