Byline: Louise McHenry
Tesco, Britain's most powerful retailer, has formed a joint venture (JV) with UK-based online tyre retailer Blackcircles, to offer tyres to UK customers.
The website at tesco-tyres.com will officially go live in February.
The JV will merge Blackcircles' supply chain and infrastructure with Tesco's marketing strategies and wide customer base.
Mike Welch, Blackcircles' managing director, told ERJ that the move will allow the company to reach more customers, and to continue to support independent businesses in its network of affiliated garages and franchises.
"Blackcircles' network is made up of independent operators in the UK. We will retain the control and management of that network. Blackcircles, and therefore Tesco Tyres, are supporting local businesses and putting business back in to the independent section," he said.
Blackcircles first made an approach to Tesco about six years ago, but the formal process only began three years ago when the retailer undertook an audit on the company. Welch said the time difference had given Blackcircles the opportunity to develop objectives that matched those of Tesco.
Annual sales at the end of 2010 were about u20 million (C23.8 million), which Welch admitted was quite small in terms of the overall market. However, he noted that Blackcircles' infrastructure could cope with five times that, even if his projections for the next year were more modest.
"We have an incredible capacity within our network to cope with a significant rise but I'd be happy if we can grow ourselves by 50 percent as a consequence of the Tesco deal," he said.
Welch noted that the formation of Tesco Tyres would not lower Blackcircles' tyre prices, saying that the company would not use its economy of scale to drive prices down.
"A tyre is probably the most important element of safety, and yet retailers continue to commoditise the product by going toe-to-toe on price across the range. We will retain our low price but we won't actually trade down as we increase our volume," he said.
Customers will however receive incentives as part of Tesco's reward card scheme that offers discounts on food and fuel.
Having been involved in the tyre industry for over 12 years, Welch started off developing his business plans during his lunch breaks when he worked in Tesco as a teenager, stacking shelves. He later founded Blackcircles.com aiming to use the Internet to reach a wide customer base.
As well as the increased sales expected when Tesco Tyres gets fully underway, Welch also predicted that the winter tyre market will take off in 2011.
"There's now a winter tyre market in the UK. We sold out of all our winter tyre product from October to the end of December 2010. There's a new market emerging, and if we have customers with two sets of tyres then the markets going to double u that's certainly the trend we're seeing," he said.
Copyright 2011 Crain Communications Inc. All Rights Reserved.
No comments:
Post a Comment