Branches and retail chains

After the political breakthrough of 1989, one of the most important goals of Poland’s foreign policy became joining the European Communities, and since 1993, the European Union. In 1997, the European Council decided to commence the accession negotiations with five Central and Eastern European countries, including Poland. The EU enlargement process was inaugurated on March 30, 1998.

Poland declared that it would reach readiness for membership by the end of 2002. The accession negotiations did not really begin until after the Polish law was analysed against its compatibility with the EU law. As many as thirty-seven task teams were set up, each responsible for preparing the EU’s and Poland’s positions in specific areas. The negotiations were concluded on December 13, 2002, during the EU summit in Copenhagen. The Accession Treaty was approved by the European Parliament on April 9, 2003, and adopted by the Council of the European Union on April 14, 2003. It was subsequently ratified by all EU member states. In Poland, the treaty was adopted in a nationwide referendum held on June 7-8, 2003. Nearly 80% of voters voted in favour of Poland’s accession to the European Union. The Accession Treaty, which is the legal basis for the accession of Poland and other Central and Southern European countries, was signed in Athens on April 16, 2003. On May 1st, 2004, Poland became a full member of the European Union.

Poland in the European Union

Alfred Franke: After the Russian crisis, that is, in the late 1990s and early 2000s, there came a period of fierce competition and price wars, which lasted for many years. In fact, we can still feel its consequences. The time of skyrocketing margins was over. Companies that had accumulated capital and invested in warehouses, goods or IT systems were now able to benefit from their decisions.

Grzegorz Kacalski: Have any of the models proven to be the most successful?

Krzysztof Oleksowicz: The main argument for selling through a store rather than a branch is that the store owner is the garage owner’s partner. They both have similar problems, i.e. dealing with employees, the tax office, the social security institution, the fire department, theft, etc. So they understand each other perfectly, and after work they can go out for a beer together. Also selling through business partners generates lower costs, because it does not require any controlling. All you have to do is deliver the goods and make sure you get paid on time.

AF: It is the duty of the wholesaler to make sure that they have a sufficient quantity of goods in the right range. Their duty is to control the costs, sell as much as possible, because that’s how they build their own business. Such cooperation is beneficial for both parties.

KO: Well, that’s right. It would be difficult for the head office to choose the right location for a retail outlet that is conveniently located from the point of view of customers. They also need to determine where the parking lot should be, decide on the colour of walls, furniture, the display, and a whole host of other issues.

AF: Building a chain based on retail partners meant a lower margin, because you had to share it, but also lower costs, because you didn’t have to maintain branches. However, no one expected loyalty from a business partner. Besides, such a store wouldn’t have survived if it hadn’t put together product sets using products obtained from several distributors. The franchise model used by Inter Cars, on the other hand, combines the advantages of cooperation with an independent entity, where the loyalty is ensured by the partner running a branch.

GK: Was an Inter Cars branch allowed to source items from other distributors if the head office didn’t offer a particular item?

KO: The goods on the shelves rotated automatically, but since our offer was not perfect at the time and we were unable to provide all possible set combinations based on it, the branches had the right to source certain products from other importers, that is, to run, as we called it, their own “kiosks.” In other words, the branches were still supposed to provide garages with product sets, even if they had to be sourced from the devil himself, not to mention our competitors. The priority was the satisfaction of the garages, not blind loyalty to us as the franchisor.

AF: We also briefly operated a branch. Back in 1992, we launched a branch in Katowice. It was located near the Spodek arena and was managed from the head office. But it performed very poorly - it generated significant costs and had a very small turnover, so we eventually closed it down without regret. We then switched to a model of cooperation with independent trading partners, following the suggestion of our main supplier.

KO: The failure of selling directly to garages stemmed from the fact that we didn’t offer product sets- i.e., the assortment of various small parts necessary for car repairs. Instead, the product sets could be assembled by a store that had several different suppliers and good access to garages.

