Like many brick-and-mortar retailers, Ken Sylvester of United Tire and Service LLC is participating in online sales. But instead of creating an e-commerce website for his Philadelphia-area tire stores, he is dipping into the pool of consumers browsing other companies’ tire shopping websites.
Online tire sales make up a small portion of the daily tire transactions across the 18 stores that are part of United Tire and Service, a group of dealers who operate independent tire shops in Pennsylvania’s Delaware Valley.
Sylvester is a founding member of the group, whose primary goal is to enable independent tire shops to offer competitive pricing on all major brands. Group members also share branding, marketing and administrative expertise and resources.
United Tire and Service dealers participate in e-commerce websites operated by Goodyear Tire & Rubber Co. (goodyear.com), American Tire Distributors (tirebuyer.com), Tire Rack Inc. (tirerack.com), and Simple Tire LLC (simpletire.com).
In addition, they plan to participate in the Michelin North America Inc. e-commerce website for BFGoodrich brand tires (bfgoodrichtires.com), which is launching in the Charlotte, N.C., area in September.
An upside to the new competition
Are these online selling channels competition for dealers? Sylvester says yes, but there is an upside for United Tire dealers.
“We work as hard as we possibly can to get in front of a customer. The industry is changing. Any incremental unit and customer we can get in the door is a positive for us. If they are looking at the websites, I have a pretty good shot they are going to come to one of our stores. I would have to say it’s giving us a little bit more visibility that we didn’t have before.”
Goodyear became the first tire company to sell its own tires directly to consumers online in January 2015. Sylvester’s initial suspicions that Goodyear would use data obtained through online sales transactions to market directly to his own customers have faded.
“I have to say there is less of a fear today because most of the customers who come in through the online portals are first-time customers to us, so we are seeing people we normally wouldn’t see. So from that standpoint, the fear of Goodyear having access to our customers was probably more of an overreaction.”
He expects more manufacturers will sell tires direct to consumers.
“Goodyear opened the door and other manufacturers are sure to follow because they want to pick up as much market share as possible. I think we will see other manufacturers follow Goodyear and now Michelin. We need to embrace the Michelin installer program.” United Tire and Service stores are part of the Michelin Americas Small Tires (MAST) dealer program.
3 major concerns about online tire sales
Michelin says the future of online tire selling is hard to predict but the sales channel itself is growing.
“This is a part of the market that is not going to diminish but will expand,” Brian Adams, e-commerce project manager, told Modern Tire Dealer when Michelin introduced its e-commerce website to the market. “We believe it will further expand in areas we can’t predict at this point.
“Our main goal is trying to get in there to meet consumer needs in this environment, learn with them and adapt over time so that we’re prepared for the future,” says Adams. “Our main focus right now is getting in here, executing and finding something that is a win, win, win for everybody.”
Although Sylvester believes dealers need to be on the manufacturers’ installer programs, he has three major concerns about online tire buying channels.
- Increased website buying options mean increased competition, which will have a downward push on margins.
- Tire Buyer, Tire Rack and Simple Tire have sold tires at or near his stores’ cost. “This is a concern for two reasons,” he says. “One is if the buyer has a question that we gave him a fair price, he checks online. We sell a tire at retail; the customer shops after they buy from us and sees the tires were available at a lower price. The second is the low price drives us to lower our selling price, which means we make less margin on our regular customers, who have been coming to us for years.”
- As more tire manufacturers get involved with e-commerce, consumers will be trained over time to buy tires direct from the manufacturer and not the retailer.
Many online tire buyers are first-time customers
Sylvester estimates at least 90% of the consumers who come to United Tire and Service stores through tire shopping websites are first-time customers. Employees sell wheel alignments, oil changes and other services to 45% to 50% of them. About 25% to 30% become repeat customers.
“Once they come in, if we give them a great experience, they will come back. We want them to feel like they’re part of the family no matter how they came to us.”
Interestingly, online buyers are not always looking for the cheapest tire. “Very rarely do you see a low-end tire come through the Goodyear website. But on Tire Buyer or Simple Tire it’s a different story,” says Sylvester.
He feels customers buy tires online because they can see the entire purchase process. “They know what the out-the-door price is going to be. They buy with confidence knowing exactly what they’re paying for,” says Sylvester. “Consumers today don’t want to have to deal with someone. They would rather just look at it online. If they feel comfortable, they are going to buy it.”
How the websites work
When a sale closes online, the Goodyear, Tire Buyer, and Simple Tire websites notify the installer via email. Tire Rack does not. “With Tire Rack there is no communication delivered to us. We’re an afterthought,” says Sylvester.
He says Goodyear’s and Tire Buyer’s websites provide the most information to a dealer before the customer arrives at the store than other shopping websites.
Once the customer completes the purchase and schedules the installation appointment, Goodyear alerts the dealer via email, places an order with the distributor, and gives the dealer the information needed to write up the work order.
“Goodyear credits us for the tires and for the installation, which the customer paid for up front. They give us a flat fee for the tire. The only thing we have a problem with is that the Goodyear tire we put on for them only counts as a unit toward our required annual purchase of Goodyear tires, but we don’t get a dollar credit for the unit.”
Instead of paying a flat fee, the Tire Buyer website rewards a small percentage of the sale to the dealer. If a tire purchased through Tire Buyer’s website happens to be a Goodyear tire, the units count as program dollars to the dealer. “We get all the manufacturer dollars, and we get to count it like a retail unit,” says Sylvester.
Unlike Goodyear and Tire Buyer, the Tire Rack does not reward dealers for installing tires purchased through its website, according to Sylvester.
The websites also approach registration of a tire’s Department of Transportation (DOT) Tire Identification Number differently.
Tire Rack, Tire Buyer and Simple Tire customers are responsible for registering the tires’ DOT numbers. However, tires purchased through Goodyear’s website are processed like a national account. The dealer bills Goodyear, and Goodyear gives the dealer a credit for the tires. When dealers receive their credit, they submit the DOT numbers for Goodyear.
Sylvester gives Goodyear high marks for responsiveness. When a customer bought the wrong tires for his vehicle, Sylvester’s staff helped the customer get the right Goodyear tires. “Goodyear was real good, they reversed his credit card right away, the customer service was phenomenal, and I think the customer walked away with a good experience. They made us look good because this is a partnership.”
Warranties are opportunities
United Tire and Service dealers handle all manufacturers’ warranties. Regardless of who sold the tires, a warranty issue is “an opportunity to earn a new customer,” according to Sylvester.
He considers an online tire buyer to be a customer of a United Tire and Service shop, not the online tire seller’s customer.
“If they come in my door and I sell them a service, they’re my customer. Granted they may have started on a website, but I feel that once we get them in the door we can show them a brick-and-mortar location is the best place to shop. If there’s an issue they can always come back to us. It’s pretty hard to go back to a website and take care of a warranty issue.