Retail: Hold it steady

The introduction of tyre labelling is likely to be the greatest change tyre dealers will experience this year. In fact some say it is the biggest adjustment to the business experienced in this tyre retailing generation, something that is likely to be true irrespective of country. Whatever your view, the introduction of this legislation comes at a time when European financial markets remain in turmoil and some of the continent’s largest tyre markets – including the UK – have returned to recession. And this at a time when incoming product prices remain high as a legacy of the last couple of years of raw material cost increases. It all adds up to significant pressure on the retail sector.

Over the next few months before labelling becomes mandatory in November manufacturers, associations and other interested parties will all be trying to communicate the rules, their views and of course the labels themselves to tyre dealers. Tyres & Accessories will of course continue to report on and analyse the information as we enter the labelling era during the next few months (keep an eye on tyrepress.com and look out for future issues of Tyres & Accessories for more on this important issue). So for that reason this year’s Retail Chains and Buying Groups feature, to be published in the June 2012 issue, focuses on market progression – how the retail landscape has fared – in the tough economic conditions we find ourselves in. To this end T&A has updated what has now become our annual Top 25 UK tyre retailers table with the latest figures, which act as something of a barometer for market recovery.

Retail stabilising despite double-dip

As this issue of T&A goes to press, the UK government has been forced to concede that the British economy contracted more than it thought in the first quarter of 2012. For most the fact that we have entered the much-feared double-dip recession is a bad enough knock to consumer confidence, but now that we know GDP fell 0.3 per cent in the first three months of the year, who can say what affect this will have on retail tyre sales during the rest of the year? However, there is good news. If we use the total number of tyre retail points run by the top retailers in the UK as a barometer, this suggests that the worst of the recession is over and the decline is…well…declining.

Of course this approach is a fairly blunt methodological tool and there can be numerous reasons for companies closing retail depots – not least for strategic reasons. It is at this point that retail directors may point out that “right-sizing” and the strategic placement of branches are good reasons for closing depots. Be that as it may, the fact remains that this time last year the top 20 UK retailers shed more than twenty times as many branches as they did this year. The net total of branches from the UK tyre retail premier league fell by two to 1,894. However, the net total of branches within the top 25 actually grew by three to 1,937.

The top five retail chains still account for 79 per cent of the top 25 and therefore remain very influential in the wider the sell-out landscape. That said the largest of these are still fine-tuning their footprints, with the ever-dominant Kwik-Fit sharpening its position by four locations. Coming as it does 15 months after the acquisition of Kwik-Fit by the Japanese Itochu group, which also owns Stapleton’s Tyres Services and its retail businesses (STS, Tyre Pros and Central branded shops) this is likely to represent an exercise in right-sizing by both branches of the Itochu empire, with industry figures speculating that the ones to go would have been the weaker performing links in each respective chain. Tyres & Accessories has requested interview with Itochu on several occasions, but so far no-one has been available to answer our questions on this. Nevertheless, the Itochu group’s UK tyre retail interests remain considerable, totalling some 796 branches, which is more than half the top five and 41 per cent of the top 25 alone.

HiQ falls, National rises

Despite a strenuous and continuing retail franchisee recruit campaign, HiQ is this year’s biggest faller, with the company counting 140 branches amongst its number in 2012, 10 less than at the same point last year. In fact the attrition could have been greater earlier in the year, as the NTDA 2012 handbook reports that the branch count fell as low as 131. However, HiQ representatives told T&A that the current figure is 140 and that 16 more branches are sent to join the HiQ chain during the remainder of 2012.

Perhaps the brightest rays of sunlight are shining at National Tyres & Autocare where there company reports by far the fastest growth in the marketplace. According to our research, the third largest tyre retail chain in the UK added 18 depots to its number in the year since our last survey, taking its total to 225. With second place ATS Euromaster’s branch count reportedly staying flat at 369, following the company’s reorganisation over the last couple of years, this means the gap between second and third place continues to narrow. Judging by the speed of growth, National Tyres & Autocare has got second position well and truly in its sights.

The next tier saw footprint growth remain relatively stable, with McConechy’s reporting three fewer branches and Protyre, Bathwick Tyres and Mr Tyre all remaining at the same level they were 12 months ago. The exception here is the Malvern Tyres which appears to have added half a dozen more points of sale. However, a word of caution here: as Malvern Tyre’s retail portfolio is growing by acquisition and because some of these include HiQ branches (according the company’s website) it isn’t completely clear if there is some element of double counting here.