Anyone who thinks the Internet won't have an immediate impact on the tire industry had better think again. In the last few weeks alone, several Internet initiatives by auto and tire manufacturers have shaken up the status quo.
They offer a clue as to how the Internet will help shape the tire business of tomorrow—and raise several red flags.
Tire makers already are shuddering from Ford Motor Co.'s recent online auction for original equipment tires.
That effort treated OE tires as a commodity in which the lowest bidding tire makers won.
A Michelin North America Inc. spokesman rightly pointed out that such commerce potentially could devalue its "carefully cultivated brand" by focusing solely on lowest price. The same holds true for every OE tire maker. Michelin also has shown how the Internet can be used to sell customized tires.
The company recently began offering customers the ability to order BFGoodrich Scorcher T/As in colors of their choice.
In doing so, Michelin is making the sale itself and using the tire retailer as an installer.
Now comes Pirelli S.p.A. with a passenger tire it plans to sell only through the Inter-net, bypassing retailers for all but the installation.
Pirelli will begin offering the tire for sale on the Web beginning March 15. The P2500 will be available only in Europe and have its own Net site that provides a price list, proof of purchase coupon and locator map of the nearest installer.
The concerns for tire dealers are how such Internet activity will change their operations. While Internet sales to tire consumers are still in their infancy, these initiatives raise troubling questions.
Ford's online auction appears to ignore the differences between products, reducing tires to the lowest common denominator—price. Should such auctions become prevalent industrywide and spread to replacement sales, the dynamics of how tires are bought, sold and marketed could change.
Michelin and Pirelli's experiments with direct selling present another concern. With the sale already made, the independent tire dealer loses the ability to influence the buyer's choice at the service desk. The sale in effect becomes a national account, with the profit margin dictated by the tire manufacturer.
Under this scenario, dealers still will be able to offer additional service, such as undercar work and add-ons, but the tire sale itself will have been completed before the customer arrives.
We don't think all tires will be sold this way. Some customers always will be loyal to their local dealer. But dealers had better prepare for the day when many customers walk in pre-sold.
The Internet already is changing how tires are bought and sold.