Chains
Goodyear is aiming to increase its market share in Finland by achieving a 10 per cent sales growth target. According to Deutsche Bank analysts the manufacturer aims to do this by focusing on distribution and becoming the second or third strongest player in the country (behind Michelin and Continental), compared with its current number four position.
There has been much talk about the supposed benefits of nitrogen inflation during the course of this year. Some people call it a gimmick, others take the view that the technological benefits are based on science and that the economic benefits are not to be sniffed at. With this in mind Tyres & Accessories addresses the myths surrounding nitrogen inflation.
Nitrogen tyre inflation is more common than you might think. While comprehensive market data is difficult to come by at this relatively early stage in Nitrogen market’s development, the number of systems on the market is definitely in the hundreds. One equipment manufacturer told T&A (rather optimistically) that there are 500 of units currently on the market. If this is correct it is highly unlikely that these units are being used in tyre inflation applications.
Blackcircles.com is aiming to turn 700 independent garages across the UK into franchisees. And what’s more, managing director, Mike Welch, has a five-year plan to capture 10 per cent of the market and plans to enter Europe in 2006.
Blackcircles.com is something of dotcom success story. Founded in 2001 when Mr Welch was 23, the company currently operates a network of 987 independent garages serving consumers from “Thurso to Truro.” Next the 27-year-old managing director is aiming to capitalise on this position by turning 700 of the garages into branded franchisees, making local independent garages into outlets linked to Blackcircles’ ordering and stock checking systems.
The tyre retail system in countries like Norway, Sweden and Finland presents a fairly unique brand of independent tyre retailing. Perhaps the best demonstration of this can be found in the example of Nordic retail group, Dekk Partner. Tyres & Accessories met the group’s managing director, Leif Kristiansen, and asked what other national markets can learn from the tyre trade in the north of Europe.
The success of the Dekk Partner retail group is quite possibly the European tyre industry’s best-kept secret. Think this is an exaggeration? Just look at the numbers. The group’s collective turnover is expected to reach up to 300 million euros in 2005. In recent years the Nordic tyre retail group has seen its geographical spread, number of branches and, consequently, its turnover grow dramatically.
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.
“I would like to get rid of the expression ‘controlled distribution’,” one contributor told Tyres & Accessories. And this is because along with this term come some ominous implications – that manufacturers can purposefully steer purchasers towards their own products. Of course, this is said to take place most naturally in a manufacturer owned equity like Michelin’s ATS Euromaster, for example.
However, the concept of ‘controlled distribution’ covers a whole spectrum of different scenarios. These range from the obvious – manufacturer owned entities – to the more subtle influence manufacturers can exert over completely independent wholesalers and dealers. It is seldom as straightforward as one person controlling and another being controlled. ‘Controlled distribution’ does not only refer to the role played out by manufacturer equities alone, but also to a wide spectrum of influence extending as far as the independent wholesaler.
‘Distribution in Europe could be just around the corner’
In February 2005 Supply Direct managing director, John Prout, closed an exclusive distribution deal with Chinese equipment manufacturer, Ever Eternal. Now, as a result of “mass demand” Ever Eternal exports its equipment to the UK at an accelerated rate. Supply Direct’s management team regularly visits China in order to maintain strong relations with the company’s supplier. The most recent visit was in July with product development for the UK market at the top of the agenda. With the company reporting such strong business in the UK, John Prout, hints that expansion into Europe could be the next step.
At a time when some small garages are struggling to keep up with the hi-tech advancements of large dealerships, Supply Direct aims to offer brand new equipment at prices that are “just a touch over second hand.”
“Our marketing team has done an in-depth study of the automotive sector and identified a constant decline in the number of small independent garages. By offering new equipment at such low prices, we intend to bring a balance back to the ratio of small garages to large chains through affordable, high quality equipment,” comments Carl Allenson.
And the result? “Our new range is selling quicker than we imagined! Customers are buying and recommending us to others, simply because they’re getting such a good deal. The demand is so high, we’ve had to open a second warehouse,” says sales and marketing director, Carl Allenson.
There is often an assumption that Chinese equipment means poor quality, but this isn’t the case with Supply Direct’s range, according to Mr Allenson. “We’ve worked alongside Ever Eternal to bring their products up to and above CE standards to satisfy the UK market,” he explained.
