Anything But Average
Profile Study Shows Dealers Adjusting to Stay Ahead
Tire Review’s annual Tire Dealer Profile Study provides an accurate snapshot of the "typical" tire dealer. This year’s 2000-2001 Dealer Profile Study, however, was expanded to include a more detailed look at today’s commercial tire dealer.
While the clear majority of tire dealers are involved in retail trade, commercial tire dealers appear to enjoy greater profitability, according to our recent study. At the same time, commercial dealers are more susceptible to the ebb and flow of the economy and the relative condition of the markets they serve.
The overall highlights of the 2000-2001 Tire Dealer Profile Study were presented in our September 2000 issue. In this report, we pinpoint data specific to commercial tire dealers.
Of those dealers responding to our Tire Dealer Profile Study survey, 53.3% said they handled tire sales for commercial vans and pickups, 34.6% sold agricultural tires, 34.4% sold and serviced tires for Class 3-8 vehicles, and 16.5% handled OTR equipment tires and tire service.
With regard to the number of tire brands the average commercial tire dealer carried, dealers handled an average of 2.3 major brand commercial light tires, 1.5 house/associate brands, and 1.4 private brands. In medium/heavy truck tires, dealers carried an average of 2.3 major brands, 1.4 house or associate brands, and 1.4 private brands.
With OTR equipment tires, dealers average 2.2 major brands, 1.3 house/associate brands, and 1.3 private brands. And in agricultural tires, dealers carried an average of 2.1 major brands, 1.1 house/associate brands, and 1.0 private brands.
Despite the fact that 1999 was a overall solid year for the tire industry, continuing fill rate problems forced many dealers to change or add brands in order to keep up with customers. Over the 12 months prior to the study, 57.1% of dealers changed commercial light truck tire brands, while 28.6% added at least one brand, and 14.3% dropped at least one brand. On the medium/heavy truck tire side, 50% said they changed brands, with 33.3% adding at least one brand, and 16.7% dropping at least one brand. With agricultural tire brands, 12.5% said they made a change, with 62.5% adding at least one brand and 25% dropping at least one brand.
From a profit perspective, dealers seemed to do reasonably well Ð though surely not as well as they would have liked. The average reported gross profit margin on commercial light truck tires was 22.8%. For medium truck tires, the reported margin was 16.7%, and for heavy truck tires, the profit margin averaged 15.5%. With OTR equipment tires, dealers averaged just 14.1% margin, and turned a 19.1% average margin on agricultural tires.
Among tire dealers surveyed for this study, 57.1% claim to do commercial light truck tire service, 35.7% agricultural tire service, 34.7% Class 3-6 truck tire service, 32.7% Class 7-8 truck tire service, and 26.5% handle OTR equipment tire service.
In terms of service vehicle ownership, 76% of dealers reported they owned at least one pickup truck, nearly 20% had at least one SUV, some 15% had at least one cube/stake truck, and around 30% had at least one purpose-specific service truck. On average, tire dealers had four pickups, 1.4 SUVs, 2.3 cube/stake trucks, and 3.2 service trucks.
Of those dealers specifically performing commercial tire service, 81.3% reported having at least one service truck to handle medium/heavy truck tires, 76% had at least one service truck dedicated to OTR equipment tire service, and 65.9% had at least one service truck for agricultural tires.
Some 19% are considering adding a medium/heavy truck tire dedicated service truck, while 20% plan to add an OTR equipment tire dedicated truck. Only 4.9% intend to add a dedicated truck to service agricultural tires.
Of those surveyed, 85% of dealers charge some kind of fee to accept take-off tires, with dealers charging an average of $6.50 per medium/heavy truck tire, $12 per agricultural tire, and $20 per large OTR equipment tire.
While we only tracked the average selling prices for the most popular sizes of medium truck tires, the results were still enlightening. The average selling price for an 11R22.5 was reported at $274.80, and for a low profile 295/75R22.5 the average price was $273.16.
For a standard 11R24.5, the average price charged was $291.44, and for a low profile 285/75R24.5 the average price was $284.43. Low profile 255/70R22.5, the fifth most popular size, returned $235.78.
Though few of the dealers surveyed said they did vehicle service on commercial vehicles, those that did enjoyed a pretty good profit. Those doing service work on commercial light trucks averaged a 45.5% gross margin, while those handling medium/heavy duty trucks averaged 38.2% margins.
Dealers’ fixed hourly labor rate for commercial vehicle service averaged $49.80
For information on obtaining complete results of the Tire Dealer Profile Study, contact Research Director Bob Roberts at 330-670-1234 ext. 252, or by e-mail at [email protected].