Old trucks, more bucks: David's Commercial Tire caters to used truck dealers by giving them choices
In a segment of the market in which customers can source quality products from a wide range of places, finding an underserved niche can be the key to success.
Years ago, Knoxville, Tenn.-based David's Commercial Tire Inc. discovered an extremely lucrative niche in used truck dealers. Since then, the single-location dealership has established itself as the "go to" source for local trucking companies that specialize in selling second- and third-hand tractor trailers.
Trial and error
Robert Porterfield's career in the tire business stretches back to 1968, when he returned from the Vietnam War and began working for another Knoxville dealership. He soon left to start Porterfield Tire with his father, Jay; his brother, Jamie; and a cousin, David. (David's Commercial Tire Inc. came along later.)
"When we first started out, it seemed like everybody was a single-truck owner-operator," says Robert.
There was plenty of business to go around but it wasn't always good business, he says. The credit worthiness of some of his customers soon came into question. "When you first go into business and you're hungry, it's easy to trust people and let them have some tires; hopefully they'll pay you. But we came close to going broke a couple of times because of these truckers and their lack of credit."
Some cases got so out of hand that the dealership had to call in bill collectors.
David's Commercial Tire was faced with the task of rebuilding its customer base and went after big trucking fleets and truck dealerships. The latter opened up an unexpected avenue for the company: putting tires on used trucks.
Used is good
David's Commercial Tire -- which Robert co-owns with his cousin, David, and David's wife, Shirley -- works with local Volvo, Mack and Peterbilt truck dealerships that sell used vehicles. Each has 100 to 150 used trucks on lot at any given time.
"They know if they have any problem at all they can put it in our hands, and they don't have to worry," says Robert.
In general, used truck dealers are easier to work with than new truck dealers, he explains. "They're not nearly as picky.”
Choice of replacement tires usually hinges on a truck's age, according to Robert. "Customers will want to put newer tires on newer trucks. On a truck from the year 2002 or further back, they'll want retreads. With an old truck, they'll just want used tires to get it back to the point where it's sellable."
Used truck tires can be particularly profitable due to their low inventory cost. "Some of these used units you just acquire. Sometimes you have little money in them at all. A guy will put on a new set of tires and pull the old ones off... some of those tires are re-usable."
David's Commercial Tire also buys used tires from third parties. "We re-sell them -- sometimes at double the money."
There's no shortage of used trucks in the greater Knoxville market. "There are a lot of repossessions," says Robert. "When these repos come in, they have junk tires on them, so we have the opportunity to shoe these trucks to make them marketable again."
David's Commercial Tire has found another way to differentiate itself: The dealership goes to truck dealers' lots and mounts tires on the spot.
It all goes back to making things as convenient as possible for customers, according to David. "It's a great benefit to them. They don't have to tie up a man sending him over here."
This also gives David's Commercial Tire a chance to check customers' tires. David's Commercial Tire relies on four local warehouses to supply it with truck tires. Tire Centers LLC is the company's primary wholesaler. The firm also sources from American Tire Distributors Inc., S&S Firestone Inc. and Raben Tire Co. Inc.
"We used to be almost 80% with ATD, which was Heafner Tire at the time," says David. "TCI then came to town. S&S has been here as long as we have; it's almost like we've grown up with them. We mainly use S&S for fill-in orders and sizes that some other wholesalers don't have.
"Raben just came to town; they bought out a little local dealer. We jumped on board and are going on the Goodyear national account program with them."
Using four distributors gives David's Commercial Tire access to every major brand it desires, says Robert. "It's almost like having $4 million or $5 million worth of inventory."
David's Commercial Tire supplements its major label offerings with Chinese-made truck tires. "They've allowed us to make a few extra bucks, which has helped our bottom line,” says Robert, who describes Chinese quality as good and more than adequate for trailer positions. (David's Commercial Tire puts only major brand tires on steer axles.)
Unlike some of its direct competitors, David's Commercial Tire does not perform any mechanical work on trucks. "We've never been active on the mechanical end," says David. "You can tie up a lot of bays doing mechanical work. We do tires... that's kind of our motto."
However, road service work is lucrative. David's Commercial Tire runs five service trucks and is ordering a sixth. The dealership prefers used service trucks to new ones. Beyond the obvious cost savings at purchase time, "they're already geared up for you," explains Robert. "They have everything you need. The last two we found were low mileage -- around 100,000 miles, which is low for a service truck."
