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An Analysis of the Current Status and Prospects of E‑Commerce in China’s Tire Industry

Release date:

2019-06-04

The rapid growth of the internet and e‑commerce has opened up new market opportunities and profit margins for numerous enterprises, reshaping traditional marketing approaches and transforming business operations. In recent years, as competition in the conventional market has intensified, many tire manufacturers have embraced the internet and ventured into e‑commerce.

　　The rapid growth of the internet and e‑commerce has opened up new market opportunities and profit margins for numerous enterprises, reshaping traditional marketing approaches and transforming business operations. In recent years, as competition in the conventional market has intensified, many tire manufacturers have embraced the internet and ventured into e‑commerce.
　　Transform the traditional sales model
　　As an industrial product, tires have long followed a traditional marketing model—moving from manufacturers to wholesalers and then to retailers—before reaching end‑user car owners. However, this sales approach relies on high gross margins to remain viable. In today’s increasingly competitive market, tire wholesalers are seeing their profit margins shrink ever further.
　　Under the traditional tire‑marketing model, each tier of distributors is expected to turn a profit, driving up transaction costs for consumers. At the same time, consumer feedback is difficult to channel back to manufacturers, leading to distortions in information flow throughout the industry. With the tire sector’s production capacity now expanding, the market has entered a phase of intense competition, leaving tire wholesalers with profit margins as low as 2%. Coupled with the proliferation of consumer purchasing channels and growing bargaining power, the existing sales model must undergo fundamental transformation.
　　Tire e-commerce should adopt the O2O model.
　　According to available data, in the European market, e‑commerce accounts for 9% of total tire sales, with particularly mature ecosystems in the Netherlands and Germany. By contrast, China’s tire industry still sees very limited online sales, with e‑commerce likely representing less than 5% of the overall market.
　　However, industry experts also believe that the notion of regional distribution will gradually give way in future tire sales—indeed, the U.S. tire industry has long done away with the concept of regional distributors. Going forward, major brands are likely to further streamline their channel hierarchies, while the value of retailers will continue to grow. Meanwhile, e‑commerce platforms led by strong brands will experience rapid expansion, thanks to these brands’ robust consumer appeal and the nationwide network of authorized dealers offering delivery and installation services. At the same time, platforms specializing in tire‑related transaction services stand to benefit significantly, as China’s tire market is characterized by a large number of brands; weaker players must drastically shorten their distribution channels to survive and thrive, creating opportunities for online intermediary platforms.
　　Future competition will break with tradition and transcend conventional boundaries. Tire companies’ profitability will hinge on innovation in business models and mindsets, calling for the adoption of an O2O e‑commerce approach—a seamless, integrated “online plus offline” connection. By marrying offline commerce opportunities with the internet, the online channel can serve as the front end for in‑store transactions. In this way, tire firms can leverage online channels to attract customers, enable consumers to filter and select services, and facilitate online payment at the point of sale—quickly scaling up operations.

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