Let me just briefly introduce Thomas. A little bit of his background, and then Thomas you can go a little more in-depth, and give us kind of a brief overview of the industry and your experience. And as Thomas is talking, everyone else feel free to submit questions online. And we'll take those as they come. So, Thomas used to work at Walmart as a purchaser of tires. Technically buyer I think is the right word, and also merchandise planner. So, he knows what it's like to buy tires for a big company and a lot of customers. And he currently works for a company called SimpleTire, one of the e-commerce with a totally different business model, doing sales for SimpleTire. So, Thomas that's a pretty rude and crude introduction. So, if you want to go a little more into detail, and then tell us a little bit about the industry. I spent five years at Walmart managing the tire business, purchasing tires. Then about six months ago, I made the leap to SimpleTire, where you're raid e-commerce site and also distributor of tires, here in the US. It's a very interesting industry to be in. Speaking US in particular, it's about a 40 billion dollar industry. 25 five billion dollars of that is in tires that you would put on your everyday vehicle. The remaining 15 billion is everything that goes on trucks, that are used to transport goods to money, equipment, farm equipment things like that. So, I'm much more familiar with the what we call the passenger and light truck of the industry which is tires that fit on your everyday vehicles. But we also do that simple tire pretty sizable business, and the everything from mining, to farm, to commercial tires as well. It's a very concentrated industry in terms of the manufacturers. Major manufacturers are pretty consistent across the world. In the US the major manufacturers are Michelin, Goodyear, Bridgestone. That's pretty consistent across the world, and here in the US those three combined have about 50 percent of the market. Pretty consistent throughout the world as well. On the flip side, those that sell tires actually tend to be a pretty fragmented pie, if you will. Or just retailer tires in the US. There's a company called Discount Tire, where if your from California they go under the flag of America's tire. They're the number one retailer in the country. They are about ten percent market share. So, that's a very fragmented industry. Most interesting you're talking to Walmart owner will generally have a 25, 30 percent market share, of everything from groceries, to deodorants, and toothpaste. Not the case in tires, much more fragmented industry. Mom and pop shops, your local tire shops, that don't have between 50 and 55 percent of the industry. The big box stores, the Walmart's, Abuja's, Costco's, Sam's Clubs make up 20, 25 percent of the industry. Then the remaining is going to split between car dealerships, and a handful of other channels. Any questions at this point? If Rita interjects? No, no. I've got a question for you Thomas. Yeah. So you mentioned Discount Tire, I'm just curious. Discount Tire, what brands do they sell? Isn't just their own brand? Is it none of their own brand? Where are they getting their tires? Most of what Discount Tire will sell will be the major brands, Michelin, Goodyear, Continental, Bridgestone. But they do also have their own house brands. Arizonian is an example of that. Beirum is an of example of that. They tend to be a lower priced or the no PP products opening price point as the acronym, products that they'll import. The brand name will be exclusive. The discount par, you see those bigger retailers in the space. Walmart and Walmart as an example, the Douglas index there brand excludes Walmart. You'll see that some of the other bigger retailers in this space as well. And so as a follow up question for the tire manufacturers, Goodyear or Michelin and so on. Do any of them sell their tires on their own or are 100 percent of their tires sold through to someone else like Discount Tire or Walmart? It's been a bit of a mixed bag. They are when you talking about Bridgestone and Goodyear, A portion of their business is completely vertically integrated. By that I mean they do have their own company owned shops. Bridgestone owns the Firestone brand of Schuch ops here in the US about 200 locations. One of the two, along with Walmart one of the two nationally present tire retailers. Goodyear on a much smaller scale maybe seven 800 stores that are company owned. But that's not 100 percent of the tires they sell are sold through their company owned stores. So, it's on the flip side Michelin, they have no company owned stores. So 100 percent of what they sell is through the retailers that are not owned by their company. That's helpful. I think we've got a question from. Yeah. One of the students do you. Yeah. Want to read that a little. Okay. So, he asks about how do you decide which tire to purchase. Any suggestion if Double Star wants to put your tire on warmer shelf? Yes, when you're talking about a Walmart, somebody with that much skill will buy direct from the manufacturer compared to a smaller chain or one store mom and pop shop and to buy from a distributor. Walmart will buy direct from the manufacturer, buyers are very capitally intensive in manufacturing process. A lot of engineering that goes into it. I would say there's a lot of safety concerns, things like that. Lead times in any of that process are done them well in advance and Walmart and particularly that you're moving millions and millions of Tires. You tend to rely on manufacturers with experience in the market that have a long track record of safety and same products and moving tires in the US. And, so, a company like Double Star in particular, is not necessarily