The dealership's service trucks usually stay within a 30-mile radius of company headquarters, but will go beyond if necessary.
David's Commercial Tire sells about 5,000 new medium truck tires each year. Its main brands are Michelin, BFGoodrich, GT, Bridgestone and Firestone. New truck tires will make up approximately one-third of the dealership's estimated $3 million in sales this year. Retreads will comprise another 10% to 15%.
"A couple of years ago, we looked at every penny that came in here," says Robert. "Whether it was new truck tires, used truck tires, retreads or service calls, when it was all said and done, nearly 50% of our business was due to truck tires. Fifty percent of every dollar coming through here can be tagged to the truck tire business."
That percentage is expected to grow. David's Commercial Tire is looking forward to pursuing national account business with Goodyear. (It already has done some national account work with Bridgestone Firestone.)
"There's not a lot of money in national accounts, but it opens up so many other doors for us," says Robert. "Those people all have cars, they have friends with cars... it opens up other avenues."
David's Commercial Tire also has an opportunity to pick up some government tire contracts, another as-yet-unexplored avenue, he adds.
Meanwhile, the company will continue serving used truck dealers and other customers with quality products and exceptional service.
"There's a tremendous amount of competition here," Robert notes. "But we've been in business for so long and have such a loyal customer base... those are major factors in our ability to move so many tires."
On the go: Retreaders forge ahead in '07
The word "busy" doesn't even begin to describe some of the country's leading retread shops. Here's what a number of retreaders recently told CTD they're doing this year.
* Allied Retread Technologies (Omaha, Neb.; Michelin mold cure and precure) plans to increase its production by 10%.
* Free Service Tire Co. Inc. (Johnson City, Tenn.; precure, OTR mold, sculpturing) will continue to update its equipment and expand its OTR retread plant to handle 51- and 57-inch tires.
* Central Tire Corp. (Verona, Va.; Goodyear, Horizon precure and AcuTread mold cure) will add new AcuTread matrices and tread designs and also will add new extrusion and rubber testing equipment.
* Dale's Tire & Retreading Inc. (Rapid City, S.D.; Bandag precure) is building an addition and adding a curing chamber.
* Eastern Iowa Tire Inc. (Davenport, Iowa; Bandag precure) says it will add a new plant through acquisition.
* H&H Industries Inc. (Oak Hill, Ohio; mold, sculpture, precure, strip wind) plans to update equipment and possibly buy a new autoclave.
* Heintschel Tire & Service Inc. (Texarkana, Ark.; Marangoni Ringtread, HB Plus Bandamatic) is adding new non-destructive casing inspection equipment.
* Highlands Tire & Retreading (Carlisle, Pa.; Michelin precure) has added a second shift to keep up with demand.
* Holyoke Tire & Auto Service Inc. (West Springfield, Mass.; Bandag precure) plans to promote Bandag Inc.'s new "line extension" tread designs.
* I.T.R. Inc. (Jacksonville, Ill.; Marangoni precure, ITR private brand, Bandag OTR) plans to "hone in" on some OTR retreading, say company officials.
* McCarthy Tire Service (Wilkes-Barre, Pa.; Bandag precure) is adding new machinery.
* Moore's Retread & Tire of Ark.-La.-Tex. Inc. (Shreveport, La.; Goodyear precure and Unicircle) performed a Goodyear "lean plant" conversion earlier this year.
* Purcell Tire & Rubber Co. (Potosi, Mo.; Goodyear mold cure, flex cure, precure and Unicircle) is adding new, larger mold cure sizes.
* RDH Tire & Retread Co. (Cleveland, N.C.; computerized strip and tread grooving, Bandag Continuum) plans to boost its production by 35%.
* Rice Retreading Inc. (Winchester, Va.; Goodyear precure) is planning a major plant remodel to boost efficiency.
* Service Tire Truck Centers (Bethlehem, Pa.; Michelin) will add a new plant during the rest of the year.
* Valley Tire Co. (Charleroi, Pa.; Michelin) is increasing its capacity.
An estimated 15 million medium and heavy truck tires were retreaded in the United States during 2006, according to Modern Tire Dealer's 2007 Facts Issue. The Rubber Manufacturers Association predicts tread rubber shipments will grow by 2.3% this year.