Growth in new markets giving Deldo a better spread
When Tyres & Accessories spoke with Deldo’s Rutger Veerman in the last week of March, he and several colleagues from the Belgium-based wholesaler had just returned from the Tyrexpo Asia show in Singapore. In addition to praising the exhibition as “the best show in Asia”, Veerman shared that Deldo’s presence at Tyrexpo Asia was important as Asia represents a region that is increasingly important for the company.
“As the European market is slow, we look to markets that are still moving in order to give us a better spread,” explains the international sales and marketing manager. “Asia is one of them. We’ve been doing business there for many years already, but in the last years with more focus. The number of customers and markets we have in Asia is increasing.”
A lot of the business in the Asia Pacific region relates to Deldo’s private labels, which Veerman says are shipped direct from China to customers. He adds that Deldo also sells premium brands there and is seeing growing demand for these products in Asia; replacement fitments for (expensive) European cars are increasingly required. Everything can be delivered mixed in a single container, and the international sales and marketing manager says that even freight costs for premium tyres, which are shipped from Deldo’s warehouse in Antwerp, are competitive.
“Because we have high volumes, we get good conditions,” says Veerman. “We share these with our customers. Furthermore, freight prices from Europe to Asia are much less than for the other direction. For example, it only costs half an euro to ship a tyre from Antwerp to Asia, a quarter the cost of shipping the other way. A huge volume of freight is shipped from Asia to Europe, but empty containers need to return, therefore it is cheap.”
Freight prices for even the most geographically distant locations, such as Australia, are low enough to make doing business there worthwhile. Rutger Veerman notes that freight from Antwerp to Australia is cheaper than from Antwerp to Finland, although the latter is a mere 1,250 nautical miles away compared with the former’s 10,000 or so. “The more popular the route the cheaper it is,” he comments. “We can cost effectively sell in Australia. It is an interesting market for us, and sales are performing nicely in the largest five cities where the country’s population is concentrated. We’re selling both premium and private there; the market is not as budget oriented as the UK.”
Europe remains core business
Although sales outside of Europe – the wholesaler is present in 64 countries –now account for ten per cent of Deldo’s total, Europe is still very much the company’s main market. Operating in this crisis-battered region presents Deldo with the same challenges as it does other companies in the tyre business, and Veerman describes Europe in 2013 as a “very weak” market where margins are being squeezed. Although inventory stocks of winter tyres left over from the previous season have been sold and tyre dealers are placing orders for tyres, Veerman observes that dealer behaviour is becoming careful. “We’ve seen a large increase in parcel services (DPD). Customers are ordering two pieces or four pieces; these smaller orders are not only coming in because of internet B2C, tyre shops and dealers are also ordering small. Placing small orders is a no-risk decision for them, and distributed just-in-time. By taking advantage of smaller, more frequent orders, dealers need less space and capital for stocks.”
Larger orders are shipped to Europe direct from China (Rutger Veerman says that Deldo’s factory partners set aside warehouse space for the wholesaler’s stock) and smaller (seasonal) orders are dispatched to European customers from Antwerp – he describes this arrangement as giving Deldo “the best of both worlds.” And although Europe’s tyre business is slow at the moment, Veerman sees a silver lining in this. “It’s given us a chance to think through new cost efficiency strategies. Cost efficiency is very important, and we already have introduced cost-efficient flexibility into our warehouse. About half the 140 staff there in peak times are sourced through agencies; at the moment we are saving money as we do not need the full capacity in the warehouse. Flexible labour agreements are a good system and we are also considering introducing greater flexibility into our transport in the long-term. Presently about 60 per cent of our total transport is through our own fleet. This is a fixed overhead and we foresee that good external partners could perform better and more cheaply.”
Investing in private brands
When it comes to product, Rutger Veerman shares that Deldo is investing solely in private brands. “We’ve decided to make private labels our investment focus as we have full control of these brands,” he adds. The most recently-introduced brand is Imperial, which entered the Deldo portfolio last year. It will soon be joined by Atlas, the wholesaler’s fourth private brand. The Atlas range will include passenger car, light truck, SUV and winter sizes.
The very first private label introduced by Deldo was Minerva. This brand has been owned by Deldo since 1995 and Veerman points out that the Minerva range now covers some 300 sizes. “No other Chinese private label has so many,” he says. To complement these numerous passenger and light commercial sizes, Deldo is also launching a line of Minerva truck and bus radial tyres. “A lot of customers are demanding TBR. We will distribute this range through the same channels as our pcr products.”
Still much to do
Although Rutger Veerman doesn’t foresee the European market turning around in 2013, he says Deldo is confident about its future here. “We have a strong company and a good mix of people. One day the markets will pick up again – we are not pessimistic.” In the meantime, the company sees exploring new markets as a priority. “Our founder Jos Delcroix has just turned 69 but is here every day,” Veerman comments. “He says the ‘world is so big, and there is so much still to do.’ He believes we can sell seven or eight brands in every market – an accomplishment that will give Deldo plenty to keep it busy.”