Independent tire dealers should find 2019 similar in many ways to the year that just ended.
Talking with industry experts and tire dealers about the coming year, Tire Business found the general consensus is the economy will remain strong, unemployment low, vehicle miles driven will grow — albeit slowly — and the sweet spot for independent repair shops (i.e., vehicles out of manufacturers' warranties) will continue to expand.
Sounds like 2019 has the makings of a good year for independent tire dealers and auto service shops.
But like the year that just ended, dealers will face significant challenges as more baby boomers retire and millennials become the largest consumer-buying segment, more new vehicle technology is introduced, auto makers shift production to more CUVs and SUVs and away from traditional sedans, and marketing and communication via social media and smartphones become more prevalent in the tire and auto service world.
While tire dealers historically have been able to adapt and adjust to evolving competitive environments (and there's no reason to think that has changed), it's the speed of change today that is making it difficult not only for them but also for all businesses in what has become an increasingly disruptive business and consumer world.
Here are some of the challenges and opportunities tire dealers are likely to face this year:
• Find a way to communicate with two very different consumer groups — baby boomers, who are retiring in increasing numbers and whose peak driving years are behind them, and millennials, who are just entering their peak driving years. Baby boomers prefer face-to-face and traditional service and marketing communications, while millennials prefer communicating online. Dealers who develop a strategy to market and communicate effectively to both groups should do well.
• Develop an online strategy to take advantage of tire manufacturers and other online tire sellers, such as Amazon.com, which have introduced direct-to-consumer sales programs that bypass the traditional retailer. While online tire sales remain relatively small, they are growing annually. Dealers can ill afford to let their suppliers and other online competitors take business from them. Creating their own online strategy and presence is one way dealers can take advantage of this new way of tire selling.
C&D Tire, with five locations in Tennessee, is doing just that. It recently launched a program that provides real-time pricing to consumers. "Our hope is that this program will allow consumers to compare and decide quickly on tires from the computer or mobile device and speed up the buying process," said Sales Manager David Ogle. What might work at your dealership?
• Take time to study the impact that consolidation is having on wholesale tire distribution and develop a strategy that protects your dealership. In 2018 alone, two huge wholesalers were formed — Goodyear and Bridgestone Americas got together to create TireHub while Michelin North America and Sumitomo Corp. of America creating National Tire Wholesale — and American Tire Distributors Inc., North America's largest tire wholesaler, entered and exited bankruptcy protection. Few expected such rapid and monumental happenings, which sent the industry into a frenzy.
In reviewing and analyzing their supplier situation, dealers might consider a concern voiced by Mathew Riechers, manager of Riechers Tire & Auto in Washington, Mo.: What happens "if the wholesalers like TireHub and Amazon start funneling tires to company-owned stores or influencing where these tires are delivered for installation? Independent tire dealers are going to suffer," he said. Being prepared for any and all potential situations is the name of the game.
• Make sure your sales team understands the products and services you're offering. Today's consumers research tires online before coming to the dealership to purchase them. Once in the store, they tend to ask many questions. Store personnel must be knowledgeable to service customers properly and provide the correct tires. This will build trust and enhance the dealership's reputation as a knowledgeable tire location.
• Consider what the aging U.S. auto parc means to your auto repair operation and how to take advantage of this. In 2018, there were 69 million vehicles aged 16 years and older in the U.S. By 2023 that number is expected to reach 84 million. Repair opportunities change as vehicles get older, according to Mark Seng of IHS Markit, and shops may be dealing with the second or third owner of an older vehicle who might not want to spend as much on repairs and maintenance. Knowing this, he recommended independent repair shops consider introducing "good-better-best" repair options for these owners.
If 2018 is any guide, 2019 will be a good year for independent tire dealers and repair shops, especially those that take time to study how the tire industry, auto service, consumers and technology are changing, then react accordingly.