A Changing Wholesale Business?

When Tyres & Accessories last wrote about the pressures facing wholesalers, the issues pressing the business were not too dissimilar to what there are today. Then raw material price increases at the manufacturer level, not to mention high oil prices, were in danger of effecting wholesale pricing policies. Today oil prices (affecting both raw material and transportation costs) are almost 50 per cent higher, and almost all manufacturers have raised their product prices at least once if not twice this year. In order to get a feeling for how these issues are affecting international wholesalers, T&A spoke to representatives of US company Zisser Tire and Belgium-based Deldo.

Price, supply by tyre manufacturers and the new Chinese companies that are always emerging, continue to put pressure on the wholesale business, Zisser Tire’s Don Mathis explained. And these pressures are said to be compounded by the ‘business at the speed of thought’ mentality that comes along with worldwide Internet access. The problem with this technology is it means everything is ”known worldwide in an instant,” added Don Mathis.

In spite of this business has been good for both Deldo and Zisser in recent times. In the last five years, for example, Zisser’s sales have risen from $17 million to over $110 million. Meanwhile Deldo has reported a string of record breaking sales months, most recently with winter tyre sales.

But where exactly are all the tyres destined to end up – have the traditional distribution routes changed in recent years? While Zisser continues to sell to tyre dealers, 98 per cent of its sales are to other wholesalers. In Europe however, there have been some interesting developments. “Our traditional customer is the tyre trader (both regionally and nationally) and tyre fitters,” a Deldo spokesperson explained. However the company says that it is “looking more and more” to supermarket chains and car dealers. According to Deldo: “This really depends on each country. As we are able to supply big quantities in a very short time, more and more supermarkets know the way to Deldo.”

From the Belgian company’s point of view this shift has been influenced by the success of its e-commerce system. “In fact the percentage of tyres sold through car dealers has increased over the last years. The reason being [they] realised…they are in a perfect position to sell tyres too,” the Deldo representative added.

However set against this increased diversity in distribution channels, the relatively high oil prices remain. This is a presents a particular problem in Europe for Deldo: “As we do more than 70 per cent of our transport ourselves, we are very much affected by the increase. The problem is also that you cannot really increase prices because of. So it eats into a piece of your margins instead.”

Zisser Tires’ strategy for sidestepping prices increases centres on the fact that the company specialises in UHP tyres, mainly in 17 – 24 inch sizes. However, “in these sizes prices have been dropping, especially the 20 – 24 inch sizes,” Don Mathis explains. The same is true at Deldo where price decreases have been observed, “starting in the premium brands and going down all the way to budget tyres.”

Continuing Mr Mathis explained that, on his side of the Atlantic at least, there has been a “definite trend toward cheap/budget UHP” products and a “huge decline in demand for name brands.” This is likely to be good news for both wholesalers because, as Deldo is in Europe, Zisser is the exclusive US importer of Chinese produced Wanli tyres, the so-called high performance budget brand.

So does this mean tyre wholesaling is becoming a more international business? Not exactly, says Zisser Tire. There’s “just a few more brokers involved, and Internet/email makes it that much easier for them the work for their 50 cents or a $1. The main professional people in the market, the true wholesalers with tyres in stock is pretty much the same now as 10 years ago,” says Don Mathis. According to the man from Zisser Tire, the order of size is pretty much the only thing that has changed.

Following Zisser’s strong performance this year, the company plans to continue its steady growth building on its strong partnership with the Chinese company behind the Wanli brand, South China Tire & Rubber. Furthermore the company reports that it plans to add another Korean tyre and use some of the profit it made from last year’s $110 million dollar turnover to build a new 120,000 square foot warehouse. This coupled with a “substantial” new bank credit line will put Zisser in a strong position to become a prime player, the company says.

Deldo also has plans to improve its position and aims its current stock levels of 1.4 million tyres “day by day.” This month the company has changed its system in Holland from a weekly to a daily service. “On a service level we want to act quicker, supply on demand over e-commerce. By better sourcing, we also want to be competitive on price, not only in budget, where we are traditionally very strong, but also with premium brands.