AF: I remember that many industry experts argued that creating branches didn’t make any sense; they believed cooperation with wholesalers was more rational and economically viable. This approach didn’t require significant capital commitment, and the costs associated with investments were shared by the distributor and its trading partners.

KO: One of the experts who shared this opinion was Van Heck, one of the industry’s gurus. He argued that it only made sense to work with trade partners, as the owner of a store was a small business owner who knew another small business owner, that is, an owner of a garage, so together they were capable of building partnership relations. As I mentioned before, I didn’t question this approach.

AF: But yet you didn’t choose this model. You wanted to go your own way.

KO: I wanted to build a more efficient system in terms of the flow of goods. I also saw the downside of the distribution model based on cooperation with independent wholesalers, which you mentioned, that is, the risk of lack of loyalty on the part of business partners, who can buy goods from different importers, because they have total freedom in this regard. The franchise system allowed us to avoid this. A franchisee is completely relieved of the obligation to think about the goods, because this is our domain as a franchisor. Their responsibility is to find the right location for the branch, hire staff, reach out to garages, control costs, in other words, do everything a business partner does. Likewise, they remain close ties with garages and easily find common ground with their owners.

GK: Since your franchise network model has been so successful, it would seem that everyone should follow this path.

KO: The franchise system could have been built only by a company that had a leading position in the market and offered a wide range of products, so that subsidiaries, with a few exceptions, wouldn’t have had to turn to other importers for product sets necessary for carrying out repairs. It is also worth pointing out that the franchise-based branch chain is a Polish invention, and no foreign company has ever applied this idea at home. But we have been successfully exporting our franchise system. Inter Cars has been creating its own branches abroad through its subsidiaries.

GK: Why hasn’t any foreign distributor copied this idea from you?

KO: There is a certain sensitive point to our franchise concept. There might occur a situation where a branch owner earns more than the CEO, which the latter might find difficult to accept for psychological reasons. Thus, the franchise system can be implemented effectively only where the board of directors is controlled by the owner, which is virtually no longer the case in the West. In our country, many branch owners earn more than the board members.

AF: It should also be pointed out that there are also successful distributors on the market, who run their own branches and sell parts only based on the B2B system, sometimes even forgoing retail sales.

KO: That’s right. I never claimed that our strategy was the only viable strategy out there. On the other hand, observing the development of our market, I think that consistency is the key. I mean, for example, if you sell through wholesalers, you can no longer directly serve garages, because this way you become a competitor to your own business partners. Once you create a franchise network, you can’t create your own branches managed by the head office right next to the franchises.

GK: A certain distribution company from the Tri-City area, which once ranked among the market leaders but no longer exists, operated both its own as well as franchised branches.

KO: Initially, it operated a chain of “state-owned” subsidiaries, as they are colloquially referred to in the industry, i.e. its own outlets managed by the head office. However, seeing how rapidly our franchise branches were growing, it began to open franchises in addition to its own branches, and, in pursuit of the largest possible market share, also cooperated with independent wholesalers. This led to internal tensions and conflicts. In such a “mixed” arrangement, the company-operated branches are favoured by the head office staff, which results in branches competing with each other on unequal terms. As long as there were only a few such outlets and they were located far from each other, that wasn’t much of a problem. But as the chain grew, things started to get out of control. There were simply too many mushrooms in that borscht.

AF: But, if I remember correctly, your first branch was not a franchise, was it?

KO: Theoretically, it was a branch of its own, but it was created to carry out other tasks. On Waryńskiego street we had a branch that specialized in parts for French and Italian cars, while the main branch at Powsińska Street offered parts for German cars. So, it was not a classic branch. Our franchise branches were established later based on the existing stores, and sometimes even small importers.

GK: What prompted those companies to get involved with Inter Cars and give up full control in favour of cooperation?

