Tire Roundtable: Perspectives 2018

Tire Roundtable: Perspectives 2018

Automotive industry: I don't know of any industry in the world that claims that its own product is a “low interest product”. You don't want to, you have to buy tires, comparable to toilet paper. Anything but a pleasure purchase. Why is the tire industry so deep?

Kristjan Ambroz:I don't think it would help us if we told ourselves that our product was as popular with end consumers as, say, a smartphone. Even a refrigerator manufacturer would not describe their product as a high interest product. One thing is clear: the tire does not have the status it deserves. In the Austrian market it can be said that a lot of customers choose high-quality products.

Wolfgang Stummer:Politicians often focus on the car itself. As a result, the tire also suffers from this, so to speak. Today hardly anyone dares to say that they B. is a motorsport fan. 20 or 30 years ago the car had a completely different status than it does today. Everyone followed Formula 1, we knew which tires were being used. This emotion no longer exists today. The car-loving group in which tires also have a high priority is getting smaller and smaller.

“The car-savvy group in which tires have a high priority is becoming smaller and smaller.”WOLFGANG STUMMER, GF GOODYEAR DUNLOP

Martin Krauss:We are of the opinion that the tire is not a low interest product. The point is to emphasize that the tire is the only safety-relevant product that has direct contact with the road. We have no choice but to emotionally charge the tire as a product. We are the only tire manufacturer that is a top partner of the Olympic Games. It's about emotion.

Michael Peschek:The only thing that really exists in the world of marketing is the reality in the minds of our customers. No matter how good a new winter tire is, the customer doesn't throw away the old one and immediately gets the new one so that they can be up to date in the new winter season. The tire is replaced when it no longer performs as expected.

“The most comparisons are made in the premium segment.”MICHAEL PESCHEK, CEO POINT-S

So it's purely a commodity?

Michael Peschek:Yes. When it comes to the term “low interest”, it’s about what the tire is from the customer’s perspective. The customer buys when they need it, but not because of a great new release. We simply cannot manage to actually raise awareness among the end consumer.

Klaus Kreisel:The tire is a high importance product when it comes to safety. When it comes to emotion and the end consumer, I think we have many different groups that can and must be addressed differently. Of course, there are customers who use emotion.

How many are that? Five percent? Klaus Kreisel: I would say ten to 15 percent.

“The most comparisons are made in the premium segment.”MICHAEL PESCHEK, CEO POINT-S

Michael Peschek:In ten to fifteen minutes, all of us sitting here at the table will be able to get every driver excited about the tire product and arouse interest and curiosity. But if there is no need to buy new tires, this conversation will not even happen.

Philipp Janout:From the end user's point of view, the tire is undoubtedly a low-interest product. If a new top product comes onto the market, people will still not buy it if there is no need. The smartphone I bought last year still works perfectly, but the consumer still wants the new one.

Martin Krauss:The smartphone is a status symbol. That's not the tire.

Philipp Janout:In the 60s and 70s the car market was constantly growing. No tire manufacturer has had to think about how they could possibly put emotion into this product. We've only regretted the fact that it's not a high-interest product for the last ten or 15 years. Today we sit there and think: “What do we do with our low interest product?” And all we can think of is the issue of “security”. At best, “sustainability” is still a new topic.

Mr. Kreisel, is retail exploiting its potential when it comes to advice?

Klaus Kreisel:There is a big difference between summer and winter seasons. In winter the entire consultation is shortened to around five minutes. This is a micro-theater piece that we are performing there. The sellers are under enormous time pressure due to the cumulative rush. If you look at the numbers on how premium compares to budget, the premium product is clearly stronger. And the budget segment is stronger than the quality segment. You can safely invest in quality advice. This is something that retailers probably don't use enough. A criterion for the seller is certainly his inventory level. In other words: What has to go.

How does a tire retailer have to be positioned today in order to survive?

Klaus Kreisel:It’s primarily about flexibility. The way to meet customer needs must be short and efficient. I think it's about positioning yourself, not about always necessarily following any trends. Things look completely different for a chain store than for smaller units. I suspect that the challenges are greater for chain stores at the moment.

As a retailer, what are your expectations of the industry?

Klaus Kreisel:I feel like I'm being taken more seriously now than, say, ten years ago. At that time I had the impression that the tire trade was perceived as a nuisance and that hopes lay elsewhere. The flower explained to us: “You have nothing to lose in resale.” In fact, we have something of a local supplier function and are much more established today than we were ten years ago. Now emphasis is again placed on quality marketing. The industry has recognized that the car dealership also has its limits.

