MOTORING | YESTERDAY | TODAY | TOMORROW
chapter 1
MOTORING | YESTERDAY | TODAY | TOMORROW
chapter 1
Following the so-called Edward Gierek decade and a few years of prosperity driven by credits from Western banks, which ended in the mid-1970s, Poland’s economic situation began to deteriorate dramatically. The scheme aimed at building a “new, better country” didn’t work out. The massive investments in heavy industry, construction and farming did not yield the anticipated results. The centrally controlled economy, which did not go by the free-market laws of demand and supply proved more than inefficient.
The basic consumer products became scarce, while goods such as washing machines or TVs were extremely hard to get. Yet, on the other hand, the Polish society underwent an accelerated motoring process following the launch of the Polski Fiat126 p car in 1973 at the Fabryka Samochodów Małolitrażowych (Small Engine Plant). Those passenger cars were sold against a prepayment and their servicing and spare parts distribution was handled by a state-owned chain called Polmozbyt. But the automotive market as such was completely dysfunctional. The car owners faced a constant shortage of the basic consumables, which had to be “arranged for'' through informal connections rather than simply bought, or purchased on a parallel, illegal market at much higher, market prices.
The country entered the 1980s in a deep crisis, stricken by an increasing shortage of consumer goods. The government tried to save the situation by increasing prices and rationing the basic products much to the society’s dissatisfaction. These measures proved futile. Many of the goods, including fuel and spare parts, leaked out of the official trading chain into the black market.
The authorities tried to stop this by prosecuting the “profiteers.” To this end, they established a special authority called the Worker’s and Farmer’s Inspection. Despite high penalties and stigmatization of the practice of profiteering, the market deficit accompanied the socialist government until its collapse.
At the end of 1988, when Mieczysław Rakowski was appointed prime minister, the authorities made an attempt at liberalizing the centrally controlled economy. One of the measures was to sell the so-called non-rationed, “commercial” fuel at a much higher price than the rationed one. A breakthrough came in 1988, when the parliament passed the Business Activity Act, which came to be known as the Wilczek Act, named after the then minister of industry. It allowed people to set up and develop small businesses. But it wasn’t until the first non-communist government led by Tadeusz Mazowiecki took power, when the centrally controlled economy was transformed into a free-market one.
KRZYSZTOF OLEKSOWICZ: Shortly after graduating from university I worked at a state-owned transport services centre for a few months. More specifically, I worked at the engine repair department, which was in line with my interests. I can’t say that I gained much practical experience there, but at least I read all the books on car servicing available back in the day. I was an expert in the Polish Fiat 125 p carburettor, which I was capable of disassembling, reassembling and adjusting with my eyes closed.
ALFRED FRANKE: You’re talking about your experience with cars from the socialist block. But how about the Western cars? When did you start dealing with those?
KO: Still in the 1970s, I went to West Germany, where I got a job at a scrap yard. Its owner, Harald Ricken, would strip old cars down and sell the individual parts obtained this way. He also repaired cars. He was not only a great mechanic but also a superb trader - he traded used parts and whole cars, and he did with an unprecedented skill. Under his supervision I not only learned the trade of a mechanic but also discovered how the free market works. I’d like to share an anecdote with you, if I may. Well, Harald was quite a character - a gigantic man with a gladiator’s physique. By a stroke of luck, one day, Jerzy Kulej, a two-time Olympic champion in boxing, showed up at Harald’s yard.
I remember that he was not so much interested in the cars standing in the yard as in Harald himself and his extraordinary body-build. Kulej made a funny comment about it and with an expert’s touch felt Harald’s biceps saying that he would make him into a heavy-weight boxing champion in just one year. As you know, Kulej was a light welterweight boxer and was not much of Goliath, which made the whole scene even more humorous.
AF: A truly charming anecdote. But going back to motoring, did you observe the independent aftermarket back then? Did you try to figure out how independent garages operated and how the spare parts distribution was organized? In other words, did you try to get the know-how to use it in Poland after the collapse of the communist system?
