Navigating the ups and downs of tire pricing has prompted at least one tire dealership to do something it’s never done in its first 43 years in business.
Nick Fox, president of Fox’s Point S, a four-store Point S Tire & Auto Service operation in Montana, says the company placed its first container order. The shipment of 700 passenger and light truck Blackhawk tires from Sailun Tire Americas is scheduled to arrive this month.
Fox, the second generation to lead his family’s tire business, called the current state of pricing “bizarre.
“You’ve got your tier-one and higher tier-twos doing price increases and then the rest of tier-two is leveling out and staying the same. Then tier-three and four are going down in pricing. We had to pivot.”
The first move was to monitor selling prices of those lower-tiered tires more closely. Fox says his company had been selling based on the most recent cost to acquire those tires, but in some cases, that meant they weren’t covering all of their expenses.
He’s also streamlined purchasing multiple lower-tiered brands and plans to focus on the Blackhawk line.
“We’ve sold some previously, but it’s never been a major part of our lineup. We’re putting full force behind it. It was a strategic move because they (cost) less money than other brands we were buying.”
Consumers are shocked by the prices they’re facing to replace a set of tires, he says. About 20% of Fox’s customers are deferring service repairs and tire replacement.
He says customers seem more comfortable delaying a purchase than trading down to a lower-priced alternative.
“(The month of) May picked up, but we’re seeing customers holding off on making tire purchases because prices have increased substantially. They’re coming in expecting to spend $800 on a set of tires and now they’re a $1,000 purchase instead.
“And in Montana, we’ve got a lot of outdoor enthusiasts who are looking for more of a premium tire line and those have been subject to even larger increases,” says Fox. “It’s gotten to the point where promotions that manufacturers run to save $80 or $100 on a set of tires aren’t all that attractive.”
Shopping for value
In the Atlanta, Ga., market, Michael Spencer says tire sales are down so far in 2023. In some of the seven TireSouth stores he and his wife Jessica own and operate, volumes are down by anywhere from 7% to 9%.
And while tire demand “is off a little bit,” his cost to replenish inventory is much lower than it was just six months ago.
“The floodgates have opened so there’s a lot of inventory out there, which is causing pricing to come down,” he says. “Our replacement cost is significantly lower than it was at the end of 2022. Everybody’s calling you with a new deal every other day.”
There’s a downward push on premium brands, but Spencer says, “our entry level (products) are outselling our premium (products) right now.”
TireSouth markets both levels of tires, as well as a full menu of automotive service. And Spencer says “the service side is still humming along.”
He attributes that to drivers holding onto their vehicles longer than normal, which creates the need for regular maintenance.
“People who were used to getting a new car every two or three years are now getting services they’re not used to having to perform. People who are used to trading in a lease are now repairing (the vehicle.) We’re in that sweet spot when it comes to service.
“I think people are more price conscious right now,” says Spencer.” It’s not as bad as it was in 2008 and 2009. I think they’re value shopping a little bit more.”
Balancing tires with service
Small independent tire dealers aren’t the only ones making moves when it comes to price.
Mike Broderick, the president and CEO of Monro Inc., told investors in May that consumers had been trading down to lower pricepoint tires for three straight quarters.
And in the first three months of 2023, “as our customers continued to look for more choice and greater value, tire sales of our opening price point tires were a larger proportion of our overall tire sales.”
The growing popularity of those lower-priced tires “was a drag on our overall gross margin” in the quarter. So Monro raised prices on its opening pricepoint tires and Broderick said the company recorded improvement as the period progressed, while maintaining market share in the process.
Broderick said he’s focused on Monro balancing its role as both a tire seller and a service provider.
“I do not want to be a tire-only provider. I believe Monro’s greatest strength is that we are a full-service provider.” And Broderick said those pricing moves are a step to maintaining that balanced approach.
