Competing against your supplier
Goodyear Tire & Rubber Co. recently announced it was going to sell tires online from its website. There is no question in my mind other tire manufacturers will follow suit within the next 24 months.
How will this affect you, the independent tire dealer? Goodyear believes it will help its dealers. Not all of them agree.
At the 2015 Goodyear Dealer Meeting in January, Andy Traicoff, vice president of consumer sales and customer development, explained to attendees how technology is changing the way tires are sold.
“It isn’t just advertising and marketing and sponsorships. And it’s more than developing and manufacturing great tires. It’s the total value proposition for the consumer.”
He said Goodyear was not only embracing that change, but also at the forefront of the paradigm as it shifts. By that, he meant selling directly to consumers on goodyear.com.
“Our consumer research shows the online tire-buying process is happening with or without us,” he said.
At least in theory, Goodyear is competing against its retail dealers for tire sales by selling online. So how does that help the retailer? Goodyear, which began testing the program in 2012, said dealers who sign up as preferred installers will come face to face with plenty of new consumers based on the following test results.
- Nearly 60% of the consumers who purchased online were new consumers to the installing location.
- The additional service that accompanied the sale accounted for, on average, $280 in incremental revenue.
- Following the installation, 38% of these new consumers returned to the installing location for more service, and that additional service bill was, on average, $749.
As for the sale itself, preferred dealers get to keep the installation fee and receive a delivery fee for their troubles.
Goodyear dealers representing 1,100 locations, including company-owned stores, had signed up for the online program prior to the dealer meeting. Since then, that number has grown to more than 3,000, says Goodyear.
Ultimately, it’s all about making it more convenient for the consumer to buy tires, according to Goodyear. In this case, the “consumer” in question belongs to a very specific group of online shoppers. Sounds like a win-win, right?
Not necessarily. “Why in the world would I want to sign on to a program that spells eventual doom to a large part of the profitability of my business?” wrote Charley Gowland in an open letter to Goodyear emailed to Modern Tire Dealer. He said the program will set in motion the need for other manufacturers to follow suit with direct-to-consumer programs for “competitive” reasons. “In the end, another distribution channel will be established, in a static marketplace, with the loser being the independent dealer channel.”
Gowland is owner of Chabill’s Tire Service LLC, a 14-store retail and commercial chain based in Louisiana. His letter, in its entirety, can be read on www.moderntiredealer.com.
If Gowland is correct, he could be hurt significantly by the practice even if he signs up. While Goodyear said nearly 60% of its online purchasers were not customers of the installing retail location, more than 40% were. And if, as a Goodyear dealer, you are not part of the program, who knows how many of your customers or referrals are being poached by other Goodyear dealers?
We also are dealing in overall percentages. In any given market, the numbers could easily flop, even to the detriment of the dealers who are part of the program.
I don’t think the potential tire sales lost by any individual retailer will add up to much. According to MTD research, only 6% of the consumer tires purchased in the U.S. are bought online. Because that percentage is not much higher than it was in 2008, I tend to believe online sales by tire makers would cannibalize existing sales from other online sellers, maybe even The Tire Rack. Independent retail stores were not getting that business anyway.
In addition, you can adapt quickly, and are better at selling tires than any other distribution channel. Remember when Goodyear announced in 1992 it was going to sell through Sears? The initial uproar died down a long time ago.
One of the big keys will be how close Goodyear’s online pricing is to what you pay for the same tire. If it doesn’t undermine your profitability, you should be fine.
My advice? If you are worried about it, sell online yourself and try to eliminate unwanted competition. ■
If you have any questions or comments, please email me at firstname.lastname@example.org.
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