Chinese Dealers Facing Pressures


SHANGHAI – Regional dealers are widely viewed as key cogs for producers seeking timely headway in Chinas vast, crowded and multi-tiered lubricant market.

Sinopec, for example, has multiple levels of dealers under its regional sales offices, while Shell has more than 300 dealers in China. At the Inter Lubric trade exhibition here in November, marketers ranging from the Chinese company Zhong Ou to Russias Gazprom and American Maxx Oil were looking for regional dealers.

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However, as the competitive landscape in China becomes more complicated and intense, and as emphasis on e-commerce rises, dealers are becoming increasingly choosy, wary and sometimes confused.

We see a lot of new lube brands in China, but [such a large number of] options also causes confusion for dealers, Tong Ruirong, general manager at Wuxi Dongjia Trading, said at a dealers forum at the exhibition. They are struggling to decide which ones have the most potential for their business.

Tong advised dealers to tie up to big brands, and he suggested that the size of the company may be more important than the quality of its products.

Quality is just one factor, and its not enough, he said. Big brands usually have a strong marketing team that could help you promote their products in your region, Tong said.

He cited Italian oil major Eni as an example.

Eni lubes have great quality, no doubt about it, Tong said. But I know very few dealers want to work with that brand. Why? Because the company knows little about the Chinese market, yet is reluctant to listen to dealers ideas and support their promotions.

Tong started his business about 15 years ago and found success after it began selling Castrol engine lubes in 2005. Today his company records approximately 65 million (U.S. $10 million) in annual sales.

Steve King runs a United Kingdom consulting firm, SJK Marketing Services, which focuses on helping small British lube brands to enter markets like the Middle East. He agrees that brands should work hand-in-hand with local dealers to achieve best results.

“The main thing is that the brand and the dealer should have common objectives for everything and work toward them, he told Lube Report Asia. It’s a relationship between two entities, but the goal is to reach common objectives with neither party having ultimate control over the other.

Another major concern for Chinese dealers is the nations ever growing e-commerce. Although not every brand is currently available at online stores, consumers indeed can buy major brands at Chinas leading business-to-consumer websites such as Tmall, JD and Amazon China. Because the online prices could be much lower than the prices at dealer shops, it is no surprise that dealers worry about the brands they chose eventually being offered online.

For example, on Nov. 11, a day designated for Chinas national online shopping extravaganza, Nanjing-based lubricant marketer Lopal led the industry in sales on Tmall with 18.59 million, more than multinational brands like Mobil and Shell.

Some dealers complain that Lopals aggressive online promotion hurts its dealers, but Lopal insists the impact is limited.

We strategically separate our brands for online and offline businesses, said a source at Lopal, who spoke on condition of anonymity. At our online store, we only sell the engine oil brand Lopal Sonic, while our dealers sell our major brands, Lopal Zhizun and Lopal Jingwei. In fact, our online store is part of our marketing plan. We dont expect to rely on it for great sales growth.

Dongjias Tong said dealers feeling pressure need to turn themselves into some value-added assets for their brands.

The days of dealers considering themselves a third-party sales arm for a lube company have long gone, he said. We must provide value-added services to face a series challenges. The market is changing very fast.

For example, if a brand moved to e-commerce, the dealers could provide a variety of offline services including delivery, customer support and branding.

By offering themselves as a service center, dealers can attract more brands to work with them, Tong said. After all, lubes are unique products that demand long-term offline support.

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