Case 3: Diversity Means Opportunity
Times are tough in every industry it seems. The economy’s sluggish, prices are increasing and consumers don’t have a lot of money to spend.
But one industry that’s been especially hard hit is the agricultural market. Costs and demand are increasing, yet prices and margins are evaporating. Tire dealers trying to make their way in this market are also finding it tough.
There isn’t a whole lot that can be done when there are absolutely no profits to be had. But there are things to do that can prevent existing profits from drying up.
Dealers may have to diversify, find ways to reduce the amount of competition, and just plain weather the storm. All these things require guts and the proper managing in order to keep the dealership successful.
More Eggs and Baskets
One good mark of any dealer is the ability to diversify. Every dealer has a specialty a bread and butter they fall back on. However, it’s always important to have a couple irons in the fire at once. Just in case one of them cools off.
This business philosophy is exactly what Lyndon Parks practices. Parks opened his GCR dealership from scratch on Jan. 2, 1989, in Longview, Texas. His 15-employee dealership caters to several markets, including OTR, truck tire, logging, and retreading not just agriculture.
He feels there is no specific product or service that will dump profits into his lap. Parks continues to keep a simple fact in mind profits come from sales. So, to add more to his bottom line, he focuses on constantly growing the business.
“If you’re not growing, you’re regressing. It’s important to never be satisfied with the status quo, always look for new opportunities,” said Parks. ®If our dealership sells more tires and supports that customer base with superior service, we’ll grow our business and make more money.®
Currently the agricultural and logging markets are depressed, so much so that Parks his having a hard time selling skidder tires. The market started heading south a couple years ago and has steadily moved in a downward direction and there is little business in sight. Unlike three or four years ago when Parks would buy 100 tires at a time, he now buys enough to make weight, which is usually two or three.
“This is the worst it’s been in a long time,” said Parks. ®I’ve been here 13 years and it’s never been this bad. It’s not the economy, the store is really booming overall. I would say it’s a down market.
“What’s worse is that there’s nothing the tire people can do. Our ag suppliers have offered us real deep deals on skidder tires but there’s not a market for them.”
But this is why GCR is diversified. Parks is heavily involved in earthmover tires because there are several big mines in his market. There’s also some small construction work to be had. And truck tires have taken off recently.
“The truck tire market is growing around here and the economy is pretty good,” Parks said. ®About the time the skidder tires declined, we started to see an incline in oil and natural gas and we’re near one of the oldest oil fields in the world, so that has helped.
“I’m just very diversified, and don’t keep all my eggs in one basket,” he said. ®Now, the skidder tires aren’t the biggest part of our business. We’re growing in other areas.
“But still, we’d hate to lose any part of our business. No matter how big or small, if we lose a piece of our business, that’s still a void we have to fill.”
Making It Up in Service
One of the biggest pieces of GCR’s business is service. It’s just as important as any of the tires the dealership offers. GCR is located in the eastern corner of Texas, 50 miles from Louisiana, and 100 miles from both Oklahoma and Arkansas. Parks’ eight service trucks allow him to service the four-state area 24 hours a day, seven days a week.
“We target one thing here first and that’s service,” Parks said. ®We just strive to put service as our number one objective. That’s what got us here in this market.
“There were four competitors in the truck tire business here when we started. We were number five. The market was not being handled service-wise, and that was our goal because some competitors were selling the same products. We really stressed the best service and it’s helped us. Today, two of those competitors are gone and another has sold three times to different people. Service can make you or break you, and we know that service is how we’ve gotten where we are today.”
Ahead in a Down Market
Cotton is king. Not literally, since no one named Cotton has probably ever been a ruler. But in the South, cotton is as close as it gets.
Until recently. The market is depressed and cotton prices have been low for quite a while. To make matters worse, there doesn’t seem to be a great deal of optimism about the next couple years.
“We’re primarily cotton growers in this part of the state,” said Mel Shook, president of Big State Tire Supply in Lubbock, Texas. ®Over the last 12 months, we’ve seen a decline in cotton prices. The cost of farming has risen with things like fuel and fertilizer going up. So a depressed price is making it even more difficult. Rising costs, over supply and depressed prices don’t make for a good market.®
Big State Tire Supply is a 22-year-old wholesale company that covers Texas, Oklahoma and New Mexico. It’s eight locations and 100 employees handle everything from “boat trailer to earthmover tires,” said Shook.
Which is a good thing in a down economy. But economies fluctuate. There can’t always be a steady increase. The market needs time to level out and recover even if that means down years.
“We’ve seen the whole economy bottom out and things have come back,” Shook said. ®Typically the economy continues to grow and it will.
“Farming is a gamble at best. It’s either feast or famine, there doesn’t seem to be any average years.”
The thing that Big State has tried to do is remain as aggressive as possible. Even in a down market, there isn’t time to sit back and watch. If there isn’t new business available, there’s old business to fight for.
“Company-wise we’ve grown,” said Shook. ®We were up 20% in ag tires last year and we’ll be up again this year. But that’s because we’re taking that business from someone else. Our customers aren’t the ones that are growing, we’re just taking more business.®
As for the state of the market, Shook is trying to remain hopeful and patient unlike many.
Eventually there will be a greater need for cotton leading to a better market, which in turn will lead to a better market for tire dealers. It will take time, but people will still have to buy new clothes and other products. That won’t stop.
“I don’t think there’s anything on the horizon that’s going to change the farm economy,” Shook said. ®But this, too, shall pass.®