Goodyear implements direct online sales in US

Thursday 3rd December 2015 | 0 Comments

Goodyear’s global headquarters in Akron, Ohio – the direct online sales effort is currently only underway in the US, but could what is happening across the pond be a harbinger of changes on this side of the Atlantic?
Goodyear’s global headquarters in Akron, Ohio – the direct online sales effort is currently only underway in the US, but could what is happening across the pond be a harbinger of changes on this side of the Atlantic?

Senior US executives share insights into thinking behind new strategy

Last January at its annual dealer conference, Goodyear unveiled plans to launch direct-to-consumer online sales across the US through its website. Since then, Michelin has bought into two large European e-tailers and Apollo has acquired another. Clearly 2015 has been the year that tyre majors have allowed their online retail strategies to surface. And while approaches differ between manufacturers and markets, Goodyear’s US approach is by far the most direct. At the moment, this approach centres on North America, however what we learn from Goodyear’s case is valuable in any market. In mid-November Tire Review editor Jim Smith met with Goodyear’s Mike Dauberman, senior director of marketing and interactive, and Bill Friel, general manager of consumer dealer retail, and here gives Tyres & Accessories readers access to their conversation.

As you can imagine, Goodyear’s decision was not met with universal approval. In fact it was faced concern from dealers, some of which quite vocally denounced the move as another slap to the face of independent distribution. At the time of the announcement, Goodyear claimed that it had 1,100 locations – including some 600 company-owned retail stores – signed on. As of 13 November, that number has swelled to 4,000 retail locations (including company-owned stores), but Goodyear would not say how many individual dealers were involved. We were told that there were a number of large 30-plus store dealers involved, but no mass merchants or chain stores. After months of a market-by-market roll out, the program was completely live from coast-to-coast as of October.

Mike Dauberman began by explaining the general rationale behind Goodyear’s: “More and more consumers are reporting that they’re using the Internet to research, using the Internet to buy tyres before going to the store or instead of going into the store. So we think it’s fair to now assume that the vast majority of people who are walking into a store had been to the Internet. They’ve already shopped, they’ve already started to look at products. And their expectation when they walk into that store probably is very different from 2007 or 2008 when the very first conversation they’re having about tyres is with that person behind the counter. Now they’re doing a lot of that work themselves. Not all the 83 per cent that claim to be researching tyres online are buying online, and we don’t think that 83 per cent will all ever be buying online, but the key is that consumer expects to do research online.”

Goodyear spent at least five years building up to the launch of the firm’s direct sales system, in Dauberman’s words :”we started to build up that user base so that five years later, when we’re physically selling, there’s somebody there to sell to.” This is significant because it reveals just how long Goodyear had been considering the whole project. However, having said that, it is clear that the project has evolved into a direct sales platform rather than starting out that way: “…five years ago we felt that the Internet was becoming a very important influencer of consumers’ buying decisions. Five years ago we had conversations around would it ever make sense for a company like Goodyear to sell online. That was the extent of the conversation five years ago.” This is then understood to have embarked on the direct sales route some three years ago: “So we weren’t thinking Goodyear would be selling tyres online four years ago, five years ago. It evolved to it, based on all of these signs. The biggest signs for us were the consumer behaviours and what the consumers are telling us.”

However, for all the planning, there is still the real life response. So how did Goodyear build its platform with the distribution chain in mind? “…We engineered the solution with dealers in mind. From day one, when we announced the program, we announced it with the dealers’ role. We made sure that the dealers had a role. We made sure they were highly compensated in the practice. We were very diligent and careful in that way, and we feel like we’re a leader in this space and that our solutions are the ones that are catering to the dealers that sell our products.”

“It’s not an abnormal thing to have 85 per cent of consumers in any category shop online. Some categories it’s not unusual to have 30 per cent-40 per cent of people buy online. We all need to make sure that we’re prepared for that”

Convenient consumers

Dauberman continued sharing some of what the company has learnt about changing consumer preferences: “Distance-wise, so we’re learning a lot. We’re learning how far consumers want to drive to get a tyre installed. We’re learning how far they will drive versus how far they want to drive, and we still have some work to do. But overall, in most markets, especially the markets where Goodyear is strong, the consumers don’t have to drive very far – meaning not more than a few miles – to be able to go to one of our authorized installers to have the tyres put on. The key is – we called it a ‘convenient consumer’, but real-time learnings, being online, has helped us to evolve this – convenience is king for what these consumers are looking for. Part of convenience is distance. So, it’s important that dealers are participating in these programs so that these consumers don’t have to drive 20 miles, because convenience consumers don’t do that.”

48 hour delivery time

While wholesalers can deliver tyres “just in time in the UK” and consumers expect next-day delivery options, in the US Goodyear is quoting a 48-hour delivery time. “It’s 48 hours. We’re testing though. So, 48 hours is extremely safe. It allows us to make sure the tyre’s there, but we’re going to test that window. Over time, we’re going to figure out if 48 hours is right.”

