Michelin went to the consumer to do his own electricity supplier. It is not to compete with Jingdong but to consolidate a more effective retail service channel.
It seems that the story of e-commerce subverting traditional channels has to be staged in the tire industry.
In 2014, when he started operating Michelin and German horse brand tire shops, Tien Young’s most heard question was this: “Online tires are 80 cheaper than you. Can you sell this price?†Xiang Yang can only Reluctantly refused, according to the discount rate, he is doing a loss of trading.
As in most retail industries, traditional tire retail is a pyramid structure consisting of large wholesalers, distributors, and terminal stores, each of which retains a certain margin.
However, the e-commerce platform represented by the Tomo car-raising network (hereinafter referred to as “Tigerâ€) and JD.com is breaking this structure. The trick is still: Buying from wholesalers, selling tires directly to consumers, compressing intermediate links to gain price advantage, and increasing orders, their bargaining power for wholesalers will increase.
On the way Tiger, the price of the same tire is often 10% to 30% lower than that of the tire shop.
The sub-distributors are the first to be hit, and the latter's existence value is even suspected. The pressure is transmitted to the stores along the channel industry chain, and the loss of advantageous prices leads to the loss of tourists. Xiang Yang said that his understanding of the tire store, including his own, had a general decline of 20% to 30% in the flow of shoppers in 2014.
As of now, the way Tiger did not disclose its own sales. However, founder Chen Min publicly claimed that the company’s sales target this year is 1 billion yuan, which shows morale.
As a tire manufacturer, Michelin did not suffer direct losses in this process, and those tires were still produced by it. According to media statistics, in April 2015, Michelin's online sales ranked first in the Chinese market. However, taking into account Michelin's other role, the owner of the Chiba brand, things are not that simple.
Chijia is Michelin's automotive after-sales service brand in China. In addition to selling tires and related services, it also provides maintenance, quick repair and car beauty services. At present, Chi Chi has seven direct-managed stores in the Mainland and the remaining 1,100 are operated by franchisees. In addition to tires, parts such as oil and brake pads, Michelin has assigned to Jiajia Stores after purchasing from partners such as Castrol and Bosch.
Michelin has 12,000 retail terminals in China, including 4S stores, independent express repair shops, and tire shops. "I can't disclose the proportion of sales by sales. I can only say that it is the most central part." Liao Chuhang, general manager of Michelin China's passenger car and light truck tire replacement market, said to CBN Weekly.
Compared to the tires replaced in two or three years, oil, brake pads, and quick repairs, the frequency of these services is much higher. "Fast repairs and maintenance can increase Michelin's contact with customers. Even customers who often come to wash cars will tend to choose Michelin when changing their tyres." Liao Chuhang explained the original intention of doing business. The scale of 1100 makes Chijia one of the largest independent automobile service networks in China.
It is Chijia that really suffers. "I can't give you specific statistics. I can only say that our stores have obviously felt the pressure from e-commerce," said Liao Chuhang.
As a counterattack, Michelin established its own tire retail website and Tmall shop. Unlike tires and other products, tires are not a courier home product. It is large and heavy and requires professionals to install it through specialized equipment. Therefore, regardless of the purchase route, consumers must return to the tire shop to receive services.
The way the Tigers did not have a physical store was to transport the tires to a contracted store and the customer went for a free installation. The Tiger paid the installation fee of 20 yuan to the store, and the replaced old tire was also owned by the store.
Michelin's e-commerce platform is functionally similar to the way Tiger, and it selects tires through models, and then chooses to install stores. The difference is that only Michelin tires are sold on the Michelin platform, and the offline store is limited to Chiba. In other words, Michelin did not aim to build a website to compete with the Toho and JD. Instead, it just tailored a drainage tool for Chigai.
Similarly, German tire makers such as the German horse brand and the Kingu stake also opened stores on Tmall, or established their own retail websites. The offline installation points are also limited to their own brand channels.
This strategy has caused the curiosity of the Michelin headquarters. At the global meeting of the retail business, executives from other regions asked Liao Qihang details of the plan. Because in other markets, Michelin's attitude toward e-commerce is much simpler - buy it directly. In April this year, Michelin announced the acquisition of a 40% stake in Allopneu, France’s largest tire retail site. A month later, it acquired Blackcircles.com, the UK’s largest tire retail site.
In Europe, 8% to 10% of tire transactions are done through the Internet. In the past, tire retail in Europe was dominated by large distributor groups. One of the largest, Reifen Ihle, has an annual income of more than 100 million euros, distributes more than a dozen tire brands, and has its own logistics system and retail stores. Manufacturers such as Michelin and Goodyear simply sell their tires to these distributors, ensuring that the product reaches the widest range of end customers.
