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How an Automotive Market Leader Can Maintain the Dynamics of Growth

Automotive
client
industry
tools

PowerBI

SimilarWeb

Google Analytics

Google Trends

EuromonitorStatista

client
industry
tools

PowerBI

SimilarWeb

Google Analytics

Google Trends

EuromonitorStatista

content

Client

Infoshina is an online store selling car tires and rims for vehicles with the option of store collection and fitting service. Direct importer of Continental, Gislaved, Barum, Michelin, Goodyear, Kelly, and other tire brands.

Challenge

Finding new opportunities to grow the business in sales by N% year-on-year in the context that the brand is already using all available performance tools.

Initial Data

The research presented in this case study was conducted by our team in 2020 and was subject to an NDA until 2021.

Since 2013 Infoshina has grown from a regional business to a leader of the online market of tires and rims with its own warehouses and stores in the five largest cities of the country.

Promodo and Infoshina have been working together since 2014. During these eight years we have become a full-fledged marketing department for the client and together we have developed large-scale growth strategies, launch TV advertising and we are responsible for the results of performance campaigns.

Solution

To answer the question of what level of business growth is possible in the market of automotive products in Ukraine, and to determine the vector of development for 3-4 years, we offered the client to develop a comprehensive marketing strategy. The purpose of this strategy was to help identify points of growth at the expense of new business opportunities and at the expense of the consumer.

STAGES OF DEVELOPING A COMPREHENSIVE BRAND STRATEGY

In this case study we will look at the first fundamental stage of work in a comprehensive marketing strategy ー Market and competitor analysis.

Stages of Market Analysis

  • Study of macro and micro indicators of the automotive market
  • Analysis of global trends in the tire category
  • Study of the structure and capacity of the domestic market
  • Analysis of online and offline sales channels
  • Identification of competitors and study of their services
  • Analysis of the customer's business

Methodology: What Was Studied

  • We analyzed more than 100 data sources, more than 30 analytical panels and reports of such authoritative companies as Euromonitor, Statista, Association of European Automobile Manufacturers, and others.
  • We analyzed analytical reports on car and tire markets from around the world and Europe.
  • We researched the market for online sales of tires in the U.S. and Europe.
  • We analyzed 13 annual financial reports of the top tire manufacturers, including Michelin, Pirelli, and Nokian.
  • With the help of BI-platform we prepared dashboards on car registrations from 2013 to 2020.
  • Conducted five interviews with Infoshina sales managers to immerse themselves in the client's business.
  • We analyzed Infoshina's business and studied the sales and dynamics for the period from 2019 to the first half of 2020.
  • Developed a scoring map of prospective regions for offline presence.
    Scoring is an evaluation system based on the client's business indicators (regional sales), population data, car registration and re-registration.
  • We made a SWOT-analysis for infoshina.ua: identified strengths and weaknesses of the brand and business, identified opportunities and threats of the market that may affect the client's business.

Structure of Market Research in the Automotive Sector

Market research

1. Study of Macro- and Micro-Indicators of the Auto Market

Auto market: Worldwide & Ukraine

The tire market is directly dependent on the automotive industry: the decline or growth of car production, sales dynamics, changing demand and consumer preferences in this area have a significant impact on the development of the tire industry.In our study, we found that the global automotive industry is outpacing sales: the number of cars produced in the last 10 years has exceeded the number of cars sold in a year.

Production and sales of new cars in the world over the past 10 years, millions pcs.Source: Auto.vercit

Conclusion

Majority of cars are sold a year after production. These global dynamics, as well as global traffic congestion, indicate an oversaturation of the market with new cars. At the same time, these factors contribute to the growing demand for alternative means of transportation ー motorcycles and bicycles.

It can be assumed that these market trends in Europe and the U.S. will largely influence the situation on the Ukrainian market in the coming years. This means that the client has one of the possible points of growth:
to increase the range of tires for two-wheeled vehicles/mode of transport.

Following global trends, the Ukrainian market also grew. According to data for the same period in the country, there has been an increase in the number of registered cars: as of 2019 〜1,100,000 Ukrainians have purchased or changed their car.