KO: In a sense, yes, although no one expected that communism would soon give way to democracy and freedom, also in economy. I just wanted to make some money, just like I did as a student, when I would take up different summer jobs. I remember that at one point I even took a leave of absence as an opportunity had come up for me to go to the United States to wash windows in Sears Tower in Chicago. The money I earned for a month’s work there was equivalent to a year’s salary in Poland. In addition, from each of my trips abroad I would bring a car to sell in Poland with a profit. This way I earned quite a lot of money already as a student.
AF: And that is something to which you easily get used, isn’t it?
KO: Exactly. Back then, I had no idea that I would deal with motoring in my professional life. All I knew was that I wanted to own a profitable business to secure a comfortable life for myself. I remember a situation when shortly before defending my thesis at the Catholic Academy, my friends and I were going by tram down Marymoncka street, talking about what each of us planned to do after graduation. One of the guys said he was hoping to get hooked up with Pax (editor’s note: a catholic association cooperating with the Polish communist government) because he had some connection there. One girl said she was going to be a librarian. As for me, I didn’t see myself pursuing a similar career.
AF: So, what were your plans? The government allowed private businesses to a very limited extent. Private companies were a thorn in the authorities’ flesh, but they didn’t have a problem with one-man businesses.
KO: You’re right. Business possibilities were very limited back then. You could import a used injection moulding machine from Western Europe and produce plastic bowls or toys, or grow flowers in a greenhouse. But I didn’t see myself doing that. I was into motoring. I wanted to run my own garage, as a garage owner was allowed to have six employees plus three interns, which made him a true businessman by then standards. As I happened to have a commercial driving license, I thought about buying a used commercial vehicle to transport goods, for example furniture. It was a good business back then.
AF: So, on the one hand you were a private car importer, and on the other, you were thinking about setting up a logistics company. But when you were working at Harald’s scrap yard, your eyes suddenly opened to a whole new perspective. Do you remember that moment?
KO: Yes. That was in 1984. One day, Harald and I went to a wholesaler company named Egon vonRuville to get some spare parts. That’s when I met Klaus, a sales representative, with whom I cooperated later on. Let me describe the situation: While buying the spare parts he needed to do repairs in his garage. Harald asked Klaus why the discount he had been getting was so small. He meant that as a joke. To which Klaus answered: “Honestly, Harald, you’re just too small a customer to get a bigger discount.” Well, it sounded really funny given that Harald was a huge, 200 cm tall guy. We all burst into laughter, but I suddenly had an idea. I asked Klaus: “Listen, what discount would you give me if I wanted to buy a bigger quantity of spare parts and export them to Poland? Klaus was stunned as this “request for proposal” caught him completely off guard. But he took it seriously and went to ask his boss about what his company could offer. Klaus’ boss asked: “Do we have any customers in Poland?” “We don’t. This one would be our first one,” said Klaus. “Well, then give him the maximum discount.” That was the first time I ever bought new spare parts with the intention of selling them in Poland. I perfectly remember that I bought Glyco bushings for the OM 615 engine Mercedes cars in three of the most wanted sizes.
AF: Did you have any problems exporting them to Poland? I mean, didn’t the customs officers cause any difficulties?
KO: My cargo didn’t catch their attention at all. One of them just asked me casually what I was carrying. I told him that those were bushings - metal plates for cars. And they let me go. It wouldn't have been so easy had I been carrying a bag of pantyhose or groceries from Aldi. I’m sure they would have seized them. I didn’t even pay a custom duty for my bushings because the customs officers didn’t even bother to weigh them. Back then, all passengers had to pay a duty fee per kilogram of the goods they carried, regardless of whether they were carrying bushings or an engine block. In other words, the duty fee was really small and the total amount for a bag of bushings would have been ridiculously small. They just didn’t care. I should mention that I had a towing business registered in Poland, and in my personal ID there was a stamp confirming that I was employed. Otherwise, I wouldn’t have been able to live a normal life as I would have been considered to be avoiding employment, which always invited trouble in confrontation with the authorities. Plus I wouldn’t have gotten my passport. So, I paid some fees and taxes back in Poland, which amounted practically to nothing. And just in case, I had towed a car or two to make it look like my business was working. All to be able to travel to Germany without any problems.
