Following is a very interesting article from Wellington’s highly respected Dominion Post newspaper. It clearly outlines the probable future path of the tyre industry and for sure, Tyresales is in full agreement with it. We truly believe that the huge internet generated changes in Society, Retailing and Business are still to come! Its both scary and exciting at the same time; nothings going to stop it.
By MIKE O’DONNELL – The Dominion Post
OPINION: About a year ago the British Daily Telegraph carried out an investigation into 50 businesses and business practices that were being killed by the internet. They ranged from music stores to mainstream news media and even Sarah Palin.
The list demonstrated how the internet was no respecter of reputations, boundaries or ownership of information. And even less of constraint, ticket clipping and opacity. The net fundamentally changes the game for selling commodities and accessing information.
Just ask the Yellow Pages what it’s like trying to do battle with Google, or a travel bucket-shop trying to compete with Grab-a-Seat? It’s not pretty and it’s only getting worse. To coin the words of actor Daniel Day-Lewis, in the movie titled the same, “there will be blood”.
Last week it became apparent to me that the Telegraph missed one industry; the tyre retailing industry. Here is an industry with big brands, multiple manufacturers and suppliers. It’s also an industry that more than 2 million car-owning New Zealanders come in contact with.
You’d think the good level of competition and diverse participants, together with the tough trading conditions, would create good consumer outcomes. But you’d be wrong. My experience is that the mantra for this business should be: “Hey, we promise to shaft you slightly less than the other guy but still keep you in the dark.”
The industry seems to have two or three big franchised players who offer lowest price pledges and a bunch of independents. I approached one of the big players (let’s call them company A) and asked for a price for new tyres for my ageing Nissan Patrol. Their local branch said the tyres were normally $475 but they could do them for $450.
I then went to the other big player (company B) and asked them for a price. They asked me if I had received a price from anyone and when I told them what it was, they quoted $430. Back to the company A who now could offer $399. Then I called company B who said they could do $390 “if we are doing the business”. This I found vaguely threatening and somewhat different from their TV persona.
This process took about two hours of phone calling, resulting in me feeling more than a little frustrated. “How much” is a simple consumer question. It deserves a simple answer. Based on my experience it seems that neither player is prepared to offer a fixed public price, probably because they both figure they can make more money by keeping the market as opaque as possible.
Ad Feedback If there was ever an industry crying out for internet trust busting then this is it. The internet is about transferring power to consumers and removing opacity. Tyre companies need to be prepared to be transparent in their pricing and not try to fleece consumers by starting with a high price and only dropping it when presented with evidence of competition.
There’s real opportunity for an internet-based play that would nobble these sorts of operations. The new company would do all marketing, product and transacting online, with no need for human contact. This lack of overheads would allow them to offer tyres at competitive fixed prices. Fitting and balancing would also be booked online, and executed at service centres that only did fitting.
Better still they could have mobile fitters who came to you, so you don’t have the inconvenience and cost of having to drop your car off. Mobile fitters would also mean the business didn’t need to pay rent, further reducing overhead and allowing the business to offer leaner prices.
Give it a memorable name, say www.tyreonline.co.nz (yes the domain is still available) and you’ve got a nice wee business, a business that with no employees apart from the mobile fitters, and no credit control problems because customers pay before the tyre is ordered.
The impact on the traditional tyre retailers would be immediate and weighty. The starting price for any tyre would quickly migrate to being the advertised price of the new online provider. Typically this would be a price the traditional outfits couldn’t hope to meet because they have higher overheads and less flexibility, forcing them either to go out of
business, or offer true value- added service.
Offshore this sort of operation is not just a theory, it’s a reality. Online tyre retailers are big business. A recent survey by British tyre industry research house Encircle, found that internet tyre sellers were 22 per cent cheaper than the nationwide traditional players, a measure of the margin waiting to be taken out of the local market and given to consumers.
If you have a business retailing commodities, then the chances are the net will fundamentally change the game. The good news is that it also offers great opportunities for those that embrace it.
Mike “MOD” O’Donnell is an online exponent, professional director and failed motorcycle racer.