KO: It all came from the good relationship we had with our partners. I remember a conversation I had with Krzysiek Pietrzak, who became our franchisee in Warsaw. This whole idea didn’t seem very appealing to him at the beginning. He said: “Business is going well for me, why should I change anything?” And I said to him: “Krzysiu, first of all, you will free the money you have frozen on the shelves at the moment, because from now on the warehouse will be fully financed by Inter Cars, and the goods will move automatically. You won’t have to think about what you are missing and where to get the funds to expand your assortment, we will provide you with the whole system. You will increase your turnover, and on top of that you will sleep peacefully.” And so Krzysiek decided that it was worth giving it a try.

AF: Unsurprisingly, Krzysiek was not easily “convinced” of the idea (laughter). We met when I was fresh in the motoring business, while he was an “old hand” by then. I think this may have been a negotiating tactic on his part. I remember my first meeting with Krzysiek while establishing a business partnership. He had successfully pressed me to get favourable purchasing terms and that turned out to be just the beginning. He then offered to get us a new big customer for each additional 2% discount. Well, he delivered on his promise and we gained five new big customers.

KO: It’s true, the initial negotiations were difficult, but pretty soon the branch owner candidates themselves recognized that the system was working, because the stores that had become branches recorded a huge increase in turnover, which strengthened their position on the local markets. In just 2-3 years, a branch was able to increase its turnover by as much as 10 times compared to the sales it generated as an independent store.

AF: I think there was one more factor that encouraged former independent stores to become branches. Their owners noticed how other distributors’ branches opened right next door. They saw that as a threat and figured they’d be better off hooking up with a stronger partner. They just had to choose which one they were ready to build a future with.

KO: Inter Cars was the largest distributor; it offered the widest product range and the best availability. And that’s what determined the local position of a branch owner. Thanks to our support they were able to get ahead of the competition in the region, which is crucial for a private entrepreneur.

GK: Can the Inter Cars branches compete with each other?

KO: Yes, but they must follow certain rules. They must not offer lower prices and extended payment terms. We can’t allow a situation where a subsidiary gives a customer an extra discount as long as they buy a given product from it.

AF: And what about situations when a new branch would open and a customer who had purchased products from an old branch suddenly decided to buy them from the new one simply because it was located closer to him?

KO: He would just buy them where it was more convenient for him. Frequently, customers would find it convenient to buy products from both branches - from one of them on the way to work and from the other one on the way back home. Initially, we wouldn't allow more than one branch in the same city. But in the 2000s, our branch owners created more branches, and that’s how branch groups were formed, consisting of up to several outlets each. This resulted in a cost reduction and streamlined logistics as well as the work of sales representatives, who could now take responsibility for specific product range sectors, which proved particularly effective when we entered the truck parts segment.

GK: Did building your branch chain go smoothly or did you encounter occasional obstacles? I realize that in business, in addition to talent, you also have to have plenty of luck, but I find it hard to believe that even in a company as organized as Inter Cars, everything went smoothly.

KO: We did make some mistakes and even had to part ways with some of our branch owners.

AF: In hindsight, would you have done anything differently regarding the building of your franchise model?

KO: I would certainly have changed some things. The present model was based on the idea of sharing, that is, each branch owner is a beneficiary and is guaranteed profits. But at the same time, they should be obliged to reinvest a certain portion of their profit and share it with their employees. Unfortunately, this part was never clearly defined, but looking back in perspective, it should have been. I strongly believe that employees should be treated as partners, because they are engaged in the business building process.

GK: Changing the topic, I have a question about a certain peculiarity of the Polish automotive segment. Well, years ago someone explained to me that in the well-ordered Western markets each distributor has one leading supplier in a given product range group, so companies share their manufacturers and everyone is happy. Meanwhile, in Poland there is a complete mess in this regard (my interlocutor used a coarser word), because everyone offers exactly the same products, which causes incredibly fierce competition and leads to lower margins.

