The allure of the open road has long been a part of the American mythos. Even as fewer teens are jumping at the chance to get their driver’s licenses, owning and caring for a car is still a part of our collective psyche. As generations of Americans have hit the open road in cars of all shapes and sizes, good tires have been a key component in those road trips. In honor of the SEMA Tire show, here’s a look at what’s shaking in the otherwise calm and unchanging Tire market.
Stability At The Top
Three brands founded in the early 20th and late 19th Century have consistently held the top spot in the US Market. Goodyear and Michelin have repeatedly come in 1st and 2nd in terms of units sold, with Firestone coming in 3rd.
While the top three tire brands have held steady, there’s been some movement in the ranks. Most notably, Walmart’s in-house tire brand, Douglas Tires, has been gaining traction. They’ve seen significant YoY unit growth for the past two years, in terms of tires per ticket. This growth is also reflected in Walmart’s position as a tire outlet. This recent growth in Douglas Tires has come at the expense of the brand with the largest share, Goodyear. While they are still the number one player, Walmart appears to be shifting away from Goodyear and towards lesser known brands with smaller market share.
Factors for Growth
There are multiple factors that have led to this growth. For those consumers buying tires, Walmart, one of the nation’s largest tire sellers, is drawing more people into its store. Additionally, both its draw rate and close rate have been on the rise for several quarters. In the four quarters ending September 2017, Walmart drew 16% of shoppers, and closed 69% of tire sales compared to 15% and 67% respectively just a year ago.
Walmart’s in-house brand is gaining, and most of those gains come at the expense of Goodyear. As the brand mix at Walmart has shifted, you can see an almost equal gain for Douglas. For example, where Goodyear’s market share at Walmart two years ago was nearly 30%. However, the most recent statistics show a 6 percentage point drop for Goodyear while Walmart’s house brands grew from 16 to 21 in the same time period.
The average price paid per tire for Walmart last year was 30% less than the industry average (WMT=$126 vs. the industry= $158). This is a result of slightly fewer tires being sold per transaction (2.7 at Walmart vs. 3.0 for the industry), smaller (and less expensive) tires being sold, and tires being sold at a lower price. Consequently, despite Walmart’s tire growth in units, the in-house brand makes a very small impact in overall dollar share, just breaking 1% of the market.
Additionally, the lower average price paid per tire for Douglas Tires is more appealing to Walmart’s target demographic. Households making less than $50,000 per year make up 63% of Walmart’s tire purchasers. That same demographic only makes up 42% of tire purchasers nationally.
Walmart has also done well at building brand loyalty in its Douglas Tires. Almost one quarter of consumers indicated that they chose Douglas Tires brand because it was a brand they’d previously owned. This puts them only a few percentage points behind Firestone for brand loyalty; though Walmart still trails behind Goodyear and Michelin for brand loyalty (34% and 47% respectively for the year ending September 2017).
While there haven’t been any major changes in the Tire market over the last few years, there are shifts if you know where to look. Like the open road, it’s mostly smooth sailing, with just enough unknown to keep things exciting. Are you in the tire industry at all? Let us know your thoughts either by tweeting us @TraQline, or dropping a note on LinkedIn.