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OTR/Ag/Specialty Tires

Steering Sales: Stable Skid-Steer Market Offers Opportunity for Profit

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With their convenient size and ability for specialty attachments, skid-steer loaders are as necessary as ever in work sites nationwide. Perhaps more versatile than any other piece of equipment, the machines have a place in excavation, construction, demolition, recycling, mining, landscaping, snow removal and more.

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Even though the mini-loaders – and the tires that make their use possible – are in high demand, entering or improving your position in this market segment doesn’t come without challenges.
Several factors have combined to alter the face of the skid-steer tire market, and up-to-date dealers who know the ins and outs of servicing these tires will find themselves ahead of the competition.

A Changing Market
The housing slump and faltering economy have decreased the overall number of construction jobs in the U.S., softening demand for skid-steer OE and replacement tires over the past couple years, according to Michael Burroughes, director of marketing for agricultural tires with Michelin North America.

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“Consistent with many industry experts, we expect that the current softness of the domestic market will continue through 2009 with some recovery expected in 2010,” he says. “A dramatic change in the economic landscape, especially in the construction sector, could bring improvement earlier than presently expected.”

Several factors have combined to give U.S. manufacturers an edge in this segment, beginning with the Commerce Department’s preliminary ruling last year requiring Chinese OTR tiremakers exporting to the U.S. to pay additional duties. The anti-dumping duty has decreased the Chinese influence in the skid-steer tire market, resulting in overall higher prices that have enabled domestic manufacturers to compete, says James Tuschner, marketing manager for Denman Tire Corp.

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“Another thing that’s helped U.S. manufacturers is the change in currency,” he says. “People can’t buy as much from China or from India as they could before because of the state of the U.S. dollar. U.S.-produced merchandise has become a better value and dealers are making the change.”

Increasing freight container costs and higher raw material prices have also benefited U.S. manufacturers. “We’re paying exorbitantly higher labor than India, China, Taiwan and other countries,” Tuschner says. “As raw material prices escalate, labor becomes a smaller piece of the equation. This helps to level the playing field with overseas manufacturers.”

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Evolving Tires
Just as the market segment itself has changed, so have the features and customer demands of skid-steer tires. Today, consumers are looking for larger sizes with more durable sidewalls and tread that is specifically designed for varying applications.

“As in so many machine segments, the trend in skid-steer loaders is toward ever-increasing capacities which requires larger, higher capacity tires,” Burroughs says. The once ever-present 10-16.5 tire size is now being joined by 12-16.5 and even 14-17.5 tires, he notes.

“One trend that’s been evolving over the last decade is that people want a skid-steer tire that can withstand more abuse,” Denman’s Tuschner says. “Fifteen years ago none of the skid-steer tires had an extra heavy duty sidewall with rim guard. Now, most tires sold in this segment have this feature, which is an extra piece of thick rubber that extends from the sidewall and covers the rim flange. That way, if you go up against a curb, the wheel doesn’t get damaged. It also does a great job resisting sidewall punctures.”

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Other skid-steer evolutions include wider lugs for increased wear and more durability, deeper tread and a slow move toward radialization, he says. “The bulk of the skid-steer market is still bias, but there has been a shift to radial. Five years ago there were no radials, now radials make up a small part of the market.”

Additionally, the skid-steer market has seen a proliferation in the number of tread designs available. Standard directional tread designs used to be the only option available 10 to 15 years ago, according to Tuschner, but now the tread designs have opened up to about six basic designs that vary for specific applications.

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Success With Customers
One  key to succeeding in this highly profitable market segment lies in your shop’s location. Scout out your area for the industries that rely on skid-steer loaders, including equipment rental companies.

“By far, the single biggest customer segment is the rental houses, made up of both national and regional players,” Burroughs says. “The overall efficiency and versatility of the SSL machines punctuated by their relatively low cost and transportability make them a key component of the equipment fleet in an ever widening market.”

Like with any specialty or industrial tire, this particular segment offers profits unmatched by more common passenger or light truck tires. It’s a matter of basic math – less competition equals more potential sales for you.

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“Virtually every single tire dealer – whether it’s a mass merchant or an independent dealer – has some type of passenger or light truck tire,” Tuschner explains. “You’re competing with Wal-mart, Sears and every other tire dealer. With industrial/specialty tires, competition is much more limited.”

In addition, entering the skid-steer market requires little upfront investment since the tires can be mounted using standard equipment. “One of the things that’s nice about specialty tires is you don’t have to buy a whole slew of SKUs, like you do with passenger and light truck tires. Denman’s most popular two sizes, the 10-16.5 and 12-16.5, would cover 67% of the market nationwide.”

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Aside from keeping tabs on the market and stocking the appropriate sizes, success in this niche depends on earning a reputation for fast, reliable service, according to Burroughs.

“Recall that these are ‘productivity’ machines that are often used in very extreme or demanding environments,” he says. “As they are primarily still equipped with bias-ply tires they are, by nature of their construction, more susceptible to tire failures and punctures than steel-belted radial tires.”

He notes that success depends on a dealer’s responsiveness to urgent customer service requirements in the field. Having mobile equipment and the ability to get to job sites for tire repairs in a timely manner will result in success.

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“Ensuring that the service personnel are properly trained, in addition to ‘going the extra distance,’ such as keeping spares for key customers, will translate into success,” Burroughs says.

Popular Sellers
Of all Denman’s offerings in the skid-steer market, the company’s Premium Skid Trax is the most popular among buyers. The bias tire features a heavy duty sidewall with rim guard, ultra deep tread for reduced wear in hard surface applications and directional tread for performance in the dirt. A radial version is also available, Tuschner says.

Unique to Denman, the company offers an hour warranty on its skid-steer products. The Premium Skid Trax comes with an 800-hour warranty, while the Premium Radial Skid Trax offers a 1,000-hour warranty, he says.

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“It’s almost like a mileage guarantee for skid-steer tires. It’s a selling point that differentiates us from the competition,” he says.

According to Burroughs, Michelin offers the only comprehensive steel-belted radial tire line for the skid-steer market, the steel-belted XZSL, with sizes ranging from 15- through 20-inch bead seat diameters.

“The high failure/service rate associated with bias ply tires is a sore point, a ‘necessary evil’ for most users,” he says. “Using Michelin XZSL tires will reduce flats by at least 50%. Additionally, the number of hours of service from the XZSLs compared with bias tires is generally at least doubled. The benefit to the customer is immediate and the operators appreciate the comfort and improvement in machine responsiveness.”

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The XZSL line includes a 90-day satisfaction guarantee from the purchase date, and if a customer is not satisfied with the performance of the XZSL tires within that time, Michelin will refund the full purchase price of the tires, Burroughs says.

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