For the week ending April 11, tire sales plummeted nearly 50%, according to GfK data, but since then the market rallied as stimulus checks were delivered, down 15% during the last week of April and down 11% for the week ending May 2, compared with the year-ago period.
Traditionally, the first quarter of the year is a strong sales period for Tier 4 brands, but then in subsequent quarters, Tier 4 brands lose market share to upper tier brands, according to Dave Stevens, GfK's vice president, POS tracking.
Among the brands GfK defines as Tier 3 include: Cordovan, Eldorado, Fuzion, Giti, Hercules, Kelly, Nokian, Sailun, Sumitomo, Multimile, Uniroyal, etc. Tier 4 brands are all other brands with smaller market share.
This year, Tier 4 brands garnered an 18.3% market share during the first quarter. For the second quarter, which will end June 30, "we anticipate, instead of going from 18.3% to a 17.5% or 17% share of tire sales across the market, we're expecting that (Tier 4) to be more in the 20%, 22%, 23% range, which is a rather substantial increase," Mr. Stevens said.
"What we're seeing is that more and more sales, it's a smaller total sales, but the share of those is definitely driven towards Tier 4."
He noted that the shift to Tier 4 is not necessarily driven by price, as tire prices across the board during March and April remained relatively stable.
"It wasn't a price-driven shift downward, it was that the prices were already low and factors outside of that were driving people's interest in purchasing a lower-priced tire," he said.
"A lot of people who may be interested in a Tier 3 product are shifting down towards a Tier 4 product, but they're shifting to a higher end of the Tier 4. ... They wanted the best quality of, for lack of a better term, the opening-price-point group of tire. Since then people have begun to establish what they believe to be their normal and know what they want, know what they expect and prices have somewhat reverted back to normal," Mr. Stevens said.
During the week ended April 4, GfK found what it determined was the lowest average selling price for a Tier 1 LT tire so far this year — $203. Over the course of April and first week of May, the average selling price increased to $229.
Conversely, Tier 4 LT tires averaged about $137 for early April and in recent weeks decreased 5% to about $130, according to GfK research.
"So at the very worst of people's concern regarding what's happening around COVID-19, people were willing to spend a bit more for a Tier 4 tire," he said.
In the passenger/SUV tire segment, prices stayed essentially flat during the two-month period, according to GfK.
GfK also noted a sales uptick in tires used on conversion vans and delivery trucks, which coincides with the increase in home deliveries during stay-at-home orders across the U.S.
During the second half of March, when stay-at-home orders were instituted, retail tire sales declined 17% compared with the same period in 2019, GfK said. However the light truck tire category outperformed other categories with only a 12% decrease in sales.
Since 2016 GfK said it has been tracking independent retailer tire sales trends and noticed a steady decline year-over-year as customers seem to be migrating to big box stores, warehouse clubs or even car dealerships.
Before the national quarantine, independent retailer tire sales had been down slightly every week this year compared with the same period in 2019, GfK said.
Going forward, Mr. Portnoy urged tire dealers not to resort to price cuts, and thus, margin cuts, to bolster sales. Instead, they should adopt a strategy by tracking their own sales data and trends.
"There's a lot of fabulous information for tire dealers locked up in their own point-of-sale data and we encourage all of them to fully leverage this data set so they can continue to make fact-based business decisions and then use the data to measure those decisions as the weeks and months roll by," he said.