The tire wholesale distribution channel has changed a great deal in the last 10 years. The big got bigger. And the larger distributors stopped being just “tire wholesalers.”
Manufacturers put the responsibility of delivering tires to the smaller dealers in their hands. Wheel and equipment manufacturers took advantage of them, too. They have, in many ways, become a one-stop shop for tires and tire service equipment.
Significant price increases the last several years have affected margins at both the wholesale and retail levels. And that brings me to a complaint a retail dealer friend of mine shared with me at the 2013 Goodyear Dealer Conference.
“I don’t think our wholesalers helped us with price increases last year,” he said. “They could have absorbed more of the increases.”
Interesting statement. I wondered if my friend’s attitude was widespread, so I asked dealers from across the country what they thought about the relationship.
Dealer No. 1: “I don’t think they’re cheating us, I think they are in the same position as we are.
“Margins were down for everyone. All the spiffs are gone. The guy saying ‘You want to go golfing next week? Go to dinner?’ It’s all gone. The guys selling parts, same with them. They don’t have budgets anymore. The most maybe you get is a free calendar.
“You still get volume discounts, but you don’t often see them give special pricing on items they want to get rid of anymore.
“Nobody’s making what they did before. No one has the 2% to give. The 2% that went up is a survival 2%.”
Dealer No. 2: “In my opinion, some of our wholesalers have not been coming to the table. That has been going on the last few years.
“Do you think they are concerned about the little guys like us? I don’t think so. I think they are more concerned with big box stores.
“Our best wholesaler is our smallest. He delivers to us every day, but not all of them do. I also wish the larger wholesalers could help us a little more with our advertising, like they used to.”
Dealer No. 3: “In 2011, one of our wholesalers held back compared to 2010, but they more than made up for it last year. We did make a fuss — sometimes you have to make things happen yourself. Another one of our wholesalers had a lot of specials and promotions and did an excellent job last year, too good, actually. They had inventory issues and ran out of tires, but that has changed this year. Through the first few months of the year, so far, so good. But that can change. You just have to stay on top of it.”
Dealer No. 4: “I’m sure the wholesalers are holding back. I think they should be a little more aggressive in giving us discounts. We’ve asked for special discounts on things and sometimes we get them, but not always.
“We’re a pretty good size dealership. About 90% of our tires are purchased directly from the manufacturer, although last year, when the fill rate hovered around 65%, we had to buy more from our wholesalers.
“We do some wholesaling ourselves, and compete with American Tire Distributors with the car dealerships. They can undercut us a little. It’s a little upsetting, but we have to buy from them, too, once in a while.”
I also talked with a representative from a large wholesale distributor, and voiced my friend’s concerns to him. “We are not holding anything back,” he said. “It’s all about value. We offer more than just tires. We have a lot of programs that make it easier for our customers to do business. We try to keep costs down, but we, too, have to get a return on our investment.”
Results from Modern Tire Dealer’s exclusive “State-of-the-Industry Survey” indicate that many wholesale distributors suffered setbacks in 2012 vs. 2011. Although 59% of the wholesalers said their dollar sales were up (by an average of 19%), that was down from 75% in 2011 and 82.3% in 2010. Close to 30% of the wholesalers reported their sales were down (by an average of 10%), compared to 16.7% in 2011.
Only 35% said their bottom-line profitability was up; in 2011, 58.3% said it was up. Even more telling, 56% said their profitability was down in 2012, compared to 18.4% the previous year.
According to the 2013 Modern Tire Dealer Facts Issue, wholesale distributors (and, to a lesser extent, tire manufacturers) account for 77% of the tires sold through the consumer tire distribution channel. As long as they work with their customers, their role will continue to expand. ■
If you have questions or comments, please email me at [email protected].
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