QL2 Pricing Data & Insights TIRES · QL2 has spent the last 15 years pioneering the market for...

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QL2 Pricing Data & Insights

TIRES

Q3 2017


QL2 Pricing Insights: Tires October 2017 QL2 delivers true competitive advantage through on-demand data extraction and analysis, producing a real-time, insightful picture of your market so you can make profitable decisions. QL2 has spent the last 15 years pioneering the market for competitive data and analysis. We provide advanced real-time data capture technology and analytical tools that create business intelligence solutions for managing the complexity of optimizing and managing pricing, revenue and other competitive data points on a real-time basis. We proudly serve global customers across the travel, retail, automotive and finance and data aggregator sectors. Our October 2017 Pricing Insights will analyze our Tire data product which includes daily pricing shops across the tire industry and over 3 years of historic pricing and product data. The following insights, trends and analysis are sourced from our daily pricing shops from 5 top tire retailers with national pricing: Amazon, Discount Tire Direct, Tire Buyer, Tire Rack and Walmart. All data is updated through Sept 30, 2017.


Opening Pricing Point In order to help our clients determine opening price points for their tires we look at the lowest price points available over time, across retailer, size and brand. Chart 1 below summarizes the lowest price point available in 2017 for the top 10 US tire sizes broken out by our six tire retailers. Note that both tire size and brand rankings are based on full year 2016 sales.

Chart 1: 2017 Lowest Price for Top Tire Sizes by Retailer – All Brands

Through September of 2017, TireBuyer generally has the highest opening price point across the top tire sizes while Amazon has the lowest opening price point. In order to compare similar brands we will focus only on the top 5 tire brands from 2016, Michelin, BFGoodrich, Goodyear, Continental, and Bridgestone. Chart 2 again shows the lowest price point available at each of our six retailers for the top 10 sizes, but now is filtered for only the top five brands. TireBuyer still has the highest average across 4 of the top sizes while Tire Rack and Discount Tire Direct have the highest across 3 each. Amazon is most frequently the lowest average price.


Chart 2: 2017 Lowest Price for Top Tire Sizes by Retailer: Top 5 Brands Only

In Chart 3 we can now look at the lowest price available across the first five months of 2017 for each brand and size. This chart is inclusive of all 5 retailers. See charts 14 – 23 for detailed brand and size breakout by retailer.

Chart 3: 2017 Lowest Price for Top Tire Sizes by Brand


Retail Price Drivers It is essential to understand which retailers are leading the pricing decisions for tires and which are following that lead. Our data allows clients to track price changes over time to identify on a detailed level the timing and magnitude of price changes. In order to illustrate the price drivers we have sampled two models to focus on. The models selected are based on Consumer Reports Top Tire Picks for 2016.1

• Top All-Season Tires: Michelin Defender

• Top Performance All-Season Tires: Continental PureContact

Chart 4 shows the price changes in dollars week over week of the Michelin Defender in 2017 across four retailers. The graph reveals that Tire Rack and TireBuyer generally maintained the most consistent pricing with very few price changes beyond $2. Amazon and Walmart generally changed price at similar times and direction, but Amazon generally changed price at a greater magnitude.

Chart 4: 2017 Weekly Price Changes by Retailer: Michelin Defender

1 Petersen, G. (2016, May 10). Top Pick Tires for 2016, from http://www.consumerreports.org/tires/top-pick-tires-for-2016/


Continuing this analysis for Continental’s PureContact model, Chart 5 graphs the week over week price changes by retailer. Walmart appears to have the largest price changes year to date. Discount Tire Direct has had a few large price increase, but long periods of static pricing.

Chart 5: 2017 Price Changes by Retailer: Continental PureContact


Retail Price Correlation Pricing correlation attempts to measure the relationship between the change in price between two retailers by specific model and size. Correlation values fall between 1 and -1. A value of 1 would indicate perfect correlation or that two retailers pricing move at the same magnitude and timing. Whereas a value of -1 would indicate they move in the exact opposite direction. A value of 0 would indicate no measured relationship between the pricing of two retailers. In order to measure the pricing correlation between the six retailers we looked at only the top five US Brands and Top 10 US sizes from 2016, which we previously defined. Looking at the relative price on the same product by week across each of these retailers revealed that unsurprisingly all were highly correlated with values of at least 0.82. This is not surprising in a marketplace where consumers can compare prices across retailers with relative ease and are price sensitive to the same product available at different stores. TireBuyer exhibits the highest correlation overall with all 4 competitors including the highest correlations measurements of 0.97 with both Discount Tire Direct and Tire Rack. This may be an indication that Tire Buyer is more reactive pricing at these retailers or that these two retailers are reactive to TireBuyer. With correlation measurement it is always important to recognize that it is not a measure of causation. Correlation only measures the similarities in price between the two retailers and does not indicate what is causing that similarity. It is a valuable measure for determining how closely the pricing is between two retailers and which retailer(s) more frequently deviate from others. Amazon exhibits the lowest correlation with the other four retailers indicating it is the mostly likely to move pricing differently that the others.

