Not just a fast-fit market

With half of all tyres sold through tyre specialists, this is clearly the most influential route to market for tyre suppliers. Within this segment the balance of power is divided between a relatively small number of nationally influential retail chains and large numbers of smaller operators. In fact, according to the Tyre Industry Federation Factbook 85 per cent of tyre specialists operate from a single outlet. At the same time we have all been dealing with the financial effects of general economic upheaval. All this makes insights into the ebb and flow of the tyre retail sector all the more valuable.

Looking at the 2013 data we can see – broadly speaking – that the dominance of the largest tyre retail chains is softening slightly. Kwik-Fit and the other Itochu-owned tyre retail brands remain dominant, but with their total branch count rounding off at 791 five branches down on last year. This and indeed the general trend could be seen as something of a self correction of the market following Itochu’s Kwik-Fit acquisition in 2011 and the resultant bringing together of a number of different retail brands under one umbrella.

Meanwhile branch attrition (or seen in another light “right-sizing”) can also be seen at ATS Euromaster. Here the pattern is much more pronounced. While the branch count is down 11 to 358 branches this year, which is the most in our survey of the top 20, this actually means the retailer has 124 less points of sale than four years ago. Or, to put it another way, it has lost almost enough dots on a map to make another HiQ network. However it has to be said that ATS Euromaster would frame this as a continuing part of efforts to rationalise nation positioning and increase mobile fitting coverage.

National Tyres & Autocare remains static in fourth place on 225 branches. Like the other 10 networks in the top 20, considering the economic environment, it could be argued that this speaks of stability.

While it lost nine branches since last time we totted them up, HiQ remains in fourth place with 131 dots on the map. With this in mind it is worth pointing out that this is nine branches less than last year and 16 down on four years ago. And this nine branch swing is actually the second largest we saw in this year’s survey.

In the UK tyres are retailed through a complex web of large chains and smaller independent dealers 

Speaking to company representative they conceded that the franchise network hasn’t grown as quickly as the ambitious goals published at its inception envisaged, but the company is said to have initiated changes to address this. Externally it appears as if take-up of HiQ franchise opportunities has been dominated by a relatively small number of franchise holders each holding multiple branches, with the rest supplemented by franchisees with one or two branches. The potential criticism, from some quarters at least, is that this has resulted in larger players having too much of a say. Be that as it may (or may not be) Tyres & Accessories understands that the franchise approach is being modified, with changes centring on making it more attractive to independent tyre dealerships by adopting a more pay as you go approach – what some might call a softer franchising approach.

What these points don’t address however, is that during the period of the initial franchise offer the market has been affected by both macro-economic conditions (a double dip recession) and significant structural change (Itochu’s Kwik-Fit buy-out, the growth of Point S and the establishment of Profile Tyrecenter) in the UK. Both these factors, whether individually or in combination, could have also put some potential franchisees off. Indeed such points also address the lack of growth in the top 20 in general.

With HiQ holding fourth, this rounds off the quartet of truly national retailers with the next two nearest (fifth and sixth placed, Protyre and McConechy’s respectively) some 90 branches behind. However, it must also be said that HiQ (the smallest of the top four) is four times further from the top spot, some 660 depots behind pole position. This diversity between the top four demonstrates the distribution of retail distribution amongst our top 20, which is therefore no unrepresentative of the market as a whole. The one thing our top 20 can never show however is the influence of the many one branch tyre shops that are all over the country.

One reason for the relative lack of movement in over half of the top 20 is the barriers to entry, many of which apply whether a business is established or not – especially at this time. Tyre retail capital outlay remains high as it includes employing staff and building or securing garage premises. Brand awareness and location remain of key importance. This benefits large businesses and can lead small entrepreneurs to build their own local or regional brands, partner with other like-minded operations in a retail network-cum-buying group or partner with whichever manufacturer(s) are deemed to be offering the best package. Often it is a combination of these approaches.

Then there are the technological costs. It not just tyre irons and jacks now its automatic test lanes, wheel alignment, diagnostics and TPMS equipment as well as point of sale systems. And this is not to mention training which is seen as a key investment by many in the industry. Companies also have to comply with employment, health and safety, labelling and environmental laws, which – whether large or small – can deter new entrants into the market.