Commercial tire dealers who sell medium truck or OTR tires but do not sell smaller OTR units are missing out on a tremendous additional business opportunity.
“If a commercial dealer wants to be a full line supplier to their customer, then they need to consider offering small OTR products, as well,” says Tim Easter, director of OTR sales at Yokohama Tire Corp.
However, commercial dealers cannot just blindly jump into the small OTR segment. The market is complex and a variety of end-user tire needs can be very different. In order to succeed in the small OTR industry, dealers and their staff must be educated about the marketplace and offer their customers reliable service.
“Dealers either have to train the people they currently have or hire people that have experience in off-the-road business because it’s a totally different than truck tires,” Easter says.
Dealers who successfully venture into the niche small OTR market are rewarded with increased sales and profit.
“Sales and service of small OTR tires can be a lot more profitable than fighting for share in the car or truck markets, where margins can be low and there’s usually a competitor around every corner,” notes Steve Vandegrift, product manager for Alliance Tire Americas. “It can really pay off to offer a good choice of excellent OTR tires and service them well.”
Market Outlook
When it comes to describing a small OTR tire, each tire manufacturer has its own definition. This can be confusing for a tire dealer, but typically small OTR sizes are around 25 inches or smaller in wheel diameter.
Bridgestone Americas considers its small OTR tires from 13.00-24 up to 26.5R25 in size. For Yokohama, small OTR tires range from 20 inches up to 17.5R25 and 16.0R25. While Alliance defines its small OTR tires as a slightly larger size; a 24-inch wheel, 14.00-24, up to 35-inch wheel size.
Customers for small OTR tires can range from large construction and utility companies to dairy farms, ports, quarries, rental companies and more. Small OTR tires shoe graders, loaders, backhoes, and telehandlers among other equipment.
Today, the majority of the small OTR industry is made up of radial tires, but bias tires still have their place.
Alliance’s Vandegrift points to telehandlers as an example: “Those machines aren’t driving down the road for miles and miles, so they don’t benefit from the efficiency of a radial. Instead, the operator wants to make sure he’s got stable sidewalls to handle shifting lateral forces and minimize how much he’s bouncing around,” he shares.
Other technology development in small OTR tires revolves around new tread patterns, compounding and casing upgrades, Yokohama’s Easter says. He also notes that TPMS systems are being used more and more on the equipment.
Michelle Lane, director of OTR marketing for Bridgestone Americas, says that newer technology is also focused on puncture resistance.
The Future
The OTR industry tends to be cyclical and the small OTR market is on a moderate uptick in 2015 following challenges over the past few years.
“We are now seeing positive momentum in the small tire industry, one that had been lagging for the past few years as the industries with heavy tire usage in small loaders, skid-steers and backhoes were struggling,” Lane says. “Being led by positive underlying metrics for these industries, I see things continuing to remain very strong for the remainder of the year.”
Lane notes that the compound annual growth rate for the construction industry is above 4%, so that will positively affect the small OTR market in coming years, as well.
“A large portion of this market is driven by construction so we will continue to look at confidence levels for the industry,” she says. “The road and bridge market is also something we look at closely when it comes to small off the road tire sales. Paying close attention to federal and state funding of these projects is a big driver for growth in these markets.”
Alliance’s Vandegrift agrees that the market seems to be on a positive trend in 2015 and beyond.
“Construction is on the rise – particularly commercial/non-residential building – and consumer purchases are increasing, which is keeping forklifts and material handling equipment rolling,” he notes. “Forestry is in pretty fair shape, but farm machinery sales are weak after a couple of great years. Farm tires are generally considered their own category, but many farmers own skid-steers, loaders, telehandlers and other machinery that uses OTR tires, so the farm economy’s impact bleeds over into the OTR business.”
Supply also shouldn’t be a problem in 2015 or the near future.
“You might see short supply on a specific product, but I don’t think we’ll see supply problem across the board like we have during the last two shortages in the near future,” Yokohama’s Easter shares. “There will more likely be oversupply in certain products just because of the ramp up in production from all the major suppliers.”
Meeting Expectations
In order to be successful in the small OTR marketplace dealers must be knowledgeable about product, provide excellent service to their customers, and have the right equipment.
“Having great people that have the product knowledge to make proper recommendations, insights into the many variables that can impact tire performance, and understanding the different customer applications is the baseline,” says Bridgestone’s Lane. “It takes experience from both the sales and service side of the business to be successful.”
Understanding product is only one component of knowledge dealers need. Dealers should also train their staff to safety service tires as well, the tiremakers note.
While small OTR tires are used in a variety of ways, often the tire is used in an industry where downtime can be costly.
“A key piece of equipment going down with a tire issue is something that can push a project timeline and cost you both valuable time and money,” Lane notes. “Customers are looking for a reliable all-around product that that will get the job done and give them maximum uptime.”
The manufacturers agree that to successfully service an OTR customer dealers need to help them combat downtime by offering better product and 24/7 service.
“A dealer who wants to succeed in the small OTR market needs to be outstanding on the service end of the business,” says Alliance’s Vandegrift. “You need to be right there when there’s a problem, ready to fix the tire or replace it if necessary, and get your customer back to work. The dealers who excel in this market is the ones who provide the best service and advice.”
One key way dealers can help customers avoid profit-draining downtime is to keep product in stock.
“Dealers can’t expect a customer that has a piece of equipment down to wait two or three days for them to order a tire,” shares Yokohama’s Easter.
Some popular sizes are 14.00R24, 17.5R25, 20.5R25, 23.5R25 and 29.5R25, according to the tiremakers.
Other ways dealers can help better service their customers is by providing customers with proper tire maintenance programs and providing customers with tire tracking, Easter adds.
“If you’re loyal to your customers, chances are an OTR customer is going to be loyal to you – certainly more loyal than price-shopping car tire customers,” says Vandegrift. “If an OTR customer feels like you’re treating him well and that you have his back when there’s a problem, you should be in for a long relationship. Of course, if you’re not providing great service or a fair price, he’ll go to the next guy.”