AF: And that is how you became an importer and, at least temporarily, an exclusive representative of Egon von Ruville in Poland. Ok, so, you’ve imported the goods. Now, you have to find customers. Did you put an ad in a newspaper, something like “bushing for Mercedes, only serious offers by mail accepted” (laughter)?
KO: I found customers in no time, so there was no need for an ad. When I came to Poland, I went straight to this garage that I knew that repaired Mercedes cars. I told the owner: “Listen, I have a few sets of bushings here, in such and such sizes. Are you interested?” He asked “How much”? I told him the price and he took an entire pack. He told me to come back the following day to pick up the money. That is how I started trading new spare parts. That’s when I knew I would no longer import used cars, bother to repair them, pull an all-nighter to take them to a car boot sale and wait for a customer to buy it. It just didn’t make sense once I realized I could import and sell new spare parts on such a large and hungry market.
AF: So, in other words, you quit the car-selling business and switched to the aftermarket (laughter). You could say that historically Inter Cars’ roots date back to the socialist times.
KO: Back then I wasn’t thinking about building my own company. Like I said before, my motivation was simple. I just wanted to make money. So, I started making regular trips to Germany, where I’d buy spare parts and sell them on the spot to befriended garages. My German colleagues from Egon von Ruville noticed that I was doing well and kept asking: “Krzysztof, why don’t you start your own business?” We would give 50 thousand Deutsche Marks worth of goods with a deferred payment deadline.
AF: They probably couldn’t comprehend that setting up a company in Poland just like that was impossible, and that import and export were the exclusive domains of state enterprises.
KO: Exactly. Such companies were not welcome by the authorities. It was my dream for Poland to finally become a normal country, just like all the countries in Western Europe. A country where I could open my own business without any problems, hire employees, pay normal custom duties and taxes. That wouldn’t have only benefited me, but my country as well. But that normality didn’t come until a few years later.
AF: You could say so. My first encounter with the motoring industry was back in college, when, shortly before the martial law was imposed, I went on vacation to Munich, where, mind you, I got a job with the lighting department of the BMW plant.
KO: I didn’t know that part of your biography!
AF: Being a rather reserved person, I have never bragged about it (laughter). So, you can say that I started my career with the automotive industry in an authorized manufacturer segment. And it was a “top” job too. It required climbing up a rather shaky ladder to wash ceiling lamps in production plants during stoppages, so you had to be highly qualified, especially in acrobatics (laughter).
KO: You could say that the experience you gained there balancing in high places came in handy many years later when you had to deal with government institutions during your employment with SDCM (laughter).
AF: Indeed, although I had no idea that I would end up working in the automotive industry. Anyway, that summer job with BMW made me realize the gap between Poland and Western Europe.
The lamps at the Munich plant were cleaned regularly, while the oldest layers of dirt covering the wooden floor of the FSO factory in Poland probably dated back to president Bierut’s times. I thought about opening my own business back in college as I knew exactly that a 9 to 5 job in a state company was not for me. I tried different things, all completely unrelated to motoring. But since any private business was more profitable than working for a state company, I had no reason to complain. Nevertheless, I continued to seek my own way until I eventually came across motoring and spare parts trading. As you said, the market demand was so big that even though I had become a middleman between newly established import companies and garages as well as stores, I developed my career in the American traveling salesman’s style until I ended up hooking up with a distribution company.
