Diversification Is Key to Enduring the Pandemic: Mikel’sBy Alejandro Enríquez | Tue, 12/07/2021 - 17:14
Q: How did Mikel’s continue growing despite the pandemic?
A: Our success has been thanks to our diversification. We sell tools not only to OEMs but also to other channels and partners. Automotive production in Mexico fell during 2020 but the industry is on the path to recovery. However, the aftermarket and equipment segments are still in a good position, which helped our results.
Another consequence of the pandemic was a shortage of supplies and automotive tools caused by production halts in Asia. Companies are now navigating logistics restrictions, which are also influencing our business. However, consumer demand is increasing even if inventory availability is more complex.
Q: What has been Mikel’s experience in jumping to digital channels?
A: Our digitalization strategy accelerated during the pandemic and we developed our own marketplace. We are also using other digital sales platforms to consolidate our presence in online marketplaces. We have not yet surpassed our expectations for online channels as we believe that they should represent 20 percent of total sales. While we are not there yet, we did see triple-digit growth in the second quarter of 2021.
We do not work directly with workshop owners as we sell mostly to wholesalers. To strengthen the capabilities of small-business owners, we have created tutorials and online content to keep them close and answer their questions.
Q: How has the company adapted to shorter planning time frames due to industry challenges?
A: Planning strategies have changed. New issues with lead times and supply procurement have forced us to rebalance our timelines. At this point, no one is brave enough to detail an industry scenario three months forward. Companies must take all conditions into account to build their new strategies.
We sell emergency repair kits directly to OEMs. In this area, we have strong expectations because it is easier for OEMs to have local suppliers. While this area was solid, the peak of the pandemic resulted in a sales bump for us. For that reason, a diversified portfolio was essential. We had previously entered the aftermarket but the pandemic accelerated our growth in this segment.
Whatever happens to the industry, we will continue growing. Unlike other suppliers of ICE vehicle components, we have the guarantee that cars will always need wheels.
Q: How is Mikel’s Latin American expansion playing out?
A: We have franchises in Guatemala and dealers in El Salvador, Nicaragua, Colombia and Peru. The pandemic did influence our exports but if Mexico had a hard time, other Latin American countries experienced even worse conditions. We expect a recovery in 2H21. At the end of the day, vaccination efforts are bolstering confidence among both consumers and companies. We have learned as a region that economies cannot be put on hold.
Q: What are Mikel’s priorities and what challenges are there for your segment?
A: One of our priorities was to strengthen our presence south of Mexico and now we are looking forward to expanding our footprint to the north. We plan to increase our participation in North America thanks to Mexico’s extensive trade agreements. Manufacturing in Mexico provides us an ideal location from which to export tariff-free to countries in North America, the EU and Asia.
What does concern us are energy costs. Mexico was working to reduce its energy costs but that goal became unclear during this federal administration. Uncertainty on commodity prices has also influenced the automotive sector. Over the past six months, steel prices have almost doubled and it is not feasible for companies to double their prices in such a short time.