Trimming the Fat? - Tire Review Magazine

Trimming the Fat?

Thought occurred to me the other day: If GM and Chrysler are cutting costs by rationalizing distribution, might not tire companies benefit from the same?

As you know, thousands of GM and Chrysler auto dealerswere pink slipped recently as the bankrupt former auto giants struggledto shed debt and rebuild. Newspapers and local TV stations have beenfilled with hard-luck stories of long-time Chevy, Dodge, Pontiac,Chrysler, Cadillac, etc. dealers that were abruptly curbed.

Oneof the reasons for the dramatic reduction in retail of points of salewas oversaturation; it’s very hard to make profits if your product isavailable on nearly every street corner, and if your retailers arecompeting against one another with your product.

And the costfactor for shipping products to so many locations, managing yourbusiness within those dealerships, and supporting those locations withadvertising, promotion dollars and otherwise has to be huge.

It’s little wonder any automaker can make a buck these days. Hhmmm…that sounds vaguely familiar.

Withmajor brand names available at mass merchants, price clubs, cardealers, online, company-owned stores, chain stores an, of course,independent tires dealers, how can those brands (and their owners) makea decent profit?

One of the keys to marketing a premium productis to make it appear to be “exclusive.” You can do that with supportmaterials, with fancy ad and PR words, and by limiting distribution –make it harder to get.

As tiremakers consider their balancesheets and financials, one has to wonder if the next wave ofbelt-tightening might now come from the distribution side instead offrom the tire company side.

Just a thought.

If you have comments to share, send to me at [email protected].

– Jim Smith

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