Uncertain European economies, the U.S. debt crisis, Congressional gridlock, 9.2% unemployment and a slumping stock market are enough to explain why consumers are putting off big ticket purchases as long as possible. Add to that, a $1,000 bill for four tires, alignment and a few other suggested repairs further shocks your customers.
I just vacationed at the Chautauqua Institution located in southwest New York (www.ciweb.org). Chautauqua is a very unique place where lectures, concerts, religion, entertainment, kid’s activities and sports abound. There’s something for everybody. The lectures this week were on creativity and innovation and they really resonated with me as I thought about the challenges now facing tire dealers.
What you may need is a heavy dose of creativity to help increase your business. Possibly the best creative ideas may lie right within your own company. I suggest holding business creativity sessions with your entire team; challenge them for new ideas. Maybe it is renovations in your shops, maybe it’s clever bartering with other businesses or maybe it is new packages (bundling) of tires and services.
Challenge your own team – you may be surprised with what they come up with.
Monthly survey
A number of independent tire dealers were surveyed concerning current business trends. Except for tire prices and costs, the results of the July 2011 survey are compared with those of July 2010.
Passenger tire dealers lost confidence
Roughly 54% of passenger tire dealers believe business will worsen over the next six months while 23% believe it will stay about the same and 23% believe business will improve. As for truck tire dealers surveyed, 50% see business improving while 40% see business remaining level. The other 10% of truck tire dealers expect business to worsen. Recent economic uncertainty is causing consumers to hold on to their money and delay tire purchases, which has dealers concerned about near-term demand.
Economic uncertainty weighs in on passenger tire sales
On average, retail sales of new replacement passenger tires were down around 5% when compared with July 2010. Roughly 62% of passenger tire dealers reported flat or negative growth in sales. Economic uncertainty has replaced gas prices as the number one concern of dealers we surveyed. They reported that consumers are putting off tire purchases until a clearer economic picture can be painted. New truck tire sales continue to show strength, however, as volumes were up 4% while retreaded tire sales were up 5%.
Price increases more than cost in July
In comparing the month of July 2011 with June 2011, average costs for size 215/60R16 major brand tires were up 1% while selling prices were up 3%. The average cost for a 215/60R16 private brand tire was down 1% while selling prices were up roughly 3%.
Passenger tire dealers believed pricing was aggressive
In July 2011, 56% of truck tire dealers saw pricing as very firm, while 62% of passenger tire dealers viewed pricing as being aggressive as manufacturers attempt to sell down increasing inventories.
Truck tire inventories remained too low
The survey indicated that 54% of passenger tire dealers believed inventories were in line with current business levels, while 31% viewed inventories as too high for current demand. The rest (15%) felt inventories were too low. The truck tire dealers we surveyed indicated inventories have slightly deteriorated, as 56% believed inventories were too low, compared to 46% in June, while 33% felt inventories were in line with current business levels. Some 11% felt inventories were too high,
Service revenues were flat, dealers reported
Dealers who provide automotive service reported that 23% of revenues, on average, were generated by service during July. Dealers indicated that service business was flat in July vs. July 2010.
Analyst Saul Ludwig is a managing director with Northcoast Research Holdings LLC based in Cleveland, Ohio. He concentrates on the tire and chemical industries. He has been writing for Modern Tire Dealer since April 1975.
