Upbeat outlook for the 'Ikea of tyres'

Upbeat outlook for the 'Ikea of tyres'
PHOTO: Upbeat outlook for the 'Ikea of tyres'

Omni United had initially planned to make a profit of US$1 billion (S$1.24 billion) by 2015. It is not quite there, but still, the 10- year-old provider of manufacturing and retail solutions for the budget tyre sector is on the way; it expects to hit $500 million in the next 11/2 years.

Already, it accounts for two million of the 60 million tyres imported in the global tyre market - and the growth to this point was achieved amid a sluggish market that has been growing just 2 per cent a year.

Omni's founder and chief executive G S Sareen says the company - a local SME that has grown an international consumer base - positions itself as the "Ikea of tyres".

The United States is its biggest customer, accounting for 65 per cent of the business, but Omni has a presence in 61 other countries, and plans to reach out to at least 20 more by the end of this year.

The company's upbeat outlook comes from its recent successful foray into Asia; Japan and Malaysia are its largest markets in the region.

Omni already has 200 retailers and partners in Malaysia, and nearly 60 in Thailand. Demand from elsewhere has also grown rapidly.

The Middle East now constitutes 15 per cent of Omni's customer base, just five years after the Singapore company rolled into that market.

There has been significant headway in the US as well.

Omni recently concluded a deal with Sears, a major department store there; under this US$100 million deal, Sears outsources the manufacturing of its tyres to Omni.

Top-line growth there has been muted, however. As Omni has manufacturing facilities in countries such as China, US tariffs apply on its products. Omni estimates that it has lost about 35 per cent of its revenue as a result of this.

Its foray into Europe has been less than successful. Mr Sareen says that geographically, Europe is similar in size to the US, but its multiple cultures have made it difficult to penetrate the market.

Retail strategies

The situation is reversed in Asia, as the Singapore company turned its closeness and understanding of Asian cultures to its advantage as it anchored itself and grew its presence there, catering to varied consumer needs.

Mr Sareen, referring to Omni's "Think Local, Go Global" philosophy, says Omni works closely with its retailers, and monitors their sales; it steps in to craft retail strategies in pricing and promotions that meet the unique needs of particular markets.

"Relationships typically end with the retailers, but it is important to build a product from consumer backwards," says Mr Sareen.

For example, while Dubai is in a desert and most of the consumers use four-wheel drives, the actual demand is instead for wheels that can sustain their drive on long and straight-paved roads.

Omni has thus found it beneficial to have this kind of knowledge of the markets it has entered.

It has not closed the door on Europe. Mr Sareen says the company will use this strategy to bring its product there sometime next year.

The market in South America is also coming to a boil, and will clock much growth in the year ahead, he says.

A company listing is on the drawing board for this rapidly growing company, but its main focus for now remains the creating of brand awareness and sustainable growth.

Omni has entered the motorsport market, having invested significantly in developing off-road racing tyres under its flagship brand, Radar.

Collaborating with Bronson Motorsports, Omni's tyres performed well in the US, bagging their first win in the Mojave Off Road Racing Enthusiasts' New Year's 200 race in California in January.

Omni has also since expanded its manufacturing base to diversify its risk. It now has manufacturing partners in Indonesia, and is looking at countries in South America and Europe. Mr Sareen says he believes that this "redundancy building" acts as a brand warranty for its consumers.

In the next chapter of the Omni story, the company wants to go beyond the life cycle of its tyres and look into significantly reducing its carbon footprint.

Mr Sareen declines to divulge too much about this plan, but says it will take a few years to execute and is expected to make Omni a pioneer on this front.


Get The Business Times for more stories.

This website is best viewed using the latest versions of web browsers.