Fair Distribution of Service
This year’s NTDA Tyre Wholesaler’s Group (TWG) lunch in November continued in the tradition of recent years, with thought provoking speeches on interesting industry topics. TWG chairman, Ashley Croft focused on the subjects of manufacturer distribution and tyre safety policy.
Referring back to his comments on the subject 12 months ago, Ashley croft opened by querying Christian Salvesen’s intention to become the sole logistics supplier to the tyre trade: “I wonder if their report of a 19 per cent profit fall, attributed to higher than anticipated start-up costs on distribution deals with tyre makers, has caused a rethink to the attractiveness of their stated strategy. From the point of view of companies receiving delivery from this logistics supplier, they still have a long way to go before they reach the level of quality of distribution achieved by any of the UK wholesalers.
(In June Tyres & Accessories reported that profits at Christian Salvesen fell 19 per cent, at least partly due to the higher than expected start-up costs encountered in its distribution deal with Goodyear Dunlop and Continental Tyre Group in the UK. At the time, the news extended the UK transport division’s operating losses to £4.6 million for the year. By 2 October, Groupe Norbert Dentressangle had offered to buy it.)
Ashley Croft continued: “Kwik-Fit also believe they can distribute their own requirements more efficiently and at less cost than outside logistics companies with their planned new distribution hub. As wholesalers, we must be careful to ensure we do not then further subsidise the manufacturers true cost of distribution to smaller retailers. We have already witnessed a narrowing of terms between smaller retailers, and ourselves that I do not believe truly reflects the cost to serve. I am sure that in the negotiations between manufacturers and their logistics suppliers, rates will be increasing rather than decreasing, and should be passed on in accordance with the high cost that small volume deliveries incur.”
‘It’s a penguin; it won’t fly’
From here Croft drew parallels with the 1991 proposed generic ‘Tread Carefully’ campaign, designed to promote the publics awareness of 1.6mm tread legislation: “I believe that Chuck Davies, sales director for Michelin at the time, was being prophetic about our industry in general when he made his well publicised comments about this campaign, ‘it’s a penguin; it won’t fly,’ in a reference to the apparent impossibility of the manufacturers working together and with the various sectors of the industry.” Croft observed: “The politics of our various organisations and the members they represent do not apparently permit working together for the common good.” And this, of course, has implications on recent projects to paint an accurate picture of the UK replacement market: “Our net replacement market in the UK has, I believe, grown substantially over the last two years – and I recognise that this is not shown in ERMC statistics.”
(At this point it is worth mentioning that NTDA members have recently been cooperating with one of the world’s leading market research firms, GfK, to produce what sound like a fascinating sell-out market report. Initial conversations with GfK representatives suggest that this project could represent some of the most accurate “sell-out” sales data so far seen on the UK market, going down to size and speed rating. Initial results are expected in January 2008. Keep an eye on Tyres & Accessories magazine and www.tyrepress.com for more details on this).
Ashley Croft continued his speech: “Tyre manufacturer surveys tell us that ‘brand,’ and ‘trust in the brand’ are major influences upon the decision making processes of tyre buyers. The dramatic growth of brands such as Linglong, Jintong, Infinity, Maxxis, Sunny, Wanli et al would suggest there is a different over-riding influence; that of price! Let me be perfectly clear: as a wholesaler, I would much rather sell a major brand product at £75 than a budget brand product at £25. Personally, I am also not happy to see such a low market share position held by the major brands. There is, however, a seemingly insatiable appetite for budget brands in this country, a point that does not appear to have been missed by the ETRMA.
Concluding Croft said: “Until such time as we are able to work together as a cohesive industry we shall never be able to effectively communicate our message to the buying public…I believe we should take the comments of Chuck Davis from 1991 as a challenge, and not an epitaph.