'Revenue heals all wounds'
"I didn’t realize how good it was back then,” says John Cupedro of the early 2000s. “I don’t think anybody realized how good we had it.” The commercial truck tire business was booming at the time, according to the president of Economy Tire Service Co. Inc. (ETS) in Cleveland, Ohio. ETS, a single location dealership, was enjoying year-over-year growth.
That all came to a screeching halt during the third quarter of 2008, when the national economy began to tank.
“Suddenly I’m driving around making sales calls and I’m seeing tractor-trailers up on blocks. A lot of trucking companies just disappeared entirely. By the fourth quarter, we were feeling it.”
ETS is still feeling the pain, says Cupedro. Construction fleets, which comprise the majority of his company’s commercial tire customers, are idle. “Clients are dropping like flies.”
Meanwhile, the dealership’s competitors have gotten hungrier. “It’s a lot more intense.”
Pennywise but pound-foolish?
When it became clear the economy was headed toward full-fledged recession last year, Cupedro took action. He laid off two service techs in December. Three other employees took pay cuts. (ETS currently employs six full-time people, plus Cupedro’s father and ETS founder, John Cupedro Sr., who works on a part-time basis.)
Cupedro also realized that in order to survive he would have to hold his ground on price. When it comes to service, customers are demanding more, he says. But when it comes to price, they expect to pay less.
“I used to think customers were all about price in the past,” he says, almost with an air of nostalgia. “Well, it’s gone to a whole new level. The things that used to make sense, like cost-per-mile, are out the window. Now it’s ‘What’s the cheapest thing you got?’
“People are stepping over dollars to pick up pennies. They think they’re saving money buying cheaper tires, but they aren’t. I tell them I understand that cash flow is rough, but they’re not doing themselves any favors by buying the cheapest tire available.”
The problem, says Cupedro, is that there are plenty of truck tire vendors in the Cleveland market who will do anything to make the sale.
“So many clowns out there don’t know a tire from a tire iron and are going to sell as cheap as humanly possible. My intention isn’t to be the cheapest guy. I want to be the most expensive guy, as long as I get the order!
[PAGEBREAK]“I don’t talk about price right from the get-go. That’s the biggest mistake you can make because you’re directing the conversation right toward where you don’t want it to be.
“Profit is everything,” he continues. “A lot of bigger dealerships make money based on quantity. I don’t. Granted, I need volume, but I have to make a profit on that volume.”
In line with that philosophy, ETS has scaled back its inventory, weeding out slow-moving tires by running computer reports and conducting physical inspections. “I don’t have to carry $195,000. I can carry $155,000 and still cover my bases.”
Used doesn’t mean ‘bad’
Construction fleets remain Cupedro’s main customers. But he’s making more of an effort to reach line-haul trucks.
ETS is located on a dead-end side street off of Interstate 77, which runs north into downtown Cleveland. The dealership, which overlooks a valley full of dormant steel mills, is easy to miss.
To raise visibility, Cupedro has posted cardboard signs advertising used tires (“$75 and up”) at key exits along I-77. “I looked into billboards, but pricing was way out of sight.”
The signs were inexpensive to make, says Cupedro. Nailed onto telephone poles, they were even cheaper to post. And they’ve been extremely effective, bringing in truckers who didn’t know ETS existed.
ETS has ramped up its used tire business, hoping the products will appeal to cash-strapped customers. The dealership prices used tires based on their condition.
“You may have a re-grooved retread — what I would call a C grade tire — that’s $75 on the low end. A B grade tire may be one that has never been retreaded but maybe it’s been re-grooved. An A grade tire would be a virgin tire that’s never been capped.”
Cupedro also is working hard to erase the stigma sometimes attached to used truck tires. “I remind customers that every tire on their truck is a used tire,” he says.
“My point is, ‘Don’t think a tire is inferior just because it’s been used.’ When a tire is worn 50%, are you going to throw it out? No. There’s a lot of education involved.”
[PAGEBREAK]China vs. Cleveland?
Truck tire customers, no matter how broke, still like to have options when it comes to products and brands, says Cupedro. ETS sells Hercules and Firestone brand tires, and recently became a Goodyear truck tire dealer, giving it access to the Akron, Ohio-based tiremaker’s national account program.
“The beauty of (the national account program) is I don’t really solicit any of it,” he explains. “They have a call center. The customer calls into the center and gives them their information. Goodyear finds the vendor for the customer. When they pull up the name ‘Cleveland,’ I’m at the top of the list. I get an e-mail and if we can handle it, we do.”
However, not every customer is hooked into Goodyear’s national account network or wants a tier-one tire.
“I never thought Chinese-made truck tires would be a staple of my inventory, but they’ve turned out to be exactly that.” (Cupedro says the Hercules truck tires he sells are produced in China.)
Cupedro became a Hercules dealer six years ago. “I was not direct with a manufacturer, but all of my competitors were. With Hercules, they protect my territory. They don’t flood the market.”
Selling Chinese-built tires has been easy for the most part, though a few customers remain “hell-bent against them.”
The bias has more to do with the tires’ point of origin than perceived quality issues, says Cupedro.
“I like to ask people to try a set and see what they think. I remind customers that I respect the fact they’re patriotic, but they’re not going to change (global economics) by buying a domestic tire.”
Depending on application and need, customers’ options may be limited anyway, he notes.
Spreading the risk
Despite the effectiveness of holding prices at steady levels, promoting used tires, offering a variety of price points and other strategies, Cupedro concedes that gross profit percentage “is way down.”
It’s hard not to be down in the middle of such a vicious recession, he says. “I have to tell my accountant I just don’t walk in one day and say, ‘Today we’re going to do 50% gross,” he says. “We try to get as much business as humanly possible, but we have to be competitive, too.”
A firm believer in diversification, Cupedro intends to reach out to more potential customers, including small delivery fleets, “which are nice. I’d like to have 100 of those. If you lose one, it doesn’t rip your throat out.
“I like to spread things out. Having too many eggs in one basket is a major concern of mine.”
Before Cupedro bought his father out 10 years ago, he sold tires for another company. “My old boss used to preach ‘gross profit, gross profit, gross profit.’ I didn’t really grasp how important that was until I worked for myself. Revenue heals all wounds.”
That’s the philosophy Cupedro believes will carry his dealership through current tough times. ■