E-Tailers and Autocentres are on the Up

What will the tyre retail business look like in five years time? Who knows. As I have learnt to my peril in this column, prognostication is a dangerous business. Let’s not recall how last year I wrote “unless there is an unlikely stay of execution” regarding the implementation of s-marking regulations (see T&A’s August 2009 issue for more on this). But I digress.

The news at the end of February that Halfords bought Nationwide Autocentres for £73.2 million (see page 14 for complete coverage) says something about how tyre retail is evolving. Along with the purchase announcement came plans to rebrand the chain and the affirmation of existing plans to double the number of branches to 424. When you consider that the second largest tyre retail chain in the country, ATS Euromaster, reported that it was “reviewing” up to 80 of its 456 branches last September, it is clear that size gap between chains at the top of the two sectors is narrowing. True, Autocentres don’t focus on tyre sales like the traditional outlets do, but there are signs they are considering how to increase their focus in this area.

At the last count (in 2009) Tyres & Accessories reported that the majority of tyres sold in the UK (55 per cent) were distributed through either independent tyre specialists or national fast-fits, many of which can also be classed as independents. This market dominance is unlikely to change a lot. However, if the latest evidence is anything to go by, the role played by Autocentres and the Internet (another developing part of the business) in tyre retailing is likely to increase in the future.

The recent growth of the Internet as a tyre distribution channel is remarkable. Just five years ago e-tailers occupied UK and European market share so small that it was difficult to track. The latest figures, supplied by a source at a leading premium tyre manufacturer, suggest that this has grown to almost double figures in Europe. Another source puts the UK market share at more than 6 per cent. However, what is even more noteworthy is that as many as 25 per cent of the tyre buying public are now researching their purchases online before they buy.

It is also worth remembering that tyre e-tail operations are the unexpected beneficiaries of the forthcoming tyre labelling legislation. When this law was suggested, some in the tyre trade pointed out the impracticalities of labelling. After all, who even sees a tyre before it is fitted? The requirement has since been modified and it now looks like labels will still become mandatory, but communicating what is written on said label to the customer will now also be required. One part of the trade that can bypass these associated communication difficulties altogether, while still absolutely complying with the law, is the so-called e-tail sector. All they have to do is adjust their websites to incorporate a second image next to the tyre pictures and particulars they already publish for every product they sell. This could also assist them when it comes to up-selling from the budget and mid-range products on the basis of qualified performance benefits.

I am not saying these two parts of the tyre business are suddenly going to take over, but with the most mature market sizes remaining relatively static, it is worth considering whose market share will be taken over by these fast growing segments.