Also, the new passenger radial private brand “Sumo Akina,” which will be launched by the end of this year, will be manufactured in China.
China is becoming more interesting not only as a production base, but also as a potential sales market. China the giant is taking centre-stage for many wholesalers, including Stamford Tyres from Singapore.
Consequently, the company already operates two distribution offices in China (Shanghai and Guangzhou) and a third one will be established this year. More important than these offices is the plan to build up Stamford’s own retail network in China, with the outlets called “Stamford Mega Mart.”
Currently the company operates in a “full distributional mode,” says Joseph Yeong, who is running the Shanghai office. This should be changed in order to improve margins on the ever-more competitive Chinese replacement market. Wholesalers and manufacturers that continue to approach this market from a mere distributional side, without operating a network of proprietary retail outlets, will eventually lag behind competing companies that are following both marketing approaches.
In order to be prepared for the changes that are expected to take place in China soon, Stamford Tyres has now established its first Mega Mart outlets; more will follow so that there will be about 10 Stamford-owned tyre shops by the end of this year in the cities of Guangzhou, Shanghai and Qingdao.
What is happening right now is regarded as a “test run,” explains the manager in an interview with Tyres & Accessories during the CITExpo in Shanghai last December. “The critical factor now is speed,” Yeong says. In a tyre market with at least 4,000 tyre retail shops, a growing commitment of tyre manufacturers and wholesalers to retailing (for example Michelin sells in about 300 exclusive retail outlets in China), as well as decreasing prices everywhere, it is now time to struggle for a good starting position, enabling Stamford to be well prepared for the upcoming retail market consolidation.
First signs of these developments have already been experienced by many tyre manufacturers suffering from costly surplus capacities. This puts prices under pressure, says Yeong. In 2005 alone, sell-in prices for international tyre brands in China fell some 5%; domestic brand prices have dropped even more. Increasing competition and price pressure generates a situation where short distribution channels without many intermediate dealers are becoming important.
The ideal solution to this would, according to Stamford Tyres, be to establish its own retail network that can work its own cash register.
Because the establishment of a proprietary retail chain is quite costly, Stamford’s Mega Marts have “to be a major part of the turnover.” Obviously this is tried by means of a centralised offer and price policy approach, and the premises for the shops are rented. All in all Stamford “ensures that our products go to our consumers in a very professional way” Stamford is setting all the rules for its retail chain.
Thus Stamford Tyres will operate a “double system”: on the one hand there will be the well established distribution system in China with plenty of independent costumers, and on the other hand there will a retail network on its own account. Stamford also runs Mega Marts in Thailand and in Singapore.