How To Compete
Having worked in the Tire Industry for almost 20 years, I have witnessed the expansion of tire sizes, brands and models, and the subsequent and continuous fluctuation of retail prices over the years. The most pressing issue currently is the cost and price of tires as our market resets from the Covid pandemic. Supply chains have stabilized, but pricing continues to be a challenge for many independent tire dealers.
With competition growing through acquisitions and regional chain growth, as well as new online retailers coming on board, many independent shops don’t believe they can be competitive on their tire prices. But time and time again, the data we see shows this is not true; there are plenty of profits and margins to go around. And NO, we do not suggest this be a race to the bottom either. Retailers sell a product for a profit, that is the name of the game, and independent dealers can and should as well.
Some of my suggestions when looking at your tire pricing strategy are:
1. Understand your market: Who are your local competitors? What brands and models do they focus on? Who are MY customers, and what are my current strengths in the market? Am I an established brand? Known for service? What does the vehicle and consumer mix look like in my market? Older vehicles, trucks, SUV? Higher end vehicles? Focus on your strengths outside just price and find opportunities in the vehicle mix and tire sizes that your competitor might have a blind spot on.
2. Look outside Tier 1 to find margin opportunities: Most Tier 1 tires are set at MAP, but some consumers are looking to buy down a tier. This is where things get interesting, because we can get out of the brand and model to brand and model price fight. Find out what your competitors are carrying in Tier 2, Tier 3 and Tier 4, then work with your distributors to create a plan and compete in these tiers.
3. Train your staff: Most consumers don’t buy tires; they are sold tires. A race to the bottom is not good for anyone, including your customers. The staff at the counter should be well versed in the products, how these products compete against other brands, and the value the application provides. When a customer buys the RIGHT product, regardless of price, and the dealer can make a profit, then we have a win/win!
4. Programs: Pay attention to the programs and back-end dollars that are available to you. Working with a good distributor partner and having a good rep will be very beneficial when navigating these waters.
5. Don’t just set it and forget it: We have often seen dealers setting a fixed margin on all brands, models, and sizes. There are nuances and opportunities to make more margin here and less margin there. You can balance things out based on your market, tire sizes, tread patterns, and so on. Keep an eye on your prices and margin settings and make adjustments as the market moves or as opportunities arise.
Prices on consumer goods continue to fluctuate greatly, and tires are no different. Keeping a pulse on the state of our economy and consumer sentiment is also very important. Leverage your suppliers, leverage available technologies, and communicate with your teams on strategy as the industry continues to evolve.