COMMENTARY: Don’t help online retailers take over your business!

By Richard Bender

Online retailers are out to conquer the world.

That may sound like a fairly provocative statement, but we’re all captive to the undeniable reality that technology is changing everything about the modern world, including the way retail sales are conducted.

And it’s clear the ‘online’ trend is not going away soon.

The inescapable conclusion is that the click-through model is a real and potent threat to traditional stores.

History has shown us that changes in retailing are inevitable and they often occur abruptly. Look at how department stores, and then malls, and then big-box stores changed the North American shopping experience. Those changes were relatively sudden, and increasingly disruptive.

Traditional auto parts retailers – particularly tire sellers – are certainly not immune to onliners. We’ve seen their advance in recent years. Indeed, some traditional stores have already experienced significant financial impact.

But tires have to be installed, and that involves expensive equipment, extensive knowledge, and time – all things that the average consumer is without. So online tire retailers have been extremely active in soliciting ‘install centers’ to complete their sales.

Once online retailers establish a network of install centers and have negotiated with area distributors to supply product to complete the sale, the concept of tire retailing, by means of a traditional storefront transaction will be fatally compromised.

Online tire sales achieve profitability for manufacturers and distributors and, of course, the online retailers themselves. But they do not generate any profit whatsoever for the store where the deal is finally completed.

You’ll be expected
to provide a cut-rate price
for the privilege of
earning a ‘new customer.’

Brick and mortar retailers do not make anything on a tire that is purchased online.

And if you think you’ll make up the difference with an inflated installation price, good luck. Some online retailers have recently taken steps to control the install prices on behalf of their customers.

In other words, you’ll be expected to provide a cut-rate price for the privilege of earning a ‘new customer.’

But let’s look at that new customer. The theory is that he or she will develop such a great relationship with the install centre that next time they need tires (or other service) they’ll do it directly with the tire store, without a middleman supplying the hard part. Unfortunately, there’s simply no evidence to support that conclusion.

Let’s face it, if the consumer is happy buying online and having product shipped to an install centre that will contact them for a convenient appointment, why would they bother to change things up next time? Even if they have a good experience at your shop, there’s no promise they’ll return. They’ve already proven they’re inclined toward online shopping and are quite willing to follow the online retailer’s process.

If tire shops are serious about maintaining a strong presence in the market, they cannot make an installation deal with online retailers. Retailers cannot continue to support a business model that, by design, will financially cripple their business.

Supporting your competition has never been a good business model for success.

Richard Bender is president of the Tire Dealers Association of Canada. You can reach him at richardTDAC@gmail.com.