Michelin develops its retail position and Certified Centre Network
Michelin already has one of the most recognised brands in the market. Now the company is taking steps to ensure the distribution part of the business operates at the same level. At the end of February Tyres & Accessories met with Oliver Gros, head of ‘go to market’ distribution development within UK and Eire, who – you may remember from previous interviews in these pages – was previously head of two-wheel at Michelin Tyres Plc. At the same time we spoke with Mark Coleman, partnership and certification programme (part of what Michelin calls its distribution team, itself an extension of the sales and marketing team), with a brief contribution from sales director Malcolm Scovell who was en route to another meeting. The focus of conversation was on the development of Michelin’s position in the retail distribution of its various product lines and specifically on the effort Michelin is putting into its certified centre valued added scheme in order to re-develop its links with small and medium sized tyre retail businesses.
The most recent developments flow from the relatively recent establishment of a new department – the distribution team, which focuses solely on the commercial relationships between Michelin and wholesalers, distributors. Despite what it sounds like, this team focuses on relationships with retailers and their points of sale rather than the logistics angle this title might otherwise imply. In fact according to Olivier Gros the new distribution team is “nothing to do with physical distribution, rather it about partnership.”
While the content of the discussion largely centred on developments relating to the passenger car tyre side of things, these renewed efforts extend across all the company’s main market segments including: agricultural, earth mover, truck, car and two-wheel tyres.
‘The widest possible accessibility to the end-consumer’
It is a matter of record that the Michelin brand is one of, if not the strongest in the business. Market research consistently points to two brands having the best unprompted recognition here in the UK – Michelin and Pirelli. Something similar is true across various European markets. It would be folly to say which one is the “strongest” (whatever that means) overall, but it is fair to opine that Michelin’s brand has the best breadth of the two with the company reputed for its products in segments as diverse as aeroplane, earthmover, truck, car, motorcycle, industrial and bike. To this high-level of brand equity, Michelin intends to develop “the best distribution network” there is and therefore fully leverage the strength of both. In other words the company acknowledges that it could have been more proactive in this respect during recent years and that some of the economy and mid-range manufacturers have made a name for themselves through their direct relationships with retailers and gained in volume sales because of it.
Strategy is elevated above quantity as far as the geographical spread of this revamped network is concerned. The idea is to have “the widest possible accessibility to the end-consumer.” Company representatives explain that this means to secure access to market and generate the sustainability of market access through partnership programmes in particular. Plans for this are already well underway in the business-to-business orientated segments such as truck tyres and agricultural tyres. We have all heard ExcelAgri and the work this network does in the agricultural sector, which was followed by the redevelopment of Michelin’s business to business truck tyre network last year. What had previously been referred to as the MBA (Michelin Business Advantage) network has since be rejuvenated and re-deployed as Michelin Truck Professional.
A similar metamorphosis is currently being rolled our in the car tyre segment. However as you can imagine this part of the tyre business is quite different to the others, not least because the end-customers are consumers rather than professionals reliant on their vehicles to earn a living. In order for Michelin to achieve its goals in this sector the company is actively engaging with small to medium sized tyre dealers in a bid to open new accounts in a part of the market that the company may have previously been underrepresented in. In addition Michelin is working with wholesalers strategically positioned to offer mutually beneficial opportunities for network coverage and dealer access.
A key part of this is the Michelin Certified Centre status which is an approach common across all business segments. Agricultural and earthmover orientated businesses are scheduled to come on board this year.
Back to passenger car tyres, one way Michelin is attracting dealers is by offering a number of valued-added services to its partners. This means offering exclusive campaigns and programmes to its partners. Such as the opportunity for the Michelin “fill up with air” road show to come and visit you area – all which helps retailers identify potential customers and in turn helps sell out figures. The feedback so far is that all of this is particularly apt in the tough conditions the market has found itself in the last few years.
“Within the next year or two Michelin is aiming to be seen as the benchmark for direct engagement” with its distributors. This is something that is both timely (due to the presence of unit share hungry “following manufacturers” that have been most actively courting the market in recent years) and welcome (due to the increased complexity of running tyre retailers in the 21st century. The effects of laws like this year’s tyre labelling legislation serve only to illustrate this purpose. When it comes to comes to the logistics of implementing the finer details of a fiddly piece of legislation partnership with a large manufacturer such as Michelin will be appealing to some tyre retailers. And for the manufacturer the opportunity to offer its services in areas like this in exchange for a commitment to sell its flag brand is clearly mutually beneficial.
Euromaster, franchising and the wider retail strategy
However, when you are a tyre firm the size of Michelin and when you own the last retail equity in the country, you have to consider your retail policy in light of this wider perspective. Michelin is clearly taking steps to reach out to its retail customer base with renewed vigour, but how does this fit in with the positioning of ATS Euromaster (ATSE)? After all, the major pitfall for any manufacturer controlling so many dots on the map is running the risk of market cannibalisation – that is leaving the impression that equity business is competing with independent retail business.
The last couple of years have seen ATSE significantly re-organise its retail presence, radically “right-sizing” its retail footprint and strategically positioning branches in places of high population density and therefore similarly strong tyre demand. Outside Tyres & Accessories recent meeting at Campbell Road, other Michelin executives have suggested that this reorganisation – and the significant investment that has accompanied it – has resulted in significant improvements in the profitability of the retail business. But to what end?
One hypothetical option is that the company is preparing to release itself from the obligations of owning such a big network (currently around 380 branches). But if this was the case would it have invested the significant amounts it has done in redeveloping this business?
The relative success of Goodyear Dunlop’s decision to franchise off its HiQ retail equity over here provides a tangible example of another more nuanced alternative – one that Michelin through its European Euromaster operations has successfully executed across the continent. This approach would also potentially allow Michelin/ATSE to benefit from the investments it has made to date and keep the most strategically valuable branches as equity owned centres, while allowing its partners and experienced employees the opportunity to expand their own business opportunities through franchising.
Asked if this was what was in the pipeline Malcolm Scovell’s was understandably reticent of committing one way or the other. Nothing seems to be happening on this currently, but “never say never,” was his diplomatic response. That said, this option patently has not been ruled out.
Tyres & Accessories asked the same question of another senior European representative. Shedding a little more light on the question of whether such a model is viable and indeed if it planned for the UK, he suggested that while it is not something that is going to be rolled out immediately in the UK, it is in place in several other key European markets. Of course it is early days yet, but the question is could Michelin be in the process of positioning its ATSE operation in the UK into something that would later make it more attractive in franchise terms should that decision be taken? And this makes the company’s decision to re-invigorate its certified centre network all the more intriguing.