KO: This follows from the fact that when the Polish spare parts distribution market was in its infancy, the suppliers were unable to ensure continuous availability of goods. One day a given product was available, the next day it was not. The thing is that we, Polish distributors, were initially treated as second or third category customers. German manufacturers had built long-standing relationships with their domestic customers, and German distributors then looked like Gulliver next to the Lilliputians compared to Polish ones. Consequently, they were served before us in the logistics queue and got the ordered goods first. In short, we had no choice but to turn to multiple suppliers for the same products. This way, if parts from one manufacturer were in short supply, we were able to offer to our garages parts from a different one. This ensured better availability of parts, although on the other hand it made our work more difficult.

GK: Speaking of difficulties. Today, success in the spare parts distribution market depends largely on the right sales tools, including IT. Companies now operate huge IT departments and use advanced software. And they all started out, as Alfred put it, with an “analog excel” requiring but a pencil and a ruler. How did the process of computerization start?

AF: In the beginning, we had a one-man IT department run by a Mr. Jacek, who handled our company from the IT point of view. His job was basically to modify the purchased sales software in such a way that it almost became a proprietary product designed specifically for us. The way our IT operations progressed was that we would write down the modifications we urgently needed and then have Mr. Jacek implement them. In other words, computerization of our company was initially improvised and chaotic. To give you an idea of how low the general awareness of IT was at the time I’ll tell you an anecdote about this warehouseman, who one day announced solemnly that he had decided to quit his job. When asked what he was going to do for a living, he replied that he had found employment as an IT specialist. We were stunned to hear this. He went on to clarify that he would be sitting in the main lobby of the new office building providing the people entering it with information on which floor the company they had come to see was located (laughter).

KO: So, in this way, he began a whole new career in IT. We also had only one IT specialist, Mr. Ryszard, who initially didn’t have much work and simultaneously worked for other companies., . But as the number of our IT tasks gradually increased, he focused only on Inter Cars. However, at one point, the workload became too much for a single person to handle. We literally saw him slowly shrink and fade. We realized that if something happened to him - like getting abducted by aliens, deciding to become a monk or leaving for Tibet- we would be in a tough spot.. That’s when we started building a legitimate IT department

But, returning to the pre-IT era, I’d like to share a few words about the pricing system I developed using only a calculator. Well, the boxes containing car parts had tags with prices in Deutsch marks on them, coded in between some random looking digits.

You would take a box, look at that seemingly random sequence of digits and convert the price from Deutch marks to PLN at the current exchange rate. It was a simple trick but the customers thought that I had learned the entire price list by heart (laughter). Later on, after we had introduced computers into our company, you’d enter a reference number and check the price.

AF: At that time, most distributors had densely stacked shelves in their warehouses, whereas your company introduced a self-service sales model.. Customers would walk around with carts as if they were in a supermarket, selecting the goods themselves. Your competitors envied you for your sales model.

KO: At that time, catalogues were not yet readily available, so the store owners who’d buy goods from us knew exactly what they were buying. They were genuine professionals. They resembled resourceful housewives picking vegetables at the food market. Our sales model significantly accelerated the sales. Later, once we started using reference numbers, we introduced the possibility of placing orders by fax.

AF: But that also showed how much you trusted your customers. Indeed, they had to have a really vast practical knowledge. For example, If you showed them a random silent block, they’d immediately know what kind of car it was intended for. One of our customers, a silencer specialist, was so good that he recognized particular products only by their shape. He would just walk into the warehouse and, without looking into the catalogue, he’d pick exactly the parts he needed. This way he was able to fill up an entire truck.

KO: If you remember, the most wanted parts were those that had the car manufacturer's reference number scrubbed off. Suppliers would remove this number from a car part before transferring it to the aftermarket because they were bound by agreements with car manufacturers. Customers knew exactly that the parts with removed numbers were first-assembly products.

AF: Well, and they were also convinced that some premium brands were better than other ones. Some customers would buy only parts produced by Company A, while others were convinced that the parts manufactured by Company B were better, and nothing would make them change their opinion. In general, the most popular parts were those from German suppliers. The legendary German quality was also highly valued by customers from Eastern Europe.