KO: One skill we gained back in those days was the ability to overcome obstacles, which were plenty in the People’s Republic of Poland, and which also appear completely absurd from today’s perspective. For example, the market operated based on two price lists, one official, applied by the government, the other one unofficial, reflecting the true market prices. Because of that, the value of the cars produced in Poland was higher once they left the production line. In other words, their market price was much more different than the official price. The catch was that you could buy a car for the official price only if you had a special government voucher. Consequently, a Fiat 126 p offered at a car boot sale was worth much more than the same car sold by the state trading agency called Polmozbyt. Do you remember the story when a ferry carrying Fiat 126 p cars sank? The cars were eventually recovered and sold to private individuals on the same auction on which they had been bought for, but their price was higher than that offered by Polmozbyt.
AF: That’s more or less what our automotive market looked like back in the day. But cars could also be purchased for foreign currencies. If you happened to have US dollar or deutch marks, you could buy a 126 or a Fiat 125 through Pewex - an international trade agency, naturally for a market price. You could buy spare parts, oils, tires etc. for foreign-made cars there as well.
KO: Because of the constant shortage of practically all goods, which the government claimed was due to temporary difficulties here and there, drivers had to take special care of their car batteries knowing that replacing them was not an option. So, in winter, you would have to take the battery out of your car and bring it inside the home for the night if you wanted your car to start the following morning. I will never forget that, as I lived on the 14th floor and often had to carry my battery up the stairs, because the elevator would be out of order. My neighbours would say jokingly that I was preparing for an expedition to the Himalayas.
AF: A part of the then automotive landscape consisted of spare parts made by small private businesses, which the authorities tolerated. If the original parts for a Fiat 126 or a Volkswagen Golf were not available, you could buy their copies made by those private businesses, but they were not very durable.
KO: Shortly speaking, It was a time of gigantic advantage of demand over supply, which, paradoxically, was conducive to setting up all kinds of micro businesses, which proved profitable despite the restrictive laws in place. You just had to have a little bit of courage to quit your official job and some money to invest, because the state banks refused to finance private ventures. You would earn the investment money working abroad as a student, engaging in transborder trade on a small scale or borrowing it from your family, if you happened to have well-to-do relatives. Running a business was easy in the sense that no one had any strategy, a future vision nor bothered to think about cost optimization. The demand was so high, that you’d sell everything you had to sell with a high margin.
AF: For example, I remember how popular copies of the Fiat 125 radiator grill were made of poor quality plastic. That was when FSO decided to stop applying steel radiator grills. They were very stylish, but difficult to make. They were replaced with elements made from imported ABS plastic. A Fiat 125 equipped with such a radiator grill was considered to be more modern. The small plant owners took advantage of the situation and produced copies of the radiator grills using quite primitive methods. And even though they were of poor quality, they would still sell on the spot as Fiat 125 p owners wanted to replace their steel grills with the plastic ones.
Home-made face lifting.
KO: There existed two types of garages - those which repaired Polish cars and cars produced in other socialist countries, and those which specialized in repairing western-made brands, but there were very few of them. Firstly, there weren’t all that many western-made cars in Poland. Secondly, repairing them required specialty tools, which were extremely expensive and difficult to get. You would bring them from the West - by yourself or through your friends. Finally, there were a few authorized garages, which offered better standards. They were capable of repairing a few cars at a time, had a lounge for customers and were usually located close to the city canter. Volkswagen, Opel and other carmakers would authorize such garages.
AF: I think that we should explain to the younger readers that in those times these authorized garages did not operate as part of dealerships as those just did not exist. Only the state trade agencies such as Pewex or Baltona were allowed to import cars.
KO: Foreign car dealerships simply did not exist in Poland. You could say that the socialist equivalent of a dealership and an authorized garage in one was the Polmozbyt chain, where people bought and repaired their Fiats. The stories of how people would buy their dream car at Polmozbyt sound as if they had been taken out of Stanisław Bareja’s movies, which depicted the absurdities of the socialist system. For example, you’d use your personal connections to get through to an employee of Polmozbyt just to ask them if a given Fiat 125 rolled out of the production line on Monday. The common conviction back then was that a Fiat produced on a Monday was of poorer quality because the staff assembling it still hadn’t sobered up after a christening or a birthday party.