Chart 6: Retailer Price Correlation

*Heat map displays positive to perfectly positive correlation from red to green.

AMAZON DISCOUNT

TIRE DIRECT TIREBUYER TIRERACK WALMART

AMAZON 1.00 0.82 0.90 0.87 0.82

DISCOUNT TIRE DIRECT 0.82 1.00 0.97 0.95 0.92

TIREBUYER 0.90 0.97 1.00 0.97 0.94

TIRERACK 0.87 0.95 0.97 1.00 0.89

WALMART 0.82 0.92 0.94 0.89 1.00


Pricing by Tire Size Below is a summary of average price by size for January – May 2017. Top 10 sizes are based on 2016 rankings.

Chart 7: 2017 Avg. Price for Top Tire Sizes by Retailer

Chart 8: 2017 Avg. Price for Top Tire Sizes by Brand Below is a summary of 2017 average pricing for the top 10 US tire sizes across all retailers for top five US brands.

To this point we have focused on average and lowest price points by size. Chart 9 looks at the pricing trend from October 2016 for each of the top 5 tire sizes. Chart 9 is inclusive of all brands and retailers. Overall, we see rather consistent price trends over the past 12 months for each of these sizes with a few notable movements in December


2016. We will drill deeper into the detail in order to better understand trends and average pricing for specific brands and sizes.

Chart 9: Average Price Trend by Size


Size Deep Dive: 205/55/16 We can dig deeper into the most popular replacement tire size from 2016, 205/55/16 in order to identify unique trends to the size. Chart 10 graphs the average price trend for only 205/55/16 tires across all brands for each of the 6 retailers. The lowest pricing at Walmart has remained consistent over the past 3 months while Amazon has exhibited the most volatility. Pricing has gradually declined on Tire Buyer since early July while slightly increased at Discount Tire Direct.

Chart 10: Lowest Price Trend by Size

We can drill down further on tire size 205/55/16 by looking at the lowest (Chart 11) and average price (Chart 12) across 2017. Michelin consistently has the highest opening price across all retailers by a fairly significant margin while Goodyear maintains the lowest. However, on an average price basis, Continental is the lowest price across the 5 retailers who carry their tires. Michelin remains the most expensive on an average price basis, but the gap is closed significantly by Bridgestone.


Chart 11: Opening Rate by Retailer – Top 5 Brands

Chart 12: Average Rate by Retailer – Top 5 Brands

We can also look at the difference between the average and lowest rate over time in order to determine if that spread has remained consistent or changed over 2017. Chart 11 below again only focuses on size 205/55/16 and graphs this difference between the average rate and lowest rate by month for each retailer. Overall, we see relative consistency within each retailer but with a slightly increasing trend since June for all retailers other than Tire Buyer. Amazon maintains the most consistent variances between lowest and average price, but is also generally has the largest difference.


Chart 13: Difference between Average and Lowest Rate


Appendix: Pricing for Top Brands

At the beginning of this paper we looked at the opening price points across the top 5 US brands. We will now drill deeper into the detail of each in order to better understand pricing trends, average pricing and the lowest price available by retailer. Chart 14 shows the average price over time for each brand across all of the retailers we have observed.

Chart 14: 2017 Pricing Trend – Top 5 Brands

We observe Michelin remaining the highest priced on average with an upward trend across 2017. BFGoodRich average pricing declined slightly in the first half of 2017 but has increased since the beginning of July. Bridgestone has remained fairly consistent after increasing in March. Charts 15 – 24 summarize the lowest and average price points for each brand across the top 10 tire sizes and across all 6 retailers for the past 3 months (July – Sept).


Michelin

Chart 15: Opening Pricing for Top Tire Sizes

Chart 16: Average Pricing for Top Tire Sizes


BF Goodrich




Continental




Goodyear




Bridgestone



QL2 Pricing Data & Insights TIRES · QL2 has spent the last 15 years pioneering the market for...

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