SKU proliferation, tire distribution, online sales — Rich Kramer tackled them all at the 2018 International Tire Exhibition and Conference (ITEC).
Kramer, chairman, CEO and president of Goodyear Tire & Rubber Co., was the keynote speaker on Sept. 12 at ITEC in Akron. The event, held every two years, is hosted by Rubber & Plastics News.
Here’s a punch list of a few of the tire industry hot topics Kramer addressed during his remarks.
SKU proliferation: In 2000 Goodyear’s research indicated it required 267 tire sizes to cover 80% of the U.S. replacement tire market. Less than 20 years later, that number has grown to 625. “So what if you’re a traditional tire dealer and you have to stock a set of tires for each of those 625 SKUs? What about two sets? What if you have 10 stores? That’s 50,000 tires that you have to keep in your store every day.”
He pointed to the Chevy Impala. The mid-level, four-door sedan is available in seven trim levels. Each one requires a different tire. “The drastic increase in the size of tires isn’t a discreet event. We’ve just touched on the now impossible stocking cast for retailers who don’t have the room to carry the number of tires they need to service their customers.”
The result: sku proliferation has put a premium on…
Tire distribution: “Retailers rely heavily on wholesalers and distributors to stock what they can’t. In many cases that means multiple deliveries per day, which raises the value of distribution in the tire buying process.”
Independent tire distributors have consolidated in recent years, as have independent retailers. The retail dealers are facing pressure as consumers’ shopping and buying habits and expectations change, and Kramer says that places a premium of a partnership with a manufacturer and brand that pulls consumers into a business.
“These conditions are what led Goodyear and Bridgestone, two of the industry’s biggest brands, to form TireHub. By gaining control of our distribution we could do several things. First, we could more effectively manage SKU proliferation. Second, we could better serve our retailers, including Goodyear.com, by having our products in stock and ready for consumers when and where they want to buy. TireHub and our partner dealers combine to form the backbone of our direct-to-consumer strategy. And third, we could recapture the value of our brands rather than having it diminished by distributors, who often prioritize other brands ahead of ours.
“TireHub was one of our strategic responses to the forces affecting the U.S. tire market,” Kramer says. “As consumers continue to evolve in their tire buying expectations you would be right to expect even more to come from Goodyear in the future. I can promise you that.”
Online sales: Kramer says SKU proliferation was just one indication of underlying changes in the industry. Auto makers are working to respond to consumer needs, and that’s had an effect on the many tires outfitted on new vehicles.
“The changing preferences, expectations and behaviors of consumers, not only millennials but all consumers, are the rising water level that is causing disruption in every industry, and I want to let you know that the tire industry is not immune. We’re impacted as well.”
Having a great product, whether it’s a tire or any other item, is essential. “We’re really in a battle for consumers, and the companies that make the buying process as easy as possible are the ones that are going to win over the long term. Product is just the gateway.”
Kramer says sellers need to remove the friction from the buying process. “It doesn’t matter that your call is important to us if the estimated wait time is longer than the proverbial cat video.” Consumers can make one-click purchases on www.Amazon.com. They can order a specific kind of vehicle from Uber. And he says it’s not unreasonable to think they expect that same kind of simple process when shopping for tires.
“Goodyear.com is not a way that should replace going to a dealer. It’s just a way that reflects how consumers want to shop,” Kramer says. “What we’re trying to do is prepare our partner dealers with that and tell them ‘you want to be with someone who’s going to help you do that,’ versus someone who says just be an installer for me and all you get is a fee to install a tire.
“The worst thing that could happen is they become just an installer and not a partner.”