AKRON (March 13, 2001)—For many tire dealers, gazing into a crystal ball or consulting tarot cards seem just as reliable as making an educated guess on how many snow tires to order now for next winter´s selling season.
Yet every spring, guessing is pretty much what dealers do as they place winter tire orders with manufacturers. It´s one of the quirks of the tire business—like fortune-tellers, dealers have to make predictions about next year´s winter conditions and customers´ state of mind when it comes to outfitting their vehicles for winter driving.
"It´s a hip-pocket gun shoot,`` admitted James Miller, president and CEO of Twin City Tire Inc., Eden Prairie, Minn. "You´re damned if you do and you´re damned if you don´t."
He said dealers need to order enough snow tires, but if they order too many "you sit on them. It´s a tough deal."
The opposite is true for dealers who don´t order enough.
"Snow tires are a demand item, not a luxury item," said Bryan McMahon, northern district general manager for American Tire Warehouse Inc. in Fairbanks, Alaska. "If you do not have it in stock, the customer will go to someone else. You have one shot at ordering."
Although dealers can call in an order to their distributors during the season, the customer doesn´t want to wait, he said.
So how do tire dealers decide how many winter tires to order this early in the year?
Given the reputation of weather forecasters, dealers can´t rely on weather predictions for how the next winter tire season will fare. "We hear people say we will have an early—or a late—season next year," Mr. McMahon said. "But we have to order the same time every year and we want to get our tires a month before the season starts."
Facing order deadlines in March or April for an October delivery, dealers must look at real data: prior year´s sales, remaining inventory and trends in sizes and customer buying habits.
"Historical perspective is the key," noted Dick Aronson, president of Century Tire Co. in Portland, Maine. He said he will be evaluating what sold this winter when placing his orders. About 25 percent of his tire sales involve winter tires and this winter was an excellent selling season.
"I don´t foresee ordering less than last year," he said, adding, however, that there always seems to be a tire size that becomes unexpectedly popular. That means he´ll have to order it from distributors during the season.
Twin City Tire´s Mr. Miller said his company has a sophisticated computer ordering system that provides him with information not only on winter tire sales but also summer sales to determine what vehicles changed tire sizes and what vehicles need to have snow tires for best performance.
Likewise, American Tire Warehouse bases its winter tire orders on the previous season´s sales.
"If business is on an upswing, we would look at increasing purchases based on gross sales growth," Mr. McMahon said. "We´ll buy at least what we did last year. Sales are up since last year."
Dealers who have been in the business for a while said they have usually been on the mark in ordering the right amount of tires. Overstocking winter tires isn´t a total loss, as some manufacturers offer credit and rebill programs that credit dealers´ extra inventory toward next year´s orders.
"But we are stuck with where to put the inventory," added Barry Steinberg, president and CEO of Direct Tire & Auto Service in Watertown, Mass. "Winter tires are a crap shoot, but you´ve got to do it."
As a distributor to local tire dealerships, Roland Lesieur of Maynard & Lesieur Inc. in Nashua, N.H., has found dealers are becoming more conservative in buying winter tires, partly because they don´t have the storage space to stock the assorted sizes. Many will come to his warehouse to pick up winter tires for which they already have customer orders.
How much of a winter tire inventory a dealer is left with at the end of the season often is tied to the severity of the winter in the region. For example, if Alaska doesn´t get a good snowfall by the end of October, according to Mr. McMahon, the selling season starts late and sales drop.
"We need snow to come earlier," he said. "If it comes later, people figure they have made it this far (into the season) without snow tires and they don´t buy."
Ironically, the quality of local snow removal operations has impacted winter tire sales for some dealers. Streets in the urban areas of Minnesota´s Twin Cities, for instance, are well plowed and salted, so people find all-season tires fulfill their driving needs, Twin City Tire´s Mr. Miller said. But avid skiers and people driving in rural areas still consistently buy winter tires.
In addition to improved street cleaning, advanced tire technology has led to a steady decline in winter tire sales. Mr. Lesieur said he has noticed a drop in winter tire purchases with the improvement in all-season tire traction and the popularity of front-wheel drive vehicles.
"People who want maximum safety want to buy snow tires, but they don´t like the inconvenience of coming in each spring and fall to switch tires," Mr. Miller said. He added that many customers are turning to all-season tires with silica-based compounds that provide better gripping ability.
During the past few years, Mr. Aronson said, he had seen a decline in the number of snow tires sold, but "we now see people believing that all-season tires can´t get them through the severe winter as we are having now."
His dealership sells "a tremendous amount" of studded tires, which by law are required on all four wheels. Customers with front-wheel-drive vehicles are encouraged to put winter tires on all four wheels, he said.
Direct Tire also has experienced a loss of some winter tire business due to the popularity of all-season tires, but has found a growing winter tire market among exotic car owners. Owners of popular models typically rely on all-season tires, Mr. Steinberg said. But the lion´s share of his winter tire market now consists of owners of Porsches, Mercedes, Jaguars etc., with high-performance tires that turn the cars into sleds on icy roads, he said.
"We sold 7,000 winter tires this year at our four locations," Mr. Steinberg said. "I anticipate ordering 30 percent more next year."
While winter tires make up only 10 percent of the dealership´s tire sales, they are a profitable part of the business, complemented by a boost from wheel sales since many high-performance vehicle owners usually buy a set of wheels for their winter tires.
In the mountainous Northwest, people don´t get around unless they are driving on winter tires, said Phil Wick, president of Les Schwab Tire Centers Inc. in Prineville, Ore. Studless tires are making gains in the market, but studded tires are still the best performers and sell the best in his market, he said.
But in Alaska, studless tires have become more popular in the last four years, thanks to technological improvements and government legislation limiting the use of studded tires, according to American Tire Warehouse´s Mr. McMahon. Some low-mileage drivers even keep their studless winter tires on their vehicles year round.