Modern Tire Dealer

JAN 2019

Magazine for the professional tire industry

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M T D J a n u a r y 2 0 1 9 26 I n d u s t r y A n a l y s i s time for these efforts to gain traction (many consumers do not know about this currently; many people prefer talking to a service tech in-person when getting tires), but they will undoubtedly have a place in the future of tire retailing. But I'm not sure to what extent it will ultimately grow. MTD: e landscape of wholesale dis- tribution changed dramatically in 2018. How soon before TireHub (Goodyear and Bridgestone Americas) and NTW (Michelin and Sumitomo Corp. of Americas ) iron out the logistics of their respective joint ventures? Healy: I can't speak to a timetable as to when everything will be ironed out, but things already seem to be progressing well and the only logistical issues that seem to be occurring based on our conversations mainly revolve around administrative issues, which are not difficult issues to overcome. Anecdotally, we would give the "new distribution entities" high marks in their early efforts to make the businesses stand up independently. MTD: Can we expect more changes at American Tire Distributors? Healy: It's hard for us to see how the situation at ATD does not find a level of stability in the near-term followed by what would be some very natural evolution of their business. From our perspective, dealers still support ATD and service levels have been fairly consistent with previous standards. at said, there are new owners at ATD and they will have a view on how the business should run and operate. We would not be surprised to see its facility structure adapted in some ways as new owners look to make more profit per tire and to steer the company toward efficiencies and maximizing returns. MTD: Do you expect more changes in wholesale distribution in the U.S.? Healy: I would say it just depends on how the tire distribution landscape plays out. NTW, TireHub and Max Finklestein have already formed their own distribution partnerships, so if other manufacturers continue to go that route pressure could remain on ATD. Operations seemed to be troubled even before many of these changes happened over the past year, so increased factors exacerbating ATD's operational execution could lead to more changes. We have not seen the last of manufacturers creating their own buying groups/distribu- tion channels, although I'm not sure of the timing of these actions. MTD: What new technologies should tire dealers be paying attention to? Healy: Dealers should be paying attention to social media and online selling opportuni- ties, including online scheduling offerings. Reducing friction and ease of use should be a focus of all online offerings by deal- ers. Today a dealer's online presence has a dramatic impact on their business. I feel dealers need to be mindful of their online reputation and be working to manage/ improve it continuously because that has the ability to drive traffic trends. Furthermore, dealers should be engaging potential/existing customers on social media channels to differentiate themselves from peers and keep their business in the back of customers' minds. Dealers also need to begin offering online sales opportunities; although it will be a small fraction of overall business at first, it will gain increased importance over time. Lastly, dealers should also be paying attention to the changes in the mobility ecosystem (self-driving cars, car sharing, etc.) and how those trends evolve because that will have a major impact on their end markets and the products this new ecosystem will demand. We have seen some dealers create programs to win business via offering discounts to Uber and Ly drivers. From our perspective, these targeted campaigns could be a useful tool to build a new customer base. MTD: What are your thoughts on autonomous vehicles? Healy: From our perspective, increased use of mobility and ease of friction in trans- portation generates more miles driven. So if this historic relationship holds, more miles will be driven which means more tires will be worn, thus creating growth in replacement related volumes. MTD: BKT recently announced it would build a plant in the U.S. Do you expect more companies to follow suit? Healy: We expect more suppliers and manufacturers to move production areas closer to landing areas. As demand in emerg- ing markets begins to mature and labor rates move higher coupled with increased costs to land a tire to shipment areas, the equation toward where to produce begins to produce different outcomes. We see this both in terms of new plants in the U.S. for manufacturers and also suppliers. MTD: Who or what poses the greatest threat to the business of independent tire dealers in 2019? Healy: e greatest threat to independent dealers in 2019 is further consolidation among the bigger operators. If these opera- tions continue to grow larger, they will be able to leverage scale, pricing, geographic presence, capital expenditure resources, etc., to a much greater degree than small independents and this could cause them to have a tough time competing and lose share. Additionally, larger entities are likely to be more capable to bring e-commerce offerings (e.g. mobile scheduling) to the consumer, which could be seen as a differentiator. While the big keep getting bigger, we do recognize this business is about people, too, and it would not be unlikely for a consumer to opt to go with a smaller independent, even if price may not be superior, if they trust the service technician/business that stands out by offering not only great service but an exceptional customer experience. MTD: What segment of the tire industry was the most interesting to follow in 2018 ? Healy: Clearly the changes in distribu- tion were the story of the year. Watching distribution evolve and new partnerships and paths forged is always exciting. We see 2018 as a year of change and 2019 a year of the impact. It will be interesting to see how brand market share changes as a result of these distribution shis. MTD: anks for your insights, John. 'THE GREATEST THREAT TO INDEPENDENT DEALERS IN 2019 IS FURTHER CONSOLIDATION AMONG THE BIGGER OPERATORS.'

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