Christmas in July: How Dealers Forecast Winter Tire Sales Before Summer - Tire Review Magazine

Christmas in July: How Dealers Forecast Winter Tire Sales Before Summer

Now that it’s mid-July, it’s safe to assume tire dealers in the traditionally snowy climates of North America aren’t really paying all that much attention to winter tires.

And why is that? Well, because most of them have already placed their winter tire orders, of course.

That’s right, by now most dealers who handle winter tires have consulted long-range weather forecasts, looked at last year’s sales, anticipated what’s going on in their market, crunched some numbers, leafed through the Farmer’s Almanac and sent in their orders. Probably in late April or early May.

"It’s depressing to order winter tires in the spring, but you get used to it," says Ed Hogan, president of Hogan Tire in Woburn, Mass.

With their orders well-placed, the only thing dealers have to do is enjoy the summer weather with a tall glass of iced tea and wait for their winter tires to arrive – sometime between August and October.

In truth, dealers aren’t relaxing at all. They’re busy with all the normal day-to-day sales and service work.

While dealers like Hogan do "get used to it," others, including many industry old-timers, remain puzzled by the winter tire-buying pattern. After all, just how does a dealer forecast winter weather eight months in advance? Does the weather really have anything to do with the number of tires sold? And what happens if a dealer doesn’t order enough … or too much?

These are critical questions that must be taken into account if a dealer is going to succeed in the winter tire business.

Order Up!

The reason for ordering winter tires so early is that manufacturers need to know how much to produce. There aren’t many tiremakers that keep winter tire production flowing year round, and none wants to get stuck with inventory that won’t leave the warehouse for another 12 months.

Usually, there’s a big flurry of manufacturing to fill most of the orders, with a shorter second run to finish out final dealer needs.

"Bridgestone is one of the early birds when it comes to getting your order in," says Hogan. "They want the orders for production planning. It takes the guesswork away from the manufacturers and puts it on the dealer.

"Orders for them are due the end of April, and they’ve been getting earlier over the years. They can get much earlier because the selling season isn’t over until the end of March. They only really give us about a month to get ready."

"It used to be that most manufacturers would put winter tires into inventory and dealers would order when they need them," says Bob Hepp, president of University Wholesale in Colchester, Vt. "But that’s changed. The job of forecasting has now fallen to the distributors and dealers."

Actually, Hepp, a distributor for Nokian Tyres, places and receives his winter tire order much earlier than Hogan, who is strictly a dealer. But, Nokian is one of the few tiremakers that keep winter tires in production almost year round, so order adjustments can be made at any time.

"We’re not a typical dealer because we’re a warehouse distributor for New England, New York, New Jersey and Pennsylvania," Hepp says. "We place an order in January and receive tires in February for the next winter."

There is at least one winter tire dealer out there who doesn’t place his order in the spring – or even late winter. That’s because Jim Miller, owner of Twin City Tire, which has two retail locations near Minneapolis, Minn., says many of his customers like to stay on winter tires year round.

"Our customers don’t want to take winter tires off and put on summer tires," he says. "They want a tire that’s quiet and smooth riding. Vredestein fits our market because they’re the only tires we’ve found with a mileage warranty on winter tires.

"Our customers would rather go 40,000 straight miles on one set of tires than switch back and forth between summer and winter."

Better Than Weathermen

When and how dealers order winter tires can vary. But there is one thing that they absolutely have to get right: forecasting. If they don’t hit the mark with orders, profits will be lost – either in lost sales or excess inventory.

And what’s one of the biggest factors when it comes to forecasting winter tire sales? Naturally, the weather is the main issue, and we all know how easy it is to predict what the weather will be like 200 days in advance.

Another concern is all the new cars and new tires sizes in the market. You might stand a better chance prognosticating the weather than trying to sort out SKUs.

"Winter tires are the one part of our business where you have to do guesswork because of all the new cars," says Hogan. "Sometimes you get sizes coming out of nowhere because it’s a new vehicle that hasn’t had replacement tires yet, but the customer wants winter tires.