Wolfgang Stummer:I think that there is and will be a fair coexistence. I see the potential for the tire trade to take service work with them, so to speak. I am convinced that those retailers and groups who are committed to this have a great future opportunity. The tire market is basically a very large one, including in Austria. Relatively constant, without natural growth. Wherever there is no natural growth, there is cutthroat competition. This often goes beyond the price. On the other hand, new sales channels are emerging that are depressing margins. Today you no longer have the margins that you had 15 or 20 years ago. So, as a tire specialist, it's about using your infrastructure and resources for other work and optimizing your utilization throughout the year.

Mr. Ambroz, you have always emphasized that you rely on the all-channel strategy.

Kristjan Ambroz:Just as the car dealership has taken over part of the business from the tire trade over time, the tire specialist trade has also taken over part of the service business from the workshop or car dealership. Fundamentally, we do not believe that there is one right way; that depends on the respective circumstances. Car service, for example, can be the right way or the right addition to your existing business. Or it can be some specialization, e.g. B. on EM tires (earthmoving tires; editor's note) or on agricultural tires. Just as the players in the market are different, there are also different strategies.

Philipp Janout:The branches are there, the equipment and know-how are also there. It is therefore obvious for the tire specialist company to generate additional income from the existing customer base. At Reifen John, we place a lot of emphasis on the topic of “motor vehicle service”. The earnings in our classic core business are no longer there, although we would of course like them to be.

“At Reifen John, we place a lot of emphasis on vehicle service.”PHILIPP JANOUT, SALES MANAGER TIRE JOHN

Mr. Peschek, you once said in an interview with me that tire retailers should specialize in smaller brands because the large, well-known ones would leave them out in the cold in the long term.

Michael Peschek:We have previously built the bridge from low interest product to brand building. When customers compare tires, they are often comparing brands. The premium segment is under the most pressure on margins because the premium segment is the one in which the comparison takes place the most. Good quality from the second row or a good product for infrequent drivers from the third row often results in better advice for the customer and a better margin for the dealer, with less cost pressure and less comparability.

Martin Krauss:There are different distribution channels. The boundaries are becoming increasingly blurred. The car dealership is fishing in the original territory of the tire dealer and vice versa. Ultimately it comes down to two decisions that you have to face. On the one hand: specialization in tire retail plus additional business. On the other hand: The question of who is the right partner from the manufacturer's perspective. The maxim that I have all the brands and at a great price is over. Our approach is definitely to optimally support local tire retailers.

How big is the potential for the Internet in the B2B sector?

Martin Krauss:We have seen this segment develop very strongly over the last decade. It has now settled at a stable level. For the end consumer, the Internet is primarily an information channel. He often doesn't want to buy online.

If an end user comes to the dealer with tires purchased online, should the dealer send him away? Mr. Kreisel, what do you do with people like that?

Klaus Kreisel:I consider him a customer and install the tires. We have a new tire service fee that is different than installation and balancing.

Philipp Janout:After all, it is a customer. And you should look at it as an opportunity.

Michael Peschek:As a specialist dealer who carries out the assembly service, I assume the legal obligation to assemble something that meets the legal requirements. This can also mean that I send away a customer who has bought tires online that are not suitable for the load capacity of his vehicle and absolutely insists on having them fitted. He should be sent away.

If these cases occur more frequently, will there be more?

Michael Peschek:Definitely yes. More and more often, customers come with tires that they supposedly bought cheaply and end up buying twice.

Klaus Kreisel:The question is usually not whether to send someone away or not to send someone away, but rather about professional advice. If the customer has bought the right thing online, in my opinion there is nothing wrong with installing it.

Philipp Janout:In reality, the best thing for a specialist company is when the customer comes with a product that is not technically correct. This is a penalty kick. A great opportunity.

Tire retailer versus car dealership. Mr. Ambroz, does the industry care who buys its products?

Kristjan Ambroz:We generally maintain long-term customer relationships. And we are interested in ensuring that the different groups that work with us are successful. It certainly doesn't matter to us. Otherwise we wouldn't have customers we've been serving for over 90 years. Nevertheless, we cannot develop past the market and say that certain channels are not allowed to exist. In other words: We will continue to work with tire retailers and car dealerships in the future.

“The tire retailer definitely has advantages over the car dealership.”MARTIN KRAUSS, COUNTRY MANAGER BRIDGESTONE

The administrative costs are higher when working with the car dealership. The car dealership does not store items.
Kristjan Ambroz:There are car dealerships that use a central warehouse concept. There are some that are delivered individually. There is no general answer to that.

Wolfgang Stummer:The car dealership has now recognized that the tire is an excellent driver of traffic. A good element to optimize customer loyalty. Anyone who invests in a car dealership today will plan on having a tire depot. Because he then knows that this customer comes to him at least twice a year. And he can then sell him another service. More and more car dealerships are realizing this.

Martin Krauss:As a premium manufacturer, we have to ensure that customers can access our products through all channels. I see advantages for the tire trade: When it comes to changing tires or a different aluminum rim, the portfolio in specialist shops is certainly larger than in car dealerships. Also when it comes to tire variety.

