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 8 E d i t o r i a l A mazon.com Inc. is the $230 billion gorilla in the room. e company is still in the early stages of selling con- sumer tires, but with online buying trending up, the opportunity for the No. 1 online shopping site in the world to become a major player in the tire industry seems a foregone conclusion. Maybe it will one day. No tire manufacturers supply Amazon. com directly, but if that unified front ever cracks, buying name brand tires in bulk will give it a big price advantage. at, however, is not enough of an advantage to upset our aermarket ecosystem, in my opinion. Walmart Inc., Monro Inc. and Reinalt-omas Corp., which does business as Discount Tire/ America's Tire, all have more than 1,000 outlets, and certainly leverage their economies of scale. All three of them sell a lot of tires. But they haven't displaced smaller dealers solely based on price. Single-store owners make up close to 59% of all 29,000 indepen- dent tire dealerships in the U.S. It has been that way for a long time. eir knowledge of the local market and personal service keep them in business. at is something Amazon doesn't have, and never will. Does it matter to anyone ordering online? Perhaps not if they are ordering books or electronics or apparel. Once these items show up on their doorsteps, the transaction is complete. Tires, by comparison, have to be installed, which requires another step in the transaction and takes up more time. And that is why I believe Amazon does not have unlimited growth when it comes to selling tires. Even Amazon understands this. at is why it has partnered with three large retailers to install tires purchased online: Pep Boys — Manny, Moe & Jack, Monro and Sears Holdings Corp. eir combined store count is 2,457. at will help Amazon sell more tires. at will not, however, result in a paradigm shi in its favor. Amazon has other weaknesses. It has to either charge for shipping or hide the cost in the price of the tire. If it chooses to do neither, the cost comes off the bottom line, which hurts its profitability. Anyone buying tires from Amazon, or any other online-only retailer for that matter, has to wait to have their tires installed. e transaction is not timely. For example, no one needing to buy tires because of an emergency would buy online. For now, Amazon does not have ready access to all tire brands and all sizes. at, too, limits its potential. For the sake of argument, let's say low price and the ability to purchase tires without speaking to a human being trumps all other factors to the person needing to buy tires. How low does Amazon go? I recently checked various websites for pricing on a Goodyear Wrangler SR-A, size P275/65R18. For comparison purposes, the average advertised price for a major brand in that size, courtesy of e Fitment Group, was $223.33. • Amazon ............................................. $172.97 • Simple Tire ....................................... $199.97 • Tire Rack ........................................... $220.75 • Discount Tire Direct ....................... $172.97 • Monro................................................ $203.99 • Conrad's Tire Express ..................... $173.00 Although I don't know what Goodyear Tire & Rubber Co.'s MAP (minimum amount price) is on the Wrangler SR-A, I know Goodyear has, at least in some cases, instituted MAP pricing. As you can see, Amazon's price was the lowest, but was essentially matched by Discount Tire Direct and Conrad's Tire Service Inc., a 37-store independent chain based in northeast Ohio. How many Amazon tire buyers will decide to buy from the installer directly the next time they have to buy tires? According to the Modern Tire Dealer 2018 Consumer Survey on Tire Purchasing, 42% of the respondents who paid for their tires online said it was "extremely easy" to find tires and make the purchase online. Another 23% said it was "very easy." In and of itself, that bodes well for repeat business for online tire retailers. And I don't mean to belittle the process in any way. e Tire Rack has turned selling online into a science, and it is one of the most successful independent tire dealers in the U.S. However, when asked about their tire-buying experience with the installer following an online purchase, 54% of survey respondents said they were "extremely satisfied" with the experience, while 23% said they were "very satisfied." at gives the installer the opportunity to convert the online buyer to an in-store buyer. MTD estimates 8% of the replacement consumer tires sold in the U.S. in 2018 were purchased online, up from 6% in 2016. at represents 19.6 million of the 245.4 tires shipped last year. ose numbers will grow, but slowly, in part because online-only tire retailers will continue to cannibalize each other's sales to some degree, and in part because tires need to be installed. Disregarding digital trends will not help you run your business more profitably, so don't underestimate them. But don't overestimate them, either. ■ If you have any questions or comments, please email me at bob.ulrich@bobit.com. FOR NOW, AMAZON DOES NOT HAVE READY ACCESS TO ALL TIRE BRANDS AND ALL SIZES. Amazon has a weak spot INSTALLATION WILL LIMIT ITS POTENTIAL TO SELL TIRES Bob Ulrich By

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