Analysis: Tire e-retailing to grow in next decade

MOUNTAIN VIEW, Calif. — Purchasing tires via the Internet will grow in popularity among consumers in Europe and North America over the next seven years, according to a Frost & Sullivan market analysis.

E-retail will continue to grow as customers enjoy the convenience and discounts offered by e-retailing, Frost said.

"Growing tire e-retailing will compel offline retailers to adapt to the trends in tire retailing. The market share of traditional tire retailers will decline as B2B and B2C customers migrate to purchase from tire e-retailers," said Frost analyst Oindrila Bhar.

Apart from the challenge of growing e-retail sales, tire retailers face the challenge of low-cost imports from Asia. Growing imports of lower- priced tires have hit the premium tire brands, such as Goodyear and Michelin, and other mid-range brands, such as Continental, according to Frost.

These imports compete directly with replacement tires offered at a higher price.

Dealers often find lower price points and higher margins more lucrative than premium replacement tires. This is supported by the fact that tire imports in both Europe and the U.S. are steadily increasing.

Consumer tire imports into the U.S. totaled 149 million units in 2014, of which China contributed 34 percent, according to U.S. data. The major Asian countries that exported heavily to the U.S. were South Korea, Thailand, Indonesia and Taiwan.

• This story appeared in the June 5 print edition of Tire Business

Tire imports into Europe are predicted to grow at a lower rate than the U.S. as European customers prefer premium or OE-recommended tires. U.S. imports will continue to grow, albeit at a slightly restrained pace due to protective measures implemented over the past few years.

Historically, despite anti-dumping tariffs imposed on Chinese imports in the U.S. in 2009 and 2015, tire imports did not decline. Chinese tire imports decreased marginally but imports from other Asian countries increased to fill the void.

Tire e-retailing and growing low-cost imports are the top challenges for tire retailing in the future, noted Ms. Bhar. This will result in the following two changes:

Transformation of tire retail, especially offline retail. As online tire retail penetration grows to about 12 percent in North America by 2023, offline tire retail will transform to offer a seamless tire purchase experience in tandem with e-retailers, she predicted.

Most tire retailers will reduce physical footprint and become purely digital stores or digital stores with in-store options.

"The potential customer is most likely to use a combination of online store and offline store facilities before purchasing a replacement tire. Online retailers offer in-store facilities to customers for virtual simulation of test drives or pick up and return facilities," she said.

Meanwhile, in-store identification of the customer and his/her online purchases will reduce the customer's time in the store and increase the overall customer satisfaction, she said.

Tire market consolidation. Noting that not all tire retailers will be able to maintain both online sales and retail stores, it will be the large distributors and retail chains, such as Kwik-Fit in Europe and Discount Tire/America's Tire in the U.S., that will be able to leverage the trend of tire showrooms and e-commerce.

"Though most tire retailers will invest in digital capabilities to capture the e-retail market, not all retailers will have the capital or expertise to do the same. The smaller independent tire workshops and smaller tire distributors might have to partner with the e-retailers or retail chains as fitting partners," Ms. Bhar said.

She predicts that changing tire technology could drive some smaller dealerships out of business as they struggle to invest in the latest tire maintenance technologies.

To maintain competitiveness, smaller dealerships and distributors will need to partner with larger distributors or retail chains.

Partnering with service price comparison websites could provide visibility for these small dealerships, she said.

"These two outcomes will be the significant changes in tire retail due to current challenges faced by it. Certainly, there will be other lateral opportunities created by the renovation of tire retail. Auxiliary tire services providers, such as tire hotels, mobile installation kit suppliers and others will have more prospects.

"Inventory management and efficient mobile installation logistics will be crucial for operational success of tire retailers," she said.