Cool Results: Growing Winter Tire Market Offers Steady Profits - Tire Review Magazine

Cool Results: Growing Winter Tire Market Offers Steady Profits

With the summer months upon us, winter tires are likely one of the last things your customers are concerned about. But by thinking ahead about entering or strengthening your position in this profitable market segment, you may find yourself at an advantage when the temperatures start to drop.

Quite popular in Europe and Canada, and slow to catch on in the U.S., sales in this niche have continually grown over the last decade, and are predicted to continue that trend well into the future.

The Numbers
According to figures from the Rubber Manufacturers Association, winter tires made up 1.9% of all tires sold in 2007 in the U.S., compared to 1.6% in 2002. While that increase may seem slight, the actual number of winter tires sold in that time doubled, with overall winter tire sales increasing by 21% over the last five years.

“It’s a slow growth, but it’s a continued growth,” said Razvan Bosomoiu, general manager of winter tires for Goodyear Tire & Rubber Co. “Canada, like Europe, has a mature winter market, with a penetration of about 30%. There is still a lot of room for improving the penetration in the U.S.”

The North American winter tire market has grown particularly in the light truck and high performance areas, where over the last five years sales have grown by 23% and 12%, respectively, said Dan Seitler, senior vice president of procurement for American Tire Distributors.
In the high performance segment, one factor that has contributed to the recent strong growth in winter tire sales is the increase in sporty, high-end cars that come off the lot with summer tires.

“We’ve increased our product screen in that particular area because those cars are most in need of winter tires,” said Michiel Kramer, U.S. market development manager for Vredestein. “They can’t scrape by with an all-season tire because those cars are very powerful, and often rear wheel-driven, and it’s just unsafe to do so.”

The key to keeping winter tire sales on the incline is consumer education, which can be achieved both at the manufacturer level and the dealer level, according to Bosomoiu. He noted that because U.S. highways are kept clearer of snow and ice than those in Europe, American consumers are less aware of the need for winter tires, which many still refer to as “snow tires.”

“There’s still confusion surrounding that issue, and that’s mainly because in the past winter tires were positioned as snow tires,” Bosomoiu said. “It’s a big challenge to teach what the added benefits of winter tires are when you don’t have snow on the highways. Dealers need to tell their customers that winter tires aren’t just for snow anymore – they also increase safety on the road in slush, on ice and in dry winter conditions when temperatures drop.”

Added Potential
If your shop is in an area that sees colder temperatures in the winter months, now may be an excellent time to look into entering this market segment. Not only will you turn a profit on the tires themselves, but by offering added services and benefiting from increased customer visits, stocking winter tires could be a very lucrative option, especially if your competition is lacking in this particular area.

“The marketing research we’ve done shows that these consumers typically come from higher income households. These are customers who have the income and are willing to spend the money. That makes winter tires a more profitable side of the business,” said Anne Johnson, category manager of winter tires for Goodyear.

Larger profit margins are also a result of the number of drivers who find they are in immediate need of winter tires. “If someone purchases a new Lexus in the fall and they quickly realize they need winter tires, there’s a necessity there. There is no time for them to drive on their current tires for a couple more weeks while they compare prices before making a decision. If the snow is flying, they need them right then,” Kramer said.

In addition, you are guaranteed to see each winter tire customer twice a year when mounting and dismounting their tires, “which often leads to a dealer retaining a greater share of the total tire and service dollars of the vehicle,” Seitler said.

“Dealers could use those times as opportunities to cross-sell service items, brake pads or other products. It’s a way of strengthening the bond with the customer,” Kramer said.

If your shop has adequate storage space, offering to store each customers’ tires during  the off-season for a small fee will ensure they return to you each spring and fall, and not another tire dealer in your area, he said.

“Many of our retailers also sell separate tire/wheel assemblies that are ready to bolt on for the winter,” Kramer continued. “It sounds like an expensive option, but it really isn’t. When you consider the mounting and balancing service fees every season, that alone already pays for the wheels. It’s a good idea if your customers have nice wheels for their summer tires and want to keep them that way by avoiding salt and bad weather in the winter. It will cost them more money, but they save their expensive summer wheels.”

Getting Ahead
Dealers entering the winter tire market, as well as those who have been in it for years, will benefit from being proactive. Keeping the right amount of tires in stock, demonstrating your expertise to customers and advertising your services will point your sales in the right direction.

“It’s about how proactive they want to be,” added Bosomoiu. “It depends on where dealers want to be in this development: do they just want to be a follower and join when the market is already developed, or do they lead the development in their particular market?”

In addition to advertising, direct mailing and encouraging your customers in the fall to set up appointments to change their tires for the season, it is vital to have the right selection of winter tires in stock.

“In every season, there are certain SKUs that become popular because there’s a car just out that has the tire on it and drives the demand,” Kramer said. “It’s important to have new sizes in stock immediately, so you’re ready.”

“For dealers who may not have enough storage room, many manufacturers offer two-step distribution,” Johnson said. “Goodyear has a wholesale distributor that helps with these types of seasonal products. A small dealer doesn’t need to have everything in his inventory if he can get same-day or next-day delivery.”

The Right Tire
Aside from the technical end of tire fitments (size, load rating and speed rating), dealers must consider the type of driving their customers plan on doing when helping them to select the right winter tire.

“Dealers have to really understand the customer’s driving behavior and expectations,” Bosomoiu said. “They also need to be able to educate them on exactly what winter tires offer and how they differ from summer or all-season tires.”

Overall, consumers expect maximum grip in snow and ice, less skidding and faster emergency stops. Most importantly, they don’t want to be stranded on the side of the road during bad weather, Seitler noted.

“There are definitely differences between the types of winter tires available,” Kramer said. “You have to find out what the needs of your customers are. If you see that their car is a driver’s vehicle, like a BMW, Mercedes or Infiniti, for example, you need to recommend a tire that fits that specific vehicle’s needs in handling characteristics. It’s all about determining what your customer wants.”

Vredestein’s most popular winter tire, the Wintrac Xtreme, is available in H, V and W speed ratings from 15- to 20-inch rim diameters. The tire is also available in staggered sizes for unique vehicle applications. Also, the company plans to launch a new winter tire line by the end of this year, Kramer said.

Goodyear’s Ultra Grip tire line is the tiremaker’s most popular winter offering among consumers, Bosomoiu said, and will expand this year to include 23 additional sizes. “We’re expanding across the Goodyear and Dunlop brands to match the marketplace, including the performance and SUV segments. We’re working to develop our range of offerings every year and come up with new products.”

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