Size and Prompt Delivery Is the Way Forward in Europe
It would be fair to say that the tire market in Europe has changed considerably over the last 10 years, with both wholesalers and dealers experiencing a number of significant developments that have affected how they operate and look to gain a profit.
The European tire media has kept everyone continually informed as the market has evolved, but I recently found myself with the opportunity to get an exclusive insider view on what dealers really think of how their market has evolved. Just for a change, not through the views of a veteran player but through the opinions of the market’s younger individuals.
I have known Rutger Veerman for most of the past decade and recently met up with him at his office in The Netherlands. I wanted to find out exactly how he views this period within the European tire sector.
Having previously worked for a leading European manufacturer and wholesaler for 10 years, Veerman launched his own tire purchasing and selling business three years ago. I asked him to recall his early years in the business. He told me, “When working in the wholesale market I was fortunate in being able to experience a very lucrative period when we successfully operated as a ‘parallel importer’ in what was generally termed as ‘the grey market,’ which meant buying tires in one country then immediately selling them in another to take advantage of the fact that manufacturers tended to vary the cost of their product from country to country.“This period came to an eventual end as manufacturers began to view wholesalers as additional sales channels for their own brands and especially those with large warehouses. Furthermore, manufacturers were looking for more control by keeping a more stable pricing between different countries.”
It also seems that in recent years European tire wholesalers and dealers have had to contend with the increasing rivalry of underselling other companies in what is now a very competitive playing field with highly transparent pricing levels. The situation has not been helped by the development of B2B internet tools such as Tyre24, and profit margins have certainly diminished.
I then asked Veerman what he believes will happen in the next decade in Europe, and he has no doubt that although the future looks bright for tire producers, it will not be so good for wholesalers and tire dealers. He adds, “In my opinion, size and versatility, combined with a lean and smart organization, will be the all important issues in this market to ensure long-term survival.
“There is no doubt that wholesalers are going to have to bulk up their inventories and adjust their logistic operations as the amount of different sizes and tire design options are simply too large for even aspiring dealers to cope with.”
Veerman also pointed out that the general trend now is for tire dealers to look to work with larger wholesalers to supply them with smaller quantities of tires over a shorter period of time. It seems the days of orders being for between 500 and 1,000 tires from a few years ago have finished with much smaller orders being placed for overnight delivery between four to eight pieces. Or perhaps express supply by transport carriers such as DHL, which has been growing rapidly during the last few years.
So what about private brands? Well, Veerman believes any dealer looking to take on a private brand should definitely take their time and shop around for an exclusive product, and also insist on working with a supplier who can offer some additional value with the right terms. He adds, “I have no doubt that in 10 years’ time there will be far fewer distributors in the market and those that are left will be the very strong ones who will work efficiently with supply chains and concentrate on the art of professional distribution, especially in terms of availability and speed of delivery.”
In an ironic twist, Veerman’s company is one of a few emerging businesses around the world that appears to be turning the clock back by reviving the practice of buying and selling tire stocks from a number of different suppliers including manufacturers and wholesalers. He believes there is now a new niche in the market to buy unwanted or overstocked tire stocks and then matching them with the requirements of a reliable buyer.
One thing is for sure, the European tire industry will continue to be an exciting and unpredictable field of opportunity for those companies willing to develop new techniques to do business.
John Stone has been working within the global tire industry for the past 24 years. In 2004 he launched his own consulting company, Sapphire Media Services.
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