"We look at sizing trends and see what percentage changes there are. If we see a size that’s just now appearing in replacement, we take a look at it for winter, as well. We also look at the new vehicles that just came out, especially European cars and cars with new tires sizes."

While winter tire forecasting is a real art, it’s not impossible. One thing that helps is reviewing your winter tire sales history over the last few years – how many tires you sold and how many you had to inventory.

"Forecasting is not a science," says Hepp. "However, it gets easier with experience, when you know what to look at."

Hogan agrees. "You do get the hang of it. You develop a method of ordering from year to year. The advantage to ordering winter tires so early is that you have all the information right in front of you because you just came off the winter season."

Obviously, the hardest thing to forecast is the weather itself. Just because flakes started to fall before Halloween last year, doesn’t guarantee the same thing will happen this coming winter. So, just how do you judge the weather?

"It’s hard to guess," says Hepp. "But a good winter season with a lot of wintery conditions not only affects the year you’re in but also the following year. If you get late snow and ice, say in March, people remember it and it reduces inventory that’s out there.

"With winter tires here in Vermont and further north, 80-85% of your customers will purchase winter tires before the season. That’s automatic. It’s that other 15%, the in-season sales, that’s the gravy winter tire sales give you."

Predicting the weather means thinking like the customer. As Hepp says: if it snows late, people will buy early the next year. If it snows early, more customers come in looking for winter tires.

"You gotta put yourself in your customer’s shoes," says Hogan. "We had two very mild winters before last winter. But we had a harder winter last year. You might cut your order by 10% after a light winter or add 10% after a hard winter."

Winter weather – in this case, the lack of it ®€“ dictates exactly how Twin City Tire’s Miller sells.

"We really haven’t had much snow for the last five years," he says. "If we get warm temperatures in late fall and customers feel they can get through until the end of November with the tires they have, then they’re not buying winter tires at all. If we haven’t sold them by the fifth of December, we’re not going to sell them. It’s been like that for years.

"When we weren’t selling winter tires, we needed a different plan," he says. "We needed to keep the product moving. So we went to a couple of local security companies; they drive year-round and need traction. We installed winter tires on their vehicles and serviced them, and it’s worked out really well. Then word started to spread.

"We tell our customers that if they’re going to buy winter tires for year-round driving, they’re not going to get 60,000 miles out of them. But we’re going to take care of their service."

Making Adjustments

Okay, so a dealer’s winter tire order has been placed and tires received, and it’s now the middle of the selling season. What happens if reserves start running thin? Or, to his detriment, a dealer realizes he has way too much inventory?

"Actually, we order to run out right at the end of the winter season," says Hogan.

"Most people would rather run out than have too many. It’s a conservative purchasing business."

"With the Bridgestone brand, which we also carry," says Hepp, "the early bird gets the worm with regards to getting more tires in-season. They might have customers who haven’t taken their winter tires. So the earlier you start looking, the better your chances.

"With Nokian, we can make adjustments weekly because they continually manufacture. The only thing I have to plan around is the several weeks between ordering and receiving them because Nokians are made overseas. I’ll order in mid-November for the end of December. I just have to take a look at our sales against what they should be for a certain period."

Unless you carry a brand that is manufactured year-round, working the phones is the best thing to do if you run short.

"Sometimes you just have to scrounge around," says Hogan. "There are always sizes that take people by surprise and you end up looking around everywhere. It comes down to making a lot of phone calls to find what you need."

Getting hung with tires can be worse than running short. There isn’t much you can do with excess inventory of a highly seasonal product.

"Basically, you just hope you sell them next year," Hogan says. "Some manufacturers have extended terms. But what you really end up doing is selling them the following season."

Says Hepp: "A lot of the suppliers have a re-aging process and we offer that, too. The dealer carries the tires in inventory, but we bill a percentage of the inventory to them towards next winter."

Right now, those problems are a ways off. Now that temps have breached 80⊄š, half of the dealer’s winter tire work is complete.

The forecast is accurate – with luck, perfect. The tires are in production and, in three or four months, the first sets will be going on customer cars.

There’s nothing left to do but wait by the pool for the temperatures to drop.

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