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31/10/2012
INTERPRETING THE MARKET AND FINDING NEW SYNERGIES

THE VISION OF FEDERPNEUS CHAIRMAN, GUIDO SCHIAVON
Conveying the importance of tyres as essential elements of road safety and the need to use professionals in the sector. Bringing new, perhaps shared, strengths into play to cope with the recession and changes in the market. These were just some of the subjects discussed by the chairman of the association of tyre specialists

Antonio Berardi

AT A TIME of global crisis like the present, there can be no doubt that interpreting the market is  complex, but it is important to understand it thoroughly in order to take the most advantage of commercial policies and anti-crisis strategies. Although the market for cars, and vehicles in general,  is characterized by disturbing and constant “minus signs” that leave no scope for the imagination, the replacement tyre market is more complicated.
Moreover, it is a market were substantial changes in legislation and “customs” are being made, to the extent that the needs of tyre specialists are also changing: from ELTs to labelling, the growth of winter tyres and the seasonal nature of the profession. What are the prospects and characteristics? The chairman of Federpneus, Guido Schiavon, talked about them.

What characterizes the vehicle tyre market and what are its prospects?
Basically, the tyre market can be divided into two parts that are logistically and dynamically different: distribution and retail. Distribution is way behind compared to 2011 and there are various reasons for this. The downturn in retail is fairly contained at around 10% as far as the car segment is concerned, even though a good 15-20% of winter tyres mounted in the autumn of 2011 were not changed in the spring. The strong increase in winter tyre  sales over the past two or three years led to a 35% share, but in the mountain areas it exceeded 65%. On the other hand, the 15-20% of winter tyres that were not changed in the spring, perhaps for financial problems, had a negative effect on the summer tyre business. It should be pointed out that, usually, those who do not change from winter to summer tyres are part of a fairly precise segment: city dwellers who don’t travel much, doing a maximum of 7-8,000 kilometres a year. We notice a different attitude to tyres and the importance of using the right ones based on the season by people who use their car for work or travel long distances in mid-high range cars.

How are the professional segments reacting to the crisis?
The professional segments are suffering more from the recession than cars. Trucks are heavily penalized and the two-figure downturn continues. The road transport world is one of the first and most heavily involved sectors in the economic crisis, especially trucks for long hauls and quarry work. Unlike cars, the falloff in sell out is lower than sell in, because it gambled on decreasing warehouse stocks. This also happened for cars, but to a lesser extent. A particular comment on credit must be made: road transport is being increasingly blocked by credit, with tariffs that do not correspond to costs, so the problem is a substantial one for our colleagues in this segment. Other segments have also had falloffs: agriculture is fairly negative; motorbike tyres -50% (the economic squeeze is evident here), but scooters are doing better because they are used for work. Earthmoving, internal handling and industrial tyres have recorded losses of over 50%. But then, construction and industry are at a standstill.

What is the situation of warehouse stocks in this continuing economic crisis? And what about credit?
It all began in June 2011, when there was a massive reduction in summer tyre sell out. However, during the months before the end-of-life-tyre management regulation came into effect, there was a surge in summer tyre sell in. This led to warehouse overstocking, especially in low-lying areas. But the regulation about using winter tyres or chains blocked the sales of summer tyres, which was to the advantage of winter tyres, but stocks of summer versions were in excess. In the north of Italy, the lack of snow caused a downturn in the sale of winter tyres that had been booked the previous spring and led to a ‘congestion’ of summer and winter tyres in warehouses and, as a consequence, credit problems with manufacturers. Moreover, in many cases there was no response from the banks. To date, there have been massive sales of stocks to regularize the credit relationship with suppliers. I think that this negativity has led to greater attention being paid to warehouse stocks.

In what way have customer demands changed?
If sales are slow, some retailers have significantly increased their revenues by doing maintenance. Drivers keep their tyres until the very last moment and try to take better care of them in order to make them last longer. The problem is that it often gets to the point when there is no tread left and that is a safety hazard. Our market also follows the changes that have already taken place in the United States and, subsequently, in Germany: the development of a range of products and strong offer diversification in the first, second and third segments. In other words, huge segmentation based on different customer needs, habits and use, which are even more predominant with the crisis. Because offer and customer needs have changed, price and discount policies must also adapt in order to stay profitable, irrespective of the type of product.

What are the commercial strategies for this winter?
With the various unknowns, it all remains to be seen but it will certainly be easier to find winter tyres because of the stocks of unsold tyres in our warehouses and the considerable downturn in advance orders. Forecasting snow is not easy but if everything goes well we will have made a good investment; if there is no snow, like last year, the retailer will pay a high price. I would urge manufacturers to be more aware of the problem and keep stocks in the same way as summer tyres. When we retailers place advance orders, we know about the present and the past but not the future, so we might miscalculate our needs. Moreover, we don’t have the same information manufacturers have about new vehicles because they are actively involved in the birth of new models. Greater coordination and an attempt to share strategies would be important.

In the past there was a mistaken belief that you had to buy products made the same day. Do you think users are more knowledgeable now?
Unfortunately, the urban myth of “fresh rubber” is still alive and well: the belief that you must buy tyres that have been made the same day. Sector operators know that tyres can be stocked for a long time before they are sold. In the past, the information manufacturers gave was not enough and I am hoping they will provide new and more incisive communications, especially this year when the tyres stocked in 2011 were probably made in 2010 or even 2009.

With the evolution of the market, what does retail need today?
With the strong increase in winter tyres in the north of Italy and also a certain amount of development in the centre-south compared to a few years ago, the needs and rhythms of the tyre specialist are changing and there are new requirements. In the north, shops are busy in peaks. They do a lot of business in mid October and mid January, even without the idiosyncrasies of the weather, and then in mid March up to the end of April. During these periods, they need twice the staff and also a little patience on the part of customers. In other periods, business drops off considerably, with prolonged downtimes and significant running costs. The category must think bigger, it must be courageous and invest in alternative tyre-related products and services and I am convinced that they will be adequately rewarded. What I mean is work on brakes, shock absorbers, exhausts, lubricants, air conditioners and everything else to do with consumption.

You talked about communication and collaboration. Are there anti-crisis remedies?
The crisis exists and we certainly cannot interpret market trends without taking it into consideration. Nowadays, habits are linked partly to financial problems and it’s difficult to put across the concept of product quality and its physiological cost, of service, the importance of maintenance and changing tyres, but there can be no doubt that it must be done.  In short, it is difficult to raise awareness about tyres when people don’t have enough to get to the end of the month,  but we must raise the awareness of users, authorities and institutions in order to ensure safety on the roads. Despite the recession it is essential to communicate about tyres having seen what has been achieved after ten years of the ‘Pneumatici sotto Controllo’ (keeping tabs on tyres) campaign by Assogomma and Federpneus. Informing the public about our world will without a doubt lead to greater awareness about tyres.

You have been the chairman of Federpneus for many years. What role can the association play today?
As chairman of Federpneus for almost twenty years (1995), I have followed and guided the Association’s actions to protect a healthy category. The main role of the Association today is political, a strong and united representative at institutions, bodies and the government. Frequently, requests are not heard or understood, but with our patience and perseverance we have achieved significant results for tyre specialists and we want to continue to do so.

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