ORLANDO, Fla.—Tire dealers have to be prepared for market fluctuations and changing products, mindful of government regulations and extremely diligent about customer service if they are to succeed in off-the-road tire sales, panelists told an audience at the International Tire Exhibition & Conference in Orlando, Fla., Aug. 20-22.
The movement of the OTR tire market has resembled a bell curve in recent years, according to Mike Baggett, national OTR sales manager for Yokohama Tire Corp.
“In 2009, there was very low demand in the face of the banking and Wall Street crisis,” he said. “By 2011, there was high demand, low inventories and allocations. You had to make sure your end-users and dealers were taken care of.
“Demand started to decrease in 2012, and by 2013 there was low demand. This year there is an increase in supply, overstock and a buyer's market.”
Mining is suffering a decline now, with no end in sight, according to Baggett. Coal prices are the lowest they have ever been, he said, and gold has lost a third of its peak value, from $2,000 to $1,300 an ounce.
The OTR business is always hard to predict, Baggett said. In 2000, he said, he predicted that bias-ply OTR tires were here to stay and that giant mining and construction trucks would never exceed 200 tons.
Now, he said, trucks above 200 tons are common, and radials comprise 65 percent of the OTR tire market.
Small OTR tires are enjoying an upswing now, according to Aaron Murphy, vice president of CMA L.L.C./Double Coin.
“Small OTR tires have the right production flow and the right inventory levels, and sales are strong,” he said. Radial and bias tires sized 24 and 25 inches now represent 67 percent of the units sold, he said.
OTR has three levels of business
There are three levels of business in OTR sales, according to Murphy:
• Good, which means mostly local contracts and a small inventory;
• Better, which means the dealer has some larger construction contracts; and
• Best, which are mostly manufacturer-controlled and features national accounts.
Based on a survey of the top 100 commercial tire dealers in the U.S., 75 to 80 percent of OTR tire dealers are in the good category, Murphy said. These dealers can boast a profit margin of about $200 per wheel position sold, he said, with the markup on service and other add-ons ranging from 200 to 500 percent.
“Serving the small OTR segment costs much less to dealers than selling mining tires,” he said. “You can use your existing commercial truck fleet to ship and service tires, instead of specialized trucks.”
If you're a small OTR tire dealer, it's important to stock the full line, according to Murphy.
“You will have a multitude of opportunities if you have a good inventory,” he said. “Team up with a supplier who makes the full line of 25-inch tires.”
Sales of small OTR tires are very competitive, but the dealer who has the add-ons will offer more value to his customers, as well as increasing his own profits, Murphy said.
“Sales and safety training are crucial,” he said. “You want to be a consultant, not just a salesperson.” A dealer can use trained personnel as a sales tool, Murphy said, and a smart dealer will rely on his manufacturing suppliers for training and product support.
A safe workplace
If you decide to serve the mining tire market, you'd better keep up with the regulations from the Mining Safety and Health Administration, according to Scott Perschbacher, director of sales and mining operations at Bridgestone Americas Tire Operations.
MSHA represents mine safety in the U.S., he said. The agency develops safety standards and levies fines for safety violations in mines; MSHA personnel inspect ground mines twice a year and underground mines four times a year.
“If you follow MSHA regulations, you're probably going to have a safer workplace, be more profitable and be asked back to mine sites,” he said.
It would be a mistake to ignore MSHA, according to Perschbacher. “MSHA is getting stronger, and mine regulations are getting tougher. There were 14 jobs posted just last week for MSHA inspectors.”
MSHA doesn't govern just coal, gold and copper mines, he said.
“Sand, gravel and aggregate operations—they are part of MSHA, too,” he said. “Simply put, if you're a tire dealer in a small market, and the operation you serve is extracting aggregate, they'll fall under MSHA regulations.
Furthermore, MSHA violations can be ruinous, according to Perschbacher. Fines can cost up to $250,000 for each violation, and each tire that's not in compliance is a separate violation.
“There's not just an expectation of safety—it's required,” he said. “If you're not following safety procedures, you're shortchanging your customer.”
Rick Williams, owner and vice president of Miller Brothers Giant Tire Service, said there is no substitute for regular service and maintenance of an OTR tire fleet.
“You can buy the best OTR tire in the world, but if you don't take care of it, you're throwing away a lot of money,” he said.
OTR dealers who give the best service available will get the business, according to Williams. That means more than just changing tires. “How does your customer maintain his costs?” he said. “Set realistic goals with your customer to establish the best cost package for him. That means you have to keep track of every tire change, including what you pulled it off for.”