Garage chains

GK: In the mid-1990s, distributors began creating garage chains with the aim of securing the loyalty of their best customers, whom they also supported in various ways. Which company was the first one to come up with this idea?

KO: The idea came to us from Germany, where all the major distributors had their own service networks. Our suppliers also endorsed the concept of ‘points of fixing,’ ensuring that distributors have access to repair points. In 1996, we established the Q-Service network. The letter “Q” in the name stood for “quality”, and was not to be confused with the word "quick". This is because right from the very start our idea was to create full-service garages capable of carrying out not only the most complicated repairs, but also handling air conditioning, tires, etc. As soon as we launched the Q-Service network, our competitors reacted extremely aggressively, immediately approaching our affiliated garages and attempting to entice them with discounts. This coincided with the beginning of the aforementioned price wars, which intensified over time.

AF: We started building our own garage chain shortly after you created yours. It was named Partner Service, and the garages associated within it used a special stamp reading “A Garage to be Trusted ." Only the best garages were invited to join the chain, namely those whose owners were aware of the need to develop, invest and expand the range of their services. So, you could say that the garages that joined the chain were the most promising ones, while others sensed the competitive pressure that began to appear on the market.

GK: I assume that there were also garages which were not interested in joining your chain due to the traditional Polish reluctance to get organized and cooperate?

AF: Some of the garage owners claimed that they wouldn't benefit from joining the chain, and that they wouldn’t have anyone tell them how to run their garage, and so on. Many of them later changed their mind, seeing that those who had joined us were reaping tangible benefits from mutual cooperation. Presently, about 3,000 garages are associated in chains organized by distributors and car part manufacturers.

GK: When did logistics begin to play a role in building a competitive advantage in the context of garages?

KO: First of all, this concept has two meanings. On one hand, there is the external logistics of delivering goods to the customer. On the other hand, there is internal logistics, which involves proper warehouse stocking and the orderly storage of goods to facilitate quick retrieval from the shelf. We developed the internal logistics right from the beginning. At our very first warehouse on Powsinska Street, we used literally every bit of space, including the boiler room (except during the heating season) to store goods. At first, the warehouseman simply remembered where he had put a given part. Then, the stacking of products from a particular manufacturer, such as shock absorbers, began by number. The next step was to transition to dynamic warehousing, where each item had its own address in the warehouse, and the shelves were filled with products by different manufacturers.

AF: Our warehouse was also so packed with goods that it was difficult to walk between the shelves. The warehousemen used every bit of space, even the walls in the stairwell, where brake repair kits hung on hangers. If I remember correctly, the warehouse on Powsińska street also used shipping containers for storing goods.

KO: That’s correct. Whenever we ran out of free space, we’d just keep our surplus stock in containers to protect it from adverse weather conditions. Another advantage of those containers was that you could lock them up. You also didn’t need any special building permits to use them, because they were not permanently connected to the ground, like the legendary Drzymała’s wagon in the Prussian partition. Fortunately, we didn’t have to move them around every day like Drzymała (laughter). Those containers helped us cope with a sudden surge in sales.

Foreign expansion
and buying groups

GK: Speaking about the history of the Polish aftermarket, I must pose the following question: how is it that Western distributors failed in our market despite their efforts, while our companies are thriving in foreign markets?

KO: Polish distributors are thriving. For instance, Inter Cars is now a market leader not only in Lithuania, Latvia and Estonia, but also in Greece. We are also making significant progress in the German market, where, as it once seemed, the cards have long been dealt.

AF: The lack of success of Western distributors in Poland can be attributed to the initial perception that the Polish market seemed too small and unattractive for them to develop their operations. However, when it eventually grew large enough, they realized that the competition within it was too fierce.

