Wholesalers wishing to retain a competitive edge must invest in stocks and automation
Ten years is a long time in the tyre world. Over the past decade, European industry observers have witnessed the eco tyre niche blossom into a mainstream segment, seen the implementation of regulations such as REACH and the EU tyre label, and looked on in amazement as end users stopped sniggering at Chinese-made tyres and began looking upon them as a serious, and cheaper alternative to established brands.
Tyre wholesalers have also seen a radical shakeup of their business. Speaking on this topic at last month’s Tire Technology Expo, Rutger Veerman recalled the early days at former employer Deldo, a large Antwerp-based tyre wholesaler. “The family company was established in 1973 and became very successful as a parallel importer,” shares Veerman, who today runs Vimexa Automotive, an independent, Netherlands-based company specialising in matching supply and demand within the tyre industry. “In those days, the prices manufacturers charged for their tyres varied significantly from country to country within Europe. This enabled Deldo to buy, for example, large volumes of Pirelli tyres very cheaply in Germany and sell them at a high price in Italy, or buy Michelin tyres cheaply in The Netherlands and sell them for a profit in France.
“It was a bulk business – They bought thousands of tyres in one place and sold them the next day in another country,” adds Veerman. “Deldo made a lot of money doing this, but the manufacturers didn’t like it. When I joined the company in 2006 it would have been out of the question for a company like Continental or Michelin to deliver tyres to companies like us who sold the same products in the same markets.”
The situation is very different today. Differences in pricing between markets within Europe became less pronounced, ending the golden age of parallel importing. As their role as grey market competitors faded, premium tyre makers began viewing Deldo and its compatriots as additional sales channels; major wholesalers possess large warehouses, a strong distribution network and funds to purchase large volumes of tyres. What better way for a tyre maker to supply regions where its own distribution is patchy?
While the grey market’s demise benefitted tyre makers, the last ten years have dealt wholesalers several hard blows. Veerman notes that instead of underselling tyre makers, many wholesalers now battle to undersell each other in a market where pricing is highly transparent. “B2B (internet) tools such as Tyre24 put wholesalers under a lot of pressure to be the cheapest. You can imagine what this does to prices and especially margins.”
If being in a race to the pricing bottom wasn’t enough, wholesalers have simultaneously needed to bulk up their inventories and tweak their logistics. The number of tyre sizes and options available to consumers these days is simply too much for tyre dealers and small wholesalers to cope with alone, and rather than maintaining their own stocks they rely upon large wholesalers who can supply them small quantities of tyres within a short space of time. While orders of 500 or 1,000 tyres were the rule a decade ago, these days the number of individual pieces in many orders can be counted on one hand. “Warehousing poses a lot of challenges to today’s distributors,” observes Rutger Veerman. “Not only do they need to invest in a product, often they need to invest in automation to help them get tyres out of the warehouse efficiently and to their customers within an acceptable timeframe of 24/48h. Logistic companies like DPD and GLS are making a good business out it.”
Wholesalers wishing to retain a competitive edge have little option but to invest in stocks and automation, but what can be done to bring sanity back into the B2B price war? There’s no panacea, but Veerman says exclusivity offers wholesalers and tyre distributors a means of regaining some control over pricing. “When you want to be successful as a distributor, you need to have exclusive products. With these, you can create your own marketing, distribution policy and pricing, and not compete against neighbours with the same product.”
Exclusive or private budget brands are almost invariably produced in China today. Demand for these products has skyrocketed within Europe over the last ten years, but budget tyre production has grown at an even faster rate. Current overcapacity in China means prices have been strongly decreased during the last 12 months. It has clearly become a buyers’ market, and it pays for anyone looking to take on a private brand to shop around. Veerman’s experiences taught him that credible manufacturers don’t anonymously sell their tyres through a China-based trading house; tyre distributors who are serious about developing and succeeding with a private brand should only consider products made by manufacturers that are willing to work directly with an agent in Europe who can help them develop the right strategy. “Not all Chinese manufacturers understand the need to have someone on the ground in Europe, but some do, and have established an office here or found the right European partner.”
The last few years of the past decade have been tough for Europe’s tyre wholesalers, but what can they expect from the coming ten years? Rutger Veerman opines that while European tyre manufacturers will go from strength to strength and become more active in direct online sales, size will be an important survival factor for wholesalers: “In ten years’ time there will be a few very strong distributors left.” These last men standing will work with more efficient supply chains and distribution, and Veerman notes that availability and speed of delivery will be key.
Vimexa Automotive – import & export solutions for tyres and wheels
A decade in the tyre industry has also brought Rutger Veerman some changes. After gaining initial experience at Michelin and then successfully holding the position of export manager at Deldo for almost eight years, in 2014 he launched his own business, Vimexa Automotive. In some ways, Vimexa Automotive has taken up the baton carried by Deldo many years ago. Although parallel importing has been consigned to the European tyre market’s history books, there is still business to be made in buying tyres in one place/country and selling them in another. “Buying tyres is not an exact science, and sometimes a wholesaler or distributor finds itself with products it can’t sell, for example winter tyres during unseasonably warm weather. It wants to part with these tyres and free up both funds and warehouse space. That’s where Vimexa comes into the picture. What we do is match these tyre stocks with a reliable buyer willing to acquire them for a good price. Based on our strong network and expertise we can create additional value for all parties involved.
“Vimexa is a sales and marketing organisation, focused on international distribution for wheels, private and premium brands car and truck tyres. Providing neutral and dedicated support by overstocks or shortages,” Veerman added.
An additional service the company offers is representing firms in new markets and marketing their products there; Vimexa’s relationship with stock-listed YHI in Singapore is one example of this business. At present, Vimexa works independent with more than 120 customers based in all regions around the world.