Welcome to the dawn of a new replacement tire reality.
It takes two to three years for OE fitments to have a strong impact on the replacement market. For the past few years, tire manufacturers have recorded increased OE demand for sizes in 17” and above, with strongest growth in 18” and 19” sizes. This will impact your shop in 2018.
The high popularity of Crossovers and SUVs has increased OE demand for higher wheel diameter tires. Many of these vehicles are derivatives of passenger cars and use passenger tires. Walk the lots at new car dealerships and note the standard tires on small Crossovers or SUVs. Honda CR-V, 235/65R17, Toyota RAV4, 225/65R17, Mazda CX-5, 225/65R17, Chevrolet Equinox, 225/65R17, Dodge Journey, 225/65R17, Hyundai Tucson, 225/60R17. Even the Honda HR-V is 215/55R17.
Some entry level Crossovers still have 16” as standard, but look at the available tire options. For example, Kia Soul standard is 205/60R16, but 215/55R17 and 235/45R18 are options.
We’ve all heard about the death of the sedan, but small sedans remain very popular in Canada. A good example is the Honda Civic with standard 215/55R16, and optional 215/50R17 and 235/40R18, with 245/30R20 on the Type R. Honda sold 69,000 Civics in Canada in 2017; 37 percent more than Toyota Corolla and 49 percent more than Hyundai Elantra. It is the highest volume car in Canada. The Civic is the “canary in the coal mine” to show the direction the market is taking.
Think 19” is exotic? Hyundai Tucson Limited comes with 245/45R19 as the standard tire!
Impact on your bays
How does this affect your shop? Well, bigger tires cost more, have a larger mass— size and weight—and a lower profile. On the scale of difficulty for mounting and balancing, low to high, they rank a lot higher than a 195/65R15.
Shipped anything by courier recently? The bigger and heavier the package the more it costs. Travelled recently? Did you notice Dilbert trying to check in his small block V8 crate engine? He had to pay extra baggage fees.
So, here is my point: If you are charging the same fee to mount and balance a 195/65R15 and a 235/40R18, you should reconsider your labour rates. Many think that the consumer will not pay more; however, in reality many consumers will pay more, they just need to understand what they are paying for. Amazon charges more for Amazon Prime and people pay.
Why? They understand the value and make the choice based on their needs.
Courier companies offer different rates to ship the same package by ground. Delivery by 9:00 a.m. costs more than delivery at any time within the day.
Let’s talk profit margins
We know that our industry faces challenges with Gross Profit Margins. Many complain that there is not enough profit in tires. Many shops press their Wholesale Distributor (WD) for lower prices on tires. However, the WD is facing higher costs based on larger tires—less tires per square foot in the warehouse, less tires fit in delivery vans, etc. Frankly, the prices offered by most WDs are already as low as they can go.
As retailers, I challenge you to look at your business and to mine you customer base for increased Gross Profit. Yes, this is a change, but the world is changing. And just because you have done something one way for the past 10 years doesn’t mean it’s the right or best way for 2018.