Since its formation in November 2004, Supply Direct has grown rapidly and captured what the company describes as “a valuable share” of the garage equipment market. “In a year that has seen various ups and downs for the motor trade, the company has managed to fight through all this, and is proud to be on the verge of celebrating its first birthday with a success story under its belt,” the company reports.
So what’s behind the rapid growth? “Good relations with staff and customers is the key,” says managing director, John Prout. “To think how far we’ve come since last year it really shows what a dedicated team can achieve. All of our staff has been brilliant and I would like all our customers to know that we intend to continue giving you excellent service. If we carry on at this rate, distribution into Europe could just be around the corner.
The sales and marketing team have recently designed the company’s new fully interactive website (www.supplydirectuk.com), which offers on-line buying, procedures on MOT bay installation, downloadable documents, special package prices, regular promotions and regular news articles. Working alongside the new website the company still has its usual regional sales managers backed by its call centre team and a national engineer force.
As well as supplying to consumers, Supply Direct also sells to distributors and wholesale buyers. The company reports that it is always on the look out for new distributors all over the UK and Ireland. Despite the company targeting its new product range specifically at smaller garages, it also supplies premium equipment such as Nussbaum and OMA
As a relatively new market segment the ATV tyre sector is hard to define in terms of numbers. It is estimated that the UK ATV tyre replacement market lies between 40 to 60,000 tyres, but it’s difficult to qualify specific numbers when so few companies compile statistics. Despite this lack of information everyone involved in this area will tell you that ATV tyres, in particular the recreational types, are increasing and there is potential for much growth. Further opportunities within the segment are beginning to show themselves, giving wholesalers and retailers the chance to broaden their portfolios, but there are no realistic forecasts as to their expected success. Tyres & Accessories asks UK dealers whether the ATV tyre sector has the scope – volume and longevity – to become more than just another niche?
UK wholesaler, R H Claydon has, like every other ATV specialist, noticed an increase in sales of competition ATV tyres and believes that their volume will increase in the next two to three years. However, currently the utility side provides it with its volume sales, and the company expects this to remain the case, terming it a “drip feed” segment. According to the company’s corporate business manager, Dick Anderson, R H Claydon’s existing sales are split 90:10 (utility: recreational), but he expects this to shift in the future. Whether sales of recreational ATV tyres will ever equal that of utility the manager could not estimate, but he does believe that due to the sector’s following it will continue to grow for years to come.
Mr Anderson maintains that both the volume and longevity of the recreational ATV market are certain, but what about profit? R H Claydon broke into the ATV sports sector last year and has been joined by considerably more competitors since. The recreational ATV tyre side has, until now, been dominated by a small quantity of companies but the numbers are beginning to grow. “It’s a niche market,” claims the business manager, continuing: “however the profitability has been eroded to some degree over the last few years due to the increasing number of companies present in the market.”
David Williams, ATV department manager, Fieldens, agrees that there has been a significant increase in those involved in ATV tyres. “There was a time when only ATV centres dealt with the tyres however this has changed. Now there are many more companies offering the tyres, even retail chains, and if they don’t stock the tyre they will generally offer to find it for a customer anyway.” Both managers commented that the increasing number of ATV tyre brands on the market (especially those from China) has also had an affect on profitability. Dick Anderson added: “Margins on ATV tyres are acceptable, but have decreased as the tyre’s worth has gone down.”
If the individual profit of an ATV tyre has decreased then it is obviously important that overall volume does the opposite, and that new opportunities to make money present themselves to the wholesalers and retailers involved. According to Quad magazine’s Dave Bradford quadricycles have become a “sales sensation” in Europe and are becoming a more frequent sight on UK roads. This craze has therefore increased the need for street legal tyres; e-marked ATV rubber that offers a performance similar to a passenger car tyre. Maxxis UK estimates that currently 15 per cent of ATV tyres are used on road with the remainder used in off-road conditions. MD Derek McMartin also explained that street legal tyres have become a massive opportunity in America for the company and he expects the same to happen in Europe.
Because ATV tyres have changed in terms of usage over the last five years, the technology behind them has also had to change. ATVs initially raced on turf tyres until they became so popular that ATV racing rubber was developed. As well as that run-flats have been created for the utility sector, so both wholesalers and retailers are expecting big things when it comes to future street legal tyre development.
