Magazine for the professional tire industry
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combined with a smaller product ofering of opening price point tires — fewer ftments/SKUs, was the primary reason some Tier One and Tier Two manufacturers lost share with their opening price point/private label ofering. I think we are still 10 or more years away from a point in time when these producers will have a product that would be deemed an HVA/premium tire that consumers would seriously consider purchasing. In other words, for now I expect the Chinese manufacturers will only be a noticeable competitor in the Tier Tree/opening price point segment of the market. MTD: Auto service remained a bright spot for tire dealers throughout 2013. What will happen in this segment in 2014? Mitchell: I think business trends will be a litle more balanced in 2014. I do not expect you will see a huge acceleration in demand for light service and maintenance work, but I do expect tire unit volume trends will be a litle healthier, which should help return the sales mix to more normalized levels. MTD: What are the demand trends for the do-it-for-me (DIFM) channel? Mitchell: I have defnitely seen demand trends pick up nicely in the DIFM channel over the last six months following a string of lackluster quarters stretching back to the second quarter of 2012. Taking a long-term perspective, I continue to expect the commercial channel will yield growth rates 1% to 2% higher than the do-it-yourself (DIY) channel. MTD: What are the trends in the average repair order? Mitchell: It really depends on the type of service that the tire dealer ofers. For those shops that specialize in light service — brake work, oil changes, bateries, tune-ups, etc. — the average ticket has likely been fat over the past 12 months. However, operators who ofer a wide assortment of services, including medium- and heavy-duty repair work, are seeing a nice lif in their average ticket. Indeed, as a car moves from the eight- to 11-year-old bucket to the 12-plus-year-old bucket, the amount of regular maintenance and light service performed declines in certain key categories, while there is a noticeable lif in the volume of more complicated repairs. Interestingly, the sharpest drop of in demand trends are in the categories that generate the most trafc. installers and DIYers trading down to lower quality and/or private label products to lower the cost of the average repair. MTD: What's next for the big automotive parts chains? Mitchell: I expect Advance Auto Parts, AutoZone, O'Reilly Automotive, and Genuine Parts will have share gains in the coming years, especially in the DIFM channel. I expect Monro Mufer will more or less hold its share in its existing markets, while expanding share in new markets via its aggressive acquisition strategy. I expect Pep Boys will continue to lose market share in the DIY and commercial delivery segments, but I do think that the company can increase its scale in the tire and service market through organic growth and acquisitions. Industry stakeholders will be watching Advance Auto Parts closely to see how well it can integrate the assets of General Parts International, including managing the relationships with the independent CARQUEST network. MTD: What economic factors do you see afecting automotive service profts during 2014? Mitchell: At the end of the day, the level of profts will be driven largely by the strength of consumer demand. Job growth, trends in gas prices, and consumers' desire to replace their existing automobiles will be key determinants of how much consumers will invest in their vehicles in 2014. In short, we expect the operating environment will be up 1% to 3% in 2014. MTD: Tanks for your insights, Nick. ■ MTD: Have wallets been opened for preventive maintenance? Mitchell: In the commercial channel there has been a nice pick up in the amount of preventive maintenance being done in 2013 relative to 2012, when many garage owners were reporting a lot of consumers were deferring non-essential repairs and routine maintenance. Demand for routine maintenance supplies has been somewhat lackluster in the DIY channel during 2013. However, I expect trends will improve somewhat in 2014 as we cycle the headwind from the higher payroll tax rate at a time when fuel prices are projected to fall. MTD: What changes have there been in the demand trends of the light vehicle feet? Mitchell: Tere is an ongoing shif toward more medium- and heavy-duty repair work given the average age of a light vehicle is over 11 years old. We are also seeing more professional www.moderntiredealer.com Quik-Link: 800-687-1557 ext. 11112 21