Every tire dealer wants to better understand what tires customers want, how to improve sales through a better storage strategy, and how to maximize overall profitability through pricing and program alignment. Ultimately, they want to drive more traffic to their stores. Due to new technologies, achieving these goals now may be easier than you think.
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There are sophisticated data and analytics platforms out there that can help dealers get the right information to achieve all of these goals. By collecting and analyzing data on a reseller’s sales history, inventory levels and market demand, these platforms can analyze each reseller’s store performance and recommend actionable improvement opportunities.
The platforms are especially useful for small independent resellers who do not have in-house IT teams or the time to deal with various agencies and consulting firms. By analyzing a store – or multiple stores owned by a single dealership – these platforms can provide recommendations for the tires that a dealership should stock. And when a retailer wants to open a new store in an unfamiliar market, the platform can help determine which tires to order, making their inventory very productive from opening day.
According to a study by American Tire Distributors (ATD), 85% of tire retailers say data and analytics have the potential to dramatically improve their business. And retailers who take advantage of said analytics platforms are reporting profit increases of up to 40%.
You may ask, “If this ability exists today, why isn’t everyone using it?” As breakthroughs are underway, there are several hurdles to overcome. For starters, much of the tire industry is still running on older software, making automation such as automatic replenishment and data analysis difficult. Even though we overcome this hurdle and the data can be extracted, many existing platforms are difficult to use or are just too generic for our industry.
However, tire retailers aren’t the only ones struggling in the analytics arena. Over the past 20 years, the number of separate SKUs has skyrocketed and the visibility of manufacturer and distributor sales in the 120,000 tire installation locations has not kept pace. Manufacturers lose visibility once a tire leaves their factory. This lack of visibility, coupled with ever-increasing complexity, has led to poor production decisions, low fill rates, stockouts, and high logistics costs which, in turn, hurt tire retailers. and consumers.
As a result, the inefficiencies in the replacement tire industry are real and significant. According to consulting firms McKinsey & Company and Boston Consulting Group, $ 2 billion is currently left on the table each year by retailers, distributors and tire manufacturers due to stockouts, overproduction, inventory security and unnecessary erosion of margins – losses that could be solved with data. informed decision making.
How these problems can be solved
Because the technology is available at an affordable price, every dealer can take advantage of these new tools. There are three critical areas where tire dealers can benefit from a sophisticated data and analysis platform.
- Inventory and replenishment
Dealers want to know if the tires they stock will sell. For example, what if an analytics platform finds that only 55% of SKUs in a reseller’s inventory are actually selling? This is something you could change.
A data analysis platform can help dealers understand the total demand for tires across all stores, removing unsold tires to free up space for those who sell. The ability to compare exhausted sales to market demand will allow retailers to optimize their storage strategy and dramatically increase the efficiency of their working capital. If resellers then install an auto-replenishment engine to always keep faster movers in stock, they’ll never miss a sale and have more time for their customers (or families!) Instead of ordering the same products all the time. .
A reseller who uses a sophisticated data analysis platform told me this story: “If I have a store with some storage space, my data / analysis software allows me to see what are the 10 best sizes based on my sales history and market demand. It tells me which tires I should fill this store with. This tool can replace a lot of the work I do manually which saves me time and is good for business.
Using sophisticated data, this dealer was able to identify and remove over 700 tires from a store to make way for more lucrative tires.
It is difficult to properly assess the tires. It’s even more difficult when your customers often do their own research and come to you with lower prices than they found online or from your local competitors. And taking the time to do your own research is often time consuming, expensive, and unreliable.
Resellers can now use analytics to compare prices against local, regional and national competition, while also analyzing relevant price statistics for all SKUs. Seeing how your prices stack up against others by brand, tire size, and style allows a dealer to execute a comprehensive pricing strategy and make changes instantly. This will avoid surprises from low-cost competitors and ensure that there is no money left on the table.
Have you ever wondered if you are getting the most out of your vendor benefit programs? Or how do you develop a strategy to make as much profit as possible?
Using dealer input and complex algorithms, analyzes can determine which brands of tires to sell for maximum profit from initial sales and major incentive programs and promotions. With this information, a reseller can set preferences for selling particular brands; participate in all phases of a provider’s benefit programs to receive maximum compensation; optimize their sales mix; and create data-driven target sales goals.
To demonstrate the benefits of data and analytics, recent ATD pilot programs involving multiple dealerships have been conducted to help improve sales and increase profitability. In a large pilot program involving multiple retailers in 35 locations, participant back-end rewards increased 400% over a 12-month period.
Impact on dealers
By addressing these three areas, we believe dealers can achieve the following results:
- Improve inventory storage strategy and turnover rates, maintain inventory profitability and increase sales and automation;
- Increase volume and margins through more frequent and informed pricing decisions based on real-time competitive intelligence;
- Increase profits by developing an optimal brand, style and SKU sales strategy, potentially unlocking a significant amount of money in front and back margin opportunities.
With these potential benefits available today, it makes sense that dealers in the replacement tire industry are starting to explore and consider using a data analytics platform to improve their business. By reducing the time it takes to generate an assortment strategy and dramatically lowering storage costs, these tools will give almost any dealer a competitive edge – making their inventory more productive, their store more profitable, and giving them more time to build relationships with their customers. .