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An Inside Look at Goodyear’s Direct Online Sales Effort – Part II

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Last January at its annual dealer conference, Goodyear unveiled plans to launch direct-to-consumer online sales across the U.S. through its Goodyear.com website. The announcement was met with a good bit concern by dealers, some of which quite vocally denounced the move as another slap to the face of independent distribution.

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At the time of the announcement, Goodyear claimed that it had 1,100 locations – including some 600 company-owned retail stores – signed on. As of Nov. 13, that number has swelled to 4,000 retail locations (including company-owned stores), but Goodyear would not say how many individual dealers were involved. We were told that there were a number of large 30-plus store dealers involved, but no mass merchants or chain stores.

If you take away Goodyear’s estimated 600 company-owned stores, that’s 3,400 dealer locations that are signed on to the program, up about 1,100 from the immediate aftermath of the tiremaker’s announcement.

After months of a market-by-market roll out, the program was completely live from coast-to-coast as of October. Last week, we met with Mike Dauberman, senior director of marketing and interactive, and Bill Friel, general manager of consumer dealer retail, for an update on the program and where it is headed.

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We pick up the conversation with Friel talking about the dealer’s advantage with the program.

Friel: The one thing was common to all the dealers that I deal with – and I’ve been dealing with dealers for about 40 years now – is that they all have concerns about traffic count. The industry’s got so competitive, and their car counts just haven’t kept up. So, when we presented the installer program to them and said here’s an opportunity for a new customer to come into your store and it’s not going to cost you anything, do you want to consider it, most of them said that’s a no loss situation. It’s a win situation for us. There is no cost to being an installer on our program. The analysis done on the installation package and the commission rate, we looked at that. We put the rates at something that I think our dealers will tell you that they’re very satisfied with. It’s a retail purchase from the standpoint of mounting the tires, and what they’re getting for balance and tire disposal and TPMS is very competitive, if not better than anything that’s out there. So they’ve been pretty happy with what they’re getting. The dealers are very happy with it, and it is a new customer, in many cases, and they are selling oil changes, alignments, road hazards off of it. Not every customer is buying other services, but a high majority are.

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And then, obviously, the biggest piece that we’re hearing from customers is they are acknowledging that truly it’s someone they haven’t seen before, or it’s been somebody that they did see, but it’s lapsed, and they haven’t seen them for a while. And that’s probably the most rewarding thing that we hear from customers: they want to see their car count go up. They want to see new customers come into their store. And although it’s not, to Mike’s point, it’s not a tremendous amount of volume to them, the ones that are responding to the online selling are people that they haven’t seen for quite a while or ever.

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When we did the pilot program in 2012, we had an expectation of what that new customer percentage would be and how many people we would see come into our stores and buy additional services. And the results since we kicked this off, since January, have exceeded the pilot and exceeded our expectations. Seventy percent of the consumers that are coming into our dealers are brand-new customers that they had not seen before or they hadn’t seen for quite a while. And that’s greater than our pilot, when we first ran the test. And 55% are buying additional services. So, it’s a total of about $290, in terms of the alignments, the oil changes, the road hazards, that type of work.”

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Dauberman: I think the obvious question is how big is this thing going to get. And our attitude hasn’t changed at all in the last 7-8 months: It’s still very, very early. We really believe that the majority of consumers still need to be educated on the fact that they can do this. The majority still think that you can’t buy tires online. It’ll take time for them to think that they can, but when you look at products like ours, it doesn’t just all of a sudden become 80% of the industry. It’s a slow process with tires, but over time it grows. Our expectation is that it will just continually increase, but it’s not going to be a sharp increase. As consumers become more comfortable, as they start to rely on the Internet more, as they start to realize they can do it, it’ll grow.

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The actual amount of people that are buying online, there’s not a lot of sources for this in our industry. In our industry, it’s not really a big topic of conversation, but there are some third parties that have estimated it, and here’s what you’re looking at is growth of like 4.4% to 5.1% to 6%. That’s pretty slow growth. What we all have to ask as an industry: is it slow because this is what consumers want, or is it slow because consumers can’t do it? And I don’t think we, as an industry, know the answer to that. If the majority of websites you go to today don’t permit you to buy tires online, how is it going to get any higher? So that 6% could be a big number, or it could be a very small number, depending on that yet-to-be-determined reality.