Mr. Kreisel, where do you see tire retailers having an advantage over car dealerships?
Klaus Kreisel:If you stick to the core competence: tire assembly, sales, storage, the tire retailer is certainly better prepared for seasonality and throughput in a short time. Speed, availability and selection are still the specialist company's trump cards.

Philipp Janout:The car dealership is the specialist for everything to do with cars. In fact, it doesn't recommend a tire, but rather a spare part. The customer has the advantage of getting everything from a single source. The tire also goes along with it, so to speak. The advantage of specialist retailers is the variety of brands. He can respond more closely to the needs of the customer. What specialist retailers still need to work on is the so-called buying experience. There are of course nice tire trading stations. But there are others too. When it comes to ambience and advice, there is certainly still potential at specialist retailers.

To what extent is the entry experience at point S member companies important?
Michael Peschek:It goes from wheelbarrow tires to truck tires. This also sets us apart from car dealerships. We are full-range suppliers. For a farmer, the buying experience may be best when the dealer comes to him and gives him on-site advice. Personally, I would appreciate good tire advice more than the glass palace all around. Which ultimately I know: I'll pay for it. Everything can be found in the point S group. From the oldest company to one of the most beautiful. Everyone has their own right to exist.

How does Tire John address the break-in experience?
Philipp Janout:We rely on open, modern, friendly and customer-friendly store concepts.

Kristjan Ambroz:As a full-range retailer, tire retailers have completely different options. Especially when it comes to fleets.

"We continue to invest in the brands. I don't see the brand going away."KRISTJAN AMBROZ, CEO SEMPERIT

What will brand value look like in the future? Take Semperit, for example: We and our fathers are probably the last people who value the brand.
Kristjan Ambroz:Brands still have a certain signaling effect. You don't have to explain to the customer at length that the Semperit is a sensible winter tire. For us as a manufacturer, the brand will continue to be important. We continue to invest in the brands. I don't see the brands disappearing.

Don't you see any age gap?
Kristjan Ambroz:There is an age gap, that's true. We simply have to deal with this sensibly. I am aware that the greatest popularity of the Semperit brand can be found in the older vintages. This is an issue that we are working on and need to do a lot more work on. It's about making the brand relevant to a younger target group.

Martin Krauss:Brands still have great relevance. We try to charge them emotionally. We need to clearly represent what the brand stands for. Safety, sportiness, etc.

Michael Peschek:Yes, the brands have their place. The differences between the brands are not highlighted enough. There are these differences.

Wolfgang Stummer:I think working out the differences would cost a lot of money and provide little benefit. Many customers don't care that it says Goodyear, Bridgestone or Conti. Most people want to buy a quality tire. If the dealer gives appropriate advice, he can guide the customer very far.

Mr. Kreisel, how do you steer?
Klaus Kreisel:Purchasing provides the basis. When stocking up, you already have the various customer needs in mind. You think about where it makes sense to focus – also with regard to competition. The main brands are displayed in our sales room. The edge marks are found less. We are grateful when tire manufacturers have clever concepts for the point of sale that can convey a bit of emotion.

I keep hearing from dealers: "The industry doesn't do anything for me anymore. Things used to be much better."
Klaus Kreisel:Now there is more effort again.

“We are, so to speak, offering passive resistance.”KLAUS KREISEL, GF GUMMI KREISEL, ON THE TOPIC “ALL SEASON TIRES”

Do you recommend all-season tires in your store? Or do you only respond when the customer requests it?
Klaus Kreisel:We offer passive resistance, so to speak (laughs). On the one hand, we are happy that there is a topic that is being discussed. On the other hand, we see this as an issue for metropolitan areas. The winter tire is accepted, as is the summer tire. Why should we push an all-season tire in our advice? If the customer wants it, he gets it, of course. But we didn't have one on display, for example.

Philipp Janout:There are customers whose needs are optimally met with all-season tires. In the commercial business, if it is an adequate solution, our consultants may also offer all-season tires. But at least with a sense of proportion. Basically, there is no doubt that summer tires in summer and winter tires in winter are still the right choice in most regions for an alpine country like Austria.

Kristjan Ambroz:We recommend safe tires to our customers. We rely entirely on summer and winter tires. There are a few customers for whom an all-season tire is a good fit. We naturally want to serve them too.

Martin Krauss:The question is not only what the customer wants, but also what he needs. Even if a customer comes and says he wants an all-season tire, you can convince him competently and well-founded of the advantages of summer and winter tires.

Wolfgang Stummer:There is a market for this in Austria, undoubtedly. It is currently around two percent. There are regions where it is not needed at all. In urban areas it can be a solution for infrequent drivers - and there are more and more of them. There are also commercial uses where it is assumed that the winter tire is, so to speak, the all-season tire. This is where advice must begin. There's still some potential there.