INTERVIEW: When Schwalbe UK opened its tailor-made Telford HQ in 2008, it believed the 17,000 sq ft warehouse would be good for at least a decade. The rubber specialist had, however, underestimated and just five years on, it added north of 8,000 sq feet to its present size of around 25,000 sq ft warehouse.
There’s space to grow again too, should it be needed, as BikeBiz is shown out through the back door (was it something we said?). It’s also the first time we’ve seen a brand have its very own piece of woodland on-site.
Thanks to that speedy expansion – and demand outstripping supply – that expanded warehouse hasn’t had chance to reach full capacity, until this year. BikeBiz can confirm the vast warehouse now looks pretty well stocked, and Schwalbe marketing guru Dave Taylor confirms it’s full, save for a couple of more obscure product SKUs.
“We’re well stocked, our wholesalers are – and retailers are too, hopefully. Lead times will be a lot shorter this season,” Taylor – son of Philip, co-founder of Schwalbe UK’s earlier incarnation (see inset, below) – tells us.
Schwalbe UK has had a steady two or three years following a boom from 2008 to 2012 (coinciding with that new HQ).
“Bike imports are just steady and have been for a while,” Taylor rues. Schwalbe tyres are popular in OEM, so the number of new bikes impacts on the firm.
Exchange rates have also been making their mark on the cycle business in the UK.
“We only supply wholesalers,” Taylor stressed. “We don’t go direct to retailers or consumers.
“The exchange rates are currently working in the favour of European wholesalers, some of which are turnover – rather than profit – focused.”
That’s why there have been some ‘bargains’ available to consumers in the UK recently. The European imports helped contribute to the tough 2015.
“We understand IBD frustrations with online,” Taylor admits. “We do have some control with our brand but we rely on wholesalers and there are some things that we cannot control.
“Ultimately, we can’t stop consumers going to Pro Bike or other European online retailers. Wiggle and CRC can source product from Europe too.
“We understand IBD frustrations with imports and price and we try to do as much as we can to make them competitive.
“We are IBD focused and always have been. We run initiatives for IBDs and can run promotions for them only. We want people to go into their local bike shop.”
In 2012 Schwalbe launched a London edition tyre as part of an IBD-only promo. And in 2014 bricks and mortar dealers alone were offered limited Durano Etape editions from the brand.
Schwalbe UK now has a four person sales promotion team navigating the country, each with 500 retailers to cover and making visits to shops every day. But Schwalbe wants to go further than simply promoting its own product.
“We want to help IBDs with their businesses. We can share best practice with them. Pro-active retailers are doing well. If we can help pass advice on then that is better for everyone. Then hopefully IBDs will remember our guys as they have helped.
“The UK cycle market is still maturing. We’re not like the German or Netherlands markets. That’s where we want the industry to be, ultimately.
“IBDs can focus on the things that online can’t do. In a shop the manager might use the tyres himself. He understands the product and people spend more because they come into the shop for his advice.
“We can’t force people to shop on the High Street. But if you don’t have IBDs, the market can’t mature.Even if consumers buy bikes online, they will have to go to an IBD. It is guaranteed footfall into stores.”
Taylor questions the wisdom of joining in price wars: “If IBDs are going to compete only on price then they will lose. If they compete on value added and service then they have a good chance but it does take courage to lose a sale and stick to a certain margin. There are answers to these market problems – everyone can compete. We’ve seen a lot of shops focus on workshops and expand the space they dedicate to servicing in stores. That’s an area that proves people need IBDs.”
Basing a business on turnover alone is not a long-term strategy, Taylor emphasises: “We want Schwalbe to be a margin maker. We want it in the supply chain. We understand retailer frustrations, but it is many times more exasperating for us. We only have one brand and retailers have lots.”
Schwalbe is a market leader in Europe and Germany, but the challenge of competing with other well-known tyre and tube brands is one Schwalbe UK is fully focused on: “We don’t have the financial clout to splash out on huge marketing sponsorships, so innovation is something we concentrate on. Ten per cent of Schwalbe’s global turnover is spent on R&D, which is a significant proportion.”
Schwalbe’s factories only produce tyres for the brand, with the main facility in Eastern Jakarta and another newer factory in Vietnam, which produces entry level tyres and tubes to ease the pressure on the former.
A key new launch for Schwalbe is the Durano DD (Double Defense). It’s aimed at the fast commuter market which is, Taylor explains “a phenomenon in the UK and US.
“Drop bar bikes can be on commuter bikes now. Ten years ago it used to be all about hybrids and flat bars. The Durano DD is synonymous with the UK.”
The fast commuter tyre sports a highly visible reinforced sidewall, using tech from the MTB range. “People like to see the sidewall protection,” explains Taylor. “It’s like riders who want to see a particular grip pattern, regardless of the fact it’s the same compound – it’s aesthetic and psychogical.”
There’s a national campaign and a long-term plan to take market share: “We want to be the leader. We know it will take time. The marketing campaign is robust – it will be in the majority of the consumer mags and we’ll have a bus back campaign in several cities.
“We don’t want a flash in the pan. We want to gain momentum. It’s a proven compound we’re using in the range. Stock is ready to go and we sold through last year.”
IBD concerns are uppermost in Taylor’s mind, returning to the topic as BikeBiz finishes up the visit.
“The pendulum swings and the exchange rate will change, and then European wholesalers won’t be looking to the UK.
“The industry itself drives prices down. From the top of the company, Schwalbe is margin focused. We set prices we believe give a good margin to our wholesalers and shop customers. We won’t jeopardise this strategy. We’re a daughter company to the Schwalbe group and we have to match the margin.”
Fast changing models have their draw backs too, Taylor says: “There’s lots of pressure for IBDs and distributors to carry stock for new bikes and models that will have moved on in a few months. The 12-month model year doesn’t really exist anymore for bikes or P&A brands. We’ve all been guilty of it. There’s a pressure on IBDs to hold stock and then there’s more pressure to educate consumers.
“But there’s a real appetite for the new in consumers and that’s a good thing for the industry.”
Editor’s note: This article was updated with the correct warehouse sizing – the current Schwalbe UK warehouse is 25,000 sq ft, extended by 8,00sq ft from 17,000.