KO: There have been attempts at entering the Polish market, all of them unsuccessful. There have also been a few acquisitions, but nothing came of them, and the resulting potential was wasted. Meanwhile, the largest Polish distribution companies are already earning over a half of their turnover in foreign markets, much to the amazement of their Western European counterparts. We have everything their markets need - the products and their availability. And on top of everything, we know how to do business. We ceased to be local companies a long time ago. The reason why Polish distributors have been able to penetrate the Western European markets with such ease is that the companies there have lost their flexibility and ability to compete. So, we’ve been nibbling at them from all sides.

AF: Polish companies are very innovative. They invest in state-of-the-art IT systems. Meanwhile, Western European distributors continue to utilize older, proven solutions, which of course, are being developed and expanded but are nevertheless outdated. One could say that, in this respect, foreign competitors have remained in the 20th century.

KO: Competing fiercely with each other on the Polish market, we are constantly improving something, looking for more efficient solutions. Meanwhile, our Western counterparts continue to work the way they always have, with the belief that they are the best and will always remain so.

GK: And why is it that it is Polish companies that are doing so well in the Western European markets, and not distributors from other former Eastern Bloc countries?

AF: Poland quickly became a relatively large market, providing our companies with the opportunity to grow and develop \enough to be ready to enter foreign markets. Simultaneously, Polish distributors learned to operate on much lower margins than companies not only in the West but even in the neighbouring Czech Republic.

KO: Additionally, our country’s diversified vehicle fleet has made Polish companies efficient from the logistics perspective, enabling them to build an extremely broad product range. And, as Alfred rightly pointed out, the largest distributor in the Czech, Hungarian or Slovak market is a midget compared to the largest distributor in the Polish market. In addition, Polish companies have become large enough to negotiate better purchase prices with manufacturers.

GK: But the German, French and Italian markets are bigger than the Polish market. So, theoretically, companies there should have even greater opportunities.

KO: Our advantage over them lies in the boldness, ingenuity, and the ability of Polish managers to overcome obstacles. It’s called entrepreneurship. When we, with our ability to improvise and make quick decisions, enter these established markets, where companies are run by managers because their owners can only be seen on portraits adorning the CEOs’ offices, we manoeuvre between these ossified players like Diego Maradona.

AF: Polish companies learned to react instantly in the fast-growing market, where you constantly had to change something, implement something new every now and then, and introduce a new product range. The Western European markets seem way less dynamic, if not stagnant; every day for a typical manager there looks exactly the same.

KO: I’ve noticed an interesting situation on the Austrian market. There are quite a few trading companies there that source their goods mainly from Poland and are unbelievably flexible, bold and innovative. They are owned by 40-year-olds with Central and Eastern European roots. These companies currently have a turnover of a few million euros each, but they are effectively nibbling at the three largest distributors, who continue to stick to their old ways without realizing what’s happening. These small, nimble players remind me of us from the early 1990s, the period immediately following the political and economic changes in Poland. So you can observe an interesting confrontation between the management skills learned at universities and those acquired in real life.

GK: How significant has the accession of Polish distributors to buying groups been?

KO: The first one was Inter Cars, which joined ATR, and it all happened quite spontaneously. I was at a dinner organized by one of the manufacturers at a trade fair in Frankfurt. Earlier that day, I spoke to Robert Lang, a distributor from Hungary, who told me about buying groups, including ATR, to which he belonged himself, as that’s where the most common suppliers were associated. I also figured that ATR would be the best option for Inter Cars. By some incredible stroke of luck, during that dinner, I was seated next to the ATR manager, with whom I engaged in an interesting conversation. We struck the deal the following day.

GK: What are the benefits of being a member of such a group?

KO: Well, naturally, it offers tangible financial benefits. But besides that, it brought us closer to what's going on in Europe. Western companies did look down on us a bit at first, but we were able to establish very close relations with companies from Central Europe, with whom we share similar experiences. I mostly met with colleagues from Hungary and the Czech Republic. I remember that during one meeting we were all sitting together in this “Visegrad group,” when one of our German colleagues said half-jokingly, half-viciously: “drei Kameraden aus dem Warschauer Pakt,” (three comrades from the Warsaw Pact), referring to the title of Remarque's novel. Our membership with ATR also allowed us to establish even closer relations with suppliers, but at a higher level - during ATR meetings, we had a chance to talk to ATR’s bosses.

