Winter Sell-out what can we expect?
The month of November is a particularly delicate appointment for retailers due to the weather factor, as an analysis by GFK Italy underlines. While intense promotional activities, such as Black Friday, could affect tire sell-out
Winter is coming….and, as always, there are great expectations for the Winter and All Season tire segment.
Recently, however, winters have been rather mild, and the medium-term weather forecast for 2019 does not seem to be comforting. At least for the month of November, when normal rainfall and temperatures slightly above average are expected. Against this backdrop, the hope of a cold and snowy start to the winter, which would be rather positive in terms of tire sales, does not seem likely.
In this article, we will try to analyze some historical Sell-Out data of specialized tire dealers related to the last months of the year, trying to find some useful elements to make predictions about the last quarter of 2019.
Considering all types of consumer tires - Car, 4x4/SUV and Light Transport - the last quarter of the year normally accounts for more than 8 million tires sold, as shown in Table 1. Growth rates have been quite volatile: -2% in 2016, +3% in 2017 and 0% in 2018. These trends are the result of a relentless decline in summer tire sales alongside an equally persistent double-digit growth in All Season tires. Although still very positive, All Season products have progressively reduced their growth rate, but volumes are still proving significant.
Let's now focus on winter tires: this segment generates more than half of the 8 million units sold in the last quarter of the year.
Considering this specific period, we can say that November is certainly the most important month in terms of Sell-Out: about 50% of winter tire sales are made in November. This month's positive results are therefore essential for the success of the entire season, whereas negative figures would almost irreparably compromise the winter period.
As we have already seen, sales of winter tires are strongly influenced by external factors, such as the weather. So we went on to analyze some historical data to look for possible correlations. Table 2 summarises the November weather pattern in our country over the last three years. We immediately notice that in November 2017 the minimum temperature was 6 degrees, which is 3 degrees lower than in 2018 and 2 degrees lower than in 2016. In fact, in November 2017, GfK recorded a very positive sell-out trend (+6%) for winter tires, while in 2018 and 2016 the rates were clearly negative, -2% and -4% respectively. It is also interesting to note that in November 2017 All Season tires grew "only" by +20%, while in 2016 and 2018 growth rates were in the region of +36% and +32%.
The analysis could go further into detail, for example by comparing areas of the country where the weather conditions are very different and the Winter sell-out, in these cases, take on a diametrically opposite dimension. Furthermore, looking at the national average, we can say that the apparent relationship between minimum temperatures and sell-out trends for Winter and All Season tires, is an element that needs to be evaluated carefully in order to forecast possible evolutions over the next years.
Another important element to take into account – besides unstable weather conditions - are promotional activities, normally concentrated in the last quarter of the year and particularly in November. Many manufacturers try to reach as many potential consumers as possible at this time of year.
A recent phenomenon, one that hasn’t gone unnoticed to Italian consumers, is that seasonal offers have now been affected by the “Black Friday Shopping Mania”. Surviving the month of November without being "hit" by the pressure of buying something on Black Friday is now impossible. This promotional event, relatively recent in our country, has become increasingly important over the years: on the one hand by expanding the perimeter of many product categories while, on the other, "contaminating" all distribution channels (large retailers, specialized stores, whether physical or online) engaged in developing, from year to year, a growing number of promotional activities dedicated to this event.
GfK has long been aware of the intentions and behaviour of Italian consumers in this particular period of the year. Reporting only some of the results found in a GfK research on Black Friday 2018, we can say that the average expenditure recorded in that week was 180 euro per person and on average each individual has purchased 3 different types of products. Ultimately, we can say that Black Friday is a time when consumers are attracted and stimulated by a whirlpool of promotions, discounts, unique opportunities and special offers.
This event, now vital for all durable goods, might prove to be an opportunity also for the tire market, but it could also represent a risk factor, as it catalyzes the attention of the consumer, distracting him from purchasing anything that does not fall within the "traditional" Black Friday orbit.
To better understand the dynamics of this sector, this year GFK will include tires in its research dedicated to Black Friday: it will be interesting to see to what extent this event has already affected motorists, what are the channels they use to gather information prior to purchasing, what other product categories have been purchased and what drives purchasing choices and expectations.
For more information: www.gfk.com/it