somebody that Walmart would look at right off the bat. Walmart tends to look at the Goodyear's, Michelin's, the good stuff to the world first. Give you an idea, there's the Falken brand in the US. It's been around for about 15 years. We just started talking to Falken in the last couple of years. Taking that long of a process for them to establish their brand, get on our radar at Walmart. Thomas, I was wondering the new company that you work for, It sounds like it's a new goal market model. It sounds like it's mostly online. Is there, is that a new business model, where people buy tires online? And if it is, how would you go about handling installation and service? I like to jokingly say that there's some truth to it. The tire industry lags behind most other industries by about ten years, and that you know people have purchasing TVs and computers and things like that online for, all over a decade now, and they're just now getting the first tires. And that's really where we're stuffing them, it's giving the customer a great option to buy tires. But finally, the first growth phase in the tire industry that's really going online. The total industry, about ten percent of the sales. In terms of units are done online today which lags well behind other industries, especially electronic industries like TVs, video game systems, things like that. But more and more customers coming online each day. And there's a, there's an interesting psychological dynamic, I don't think anybody's really put a handle on the customer really looks at the purchase of the tire, the installation as two separate transactions. They're concerned about getting a deal on the tire, then they figure out. Once they get the tire, they'll figure out the install this, whether that's taking it to the local Mom and Pop shop. Once they get the Tire, or Walmart, or whatever, they really look at them as two separate transactions. That's the space we feel are more or less completely pure play online retailer. We haven't brick and mortar presence per se. So, our presence is completely online. We move a lot of units. So, Amazon sells a lot of tires. Amazon's never installed a tire. Walmart has a lot of units online. I think there are a lot of other examples eBay, so eBay is actually a behemoth in the automotive industry as well. They're not selling tires themselves. They're providing a platform for Marketplace. the parties moved tires. Thomas I'll jump into that as a follow up then. What kind of a person, or what kind of a customer is buying tires online? And who are they getting to install it? You know like if I buy shoes online, I just pull it out of the box and put them on my feet. I can't do that, at least I can't do that with a tire and just pop that on my car. So, what kind of a customer are these individual customers? Are they actually businesses that are buying the tires online? Who's buying these and who does the installation? Yeah. For the most part, it's an individual customer to me, all the younger, all the tech savvy, but I guess we will over end is price conscious consumers as well working for the best deal that's the great thing about the Internet, that's the great equalizer. Once something is on the internet, it becomes a commodity. It's really about is at best price at that point. So, you get a blend of younger consumers, the savvier and that's the way they come for shopping and then there's that other price sensitive. It will be the opportunity for big pockets of customers. Yeah. I was going to ask a question about foreign made tires, whether that's a big deal with consumers, tires made in the US versus imported tires. Do you see that as a road block to a sizable enough population, if you are importing tires and sending them in the US versus making them here? Really depends on where they're made at this point. Going back I think was 2015 and then even back 2008 had been a series of tariffs on anti-dumping tariffs for government subsidized Chinese tire manufacturers and then countervailing duties were put on then kicked off and then put on back again late 2015 or 2016. And so we've seen the Chinese market really dry up a few years whereas that have been growing exponentially in the run up to late 2015. A lot of that production has moved to southeast Asia, and then also has moved back onshore again in the US. If look in the tire press of late, a big deal here recently was a tire exclusive the Wal-Mart made by a company called GT, spelled gitia had been made in China for the last few years and Polmont brother is going to start making in South Carolina. That just opened up that plants are you starting to see more of them on onshore. And that's a product of both the anti dumping terrorist as well the rising cost of labor in China. As things get more and more expensive coming out of there. But there's suprisingly not the climate is pretty good for imported tires. Customers are looking for a great product. Even with the top tier brands like a good year Michelin they've got plants cross the border in Mexico that will import tires for most tires that are purchased in the US the 250 million units that passenger light truck market are made here. But the import side in the business continues to grow. So, Thomas if what I'm hearing is if I'm interpreting this right, based on what you just said the US is not a good market for a Chinese tire manufacturer I mean that's my takeaway. Unless, they want to build a plant in the US in manufacturing guys I mean is that fair or is that maybe too simple? I would say that's fair. I mean if you go back with those tariffs were put on that was probably a more forgiving political climate. You would say the local climate's gotten even worse in regard to that there's more tension in my regard. Sort