AF: Then Auto Distribution International entered the Polish market. They had been preparing for this move for a long time and even engaged in discussions with many companies until they finally struck a deal with a group of distributors who formerly sold parts for cars made in Eastern Europe, which I must say was quite surprising. ADI played a significant role in helping them make this transition.

KO: There was a logic behind it. Garages that had previously serviced "socialist" vehicles had to switch to Western cars in order to survive. That is, they had to invest in tools, hire qualified mechanics, or train the existing ones. The reasoning, then, was like this: garages servicing Fiat 126 and Polonez cars would also service Western-made cars, but they would continue the relationships with the existing distributors. And so, the three competitors managed to cooperate and merge, which is a rarity in Poland. Hats off to them!

AF: There have been many more consolidations among distributors. One of them happened most recently and it impressed me a lot - two fiercely competing distributors from Olsztyn joined forces to build a common warehouse and combine their logistics into one. Today, all the major purchasing groups are present in Poland. We also have Temot, Nexus, Groupauto and Global One. And they each pursue a different policy. Some choose only one partner in a given country, while others collaborate with multiple companies.

Distributors pack products in their
own boxes

GK: Another trend observed in the 2000s was related to distributors creating their own brands. I have an impression that everyone was suddenly packing the products they distributed in their own boxes.

KO: Distributors started looking around the world for products that could be bought cheaply, packed in their own boxes and put into a single catalogue. There were three concepts. The first was to name the new brand after the distribution company. The second option was to create a separate brand name but including many different product lines. Both of these concepts have one important advantage, namely, they facilitate marketing activities. However, we chose yet another concept, that is, the creation of multiple brands under which different product lines would be offered. One disadvantage of such a policy is a marketing-related problem, as you have to handle several brands all at once. However, at the same time, you reduce the possible negative consequences of a quality slip-up. This way, a potential slip-up wouldn’t affect the entire joint label under which a wide range of products is offered, but just this one brand.

GK: Correct me if I’m wrong, but I don’t recall Inter Cars’ own brands ever being promoted in any special way.

AF: Private brands are also a great temptation for distributors, but they should be avoided. As Christopher said, “it’s ok to buy cheaply,” but you can't overdo it, because too low of an entry price may ultimately turn out to be a big cost for the company.

KO: Indeed, you need to be able to find a proper balance between the price and the quality. It is also true that we have always approached marketing of our own brands with moderation. We should remember that marketing expenses increase the price of a product. If a cheap product is sold under a company's own brand, it must be priced low.. So, in this case, the best marketing is ensured by a low price. Inter Cars has never advertised its own brands because we have always treated them only as a supplement to our basic offer of low-budget parts of acceptable quality. However, we focus on premium products and persuade garages to buy them. The argument we use is as follows: when you’re buying a premium product, you are also investing in your future, i.e. know-how, training and technical support. And this is essential because cars keep changing and getting more complicated. Another argument in favour of premium products which I’ve already mentioned is that even though the margin obtained is lower in terms of percentage, you earn more on them per unit.

AF: Selling under your own brand generates additional costs. Your company has to package the product itself, create catalogues, etc. And these costs necessarily eat up a part of the margin. And then there is another issue that’s important from the point of view of the company’s commercial policy. For obvious reasons, promoting a company’s own brands is not welcome by manufacturers supplying premium products. Many of them don’t like it when distributors build their offers around private brands, and they may be right. However, when such a private label only complements the offer, it is a good solution.

KO: I’d like to point out an interesting fact here. When we entered the German market with online sales, we thought that the online customer would be seeking the cheapest products, which we believed would increase the demand for our own brands. Meanwhile, it is the premium products that are selling there.