Dynamics of passenger car market by new cars / imports of used cars / resale cars in Ukraine.
Source: auto-consulting.com

It‘s important to note that the growth of the Ukrainian car market is mainly due to the sale and resale of used cars imported from other countries.

Structure of the car market in Ukraine, 2019. Source: Federation of Automotive Industry of Ukraine

According to our research, the main flow of used cars come to Ukraine from Poland. This is why we recommended the client pay special attention to the structure of the car market of this country.

Number of vehicles imported into Ukraine with foreign registration Source: OpenDataBot

In addition to global market trends, the study also took into account the growing impact of the pandemic.

At the beginning of 2020 in the global market of cars sales CUV type occupied 40%, while in Europe prevailed sales of SUV type cars, reaching 38% ー these trends are also visible in Ukraine.

CUV (crossover utility vehicle) ー high-clearance all-terrain vehicles in the station wagon version (for example, the Toyota RAV4 and Honda CR-V).
SUV (sport utility vehicle) ー practical sports car, the main difference from SUVs - the lack of increased cross-country ability (for example, Volkswagen Touareg and Audi Q5).

At the same time, there is a growing trend for electric cars, which are replacing diesel and gasoline vehicles. Over the past 10 years, this market has grown by 60% annually. In 2020, the share of electric cars in the sales of all cars in the world will already be more than 3%.

The growth dynamics of electric car sales in the world over 10 years. Source: Iea.org

For example, in Europe, hybrid and electric cars already account for more than 17% of all car registrations by 2020.

For example, in Europe, hybrid and electric cars already account for more the given. This trend of substitution in the global auto market, we conducted a BI-analysis using data about vehicle registrations in Ukraine from 2013 to 2020 and found that this segment of cars from the U.S. and Europe is actively "flowing" into our country.an 17% of all car registrations by 2020.

Dynamics of registration of electric cars in Ukraine. Source: BI Promodo

Despite the fact that the Ukrainian market of electric cars is also developing, we drew the customer's attention to the fact that the trend of substitution in our country is not yet evident. It is too early to switch globally to the range of tires for these type of cars.

2. Analysis of Global Trends in the Tire Category

To be in trend: what trends dictate the global tire market

Recognize current market trends ー create a stable basis for business development, and anticipate them ー be one step ahead of your competitors.

As part of the study, we identified the main trends in the global tire market.

  • Tires for passenger cars and light trucks account for 65% of the global market structure.
  • The demand for larger-diameter tires is predicted to grow continuously in the medium and long term.
  • China has become a leader among tire manufacturers, which affects the sales of other market players.
  • Producers' demand for airless tires is growing as electric vehicles become more popular.
  • There is a growing demand for tires with smart connectivity to improve vehicle safety and efficiency.
  • Tires for new cars are more often purchased from independent sellers (the older the car, the less money it brings official service centers).
  • Omnichannel is trending: consumers are building up the experience of ordering online, but when choosing
    a retailer, they consider it an advantage to pick up their order from branded stores.

According to Smithers Rapra, the percentage of tires purchased online is expected to be 13% by 2023.

3. Study of the Structure and Capacity of the Tire Market in Ukraine

We were able to study the current structure of the tire market and identify trends in the coming years, by examining the price preferences of Ukrainian consumers and determine the most popular types of wheels for new and used cars. The car tire market is mainly divided into three main price segments: economy, medium and premium.

According to our research, it is the economy segment that dominates the Ukrainian market: Ukrainians are not yet ready to buy premium tires. Moreover, according to liga.net experts, 30-40% of tires for passenger cars are purchased in the shadow market, which significantly distorts the real picture of domestic consumption.

Structure of the passenger car tire market by price segment in Ukraine, number of units. For the period 2007-2019

To determine the most popular type of wheels, we used data on Ukrainians' preferences regarding the choice of new and used cars. For example, the trend in 2020 shows that Ukrainian consumers prefer new cars with a larger tire size ー R17, R19.

LEADER MODELS OF NEW CAR SALES IN UKRAINE, 2020:

Source: autoconsulting.com.ua, auto.ria

While among used cars, the most popular wheel size on the Ukrainian market is R16, and the most resold car model is the Volkswagen Passat.