of consider it a risky proposition at this point. If so if you are double star would it make sense to try and have some presence in the US so that at some future if you said you know it takes 10 to 15 years until a Wal-Mart is even willing to look at you or maybe Discount Tire. Does that make sense to still kind of keep some presence here in the US and find whatever mechanisms you can to sell here. I mean what if you're double star and you're kind of hungry for the US market what would you do? On the flip side of the barriers to entry are much lower than they were the Ruediger as the on one side of the business picks up. It's much easier to enter the market. So, there's not much stopping you from partnering with the Amazon or Walmart.com one of the larger e-commerce retailers being a drop ship or simply putting your tires for sale on their site and shipping that retailer establishing your brand that one. Interesting. Okay. Or like a simple tire. Exactly. I'm just checking the screen here. Is there anyone have a hand up? No Thomas i mean what experience or what kind of knowledge do you have about outside the US market anything you know on our side we probably know almost nothing so anything you know is probably more than we know. Is there anything you want to share about outside the US? Yeah absolutely. So it really comes down to the types of vehicles that are on the road. So if you think of the US we have a lot of pickup trucks or just SUV Azure we talked last we got from Brazil. But that's a market in particular we're at it's very similar to Europe in terms of the cars that are driven down there. It's a small comp XT. So rather than like here in the US where you have big trucks with 20 inch rims and big tires you tend to see small Renault's and you goes small Volkswagens with 13, 14, 15 inch. So the mix of what's being sold is slightly different why that's a Australia's various them or Europe is also very similar. You know outside the US is much smaller vehicles because talking to the passenger light or. And what impact does that have for a manufacturer is that does that just mean they kind of focus their tires on the smaller vehicles or... You know I'm starting you know one thing we saw in the factory in double star was that their tires are high quality and high durability. You know they have this kind of self healing thing. So if you drive over a nail or something it can heal if that's one of their key features does it make sense to target a market where maybe the roads are not as clean or there's more stuff on the roads where people care more about a tire that can kind of drive over a nail and and keep driving. It's sort of like you're talking about what we call the industry run flat tires you tend to see those on premium fit BMW, Mercedes things like that. Okay, so it's not necessarily a unique feature exists but maybe not. You don't see that on all cars. Yeah exactly. Okay. So just as a broad question Thomas, if you're a double star you feel really good about your tires. You've seen a lot of success in China and maybe East Asia. You've got as a company really good leadership and you'd have maybe even a fair amount of capital potentially from..or access to capital through kind of a good network in China. So maybe you have some money to expand. What kind of questions would you think about?what which countries would you look at? And then how would you go about entering these markets? What kind of strategy would you take? That's a lot of questions in one. It comes down to the value proposition they want to bring. In the US, I think I've explained earlier, the market breaks down into four tiers; you got tier one, tier two, tier three, and tier four. tier one is brands like Goodyear, Michelin, Bridgestone, Continental or Premium Tires, tend to have value add Bicton down through tier four, which tends to be brands you don't necessarily recognize, but you get more bang for your buck so to speak. So it's really identifying where they fit in, in that mix, or do they see them sold. That's without pretty much brand equity in the US market. Be a very hard to sell to the customer to try to break into that tier one, tier two structure, but much easier to break into tier three, tier four. Whoever some value without having to have that brand recognition marketing awareness that require to play in tier one and tier two. Outside of that, it also comes down to, if you're going to get in to brick and mortar having distribution as well. So, having at least one or multiple distribution partners, stateside or if you're entering e-commerce having a handful of locations that drop-ship hires to the end users. Yes, that's okay. That's really helpful. I know one worry that Doublestar had was, they feel like they've got a high quality tire. And so they're saying, if we come in at a low price point, people are going to think this is a value based tire not a quality based tire, and so they want to keep this brand of this image of we're a high quality tire, but if they come in at the lower tier price then are they ruining their image that they want to have once they have kind of brand recognition. Do you see that is a problem or any suggestions? Yes, it's a very tricky situation. It is brands that sit in tier 1 have been nurtured, of course I'm single on the good years the Michelin's are less than 100 years old. Those are brands that have really been cultivated, have the equity with the customer and it just takes time. And there are bands that are relatively new on the scene that are working their way up. Even when I say relatively new, like hand Falcon I mentioned earlier it's been around for a year and around 20, 25 years. They're working their way up tier 3 and tier 2 pushing towards tier 1, but