The tire industry is divided into two end-use markets: The original equipment tire market (OEM) and the replacement tire market. The replacement tire market is of most importance in this case because that is Sears target market. The two markets are broken down as follows:
The Original Equipment Market:
OEM tires are sold by tire manufacturers directly to automobile manufacturers, and they account for 25% - 30% of tire unit production volume each year. The Goodyear Tire & Rubber Company is a perennial OEM leader, in 1991 they captured 38% market share. Firestone and Michelin each held 16% OEM market share.
The Replacement Tire Market:
The replacement tire market accounts for 70% - 75% of the total number of tires sold each year. Demand for this market is directly related to the average mileage driven per vehicle, and it should be noted that the better the tires are made (longer treadlife) the less they need to be replaced. Goodyear is the perennial market-share leader in the U.S. replacement tire market.
Consumer buying behavior is very important when considering whether or not to partner with Sears. When it comes to replacement tires, consumers have in recent years become more price sensitive and less brand loyal. It was previously believed that car and truck owners who were satisfied with their original equipment tires would buy the same brand when they replaced them. This is still true to an extent, but surveys have shown that dealers (salespeople) were able to influence a car owner's choice of replacement tires, in relation to both brand and type of tire. Most consumers don't have strong tire brand preferences, making it fairly easy for the salespeople to influence tire purchase. It is also note that it was difficult for car owners... [continues]
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