Tyre retailing in America
By Louis Rumao
Independent tyre dealers – around 30,000 – remain the dominant force in the US, with nearly 60 per cent share of the retail sales. Tyre company-owned stores have about 10 per cent of the market, while auto dealerships are aggressively pushing tyres, growing their market share to nearly 10 per cent in recent years. Online retailers are the new kids on the block and they are fast trending up
The tyre market in USA is huge – nearly 320 million total tyres were sold in 2016, with 52 million tyres for passenger car OE fitment and 210 million sold as passenger car replacement tyres. Until 2014, nearly one fourth of the replacement tyres for passenger cars and light vehicles were imported from China. The 2016 imports of passenger tyres from China fell nearly 50 per cent from record levels in 2014, due to US’s elevated import duties. Currently, overall imports from Canada, South Korea, Thailand and Indonesia have registered double-digit increases over 2014 to compensate for the drop in Chinese shipments. Imported tyres are mainly sold through independent tyre retailers.
Typical pricing for a 215/55R17 tyre, in USD
Speed Major Brand Low-cost Difference
V-rated 148 97 52 %
H-rated 147 102 44 %
T-rated 138 124 11 %
According to a recent survey of independent retail and wholesale tyre dealers, the average profit margin on a passenger tyre is 26 per cent. For a light-truck tyre, it falls to 24 per cent. The average wholesale passenger tyre sales margin is around 12 per cent.
There are close to 30,000 independent tyre dealers in the U.S. and they remain the dominant force, with nearly 60 per cent share of the retail sales. Tyre company-owned stores have about 10 per cent of the market, while auto dealerships are aggressively pushing tyres, growing their market share to nearly 10 per cent in recent years. The new-kid-on-the-block – online seller – is trending up as seen with many other commodities.
Except for the online retailers, all others offer additional services, in addition to selling replacement tyres and wheels:
Tyre balancing and rotation
Road hazard protection insurance
Many retailers expand the list of services offered to provide towing, brakes, shocks, oil changes, engine tune ups, HVAC repairs and other ancillary services. Given the stiff competition, retailers use every marketing trick available:
Digital and print ads
Coupons and rebates
Rebates for ordering online
Offering discounted and clearance items at large savings
Some retailers offer member-Only rewards, such as free brake inspection & tyre pressure checks, discounted tyre rotation, towing and flat repairs.
Among numerous major independent tyre retailers, Discount Tire is America’s largest independent tyre and wheel retailer. With 900+ locations across 29 states, it provides a wide range of product choices, competitive pricing, and expert staff. It attributes its growth to individual customer focus and warm personal touch. It sells 25 – 30 million tyres each year, with every outlet selling more than 80 tyres a day.
Another tyre retailer, the Tire Rack, boasts its own test track to put tyres to the test, lap after lap, so the customers would know exactly how a tyre performs. They have over 2.4 million square feet of distribution center space across the country packed with inventory from 22 major tyre and 61 wheel brands ready to deliver by the next day in most cases.
There is no question retail tyre sales over the Internet are increasing. But at what rate? And what is the percentage of consumers who buy them online? The 2013 “Google Auto Tires Purchase” online study determined 10% of consumers purchased tyres online in 2012. That jumped to 29 per cent in 2013. Online tyre buyers also tend to spend more money per tyre, and consider more brands during online research. No doubt, internet sales will revolutionize the retail tyre industry, as has happened with other consumer goods. Some estimates put Internet tyre sales in the neighborhood of 40 per cent in the next few years, and the only thing saving brick-and-mortar stores currently is the fact that consumers cannot install tyres or service cars online, otherwise brick-and-mortar tyre retailers could go the way of book and music stores.
Kevin Rohlwing, senior vice president of training for the Tire Industry Association, said that Internet sales from tyre manufacturers are undoubtedly the most significant trend in the industry.
“Bridgestone, Goodyear and Michelin have all introduced programs for consumers to purchase tyres direct from the manufacturer and then have a local dealer install them,” he said. “Under this system, the dealer does not collect any money directly from the consumer and receives a credit from the manufacturer.”
Rohlwing said that Bridgestone’s purchase of Pep Boys, another major retailer of auto parts and tyres, will also have a major impact on the market. “Bridgestone now One of Goodyear’s retail outlets (photo courtesy: corporate.goodyear.com)have more than 3,000 company-owned retail outlets, so they are competing with their dealers also at multiple levels,” he said. “That will also have an impact on the other manufacturers that supplied Pep Boys, since it’s highly unlikely that they will offer tyres outside of their own brands. For some of these other manufacturers, losing Pep Boys is a significant share of their distribution, so these companies will be looking to replace those sales.”
As if internet sales trend was not enough of a challenge for tyre manufacturers and retailers, wait till President Trump’s “Make in America” initiative leads to a “tread” war!