TOP USED CAR MODELS IN UKRAINE, 2020:

Source: autoconsulting.com.ua, auto.ria

To determine which car brands will be in demand for tires in the coming years, we built a BI model to analyze data on the registration and import of cars in Ukraine.

Implementation of dashboard on registration and import of cars to Ukraine, 2020

According to the research, we can conclude that consumer preference for larger-diameter tires will motivate eCommerce to increase the assortment. This is due to the fact that an increase in the range of wheels with a larger diameter will create additional load on the showroom and warehouse space.

4. Analysis of Online Sales Channels

The global growth of marketplace influence: what are the risks for niche businesses?

As marketplaces grow in demand, they have an impact on the performance of niche companies.

Analysis of the experience of foreign countries has shown that in the United States and Europe (in particular Poland) the globalization of the market is already taking place: marketplaces have taken 90% of the market. At the same time, there are still niche players on the market, among which there are clear leaders.

In the current model of the tire market in Ukraine, the influence of the marketplace is increasing, but the niche retail does not lose its position yet.

This shows that customers still care about service and assortment
ー something that niche players can offer to a greater extent, but marketplaces can offer to a lesser extent.

Assortment ratio of niche players and marketplaces

Given the fact that China has become a leading player in the global tire market, it was important for the client to understand: is it worth expanding the range with tires from Chinese brands?

A detailed analysis of the assortment line showed that Chinese-made tires predominate in the assortment structure of marketplaces. At the same time, niche stores specialize in tires in the medium and premium segments.

5. Identification of Competitors and Study of Their Services

As in any market, Infoshina has competitors whose products cover the same needs as our customer's products.

To stand out from the crowd with similar offerings, it is important to find a solution that helps Infoshina to become the best choice among other alternatives. It is for this purpose that the competitor's service was investigated.

We analyzed the top companies of the Ukrainian tire market according to such criteria:

  • assortment on the sites;
  • guarantees;
  • services;
  • customer service;
  • loyalty programs.

To identify unique and trending services, we researched competitors from countries with a similar tire market model.

As a result of the analysis, we determined the vectors of development of the service and assortment component of the tire and related niches for the client:

  • brought out the masthead in services;
  • identified areas for the expansion of the product range;
  • brought out a competitive advantage in service.

It was these vectors that helped identify the consumer "pains" that competitors don't close and become the value proposition of the business.

6. Analysis of the Customer's Business

The results of the client's business analysis ー are the key to solving business problems. We analyzed sales from the website and by call inquiries, studied in detail conversions from different types of devices and order structure by brands, tire types and sizes, and sales geography.

Based on internal sales data and Google Analytics data, we built a BI system that allowed us to:

  • determine the potential for sales by region, taking into account the current geography of sales, population, income and the share of registered cars;
  • Conduct a SWOT-analysis of the client's business, thereby identifying strengths and weaknesses, opportunities and threats to the business;
  • confirm that a 5 percentage point increase in the number of orders through the site will affect sales growth because the % of redemptions by carts is higher than the % of redemptions by calls.

An example of a BI dashboard in customer business analysis

An example of a BI dashboard in customer business analysis

Results

Any marketing solution should go in synergy with the business, support the key vector and the vision of owners, shareholders and management. The Promodo team always relies on facts, data and figures in its work. Implementation of effective ideas is not only about creating a concept and developing creatives, but also about deep analysis of indicators and finding ways to achieve results with their help.

Market analysis was a fundamental step in this process. The data obtained helped identify new growth points for the Infoshina brand.

  • Relying on the results of the first stage, we proposed to the client a series of tactical changes in business processes to improve current sales figures.
  • Based on the results of the SWOT analysis, we determined which processes can be implemented in the business here and now. The results of the study and SWOT analysis formed the basis of a two-day strategic session with the higher management: they discussed the data obtained and approved the development vector for the next 5 years.

All this became the starting point for us in further research and derivation of positions. We gained insights using what we had researched of the consumer to develop a comprehensive brand strategy.

What's Next?

Assortment ratio of niche players and marketplaces

  • Barriers
  • Drivers and motivations
  • User path
  • Stereotypes


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