As far as the ATV specialists are concerned there are plenty of emerging opportunities within the segment for them to get their teeth into. But what they don’t want is every other retailer and wholesaler in the market to take a bite of the cake also! As far as the existing ATV tyre companies are concerned it is a specialist market and an area for the specialist dealer only.
“It’s very much a regionally specific market, and that makes it ideally a market for specialist farm dealers, or on the sporting side specialist ATV dealers,” maintains Mr Anderson. An ATV tyre sales person needs a “sound” understanding of the market to ensure they fulfil the needs of customer, agree both R H Claydon and Fieldens, inferring that it is not an area that simply any retailer can operate in.
According to Mr Anderson, forecasting an ATV tyre stock profile also complicates matters. “With ATV tyres you have to be able to offer a full range because demand can be very varied. It’s difficult to assess the stock profile because there may be eight or nine popular sizes in the utility segment and six in racing, but each range has its own popular fitments, and you want to be able to offer them all. We (R H Claydon) bring in our ATV tyres by container so we can offer a full range, even of the less common sizes, but not every company is in a position to do that. So it’s not an area that every wholesaler and retailer could get into.”
As both the ATV utility and recreation markets develop new branches the market certainly seems to have the capacity to sustain the expected future growth. But whether these new opportunities mature into long-term profits is difficult to estimate at such an early stage. The wholesalers and retailers certainly have faith in the niche’s permanence and future volumes, just as long as it remains that, a niche.
In February 2005 Supply Direct managing director, John Prout, closed an exclusive distribution deal with Chinese equipment manufacturer, Ever Eternal. Now, as a result of “mass demand” Ever Eternal exports its equipment to the UK at an accelerated rate.
Supply Direct’s management team regularly visits China in order to maintain strong relations with the company’s supplier. The most recent visit was in July with product development for the UK market at the top of their agenda. With the company reporting such strong business in the UK, John Prout, hints that expansion into Europe could be the next step.
Hofmann, has won the contract to supply Fast Fit Ireland with all of their wheel service equipment requirements. Fast Fit Ireland, who look over the Kwik-Fit depots in the Republic of Ireland last year, are now one of the largest fast-fit chains in Ireland with over 22 depots. All depots have been equipped with “top of the range Hofmann products,” the company reports.
The decision to introduce a private brand was taken in light of the strategic advantages, says point S international AG. Point S believes that it can react more flexibly to the changing market conditions because of its adoption of the Summerstar and Winterstar tyres, which are produced in Europe and sold in all states represented by the cooperative. Heinz-Werner Knörnschild, chairman of point S international, told Tyres & Accessories what he sees as the benefits and requirements that come along with the introduction of a private brand.
At the beginning of April, Yokohama Rubber Co, made its Europe Office in Dusseldorf, Germany, a subsidiary called Yokohama Europe GmbH. Yokohama Europe will oversee Yokohama’s European marketing and sales strategies. According to the company, the move is part of efforts to strengthen Yokohama’s marketing strategy by more closely managing local operations. The new company will help reinforce sales by concluding comprehensive contracts with leading store chains around Europe and by accelerating original equipment marketing to European automakers.
Yokohama now has sales companies in 10 countries in Europe – in the UK, Italy, Switzerland, Sweden, Germany, Austria, Denmark, Belgium, Spain, and Russia.
A recent survey conducted by the Sunday Times has shown Kwik-Fit to be one of the most expensive tyre fitting chains in the UK. The publication’s research found the company charged up to 120 per cent more for certain types of tyre than outlets in the same area.
Media Multiplex presented its vehicle parc management software TireCon, at Reifen 2002 for the first time. Three years later its goal is to establish the software as a standard European solution for haulage contractors, passenger car, truck, bus and other vehicle fleets for tyre dealers, service chains and leasing companies.
Tomahawk has been through some major changes since its inception eight years ago. Set up in Wolverhampton, following two and a half years of research and testing it was the first business of its kind to retread motorcycle tyres in the UK. It was business as usual for the company until an American firm approached it two years ago, wanting to join forces to develop the retreaded motorcycle tyres for the US. Tomahawk entered into a commercial agreement with Cycle Tires, a subsidiary of aircraft tyre technologist, Desser Tire & Rubber and hasn’t looked back.
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