Online Tire Retailing
Sales of tires bought through online tire stores are on the rise around the world. Current estimates put online sales in Europe at around 10% of the market or 25 million units. In China the percentage is lower, but still in the tens of millions of units each year.
All around the world, however, the volume of tires bought through internet channels is set to grow fast – in Europe probably doubling to 20% in the coming three to four years. That's rapid growth and significant change for the tire retail sector: a business which does not especially embrace change.
I've been thinking about what drives online sales and how the growth in online sales might change in the coming years in different markets.
Most of us are familiar with the abbreviations B2B (business to business) and B2C (business to consumer) but a new one to me was O2O (online to offline). But O2O describes the online tire selling business perfectly.
A consumer goes to a website (that's the online bit of O2O) and selects the tires to be fitted. Since most consumers can't fit their own tires, the next step is to select a local fitting station (that's the offline bit) and make an appointment a day or two hence, which gives time for the tires to be delivered. The consumer pays an all-in price and just needs to turn up at the garage at the appointed time to have the work done.
If you want even less hassle, you can select a mobile fitting service and tell them where your car is parked (in the works car park, for example). They'll find your vehicle, swap the tires, take away the old ones. Fantastic.
I've done it three or four times now. It works. To be honest, it's a much better experience than going to the local fast-fit tire store, and a bit cheaper.
Most of us are pretty ignorant when it comes to tires. So when we visit the tire store, we are not in control. Up to 70% of the buying decision is made by the tire dealer. Most of us don't like that.
The world has changed in the last few years. There is now an absolute wealth of data on tires: reviewing performance; offering tire comparisons and making pricing highly transparent.
Some people in the tire industry believe that people are so uninterested in tires that they will go to a store and spend euro 100 or more on a tire merely on the dealer's say-so. Before the internet, that may have been the case, but I see more and more people going online to find those comparison sites.
I think there's some kind of threshold somewhere between euro 100 and euro 200 where people will spend a bit of time doing the research on a prospective purchase. That might be for a new dishwasher or a cooker or a mobile phone or even a couple of tires.
Europe has a massive amount of information on tires, if you care to look for it — I've listed some sites at the bottom of this article.
That is not the case in all parts of the world. At the top of this piece, I mentioned China. Fact is, there is very little consumer information on tires in that country. So online sales there are relatively low – how are you going to choose a product if there is no information on which to make that decision?
I happen to know some of the people who run e-commerce tire sites in China and they have realised this is slowing the growth of online sales in that part of the world, so they are looking at ways they can generate more information to help consumers carry out that independent research.
Apart from the availability of consumer information, the growth of online sales almost predicates a low level of involvement between customer and tire store.
The BRV in Germany records online sales there at about 10.5% of the 40 million-unit market and expects the figure to grow to 20% by 2020.
I tend to think online sales will grow faster than that. Why? Partly because I feel that the tire business as a whole is vulnerable to disruptive sales practices – since it is so resistant to change. Secondly, as more people gain confidence in the online purchasing process and realise that tires can be bought online like domestic white goods, or phones or other products in the euro 100 – 1000 range, I am sure the improved convenience of the online experience will convince customers to switch away from the more traditional sales channels.
Consumer Resources Online
Online stores (UK)
Online stores (Europe)