AF: And coming back to the independent garages that repaired Western-made cars - they usually specialized in one particular brand due to the lack of the necessary equipment, accessories, and of course, the appropriate technical knowledge needed to repair vehicles that were much more advanced than their socialist counterparts.
KO: As we’ve already mentioned, parts for Western-made brands, such as belts, filters, spark plugs could be bought at Pewex stores. More advanced parts, such as engine parts, bushings, pistons or shock absorbers were available in specialized foreign trade agencies.
You would order your part from them and then you’d wait for weeks to get it. And it would cost a fortune too, taking into account the average salary back then.
AF: In those days there were also garages that would give a second life to worn parts, but it was usually very short. Their cottage industry methods were used, for example, to “remanufacture” old shock absorbers or replace clutch disc linings. There were garages specializing in repairing different engine components. Naturally, this had little to do with today’s factory remanufacturing of various parts.
KO: I remember that one such shock absorber remanufacturing garage was located at the Theatre Square in Warsaw. The owner boasted that the shock absorbers he repaired were even better than new ones. There were also small plants, which specialized in the production of parts for Western cars. For example, one of such plants, located in the city of Łódź, was famous for the rings it produced.
KO: Well, they did differ in terms of quality. Engines were repaired using the methods available at the time: cylinders were sleeved as oversized pistons were not available, new rings and shells were fitted, valves were ground and everything was put back together. An engine repaired this way had to be run-in for a very long time, and its service life was understandably quite limited. Such repairs made sense from an economic point of view, because new parts from Western manufacturers were terribly expensive and hard to come by, while the cost of labour of a garage was ridiculously low compared to the prices of parts.
KO: First of all, a gigantic wave of used cars from the West flowed into Poland. People began to buy Western-made cars on a mass scale. Although sometimes very old, they were still better than the socialist Fiats, Wartburgs, Ladas and Skodas. This, in turn, resulted in an instant increase in the demand for spare parts and garage services.
AF: Formally, we already had economic freedom, but the free market was still in its infancy. The Polmozbyt chain inherited from the previous regime was unable to supply parts for even the few models of domestically produced cars. It was a giant yet inter company, completely unfit to trade in parts for Western-made cars. Suddenly, there was a huge new segment to be taken care of by brand new players.
KO: In the early 1990s, the demand still significantly exceeded the supply. Garages were busy repairing cars, and demand for spare parts and tools was growing by the day. The borders had been opened, yet mechanics had to wait up to a week for the ordered parts, and the imported goods sold on the post, straight off pallets. It’s really hard to imagine from today’s perspective, when customers are delivered parts even a few times per day. But that’s how it was - around 6 a.m. a truck with goods would arrive, and that’s when the first customers showed up. Quite a few of them, to be specific. The same day, the goods would disappear like camphor and we’d have to go get a new batch.
AF: I also have a very vivid memory of goods selling out on the spot. They were usually delivered to our warehouse located in the basement in the afternoon. At night, we would carry everything inside, up the stairs. I don’t really see why we did that, knowing that the goods would sell out first thing in the morning. By the end of the day, the shelves were completely empty and in that context our store resembled a butcher store or a liquor store from the early 1980s (laughter).
KO: In other words, the demand was so big that all you actually had to do was bring the goods to Poland and they would sell out in no time without any further effort on your part. There was no need to look for customers, they’d still come. It is worth mentioning here that keeping in touch with the garages was really easy, as those specializing in repairing Western-made cars were usually located close to the centre of Warsaw, many of them near the Daszyńskiego traffic circle, in exactly the same spot where an impressive complex of office buildings stands today. Back then, the area was full of all kinds of warehouses, scrap yards and garages. Speaking of which, it’s worth mentioning that there was also a great demand for the tools needed to repair Western-made cars. This is why we included garage equipment in our offer right from the start. Interestingly, in those days of creeping prosperity, the garage owners wanted the best quality equipment from reputable manufacturers, which was quite expensive.
