Low-price tires are coming to Australia, but the low-cost brands aren’t taking kindly to the introduction.
A study published on Wednesday by consumer research company Kantar Worldpanel found that Australia’s biggest brands were “unhappy” with the low prices of their products, and were planning to fight back.
“This is the first time we’ve seen brands using low-price pricing to attack the low margins of high-end brands,” said James Hirst, managing director of Kantar Research Australia.
“For the brands, it is the perfect opportunity to take on low-quality competition and take a hit in the profits.”
Kantar says it surveyed 2,600 consumers in Australia over the past year.
“We asked them which brand they liked the most, and also asked them to rate their experiences with the brand on a scale of 1 to 5, and what they thought about the brand’s pricing structure and pricing strategy,” Mr Hirst told news.com.au.
“So, we know that these brands have high margins, and the low price means they are not competing with the premium brands in a price war, so they are just trying to take them down.”
But some consumers are taking issue with the report, saying that the low cost of the products was the cause of high prices.
“If they’re getting the low pricing and that’s causing high prices, I think it’s going to be really hard for these brands to compete,” Dr John Taggart from the Australian Retailers Association told news “This is not the first report we’ve heard that they are actually unhappy with low-priced products, they’ve been doing it for years and years, and it’s getting worse.”
“If this report is going to get the same attention as the other one, we will be in trouble, because this report shows the reality of the industry,” he added.
The research comes after it was revealed that Australian manufacturers were spending almost $1 billion to buy more high-cost tyre brands, despite the fact that the Australian consumer was not buying much of their tyres.
The report comes after reports from a number of major retailers in the US, Europe and Asia revealed that prices for high-quality tyres had soared over the last decade.
But, while there is some relief from the lower prices, many of the Australian brands are now calling for changes in the industry, including introducing a new price floor for tyres.
Kantadvisor’s research shows that a total of 24 of Australia’s largest brands had already decided to introduce a new pricing structure, which would see the cost of a tyre jump by 5 per cent, but would still leave a lower profit margin.
Kane & Bates is among those that have made their plans known, and has launched a campaign called “We’re Better Than That”, which aims to encourage customers to buy less expensive tyres.
“The only way to compete with high-priced brands is to do more research,” Mr Taggert said.
“To be honest, we don’t have the answers, but we are confident that we can create new insights.”
Follow the ABC’s Consumer Price Index blog for the latest updates.
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