Facing the Facts
In his inaugural speech as chairman of the NTDA Tyre Wholesalers Group (TWG), Ashley Croft did not waste any time in highlighting the issues he wishes to address during his tenure. Referring to certain manufacturers’ use of logistics companies and the place of wholesalers in the UK tyre business, Croft opened a discussion to which there is no quick resolution – calling on manufacturers to resist the urge to increase their direct market control and rather further their relationship with the professional wholesale membership that the TWG represents.
In his own words Ashley Croft is “a great believer in not perpetuating things if they have served their purpose.” Croft commented that there is still “unfinished work to be done” and the fact that he accepted immediate past chairman Peter Gaster’s invitation to take over at the TWG would suggest that Ashley Croft remains a firm believer in the usefulness of the group.
The new TWG chairman began his speech by looking back at the aims of the group and how they have been interpreted by the various chairman in recent years. “I thought back to the beginning of the TWA in the early 1980s, and reflected on its aim: to establish wholesalers as reputable distributors in the eyes of the manfufacturers. There was a tendency to link the UK wholesalers’ approach to the market with the activity of ‘that parasitical bunch of brokers’ (manufacturers’ words) across the channel.
“In 2002 John Shaw said ‘the role of the wholesaler has changed, as indeed has his status, as the industry realises that they represent an efficient channel to market. One of the fears voiced by some customers is that increasing use of wholesalers will break their contacts with manufacturers, particularly in such matters as training. John saw no reason why wholesalers and manufacturers cannot co-operate in this field to the benefit of all.
“In 2003 Peter Gaster commented that the wholesaler performs a vital and necessary function in the UK distribution market. He talked about how important it was to fill trucks in order to reduce the costs of distribution, and how difficult that was if you were restricted to one brand. Some manufacturers were addressing this problem by forming arrangements with National Wholesalers to distribute their products and therefore reduce their own costs!
“One year later in 2004, Peter was able to state how successful that approach had been. This was then re-iterated in 2005 with an expectation that this trend would continue with increased partnerships between manufacturers and wholesalers to improve penetration and optimisation, particularly as distribution costs continued to rise. The need for closer co-operation and understanding was becoming even more important.
“Clearly, there is a strong desire from the members of the TWG to work with manufacturers in supplying and marketing their products, with a preparedness for a joint approach in many areas.
Croft’s strongest words were reserved for the management of the UK’s leader premium brand manufacturers. Following the growth of partnerships between members and manufacturers in the distribution and marketing of tyres to the vehicle manufacturer agent (VMA) sector. Viewed as the “growth sector” of the industry for a number of years (although let’s recognise that this came at the expense of manufacturers own equity stores and independent distributors – this is not “market growth”) we have witnessed apparently successful joint ventures, with the wholesaler providing not only supply of product but training in both product knowledge and selling skills…One would have thought this successful model would have been expanded upon.
“It therefore came as a shock to a number of members when manufacturers started going direct to the VMA sector, including in some cases directly to those businesses where joint co-operation had been in place!”
Ashley Croft also singled out Continental and Goodyear Dunlop’s decision to work together with Christian Salvesen logistics, and therefore bypassing wholesalers, for criticism. Describing the companies as “two major manufacturers, accounting for three of the six major brands” he voiced wholesaler’s empathy with manufacturers as far as distribution costs are concerned. However, he described Christian Salvesen’s decision to tell its staff that that it intended to evolve into the sole supplier of “major brand product” into the marketplace as symptomatic of “potentially the greatest threat that wholesalers have experienced.”
“Is the way forward really the manufacturer looking to put increased numbers of staff on the road to fulfil the training and marketing role currently provided by the members? Are logistics suppliers going to provide at a realistic cost the multi day delivery service from the members? I think I could be forgiven for thinking that we had gone full circle back to 1983, where we were having to justify our role in the eyes of the manufacturer,” asked Croft replying with a barrage of convincing market statistics:
“I believe that members of TWG supply over 50 per cent of UK replacement market. Distribution by manufacturers to their controlled outlets (equities/franchised) accounts for approximately 13 per cent of the market. Premium brand manufacturers share of the market is approaching 50 per cent. It is clear there is the need for their product to be distributed to areas of the market they do not control, and which can most easily be accessed by the members. With in excess of 13,000 tyre retailing outlets in the UK, surely the most sensible way forward is for both parties to be working together, with support from the TWG members in the marketing of the major brand products? We continue to be keen to work in true partnership with manufacturers.
“To achieve this, pricing stability is a must. The UK continues to be bombarded by cheaper prices from brokers across the channel, with much of their product supplied direct from the manufacturer. Please get your house in order, and then we will have the opportunity to market the product on a stable and sensible basis. Whilst the brokers’ prices continue to be below our acquisition price, we have no alternative but to purchase their product in order to remain competitive.
“We can then look forward to how we can grow the overall market together. We have recently seen two initiatives in this arena: the 3mm campaign, which sadly has not been given the full support it justified and deserved, and the cold weather tyre initiative. This later initiative is receiving support from members of the TWG, although it must be recognised that we shall need to be stocking an increased number of product lines in an already complex market. We recognise the support being given by the manufacturers in trying to develop this market, but let us all be aware that this will need to be a sustained effort over a period of years before this potentially lucrative market can be fully established.”
Croft concluded by emphasising that TWG members desire to work in close cooperation with the manufacturers. Wholesalers, he said, can ensure product availability at a high level with a delivery service that “no logistics supplier can ever match.” His suggestion, once again, was that wholesalers and manufacturers should work together and then reap the mutual benefits.