“It’s nice to be wanted, but it’s even nicer to be needed.” In a nutshell, that’s Monro Muffler Brake Inc.’s philosophy when it comes to online tire sales. During the company’s most recent earnings call, an analyst asked Monro CEO and President John Van Heel to provide some insight on the impact of Amazon pushing its way into the tire business, as well as how the company competes with Tire Rack.
Below is a lightly edited version of Van Heel’s response. Modern Tire Dealer has bolded some of the highlights.
Monro is No. 3 on the MTD 100.
“I think the first and most important thing is that you need professional installers to put tires on. It’s nice to be wanted but even nicer to be needed. So we’re not going anywhere. The installations that we performed for these customers are profitable in the high margin and over 50% of those customers are new to our database and we retain them at the same rates as we retain other customers.
“Our average ticket on those installation customers is about $120 which compares to a net overall average ticket of $160, and again that's higher margin.
“Online tire sales are about mid-to-high-single-digits of tires sold in the country, despite 20 years of solid competition with Tire Rack. So it’s limited, and I think it will continue to be limited even though it will grow for one really important reason and that’s because we see customers’ needs for new tires first in our shops and that's a huge advantage, we train to that.
“Also, relationships matter. Consumers like to talk to a professional about what tires are best for them and for their family's safety. But when you look at the economic side of it, our tire prices are generally competitive with online sellers. Including shipping and installation we're only about 5% to 6% higher on average than leading online players like Tire Rack, TireBuyer and that is for our top skus. And within that obviously there is significant variations between zip codes and between tire lines, but that’s where the average is.
“And we’re probably another 5% to 6% higher than Amazon, and that’s a lot lower than some of the percentages that I’ve heard out there, and that’s based on us looking at our top skus. So importantly I think we're profitable at any of those online tire pricing levels.
“So I think recent concern is somewhat overdone, and what I expect is that we’re going to continue to install for online sellers including Amazon to gain new customers and the related sales, we will continue improving our online marketing and online shopping experience with a new site that we will have out by the end of this year, and we will continue working on that sales execution within our stores because again we see the customer’s need for tires first. And we match online pricing. We want to make sure for those customers that are looking to try to save a few dollars, that they understand they can shop with us and they can get their tires put on today instead of waiting for them to be shipped.
“The other thing I think is important is when you look at profitably selling tires online, distribution is a huge piece of it because tires simply cost a lot of money to ship around.
“We have 1.3 million tires in 1,100 stores and warehouses and that is a really significant strategic asset that we’ve been looking at how to leverage.
“I know (incoming CEO and President) Brett (Ponton) is committed to continuing to look at how to leverage that. In fact we're in the very early stages of a test that we’re running to leverage our tire inventory online with an online partner. So as we go through that, we get some results, we work that out, we’ll talk more about that.
“I guess like any significant trend that requires investment in marketing, digital, training and distribution, this trend favors larger chains, and any pressure from it will expand our acquisition opportunities.
“For me the important piece is you need tire installers. We see the need first. We've got many ways to react to this and continue to grow our business.”