Online tire vendors are a threat to your business.
Richard Bender, President of the Tire Dealers Association of Canada (TDAC) is sounding the alarm about online tire vendors and how they threaten the well- being of bricks-and-mortar tire retailers. He has even coined a phrase to describe the threat: The Amazon Effect.
“I look at the effects of what has happened in different industries and businesses,” Bender explains. “We have to accept the fact that people buy things online, but I have some strong feelings about tire dealers looking after their own best interests, as opposed to the interests of the online retailers.”
The problem, as Bender describes it, is the fact that consumers buy tires from online vendors, and then they expect the local tire retailer to install them at a cost that doesn’t allow that retailer to cover all the overhead, make a profit, and stay in business.
“If you’re going to lose your profit on the sale of the tires, then you have to make it up somewhere or else you won’t be around for long,” he says. “If you become an ‘install centre’ for customers who buy tires online, and then expect you to install them for $80, you’ll go out of business.”
Learn from other industries
Bender points to other industries that have been devastated by online shopping. “That’s exactly what happened to retailers like Future Shop. People would go in, pick the brains of the sales person, find out which TV would be best for their home, and then they’d leave the store and buy the TV online for less.”
That’s a trend Bender has seen personally in the tire business as well. “About two years ago a family acquaintance contacted me to ask about tires,” he recalls. “I gave him the name and address of a very qualified retailer in his area. He went in there, and from what I understand, he picked the brain of the dealer, decided on the right tires, and then bought the tires online, and had them shipped to another store so that he could save some money.”
A growing problem
Bender admits that online retailers aren’t a huge threat to bricks-and-mortar shops yet, but if traditional tire retailers continue to allow online sellers to use them for installation, then the problem may very well get out of hand in the near future.
He knows of a tire dealer who has a very simple solution to this problem. “I spoke with a very successful dealer who only does wheels and tires,” Bender says.
“I asked him what he does when a customer walks through the door with a set of tires he bought online and wants the tires installed. His solution—he hits the customer with a sticker shot, and tells them it will cost $225 to get them installed and balanced. He’s only had about eight or ten customers get really upset and accuse him of trying to rip them off. His answer: ‘No, I’m just trying to protect my business.’”
And perhaps that’s a stand all traditional tire retailers need to make in order to discourage that kind of clientele, and the subsequent race to the bottom. “Tire dealers, from my experience, will always have their customers,” Bender explains. “But there’s also a segment of the population that’s very price conscious and they’ll go out of their way to save themselves $20. Those aren’t the customers you want.”
Winning over new business
The only time this kind of transaction makes sense, according to Bender, is if that online shopper becomes your customer and then comes to you in the future for other service needs. But that’s easier said than done.
“Most tire businesses do under-the-hood service,” Bender says, “and I think there’s a penchant for them to gravitate towards an online retailer with the idea that they’ll install the tires, and then convert the customer. But I don’t think that’s necessarily the case.”
His advice to tire dealers is simple: “Think twice before you sign up with online sellers as an installer, especially during your busy period. You can’t survive on the installation charges alone.”
Having sounded the alarm, Bender says this is an issue the tire industry needs to keep an eye on, just to make sure it doesn’t get out of hand. “Most people don’t think it’s a big issue in their business, but it may become one,” he concludes. “People buy everything online today, so why wouldn’t they do the same with tires? If this is a one-off it may not be a concern, but if it continues to grow it will be a problem
