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Blackcircles.com is an online tyre retailer which allows customers to buy tyres online and arrange to have them fitted at a local independent garage.
Having launched in 2001, Blackcircles.com now has 300,000 customers and a turnover of £10m. I've been talking to founder and MD Mike Welch about how he built a successful e-commerce business from scratch.
Can you tell me about your background before starting Blackcircles.com?
I was started a mail order tyre business when I left school at 16 Liverpool - this soon became an online tyre retail business. I had just turned 18 and I was approached by Kwik-Fit and asked by them to develop their online business, Kwik-Fit.com, I moved to Edinburgh to take on this role and spent 2 1/2 years doing that before Ford bought Kwik-Fit. At this point I decided to leave and start up in competition as Blackcircles.com.
Can you tell me about Blackcircles and its business model?
Blackcircles.com is the UK’s largest online tyre retailer. We offer savings of up to 40% versus the high street fast-fits and have a network of 987 independent tyre franchisees. Our supply chain is just-in-time, which allows us to deliver customers a low price but with a quicker turnaround.
Our franchise network will be 1400 by the middle of the year, this compares to the largest retailer in the market, Kwik-Fit, who operate around 500 outlets.
Customers will buy their tyres either from our website - www.blackcircles.com - or via our call centre. Either way the process is simple: choose a tyre, enter a postcode, choose an outlet, choose a date and time, pay and turn up on the time and date to get your tyres fitted.
We poll our customers within 10 days of their tyre fitting taking place, over 65% of our customer rate their experience across 5 key criteria, from tyre fitting experience to price. We use this data and customer comments to shape our business, dividing the information around the relevant parts of the business for action.
We spend a lot of time focusing on customer service and retain extremely high levels of customer satisfaction, with over 30% of our sales each month coming from existing customers, on the basis of our overall sales growing over 70% in comparable year on year quarters.
How did you launch the site? Did you get any funding?
When I left Kwik-Fit I had 1 month’s salary so I was quite tight on cash. I was helped out by the local enterprise council who gave me the use of an office rent free for 3 months. From there I began mail ordering tyres through specialist high performance magazines - I only had a little credit from the suppliers so I would have to pay for an advert, sell tyres, use the cash to take another ad and pay suppliers on the proceeds from the next order - effectively creating my own credit, quite risky but fundamentally a good cash model and the one I used in my first mail order business.
This cash flow allowed me to part fund a website build, the other part being a 'pound a tyre' deal for the developer over a period of time. The benefit of having a website was that I could reduce my advert size from a quarter-page with prices and detail in to a strip advert with only the web address, the 40% less price promise and a phone number.
Then the website became the focus of the business, handling virtually all the transactions. The next step was to bring onboard the garage network. Over the next 5 years over 700 independent garages would be recruited and added to the database - allowing customers to buy their tyres and add the local garage they wanted to fit them. That list of garages has now become a fully audited network of Blackcircles.com franchise stores, a huge development from our position back in 2001.
Has the motor industry been slow to adapt to the web?
The motor industry hasn’t been too slow; I would say that the established business models and ways in which customers are serviced has proved difficult to transfer to the web. And even when offerings are moved to the web the big guys still have the fundamental challenges that their own big costly models bring.
How do you see it adapting in the future?
For sure the big and little brands will have to develop online offerings to offer multi channels of communication for their customers, however my view is the opportunity is in taking the best of the web and web based technology and coupling it with offline assets to develop a lean proposition that delivers a better, lower cost way to serve customers. For really big companies this means addressing their business models from the ground up.
How do you ensure quality of service with so many partners / franchisees?
We have a partnership in place with Unipart who work alongside us as our garage audit and quality partners. Each of our garages undertake an accreditation for which they are measured against a standard initially and ongoing.
Add to that our customers give us quantitative feedback on the standard of their service so we are well briefed on the performance of our network on a store by store basis, with systems allowing us to monitor performance daily against KPI's. This is very important since we moved to a franchise model, allowing the garages to carry our brand.
I read that 40% of your new customers are referrals from existing ones - is this down a focus on retention?
Absolutely - the old cliché of great customer service results in high levels of word of mouth new business is bang on in our case. That allowed us to start our business, we couldn’t afford expensive ad campaigns so we had to treat every customer as a new potential communicator of our message to their friends and family - the same stands today, we are obsessive about customer service.
I read that you target drivers of high performance cars - how do you reach this target market?
Our reach is broader than that now - we started by concentrating on this as our core market, but we expanded our reach through deals such as Autotrader Tyres and affinity deals with brands who would communicate our message to their customers. The point is we can cater for all drivers and all cars anywhere in the UK, but in the early days we wanted to stay focused on a part of the market a) we would bring a substantial cash saving too and b) we knew would be extremely hard on anything other than an exceptional service, these guys love their cars! That really helped us develop our customer based offer and mentality internally, now all customers benefit from our approach.
How do you market the site? Do you spend much on paid search?
We started with PPC but moved heavily into SEO, moving our online customer acquisition cost from double figure pounds to single figure pence in the last 5 years.
We also work hard on developing relevant affinity and partnership deals to drive the right customers to our business, those we know will be responsive to our offer.
You have a deal with emap - how does this work?
We create a white label website 'powered by Blackcircles.com', and they deliver traffic through their website and in their magazine.
Has the Blackcircles model worked in Europe so far?
Europe has been good for us - expand our reach by utilising the same systems and web front end principles. Our intention is to continue to offer mail order tyres across main-land Europe. Our core market continues to be the UK and our strategy is to offer customers a 'Motoring for less' proposition so new products and services will be looked at to compliment our tyre offer.
What has been the biggest challenge in building up the business?
The single biggest challenge has been time; I have wanted to and still want to do things faster and sooner! Apparently Rome wasn’t built in a day...