AF: Lots of used parts were sold there, often of unknown origin, although there were also stands with new products. For companies being at the early stage of their development, a car boot sale was important not so much as a place where parts were sold, but more as a venue in which to acquire new customers, hold discussions and make all kinds of arrangements. You could say that car boot sales resembled a Greek agora in a way. They were popular meeting places for owners of spare part stores from all over Poland. It should be explained to the generation “Z” that maybe only a handful of people had heard about the Internet at the time. Thus, a car boot sale was a place where people from the crawling automotive industry would meet to discuss and do business, which would frequently result in long-term cooperation. For the distributors it was a place where they could also obtain some information about their competitors. We’d just started sniffing around then. And we’d often find out that someone new had appeared on the market from our customers.
KO: New distributors would just pop up like mushrooms. I remember that already back then some of us worried that due to the growing competition the parts trade would soon stop being such a good business. But in the first half of the 1990s, the increase in the number of cars was so great that even the growing number of new market players could not compensate for it. We still couldn’t keep up with the growing demand. In fact, all other industries had to face exactly the same experience.
AF: I remember from that period something completely unimaginable today - catalogues were sold like the most popular novels, rather than left in a garage or a store for customers to take. They were considered a hot commodity and every garage even had a bookcase with catalogues of various companies, which were treated as professional literature, a kind of compendium of technical knowledge.
KO: After 1989, companies popped up like mushrooms and, with a few exceptions i.e., small private businesses established during the People’s Republic of Poland, none of them had any capital whatsoever. So, each of them acted in a similar way - they’d buy goods to immediately sell them. Rotating goods as quickly as possible was a necessity.
AF: It’s worth mentioning that a few distributors originating in the segment of cars manufactured in Eastern Europe managed to switch to parts and accessories for Western-made cars. Some of these companies are still on the market.
KO: Indeed. We have examples of such successful conversions, but mainly in the truck market. Few have succeeded in the passenger car segment. But there was this big company, a real tycoon specializing in parts for domestic cars. I remember a conference where they announced that they were about to enter the market of spare parts for Western-made cars and that they had the funds to do so. They failed, though. Meanwhile, the distributors that once specialized in parts for Star, Jelcz and Kamaz - that is, commercial vehicles manufactured in socialist countries, succeeded in the Western-made cars spare parts market.
AF: Generally speaking, although they all shared a similar business model, different assortment profiles began to take shape. And so, for example, a company from Gdansk offered parts from Italian manufacturers, which were cheaper than the parts made by German companies. Those Italian parts were considered a budget commodity at the time, and for a while there was a high demand for them on the not-so-rich Polish market. I remember that everyone was jealous of their success. They sold their parts literally on the spot. They didn’t even have to bother carrying their parts to the basement for storage, like we did (laughter).
KO: As I didn’t have access to the “Italian stuff,” I traded only premium products through German distributors.
AF: And so you got into engine parts, which is what you started your business with. Many other companies were more focused on consumable parts - belts, filters, pads, etc.
KO: In general, there were two ways of building the assortment. One was the typical product management - for example, focusing on shock absorbers, building the offer covering as wide a range of models as possible. The other system, which we implemented at Inter Cars, let’s call it a picking system, was based on building a full assortment of parts for a given segment of the car fleet. We started with Mercedes and Volkswagen, to which other German brands were added later on. Then we added French, Italian, Swedish, American, Korean and Japanese cars. In general, our assortment policy was to have an entire stall with a wide range of parts needed for complex repairs. We were supplied by German distributors like Hans Pries at the time.
AF: On the other hand, the company I had worked for years built its offer based on the product management model. So we offered parts for practically all cars, but only in several or so assortment groups. At the same time, unlike your company and a few other distributors, we had our goods supplied indirectly by a Danish company called Tridon, which was a typical packager. So, for example, we had fantastic V-belts by Gates in a Tridon box (laughter). At first, this form of sales worked great, but when we started competing in the market with companies that had Gates directly from the manufacturer, our product turned out to be too expensive, because the price had to include the extra margin charged by the packager.