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We believe – and we’ve said this from day one and we still really believe it – that what we’re doing here is we’re enabling our dealers to remain competitive in a space where other players have the opportunity to allow people to buy online and not have them be part of this process. Yes, this is good for Goodyear, but we also believe that it’s very good for the dealers that are in our program, because we’re helping them remain competitive. If a consumer wants to buy online, if they insist on buying online, and they’re not buying through Goodyear.com, there’s a pretty good chance that that Goodyear dealer is not getting that sale or is not getting that consumer walking into the store. And that’s something that we feel like we can defend, and it’s something that we remind ourselves of and we always make sure is built into our thinking as we evolve this model.”

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Tire Review: But looking forward, you have to have some idea where this is heading?

Dauberman: Sales? We’re not talking publicly about sales. We’re not able to say here’s how much we’re selling, here’s how much we’re projecting. What I will say is we’re not projecting this big swing. It’s not happening. We’re projecting it to just progressively, over time, grow at the rate it’s growing.”

Tire Review: How many transactions have there been?

Dauberman: Can’t talk about it. We can’t talk about the actual physical number of transactions. I will say, though, if you were to have interviewed dealers six months ago, they would have said, ‘I don’t know if Goodyear’s turned it on yet; there’s not a lot going on.’ I think now you’ll hear from dealers – not that it’s blowing their socks off – we have some customers walking in from Goodyear.com.

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Tire Review: How long has the program been national?

Dauberman: Since late September. So, just a pretty short length of time.

Tire Review: What has Goodyear invested in this?

Dauberman: Can’t talk about that either. I was so close to getting through this. [laughter]

Tire Review: In terms of tire pricing, where does Goodyear’s pricing fall relative to live dealers?

Dauberman: Can’t talk about price, but what I can say is we want to make sure that we are getting the price that we believe our tires are worth, and that is not a discounting strategy. We are not the place where you buy tires at a discount. We believe that we should be able to sell tires at a certain price, and that’s the price we’re selling them at. There are a lot of places online where you can buy a Goodyear tire for other prices, sometimes cheaper, but we’re not playing in that space.

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Friel: I think one thing dealers are telling us is that the product mix that they’re selling to someone online, in many cases, is different than just the average retail transaction. That’s someone who has searched Goodyear brand and done their homework and found the tire they want. The product mix is at a higher level than just someone else who’s out there looking for a tire. So from that standpoint, I think they’re getting a lot more quality-minded consumer. I think that leads to why they’re buying services after the tire purchase, too, because you’re talking to somebody who wants to maintain their car, take care of their car. They’re buying a higher quality tire along the way.

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Dauberman: There is a phenomenon that others have reported on the Internet, that when consumers prepay for a service, it’s kind of out of mind. And when they walk into a store not having to pull out their checkbook for that purchase, it starts a new wallet. I’m not saying we’ve found this in this industry. We don’t know if that’s what is happening, but I’ve heard in other industries that when you pre-sell, then they walk into the store, they forget about the thousand dollars they already spent, and they’re more apt to spend more money when they’re there. I don’t see why our industry would be different, but it’s very likely that our stores are getting add-on services, potentially at a higher rate than if the consumer also had to write a check that day or pay that day for a tire. But that will be yet to be seen, but something that we’d love to be able to report on.”

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Tire Review: Is the pricing the same in Kansas City as it is in Palm Beach, Florida?

Dauberman: It is.

Tire Review: So, it’s not being done on a regional basis?

Dauberman: Correct.

Tire Review: Unlike your distributors?

Dauberman: Correct.

Tire Review: Is that done intentionally?

Dauberman: Intentionally, yes, but I don’t know if I would say there’s a major strategy behind it, meaning that we made a decision on whether or not that was important today, and we decided we would learn by not doing regional pricing. It’s one of those conversations that we definitely have, of what impact would it have on conversion if we had regional pricing, and we’ll probably get to figuring that out, but I wouldn’t say it’s something that our team is working on today.

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Tire Review: From an operational standpoint, this is not a free service. It’s costing Goodyear money, an amount of which you cannot share.

Dauberman: Absolutely. Yeah.

Tire Review: What is the trigger point for, “This is working out just fine” versus “We have to stop throwing money away?”

Dauberman: I think the way that I answer it – I’m trying to channel what others would say here, too – we believe this is the way that consumers are going to shop in the future. We believe that we are ahead of the game but not that far ahead of the game, in that over time if you do not have a solution like this you will no longer be selling tires because consumers are demanding it. I don’t know that Best Buy would still be here if they didn’t also invest heavily in their interactive channel, because they had to be able to meet consumers who want to do it one way and the other way. I am in no way implying that the majority of consumers are going to buy online. It’s that I don’t know that you can be in business 10 years from now without an interactive strategy, without an e-commerce strategy, no matter who you are. We just happen to be ahead of that game. So, I do not believe that’s a conversation that Goodyear is having, about how much is the investment-to-revenue scenario, but I would also say that I believe that we’re not throwing money away and that this makes sense. It makes sense for Goodyear, and it makes sense for the dealers that are participating in it.”