“….We look at the wholesaler that works with that installer. That wholesaler then drops that tyre to the store the minute that the customer hits pay, all automated. It’s all built into the system, so when you place your order, the credit card goes through, that triggers that dealer’s warehouse to put the tyre on a truck.”

Dealers are informed as soon as the consumer’s online purchase is confirmed. There’s two buttons on the email. It says confirm the time or request the consumer to come in at a different time. If the order doesn’t get confirmed within three hours, the call centre then reaches out to the dealer.

Goodyear partners get credit for their services in the form of a commission and an installation service credit. According to the company, there are several tiers, based on the SKU of the tyre, the size and type of vehicle and tyre and so on. Bill Friel, general manager of consumer dealer retail, reported that initial feedback suggests the programme is “so similar to our national account programs…it was more or less a very similar transaction to them.”

70 per cent of consumers new customers

Goodyear’s initial pilot took place in 2012 and the results since January, have exceeded the pilot and exceeded expectations in terms of customer increase. Dauberman continued, explaining that the data is based on both the firm’s pilot study and sales generated by dealers: “So, 70 per cent of the consumers that are coming into our dealers are brand-new customers that they had not seen before or they hadn’t seen for quite a while. And that’s greater than, actually, our pilot, when we first ran the test. And 55 per cent are buying additional services. So, it’s a total of about $290, in terms of the alignments, the oil changes, the road hazards, that type of work”.

Third party figures estimate that online tyre sales amount to between 4.4 per cent and 6 per cent. Other sources put the number in the middle at just over 5 per cent, while Goodyear has gone for the top end of the spectrum. One source even went as high as 12 per cent, but the criteria weren’t limited to credit card sales, raising questions about whether these were truly online sales. Later in the discussion Bill Friel added some colour to the picture: “….So 15 per cent may think they bought online because they scheduled an appointment, but it doesn’t mean that 15 per cent of people paid with a credit card…47 per cent of consumers are saying that they’re willing to buy tyres online now.”

Over here, sources predict that 20 per cent of tyre sales will take place online. What do our transatlantic colleagues think? Friel addressed this point: “if 83 per cent of people have gone online to learn about, to research tyres [according to one source]… over time, when they start to see that they can because they’re starting to see that those sites that they’re going to do their research also sell, they’re probably, some of them, going to start using those sites to buy…And even very small retailers, even very small chains have had to deal with what e-commerce means to their industries, and very few small retail stores have been able to get away with not evolving their models. And I don’t mean evolve by selling online. I mean evolve by saying what do I do about the fact that some of my consumers may not come to me tomorrow. That’s, to me, the 10 year from now question, is how are we, as an industry, going to evolve to meet consumers’ needs. We feel like we’re ahead of that. We feel like we were the first to jump out on this, but we weren’t jumping out on it because we wanted to be different. We were jumping out on it because we feel like somebody’s got to lead this industry and help us all get to where we need to be to meet the consumer demand.

“….I don’t think it’s 30 per cent of my consumers but not 30 per cent of her consumers. I think it’s 30 per cent of consumers. So that means if I’m not helping my customer base 10 years from now, 30 per cent of my consumers are probably going to go to the place where they want to go, which means I need to evolve my business model to either help those 30 per cent of consumers or figure out a different model that attracts a new consumer.

“There are a lot of consumers even today, in fact I believe there’s some movements with some generations that are so focused on the personal experience and so focused on that touch, that you going out of your way, that they’re…that there’s a new renaissance for high-touch non-digital experiences.…It’s not an abnormal thing to have 85 per cent of consumers in any category shop online. Some categories it’s not unusual to have 30 per cent-40 per cent of people buy online. We all need to make sure that we’re prepared for that. That’s it, just making sure that we’re all building our businesses around when.”

Winning with us

At the centre of the program is something designed to make the change more palatable – mutual growth, as Bill Friel explained: “One thing, though, going back to our premise, we, again, built our model to ensure that our aligned dealer network is winning with us. That’s important to us. I don’t know if everybody had that in mind with their models, but that’s ours. Our model was to make sure that we’re bringing our 4000 dealers, and hopefully more that join the program, along. “

So has Goodyear lost dealers because of the move? No, is the short answer from Friel: “I think if we charged them, we might. You know, some of them might have said I’m not going to pay the bill, but no. And some of them signed up because of that.”

In fact take-up seems to be strong, with 4000 branches partnering already, 600 of which are company-owned. This begs the question, what was the goal? “Yeah, so we were targeting coming out of dealer conference with 400. We were targeting by the end of the first year having about 2000. Our 2000 number was what we felt was…call it a pretty good density for consumers to not be frustrated with the experience….We left dealer conference with 2200-2300”, Friel explained.

Overall, despite initial rocky reaction from some quarters, Goodyear’s direct online platform appears to be growing well in the US at least. However, the US operations of competitors Michelin and Bridgestone have also invested in pilot schemes. Michelin’s is running a grand experiment in Raleigh and Bridgestone’s experiment in Nashville. And so this growth hasn’t been tested in a truly competitive environment. Either way, we can see clear signs of what is happening in the US, which makes you think – how would such a strategy work in Europe?

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Category: Company News, International News