KO: Well, that’s right, after those first “romantic” years of the 1990s decade, when you sold everything in any quantity straight off the pallet, there finally came a point when you had to figure out how to build an offer. I learned this by sitting through long hours in garages, trying to figure out what they needed. Here’s an interesting fact - 30 years ago, just like today, according to recent surveys, garages were interested in buying primarily premium products in premium product manufacturers’ boxes. This seemed rather odd considering how poor the Polish market was back then.
AF: Indeed, the survey conducted by MotoFocus shows that today garages choose primarily premium products, although in the more than 30-year history of the independent market there was also a period when they sought lower-end products. Therefore, one can say that today the selection of parts supplied by reputable manufacturers comes from a wealth of experience.
KO: Because garages already know that manufacturers who also produce first assembly parts supply the aftermarket not only with the highest quality products, but also with knowledge, technical data and training - without which it is simply impossible to repair increasingly complex cars.
KO: We owe our success primarily to the right assortment of goods, namely the aforementioned process of selling whole sets of items, that is, putting together all elements necessary to carry out a given repair. If a garage owner purchased e.g., a shock absorber from a distributor, but the bearing or bumpers were not available with that distributor, then, in order to repair a car, they had to look for those parts elsewhere. That is, they would have to go from one wholesaler to the other, wasting their time and money. Yes, there were companies that offered a wide assortment of products at very competitive prices, but they did not offer to sell them in complete sets.
AF: So, those customers would end up buying from you. But when it came to product groups such as pads, discs, shock absorbers, and silencers, we couldn’t compete with distributors who offered a complete range of these items for all car makes and models.
KO: But we did have that stall I mentioned before, where a mechanic could find a pin, a washer, or a gasket—you name it. In other words, a lot of small but important items, which, taken individually didn’t amount to much, but when put together into a set, they gave us a competitive advantage. Sometimes a garage would buy a shock absorber from our competitor but they’d come to us to buy the remaining items, that is the bearing, the bumper and the buffer cover. Eventually, they’d come to the conclusion that it was more convenient for them to buy everything from one supplier - Inter Cars. It’s worth mentioning that it was car mechanics who were in charge of selecting the product range sold by our company, i.e. practitioners, who created product sets based on their garage experience.
AF: So, it looks like you had a very clever concept of building your product range. The product range policy was indeed the framework of the development strategy in the parts market. We must keep in mind that in the early 1990s, companies were not looking at costs yet, because the margins everyone was getting were so high that you just couldn't care less about such minor things as costs. That didn’t change until sometime later. Some companies had disappeared from the market because they’d started other ventures unrelated to motoring. With time, only those companies which had concentrated on selling parts remained on the market.
KO: Well, that’s right, I myself repeatedly received proposals to get into the computer or fuel business, but I always turned them down, which some people just could not understand. Right from the start I was interested in building a company in an industry that I was familiar with and that I understood. Let me tell you an anecdote. In the 1990s, by pure chance, I ran into a guy I had studied with. We started talking and we soon realized we each had been running a business, mostly with the money inherited by his wife. He bragged about having several businesses. He told me that they were to make sure that your business was diversified. “If you stick to one industry only, then when a downturn comes, you’re done,” he said. He asked about the industries I operated in. I said that I traded in spare parts. “And how many businesses do you have?, he inquired. “Just one, the one selling parts, to be more precise," I replied. He shook his head with pity hearing my nonfiction (laughter). In those days Polish businessmen tried to kill all birds with one stone and had a dozen companies each.
AF: If I were to point to the exact moment when long-term development strategies began to be designed and implemented on the spare parts market to replace the hitherto simple yet popular “buy-and-sell” approach, I would point to the years 93/94. And as early as ‘92, the first automotive trade fair was held in Poznań, where you could meet a lot of people, get an idea of how the competition operated and how you looked against this background.
