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31/10/2012
THE LONG WAVE OF THE CRISIS

THE CAR AND TRUCK SECTORS are deep in the doldrums. Structures are in crisis because more vehicles are being made than the market is willing to buy. The economy is in crisis because private and business customers can’t buy.
The consequences are immense. Many dealerships are either closing or selling to those who still believe. Apart from the responsibility of the entire production chain from manufacturers to retailers, with structures and fixed costs that were justifiable when sales were double those of today, endurance will stretch only so far.
But the long wave of the crisis also touches the aftermarket. By 2015, the downturn in sales of new vehicles and the slight falloff in sales of used vehicles will lead to a substantial decline in ownership  transfers and the use of services. This goes for authorized and soft franchising workshops as well as totally independent firms. The figure is expected to be 30%. This decline will not be offset by older vehicles that would normally need more servicing because average annual mileage also tends to decrease.
So what does the future hold for the tyre sector?
The facts and figures show that tyre sell out is more or less stable with slight growth but volumes that are still lower than the European average. Tyre replacement is around 0.7/year. That is, 0.7 car tyres are replaced every year. It would take almost 5 years to change a complete set. In some areas of Italy, this volume is supported primarily by winter tyres that have at least reached significant figures. But that can’t be enough.
Many tyre specialists say they have two seasons – the winter/summer changeover and vice-versa. To contain their fixed costs they employ temporary labour during peak periods. Organization is certainly better but the problem is still there. And then not all tyre specialists operate in areas where the percentage of winter tyres is significant. In the light of the demand by road hauliers and the downturn in sales, many retailers of heavy vehicle tyres have opted to offer services also for private vehicles in order to cover their costs.
In short, if the demand for tyres were also to diminish gradually because of the reduction in travel and the lack of money, what can and must be done?
At a Federpneus meeting in Bologna in 1995, I sent out a message: aggregation. The future of independent retailers would have been to join forces under a manufacturers and distributors sign or even under a tyre specialists sign. The objective – buy better, sell better and cut the costs of certain services.
At a subsequent meeting in 1999, I sent out a second message: beyond specialization. The future would have been less of a burden for anyone who offered several services for vehicles and took advantage of the time that customers were in their shops. The objective – increase the offer to increase revenues and margins, but also to fill up the dead times with work on underbodies, mechanics, roadworthiness.
Many did something. Many were left standing.
Networks have grown in the car and heavy vehicle retail panorama. They have acquired a bigger share of sell out than independent firms. They have done a better job of handling competition from dealership channels.
Those who enlarged their offer were also able to better compete with dealerships, workshop chains and independent firms that had added tyres to the services offered. Now they tell me that if they provide technical assistance, they don’t have to give discounts on spares and the number of employees is consistent with costs. Hunger comes with eating: mechanical jobs have progressed to the certification of used car value, the sale of used and new cars and multi brands.
Some have already changed. They have and are taking the opportunities concealed in the twists and turns of the crisis. But over the next two or three years improvement is unlikely, on the contrary. The risks could increase, especially for those who decided to stay solely and exclusively specialists with no other kind of business.
I want to add two things that Julio Velasco said about this:
Change is difficult”
It seems impossible that things can change because everything has always been fine”
Change should be implicit to anyone who operates in a free market. Change is dictated by the outside world, by customers, by competitors, by suppliers. A company can only react in time, adapt its offer, skills, and the consistency of its operating tools.
These are some of the prerequisites of change.
A management system that provides data and figures in real time so that decisions can be taken quickly. Not only financial data but also about periods of business. It is business that determines financial results.
A strategy aimed at increasing the loyalty of active customers and keeps them over time through different paid and free activities and reminders.
The constant awareness of how customers and vehicle repair competitors behave so that needs that are currently met or are no longer met by others can be anticipated. For example, after 3,000 km every vehicle probably needs a top up of oil. All tyre specialist customers normally do similar mileages and might also need their oil topped up. No one is offering this paid service any longer - not even petrol stations.
The last prerequisite is to be open to change. I close with the words of Gramellini, Managing Editor of La Stampa newspaper: “Certainly, anyone who changes for the sake of it is hysterical. But anyone who clings to the past is either a dreamer or a coward. In work and in life, real change is a rebellion against conventions. A breaking away that is frightening and often brings suffering, but it is suffering that indispensable because it is the prelude to joy. So if you are still in time, change must be faced with your eyes on the future and the past in your heart”.


Cesare Soresina
c.soresina@pr3consulting.it

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