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Tire Review: Somewhere, though, somebody sat down and projected that at some point you’ve got to get to 6% or 8% or 11%, whatever the number, right? In Europe, they are looking at online tire sales reaching 20% within five years. They have a little bit different situation over there, from an online standpoint.

Dauberman: If in 2014, 83% of consumers went online to learn about tires. Over time, if people want to buy online, when they start to see that they can do that on the same sites where they are doing their research, some of them are going to start using those sites to buy. If you have consumers coming to a website and they’re not able to buy and that’s their expectation, eventually, when they realize they can do that elsewhere, they might not come to you anymore. That’s more what I’m talking about when I say that if you don’t have a website and sell online. I believe that there is definitely a model where you can be very successful in driving people to your store and providing a high level of service. I just think that if that’s your model, you’ve got to rethink who your consumer is, because you can’t tell a consumer they can’t buy the way they want to buy if other people are providing those options. I don’t think I’m being provocative in the statement. I’m just saying just like every other industry out there, the Internet has become a very important part of the business model. And even very small retailers have had to deal with what e-commerce means to their industries, and very few small retail stores have been able to get away with not evolving their models. And I don’t mean evolve by selling online; I mean evolve by saying what do I do about the fact that some of my consumers may not come to me tomorrow. That to me is the 10-years-from-now question: how are we as an industry going to evolve to meet consumer needs. We feel like we’re ahead of that. We were the first to jump out on this, but we weren’t jumping out on it because we wanted to be different. We feel like somebody’s got to lead this industry and help us all get to where we need to be to meet the consumer demand.

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Tire Review: How does Goodyear view Michelin’s experiment in the Raleigh area and Bridgestone’s experiment in Nashville?

Dauberman: I don’t know that I would share a view. What I would try to do is bring it back to us. We believe that consumers are trying to shop a different way. We’re doing everything within our power to meet those expectations. It’s not surprising to me that they’re learning their way into it, too. So, different business models, like Michelin trying to have the installation vans, to me that’s just saying we need to learn what consumers want. We need to learn if consumer buying behaviors are changing. We need to make sure that we’re meeting those behaviors.

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We built our model to ensure that our aligned dealer network is winning with us. That’s important to us. I don’t know if everybody had that in mind with their models, but that’s ours. Our model was to make sure that we’re bringing our 4,000 dealer locations, and hopefully more that join the program, along. That’s a choice that we made. I don’t know if other people are making those choices or not, but that’s us.

Tire Review: Some dealers, as you know, were unhappy about this and just wanted nothing to do with it. How is Goodyear approaching them going forward?

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Dauberman: To date, we have said we don’t want to be disrespectful. It’s their choice. No high pressure. What we’d like to do is just continue to educate them through dealer conference, for example, and just let them still make the choice. But what we do know about dealer conferences, it’s a great opportunity for them to talk about the good and bad. So coming out of the dealer conference in January, we would expect that a lot of people who are not on the program, if everything we’re saying today is truly their sentiment, that we’ll see another lift coming out of dealer conference of people that are participating. But we’re not actively trying to go out and say you should be on or you need to be on. If they ask, we bring it up. When we’re out in the field, we ask them if they have any additional questions, but there’s no sales process.

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Friel: I can say it’s not been a flashpoint enough to direct us from not having agreement together. In fact, one of the dealers wrote into one of the tire magazines about their opinion about it, soon as we got back from dealer conference. And about two weeks later, I had a nomination from that same dealer. He wasn’t a Goodyear dealer when he wrote the article, but two weeks later there was a nomination on my desk for him to become a Goodyear dealer. So, although he had some skepticism about the whole idea about it, I think they view it as it’s just another piece in our support programs for dealers, and it’s not anything that’s really caused any issues with us.

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Tire Review: Did he become a dealer?

Friel: Yes, he did.

Dauberman: And the skepticism is obvious, but it’s not making us mad. We totally get it. If I were sitting on that side, I would want to understand it. My natural reaction would be to be afraid of it. It’s our job to just be honest and tell them how it’s going and let them be their own choice, but when we did see some dealers come out at the beginning very nervous, very skeptical, I think our reaction was to just give it time. If they’re right we need to compensate, and if they’re not right we think that they’ll know.

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Read “An Inside Look at Goodyear’s Direct Online Sales Effort – Part I” for more on Goodyear’s direct online sales effort.

 

 

 

 

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