As a result, just last year, Reifen Ihle went bankrupt, and one of the important reasons for the breakdown of its capital chain was the erosion of profitability space by cheaper tire e-commerce.
Tire manufacturers have to find other channels.
The two websites Michelin acquired were the top ones in the local market and had a stable revenue. On the homepages of these two websites, Michelin branded products are placed in the most prominent position. Acquiring them will ensure Michelin's control of new channels.
However, in China, the proportion of online shopping tires is less than 2%. The way most brands pick up market share is to hang their own signs on the streets of every city as much as possible.
Even the e-commerce leader such as the way Tiger, its market share is still very small. Coupled with the emergence of various new tire electricity providers, it is not known who is the winner. "The domestic tire electricity providers are still in the stage of burning money to expand traffic." Way Tiger founder Chen Min said in an earlier interview. This means that at present it is not the best time for acquisition.
In contrast, strengthening its own ace channel is clearly a more prudent approach. Although Michelin developed an Internet product, fundamentally, it is still based on traditional channels.
Technically speaking, it is not difficult for Michelin to open the electricity supplier platform. Chijia Networks has a ready-made real-time inventory information system that can deploy tires at any time, as long as the website and payment platform are built on this basis.
The store has to do more simple: register Alipay and online banking accounts, install the App on the phone, and then you can take orders.
However, from the start of the project in 2013, until March this year, Michelin's Tmall shop opened.
As early as the first half of 2013, Michelin hired a third party to investigate the needs of consumer online tires. It installed tracking software on dozens of car owners who had intentions to change their tires, recording their online search for tire information. The conclusion is: Consumers need a reliable website to search for Michelin information.
Six months later, Michelin set up a project inside the company to carry out technology development. At the end of the year, Michelin began trial operations at more than a dozen stores, and this process continued for half a year.
Michelin seems deliberately keeping a low profile. It does not spread new features through any public means. It only has a link to the retail page on the home page of the official website.
A week later, the first order appeared and was a Volkswagen model. The clerk deployed tires from the inventory system on that day. The next day, at the scheduled time, customer service recognized the visitor's license plate, walked out of the store reception, and the clerk took out the prepared tires. In accordance with the regulations, the tire builder has confirmed the tire's model, price, payment method, and tire change procedure.
Everything was just like the previous training. After walking through the entire SOP (Standard Operating Procedures), this made Liao Qihang happy. SOP is the most common vocabulary in Chiigao's solution. Liao Chuhang said that Michelin's prudent pace of e-commerce projects is to "ensure that there is no problem with the entire standardization process."
Designing SOPs for all businesses is Michelin's habit. Chijia has established a team of more than 80 people to visit the store. Each consultant is responsible for 13 to 17 stores and visits at least once a month. One of the key points is to check the standardization of various businesses in the store, including changing tires, changing oil, changing brake pads, and car washing – of course, the inspection itself is also measured by the SOP.
After the formal operation, Michelin did not spread the e-commerce business in the Chiaigao network at once, but gradually added it to the system according to the ratings of different stores. As of now, there are 808 stores in more than 1,100 Chijia stores that have access to e-commerce networks.
During the two years between the establishment of the Chiiga electricity supplier project and its formal operation, the cooperation portal of the Tiger has expanded from Jiangsu, Zhejiang and Shanghai to more than 1200 cities in 266 cities across the country.
Together with Tan Guobin, the manager of overseas Takahashi shop, may not understand these figures. He is more concerned about the direct benefits of e-commerce platforms such as inventory.
In the past, Chigai stores only 20 kinds of common tires in the store. Fast inventory turnover is an important operating indicator for tire shops. In addition to the consideration of fund recovery, the tire itself also has a production date and shelf life, and the storage time is too long, and the price of “non-fresh†tires will decrease. "In general, we don't dare to store large-size, high-priced tires because we don't know when we can sell them." Tan Guobin told the "First Financial Weekly".
This means that when luxury cars or SUV owners - they have higher requirements for service quality - to replace large-size tires, the tire shop had to temporarily allow dealers to deliver, this process may take an hour or two. A contradictory situation has emerged: The higher the customer's demand for service, the more likely he is to experience bad service.
Online reservations solve this problem and stores can prepare “fresh†tires one day in advance, while guaranteeing service speed.
Since the e-commerce platform was opened, Michelin has not published data on online orders. The monthly sales of its best-selling Tyres store are 98, while the sales of the Michelin brand's best-selling products are more than 1,000 in the Tiger's Tmall Store.
