Tire Wholesaling in the US Industry Market Research Report from IBISWorld Has Been Updated

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The average miles driven is expected to increase as income levels rise, resulting in greater tire wear and higher demand for replacement tires; in addition, profitability will likely struggle from growing competition and rising raw material prices, but expansion to the internet will help revenue growth. For these reasons, industry research firm IBISWorld has updated a report on the Tire Wholesaling industry in its growing industry report collection.

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Wholesalers will benefit from increasing internet sales from retailers

The Tire Wholesaling industry hit a speed bump during the recession, but is now set to pick up momentum. Over the five years to 2013, per capita disposable income slowed due to the recession, pushing consumers to delay tire-replacement purchases. Additionally, tire dealers were hit directly by this consumer slump and ordered fewer tires from wholesalers. Wholesalers were also affected by the energy crisis of 2007 and 2008, during which commodity prices, particularly rubber, shot up dramatically. Facing weakening global demand, tire manufacturers were forced to pass higher prices on to wholesalers. In turn, because retailers had fewer customers, wholesalers offered lower prices to retailers to get inventory off the shelves, which hampered profit margins. As a result, industry revenue barely posted a gain in the five years to 2013, growing at an annualized rate of 0.4% to an estimated $25.7 billion, says IBISWorld industry analyst Brandon Ruiz.

External competition has threatened tire wholesalers over the past five years. Warehouse clubs and tire manufacturers can provide cost-competitive tire prices to retailers, while wholesalers often need to rely on long-standing business relationships with retailers to secure revenue. Typically, these relationships are not secured by long-term contractual obligations, so retailers choose different suppliers. However, most warehouse clubs and tire manufacturers do not have the distribution networks and efficient delivery ability that wholesalers have, continues Ruiz. Although revenue is only expected to grow 0.1% in 2013, this competitive advantage will benefit wholesalers in the long run. The Tire Manufacturing industry is highly fragmented. There is only one major player, American Tire Distributors (ATD). Over the past five years, market concentration has grown slightly thanks in large part to the expansion and acquisition activities of ATD. The company has capitalized on strong independent tire retailer relationships and a solid regional presence. Furthermore, the company's increased acquisition activity has contributed to the growth of market concentration by influencing other larger industry operators to consider buying smaller regional wholesale companies. The most significant acquisitions were a part of ATD's growth strategy during the past five years. TPG Capital's purchase of ATD in 2010 has increased market share concentration.

Greater internet use has also improved industry operations. Wholesalers can now reach retailers instantly, streamlining sales and inventory functions. In doing so, the internet has reduced the amount of labor required to wholesale tires. As a result, the number of employees is expected to drop at an average annual rate of 0.5% to 31,140 in the five years to 2013. This strategy has helped wholesalers eliminate some operational costs, creating the potential for higher profit margins. Wholesalers are also facilitating an internet presence for tire dealers, empowering retailers to reach a broader market. As such, wholesalers will benefit when retailers reach more consumers and order more tires. This strategy and the broader economic recovery will bode well for the industry. For more information, visit IBISWorld’s Tire Wholesaling in the US industry report page.

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IBISWorld industry Report Key Topics

Industry operators wholesale new and used tires and tubes for passenger and commercial vehicles.

Industry Performance
Executive Summary
Key External Drivers
Current Performance
Industry Outlook
Industry Life Cycle
Products & Markets
Supply Chain
Products & Services
Major Markets
Globalization & Trade
Business Locations
Competitive Landscape
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Major Companies
Operating Conditions
Capital Intensity
Key Statistics
Industry Data
Annual Change
Key Ratios

About IBISWorld Inc.

Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.

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Gavin Smith
IBISWorld
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