again that's taking them better part of 15 years in one case, in 25 years in the other. And that brings up a question. You know some companies will, when they're near to the market and there's you know like in this market there's some well-established brands. So it's kind of hard to break through that crowd. They'll come in with, a value based brand. And once that has recognition, they introduce a higher price, higher quality product but it has a totally different brand names. Like you see this in cars right, where you have, and I get mixed up, who owns what. But you know the Camry versus the Lexus versus, right there and the different, the different tiers. It's the same company but it's totally different brands and you could like me, you might even forget who the manufacturer is. Could that be a strategy where they can come in with maybe a lower priced kind of value based brand, and once they get the name out then they can introduce a new tire and if they want to create a different image maybe they just change the brand, still under the Doublestar company though? Does that happen? Yeah absolutely. And so instead of calling Doublestar like you call it X, Y, or Z, I think Michelin is a good example. The Michelin owns three brands, the Michelin brand, B.F. Goodrich, and Uniroyal. Michelin's the tier 1 brand, Goodrich's the tier 2 brand, and Uniroyal was the tier three brand and they are equally engineered products. My opinion, I think a Uniroyal is just as good as a Michelin. But you're going to pay a lot worse for a Uniroyal than you will Michelin. It's marketed much less. It's just doesn't have that premium. All right. So that's the only market that is viable. OK. I've got the last set of questions, but young Tang are there any other questions that are going to be asked? So this is more on the, than on the purchasing side. So, it seems to me there's maybe three different options that a company like Doublestar could take. They could go the e-commerce route. They could go towards some kind of a tire seller, like a discount tire. Maybe you can even call that a distributor and then you go for a retail company that sells a bunch of other stuff plus tires like a Walmart, or Costco. If they're trying to go to any of these routes. On the flip side, if I'm going to buy tires at Walmart I'm going to buy tires and find that discount tire and I'm looking for a new brand to add to my suite. What questions, what am I looking at, what do I care about, what's in my kind of decision matrix to say yeah we got to buy this Doublestar tire what's going to catch my attention? Yeah. Especially being a Walmart trained buyer, first thing I will look at is price, your production capacity, how many units can you move. And probably most importantly is safety, what's your safety track record. How is this product been tested, how does it stack up versus other products in the marketplace. The both safety and performance. That way, I can think about how I would want to slop that product my within my assortment. How would I want to price it relative to other products, relative to its value proposition. Okay. That's really helpful. Are there any other comments you have Thomas, any advice for the students this course trying to help Doublestar do this overseas expansion strategy? We've got a question. Sorry, I was living on your website at the SimpleTire. I don't see any rims. Is that normal? You just on one side of the business or is that maybe something you're looking at in the future. I don't. It's a business we're not necessarily looking to get into today. It's a very complex business. Tire's it's complex a little bit so that Rube's is infinitely more complex. We're trying to keep it simple on the Internet. Any other questions that are on our end and the others have questions you could just speak up. Do you have any questions? Not yet. So, Thomas any kind of famous last words or words of wisdom or advice for us as we're developing this strategy? Yeah. The last thing I'll mention is, I don't want to paint too much of a picture of doom and gloom like there's. Now is as good a time as ever for a smaller manufacturer to break into the U.S. market or anywhere else around the globe. Historically been very concentrated in a handful of manufacturers and seen that change shift drastically reduced benefits and your. Professor, we have a question here. Okay. He asked, do driveless cars have different tire requirements than the normal cars? You hear that, Thomas? Not that I'm aware of. I'm not 100 percent on that answer, though. I would assume that the weight is probably going to be the same, right? The load that they would carry is whether there's someone holding the steering wheel or or not. I don't know. My guess would be pretty similar requirements. You think so too Thomas? Yeah, I would imagine so it sounds like they're just my understanding of driver-less cars is to retrofit a mobile automobile. Good question. There's, i'm seeing an orange thing that we know we capture all those questions. OK. Thomas thank you so much. This has been super helpful for us. It's giving us a lot of insights. There were people here joining in live session and then people are going to watch this recorded session. So your words will live on it. Would it be OK if if any of our students wanted to reach out to you? Would that be an option? And even talk about you know SimpleTire maybe as a potential partner or or at least something to explore? Yeah. My email address is pretty simple, it's thomas@simpletyre.com, so always feel free to reach out. Happy to help in any way. Well, thanks so much. This has been really valuable and we really appreciate the time you spend. So, thank you Thomas on behalf of myself and all the students. Appreciate it.
