E-Commerce Clicks for DistributorThu, 09/01/2016 - 13:30
Tires are on a roll in Mexico, with the value of the industry here expected to see strong growth in the years to come. The sector is projected to grow at a compound annual growth rate (CAGR) of 10.6 percent during 2016-2021 after a production increase in 2011-2015, according to a TechSci research report. That is good news for distributor TBC, which sees an opportunity to grab a larger market share through its emerging online business.
TBC, which now has about 5,200 clients, fills both wholesale provisions and consumer orders of just a few tires at a time. Its 42 branches are distributed in such a way that in 90 percent of the country, you are never more than two hours away from a TBC distributor. “The national coverage we boast is thanks to such broadly distributed infrastructure and our reliable network,” says David Dauajare Johnson, Director General of TBC.
Tires account for 90 percent of TBC’s business. Heavy vehicle tires are the dominant category representing 50 percent of sales. Car tires cover approximately 30 percent. The remaining percentage is divided between industrial, agricultural and specialty tires. But even the smaller segments have a big impact. “While equipment for workshops represents only 2 percent, the utility margin is very high for this segment., It remains important despite being a small part of our business,” says Dauajare. In Mexico, TBC exclusively distributes Sumitomo, Triangle, Goodride, Golden Crown, Ling Long, Vikrant, Sailun, Durun, Advance, and Hi-Fly products.
TBC also has strong relationships with several fleet groups, including CEMEX Transporte, CEMEX Concretos, Bonafont, Grupo GEN, Panamericana and Xcaret, and is conducting pre-contract tests with Grupo Modelo, Egoba, Transportes Monroy, Grupo Capricornio and Grupo Pullman. By negotiating directly with TBC, fleets can obtain greater value for their money. “Our tires are more affordable than Bridgestone or Michelin products, and our 14 percent market share means that we supply more tires than Goodyear and Continental in Mexico,” says Dauajare. The company’s Japanese-made tires have a similar quality to leading brands but cost only 40 percent of the price. TBC tires are popular among independent distributors, which sell mostly to the heavy vehicle market.
An increasingly important outlet for the company is its e-commerce business. TBC owns the domain llantas.com, having paid US$9,000 for the rights six years ago. Llanta is Spanish for rim or tire. “Anyone that searches the word ‘tire’ in an Internet browser in Mexico will be directed to our site,” Dauajare explains. “Since we have such a broad offering, we can cater to a variety of clients in the country and our goal is to become the Mexican equivalent of the aspirational US company Tire Rack.” Dauajare says that half of Tire Rack’s online sales come via its website while the other half is clients who call the company after seeing its products online. They have highly trained personnel in their call centers, who have tried every single tire personally. This allows them to offer objective advice and adapt their recommendations and service to each customer
“We would like to join forces with competitors to help comply with Official Mexican Standards or NOM regulations and become Mexico’s primary online tire distributor by the end of 2016. We have spoken to Hankook, Michelin, Continental, Bridgestone, Goodyear and Pirelli to include their light vehicle tires on our website and several are already onboard,” says Dauajare. In Mexico, tires must comply with NOM regulations to be imported in large quantities, and doing the paperwork can be cumbersome. The process is further complicated if a tire is imported via a different company than its origin, which affects margins. For 2016, TBC’s priority is for llantas.com to grow considerably. Having invested millions of dollars in software, it has also dedicated financing to its mining division to kindle targeted growth in the segment. Based on upcoming results from its recent expansion to Guatemala, the company will decide at the end of 2016 whether to consolidate there or enter Panama or Costa Rica.
TBC has no plans to have tire shops or offer maintenance services that would put it in competition with its clients. It will focus on supplying service shops. “The overheads in Mexico mean it would not be worth having tire shops for the amount that we would see returns on sales. The business models must adjust between nations and we do not intend to emulate our counterparts in the US.” Says Dauajare: “We aim to be the number one tire distributor in Mexico, and we expect that in two or three years we will be in a very enviable position.”