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Pulling for Results: Entering Trailer Tire Market May Bring in Tidy Profits, Connections

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Entering Trailer Tire Market May Bring in Tidy Profits, Connections

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With steady growth and little competition, entering the trailer tire market is something worth considering. While the demand isn’t nearly as great as it is for passenger or light truck tires – or even some other specialty tires – being one of a few dealers in a particular area to offer replacement trailer tires can have a substantial impact on profit margins.

Representatives from a handful of trailer tire manufacturers and distributors each reported steady growth in the past several years, and most recently, increased demand for heavier ply tires that are able to carry more weight.

“The trailer market has been in a steady growth curve overall for the last 20 years,” says Steve Richardson, director of sales and marketing with Duro Tire & Wheel. “However, we have seen a slight decline in the last couple of years, roughly 15%, with a slight increase two years ago due to Hurricane Katrina.”

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“From our perspective at ATD, our sales and growth in this segment has accelerated over the past two years. I think that’s driven by the fact that we’re stocking more of these products and there’s just more availability,” says Ron Sinclair, American Tire Distributors’ vice president of marketing.

The obvious reason for the stable yet growing tire segment – used to tow boats, horses, livestock, equipment and campers – is growth in the trailer industry itself, according to Walt Weller, vice president of OE and strategic accounts for China Manufacturer’s Alliance.

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“The market has grown over the past few years, particularly things like boat trailers,” he says. “And that’s just following the boat market. Trailers come along with them most of the time, except for the really large boats, and even some of them are getting hauled on trailers now.”

Richardson says high fuel costs add to the growing number of trailers being purchased as of late, noting it’s less expensive to buy a small utility or cargo trailer to be used when needed vs. purchasing a “gas-guzzling” pickup or box truck that is driven more often.

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Location, Location, Location
The key point to consider when deciding to carry trailer tires is where your dealership falls on the map.

“It depends on where you are geographically,” Weller says. “A lot of these trailers are used to haul horses and livestock; that’s one type of market. Another is if you’re close to water, with a lot of lakes or the ocean around where you can supply boat trailers. It all depends on where you’re located.”

If the market is there, taking a proactive, rather than a reactive, approach to sales will help to drastically increase profits.

“If someone decides to go and focus on this market, they should hit all the marinas and boat dealers in the area and make them aware you’ve got the tire if they need it,” says Weller. “Find out what they’re stocking and what they’re using, because when most people need a boat trailer tire, they go to their boat dealer to try and find it. A lot of these boat dealers aren’t equipped with mounting/balancing equipment to service the tires, so there’s a good opportunity there.

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“Most dealers don’t actively go out and pursue it, they basically just sit back and replace them when someone walks in the door and needs a new trailer tire,” he says, describing the reactive role. “There are greater opportunities if you go out of your way to contact marinas or livestock owners in advance, so they know you’re there. Either way, there’s a nice profit opportunity there that doesn’t exist in a more mainstream market with a higher demand.”

Sinclair agreed, saying even though the trailer tire sales won’t reach as high of a volume as passenger or light truck tire sales, the profit margin is often more attractive.

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The Difference
Although at first glance a trailer tire may look the same as a P-metric tire, this is not the case. As a general rule, tires with special trailer (ST) designation are designed to carry much more weight than those with a passenger (P) or light truck (LT) designation, says Sinclair.

“For example,” says Richardson, “a passenger car tire in a size 205/75R15 might carry 1,100 pounds, but a trailer tire of that same size in a 6-ply range will carry 1,820 pounds.

“They don’t look a whole lot different, but they are,” says Weller. “They are heavier tires, typically 6-, 8-, 10- or even as high as 14-ply tires.”

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To allow for a larger weight-carrying capacity, trailer tires are constructed with a stiffer sidewall, says Jerry Sampson, director of sales and marketing for industrial/specialty tire with American Kenda Rubber. That stiffness helps control sway problems associated with sidewall flexing, which could cause dangerous problems when towing a loaded trailer. The key to avoiding flexing is maintaining proper tire inflation.

Unlike passenger or light truck tires, trailer tires, because they are used less frequently, often will not wear out before they need to be replaced. It is recommended trailer tires be replaced after three to four years of service, regardless of tread depth or tire appearance. If a trailer tire is older than that, it should be checked by a professional before being used, according to the Rubber Manufacturers Association’s Web site, www.rma.org.

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Ideal storage for trailer tires is similar to that of passenger and light truck tires. They should be kept in a clean, cool, dark and well-ventilated area at maximum inflation. If they must be stored outdoors, protect tires with an opaque waterproof covering.

Despite their differences, trailer tires require no special equipment for mounting, balancing or servicing, a fact that adds to the absence of a large up-front investment. Another variable that reduces the cost to enter the trailer tire market is the limited number of sizes needed, at least compared to passenger and light truck tires. Weller says a dealer could cover the majority of the market with nine or 10 sizes.

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“There are 10 to 12 SKUs that really cover the majority of the needs that are out there,” Sinclair says. “That’s opposed to stocking passenger and light truck tires, where there are thousands of different sizes and brand combinations. Here, 10 to 12 SKUs will cover the bulk of the sales for the segment.”

He noted that dealers who work closely with their distributors have an even greater advantage as they can arrange for proper inventory and on-time delivery as needed.

“So if they have a consumer that comes in, even if they don’t have that particular size in stock, chances are we’ll be able to get it to them extremely quickly so they can service that customer without having to carry the inventory,” Sinclair says.

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Customer Needs
The most important thing to remember when helping a customer select a replacement trailer tire is to match the tire with the load rating and type of application the trailer will be used for.

“The main goal here is to match up the trailer carrying capacity,” Richardson says. “Retail customers tend to have the idea that if they can fit the load onto the trailer, the tires will be able to carry the load no matter what. This is not true; overloading can be a serious problem.”

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As far as pleasing the average customer, it’s important to keep a basic selection in stock. Popular sizes in today’s trailer tire market, according to each of the companies mentioned above, include: ST205/75R14, ST205/75R15, ST215/75R14, ST225/75R15, ST235/80R16 and ST235/85R16.

“We’ve seen greater availability and fast growth in the ST235/80R16 size,” Sinclair says. “That’s really an emerging size based on increasing demand from our dealers. There are more applications out there and dealers are getting more consumers coming to their doors with a need for that tire.”

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“In our opinion, the trailer market seems to be taking on the cliche that ‘bigger is better,’” Richardson says, explaining the growing demand for larger trailer tires. “Retail users are starting to ask for and are buying more heavy-duty trailers. These trailers are able to carry more capacity and apparently can be used more diversely. The livestock and boat trailer markets have been the most consistent and have shown steady growth.”

Dealers entering the trailer tire market at this time also should be aware of the growing demand for wheel and tire assemblies, as opposed to selling them as separate units. Another trend is the shift to radial tires, which have become more popular with customers in recent years, Sinclair says.

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“The shift to radial trailer tires continues at a steady pace,” he says. “Bias tires are still a big part of this business, but there’s still that shift to radials. There seems to be more of an interest from a dealer’s perspective in radial tires right now.”

As in the passenger and light truck tire market, increased production overseas is also a trend in the trailer tire market.

“In terms of the next few years, we are expecting to see more and more of the segment shifting to import and overseas production,” Sinclair says.

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Regardless of where they come from, trailer tires are a strong specialty business dealers should consider. With ample supplies, low up-front cost and limited competition, it is a good idea to investigate what the demand for trailer tires is in your area. If there appears to be a good customer base, the move could end up being profitable.

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