From an effect point of view, this Internet product of Michelin is more like an upgrade of customer experience. It has neither the ambition nor the ability to surpass Jingdong and the Way Tiger in traffic. It just wants to ensure that people can meet the demands of online shopping. "We don't want consumers to give up Michelin because they can't buy tires online." Liao Chuhang said.
Compared with the sleek O2O platform, Michelin has added some more "traditional" style of play to more practical results.
Zuo Jian is a retail consultant manager for the West and Southern Districts of Michelin. His team of consultants started a new job this year: helping stores develop "radius marketing" programs.
Specifically, Chijia was asked to step out of the store and take the initiative to promote Chijia's products to owners within a radius of 3 kilometers.
Chiiga headquarters designed a "toolbox" containing seven marketing plans and a matching table. After entering information such as store establishment time, average monthly passenger flow, number of neighboring communities, occupancy rate, and number of neighboring companies in the form, the store advisor will select a marketing plan suitable for the store.
In Shanghai Waigaoqiao Store, which is surrounded by enterprise-level customers, the “big company plan†is adopted: the maintenance of the Chiba is packaged into sales of employee welfare products. Pudong Avenue Stores, which are clustered in residential areas, attract customers with the use of community roadshows and regular guest rewards.
These promotion methods are not new in other industries, but they are still rare in the tire retail industry. In the past, tire shops used to sit in stores and waited for customers, but under the pressure of losing customers, Michelin tried to stick to customers in the most direct way.
From January to April this year, Michelin's arrivals increased by 14% year-on-year. Xiang Yang said that after the Spring Festival this year, the trend of passenger flow has stabilized, and some regular customers have begun to return to the store.
In essence, tire retailing is a kind of community service. In the city, car owners within a radius of 3 kilometers are enough to support the survival of a tire repair shop. It also cannot cover further, beyond this range, the convenience of the service will be discounted.
In fact, in North America and Europe, similar to the supermarkets, pharmacies, and restaurants, supermarkets, pharmacies and restaurants are part of the community. The clerk can name most of the customers. For this kind of community retail store characterized by a neighborhood culture, e-commerce and O2O are not much attractive.
Deng Jie, the general manager of Horse Brand Tire in China, had been responsible for the sales of horse tyres in North America. They had run into these "community stores" when they promoted businesses similar to Chiu O2O. "Many of the old franchisees are reluctant to install these systems. They say that they do not rely on these businesses."
Even senior managers like Tan Guobin cannot recognize most of the customers. More than one-third of the stores have been open since the last two years. However, Michelin hopes that the increased store will move closer to this status. From this perspective, "radius marketing" is a must-do thing.
“The stores that have entered the mature stage and have a stable profitability are closely related to the residents of the community or the customers of the surrounding companies.†Zuo Jian said.
Since 2009, Michelin has spent more than 6 years instilling standardized maintenance methods for more than 1,100 franchise stores and establishing a unified procurement platform. These SOPs have begun to take advantage.
The reason is very simple. Customers who have won with good products, standardized skilled workers and targeted marketing methods are not easily attracted by the tens of dollars online. “The feedback the store advisor received from the store was that compared to the customer flow through low-cost attraction, the customer’s loyalty through the community and radius marketing was higher and the extra consumption was more,†said Zuo Jian.
And this happens to be the weakness of the tire electricity supplier. The tire change is one of the most easily standardised automotive aftermarket services, but they still find it increasingly difficult to standardize processes as more and more cooperative stores are added.
In order to supervise the quality of service of the stores, Mai Tire, which is similar to the Way Tiger model, has one resident staff in each partner store to ensure the standardization of the tire change process, which greatly increases the cost. Earlier this year, wheat tires reported news of a tight capital chain and the country’s expansion plan was also suspended. The way Tiger is now using the customer scoring method to evaluate the quality of service of the store.
"Automotive aftermarket is a very heavy industry. The overly lightweight internet model may soon be overrun; the pressure of the increased model is that the startup company cannot afford it. Whoever has quality offline resources will be in an advantage." Views think tank analyst Qian Wenying said.
Michelin cannot avoid the same problem. The number of Chijia stores is planned to increase to 1,500 within three years, to 2,000 within five years, and 50% of new stores will appear in third and fourth tier cities. These markets lack sufficient talents for auto service, and they must adhere to the SOP. Michelin clearly has to work harder.
Currently, Tiger has already launched a standard maintenance business. Liao Qihang revealed that in the second half of this year, Michelin may also increase its oil maintenance and other projects on the Chigas electricity supplier platform.
When the competition starts to be more difficult to standardize on maintenance, quick fixes, etc., and the business requirements for offline stores are extended, the advantage of the increase may be even more pronounced.
(According to the requirements of the interviewee, the text is named after Yang.)
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