KO: For us, the breakthrough year was ‘94, when the manufacturers of consumable parts, such as clutches, opened up to us, and we were able to add entire product lines from A to Z to our offer. I will stress it again, those were premium products, which we focused on right from the very beginning. In retrospect, it is evident that this has significantly contributed to our success. Despite the lower margin on these products compared to what you could have earned with cheaper parts, the higher per-unit earnings were substantial. This is because premium products command a higher price, and their distribution costs remain the same as those of cheaper parts.
AF: In the mid-1990s, Western manufacturers had already begun to take a keen interest in the Polish market and no longer saw us as some kind of exotic country from behind the recently fallen Iron Curtain. It was thanks to those companies that the Polish automotive market started to be more civilized, while we had an opportunity to learn many new things.
KO: Some had their own strategies. There were companies that carefully selected their distributors and made sure that together they formed a group of entities that understood each other and respected each other’s territorial boundaries, which we’d refer to as: "from river to river." There was a group of suppliers that did have their own distributors, but did not impose any territorial restrictions. But there were also a few manufacturers who chose one distributor and gave them exclusive rights.
AF: There were also supplier companies which operated through agents, who pursued a commercial policy of their own. Sometimes, wishing to arrive at the highest possible turnover, they’d sell goods to everyone, which frequently resulted in quite funny situations. For example, a brand would have as many as 13 "exclusive" importers. I remember that one such agent had irritated so many distributors by playing them off against each other, that as a precaution, he had set up a special back exit in his office, through which he could escape at a moment’s notice, if some irate businessman wanted to force his way through the front desk and barge into the agent’s office with the intention of grabbing him by the lapels or maybe even by the tie... (laughter).
KO: There were also times when manufacturers who had two commercial brands arranged the market in such a way that they’d give each brand to a different distributor. In effect, they were both selling the same thing, although formally under separate brands.
KO: After securing a sufficiently big product range and, most importantly, ensuring its availability, which in itself required a substantial capital, the next element of creating a growth strategy was to introduce new sales tools. I remember how happy we were after we printed the first price list!
AF: Setting prices and creating price lists was a difficult task, especially because of the inflation, which was still very high. The margin usually varied depending on whether a given product was a fast or a slow-moving one. I remember though an odd situation when a tie rod end that fit both a Ford Escort and a Mini Morris, because technically it was exactly the same product, had two prices. If you bought it for a Mini, you were charged way more than if you bought it for a Ford. It is also hard to imagine today that we started our business without a computer, that orders were made by hand, and the only electronic tool in the company was a calculator. “Excel” charts were made with a ruler and pencil, and orders were sent by fax and the connection would often fail.
KO: We even used a telex machine before that. I used to go to the national telecommunications company branch, where I had a trusted lady who operated the device. There was always a line of entrepreneurs from across all industries waiting to use the telex machine. I would give the lady operator the reference numbers, she would enter and send them, and by the afternoon, I would receive a reply from my supplier.
The fax machine, which we started to use some time later, was much more convenient, but sometimes the printouts came out all black. In general, in the early 1990s, we had dramatic problems with communicating by phone. Getting through to someone abroad was a real feat. There was a special line intended for overseas calls, but using it was terribly expensive.
AF: Do you remember how, back then, you obtained information on the popularity of particular references, something that special algorithms provide today? I remember that the term informatyk [Eng. IT guy] referred to someone responsible for providing information rather than to a computer programmer (laughter).
KO: My way was as simple as it was effective. I would take a catalogue - for example with pistons, then I would visit a few garages whose owners I knew, and they’d put a tick by the items they were interested in. Three ticks next to one item meant that it was really needed, two ticks - that it would be nice to have it, while a single tick meant that the customer might occasionally be interested in buying a given part. Items without a tick were not even worth looking at.
KO: A dramatic change came with the Russian crisis in 1998. Customers from the East had accounted for one third of Polish distributors’ turnover. Suddenly, the whole post-Soviet market collapsed. Customers from Russia, Ukraine and Belarus were out of the picture. We found ourselves in a completely new situation. The time of, what I call, common happiness was over. A new, key factor had to be taken into account - cost saving.
