This time of year, various media outlets offer predictions about “what’s to come” or “what will be” during the next 12 months. That’s never been a regular thing here at MTD, but as 2022 quickly winds down, I’ve decided to fire up our crystal ball.
In no particular order, here are several trends that you will see in 2023.
Some of these developments are already underway. Many have been in process for a while. All of them have the potential to impact your business.
Supply will continue to drag. “What gives?” you might be asking. “The container ship pileup is easing. Freight rates are finally dropping. Happy days are here again!”
That might be true - if you’re only talking about the overseas shipping process. What happens after those tires are unloaded has been - and will continue to be - another story.
In 2023, the shipping slowdown will center less around getting containers across the water and more around transporting those containers via rail and truck after they arrive.
You might remember that the federal government negotiated a tentative agreement a few short months ago that put the brakes on a potentially disastrous railroad workers strike.
It looks like a work stoppage has been averted for now.
But various trucking industry problems - including a longstanding driver shortage - means it will still take an unusually long time for the tires you’ve ordered to land at your store.
A top executive from a tire manufacturer recently told me that “the inland portion of the supply chain is the big problem right now and will continue to be the problem.”
I believe he’s right, based on what I’m also hearing from others.
You’ll see fewer price increases, but bigger hikes. Nearly 45 separate price hikes were publicly announced by tire manufacturers in 2021. (And those were the increases we knew about. There probably were many more.)
Significantly fewer price hikes have been announced this year. But percent increases, as a rule, have been higher.
Can you and your fellow tire dealers absorb more price hikes? Some tire manufacturers, I believe, still think so. But I also think they realize that the window for more price actions is quickly closing.
Manufacturers know that you and other dealers are sitting on a ton of inventory right now and can’t ask you to take on more units. How do you pour more water into a cup that’s overflowing?
Expect to see another round of price increases during the first quarter of 2023, but then a sharp tapering off as parties work together to restore a more traditional balance between price and inventory.
Mergers and acquisitions will continue, but in different sectors. Due to the abundance of “cheap money,” the desire of many tire dealers to exit the business and other factors, we’ve seen plenty of merger and acquisition activity on the retail side over the last several years.
I predict we’ll see a dramatic ramp-up in the acquisition of independent wholesale distributors in 2023 as big players continue to gobble up smaller independents.
I also believe we will see more mergers and acquisitions of commercial tire dealerships. However, these acquisitions will be highly targeted. You won’t see many buy-ups of big chains like we sometimes see in retail tire store M&A.
In addition, I believe we’ll see fewer tire manufacturer-owned commercial tire locations. Bridgestone Americas Inc.’s multi-year sell-off of its GCR Tires & Service locations seems to have ended. Goodyear Tire & Rubber Co. has maintained a consistent number of former Wingfoot commercial tire locations over the years. But anything can happen.
Independent tire dealers will continue to rule the roost. This is the prediction I enjoy making the most. Independent tire dealers will continue to dominate tire sales, regardless of channel or product. For instance, 66% of replacement passenger tire sales in the U.S. go through independent tire dealers, according to MTD research.
The next dominant replacement passenger tire channels are mass merchandisers - Walmart, essentially - and car dealerships, which each have around 9% market share. That’s a very distant second, folks.
Nobody serves customers better than independent tire dealers. And there’s nobody whom tire buyers trust more than independent tire dealers. (That’s true whether that buyer happens to be the little old lady down the street or a 100-unit long-haul trucking fleet.)
Whatever 2023 may bring, I know you’ll be able to handle it. You’re going to have a great year and your business will continue to prosper and grow. You can take that prediction to the bank.
