The following is the latest in MTD's exclusive series of interviews with top tire industry executives about the impact of the COVID-19 crisis on business and what their companies are doing to prepare dealers for a post-pandemic market and industry. Stay tuned to www.moderntiredealer.com for more coverage!
With more than 140 distribution centers throughout North America, American Tire Distributors Inc. (ATD) has a birds-eye view of supply, from the tire manufacturers’ side, and demand, from the dealer perspective. The company likes what it’s currently seeing.
“Late-March/early-April was the low point for volume, year-over-year,” says Owen Schiano, ATD’s chief operating officer. “We’re very pleased that over the last several weeks, we’ve seen that turn significantly more positive to the point now that we’re very close to getting back to where volumes were a year ago.
“We’re starting to see some of that pent-up demand show up at our customers and we’re cautiously optimistic about what we’re seeing.
“We’re hearing, in some cases, that foot traffic” at dealer locations “is still down compared to pre-COVID-19 times, but more and more of our customers have fully booked and scheduled appointments,” he explains. “I’ve heard a lot of examples of (appointments) being scheduled out even further than maybe they have been historically.”
Schiano says he is “optimistic” that demand will grow over the “next month or two months. Hopefully, as we enter the fall, we will start to return to what I call normalcy.”
The first thing ATD did after the COVID-19 pandemic hit the U.S. was ramp up its pace and frequency of communication with customers.
“We set up a resource center online and the first thing we put on it was any impact to our local distribution center operations. As we saw volume declines, we had to adjust our service schedules. And our customers were very understanding of that.
“While we had to pull back on some of our daily service, we placed a strong emphasis on making sure that at the local level, they understood exactly what the implication for their business was, so they could plan accordingly.”
ATD’s customers in the northeastern U.S. “were probably the hardest-hit” by the sudden drop in consumer demand, says Schiano. “We had several customers who chose to close their doors on a temporary basis, so part of our communication involved making sure we understood who was open for delivery.”
ATD did not suspend operations at any of its facilities. “While we had to scale back across the board, we kept every location up and running.”
The disbursement of Paycheck Protection Plan (PPP) loans was a significant milestone, according to Schiano.
“We started to see a big turnaround when the initial round of PPP (funds) came out. With round two, those who were unable to get support are securing some of those funds now. That – coupled with the consumer relief checks that came out – certainly contributed to the turnaround we’re seeing.”
The company’s distribution centers are ramping up service in areas where demand is rebounding.
“We’re trying to be very thoughtful,” say Schiano. “We’re not going carte blanche across our entire network because different regions are being impacted to different degrees. We’re leaving it up to our local (sales representatives), who are in day-to-day contact with our customers, and the insights they are giving to us.
“Over the last five or six weeks, that has been 100% of our sales team’s focus – making sure our conversations revolve around helping our customers navigate this.”
Immediately after news of the COVID-19 outbreak began to emanate from China, Schiano says ATD assembled a “task force” to keep tabs on developments, including any impact on tire supply coming out of the country.
“We also dug into the retail implications in China: as businesses were starting to go into this, what they were doing – then as businesses started to come out of it, what they were doing. We looked at a lot of different resources.
“What this allowed us to do is that when stay-at-home orders started coming out across various states, we were able to pull a lot of information together and get it to our customers. We also sent regular email updates. We filmed videos with messages on what was going on with our company and what we were hearing.
“And our biggest asset has been our sales team. They’ve been as busy as ever, making sure customers (can access) the resources available to them.”
In recent weeks, ATD has pivoted to helping its dealers adjust to how consumers might prefer to buy tires after stay-at-home orders are further relaxed.
“Will customers want to do more transactions online? Will they be comfortable coming into stores?
“We’re working on a product for our customers called TireSeller… which enables our customers to (conduct transactions) online, on their own websites. Many of our customers have their own websites but can’t conduct transactions on those sites. But I think a lot of (end users) will want to do that.
Through TireSeller, “we can quickly provide a code that our dealers can put on their own sites so they can immediately begin to transact online. It gives them control over their pricing as if it’s their own e-commerce solution.”
ATD also is using a digital analytics tool that allows dealers “to put in their sales and line up all the manufacturer programs they participate in to understand how to optimize their profitability on both the front end and the backside dollars they are earning.”
And Schiano says the company's ATDMobile app gives customers the ability to check inventory levels, create and view orders and track deliveries.
According to Schiano, ATD anticipated the shift to a more digital marketplace before the COVID-19 outbreak. “We’ve been working on our transformational journey over the last four years and a big part of that work” has been developing more online capabilities.
A number of ATD’s tire suppliers have resumed manufacturing operations and are starting to ramp up production.
Schiano admits that there is potential for supply disruption “as we come out of this in a more rapid manner.” But he says ATD already had a “very good inventory position” before the wave of factory shutdowns.
“As we saw demand drop off, overall sell-out followed. But we already had very good fill rates from our manufacturing partners. We expect that will help us get through any ramp-up delays manufacturers may face. We are well-stocked.”