CORONA, Calif.—Tire's Warehouse Inc. (TWI) is on a mission to expand its distribution reach throughout California and beyond.
To facilitate those goals, the Corona-based wholesaler is opening a sixth warehouse in California and has added the Tire One associate dealer program to its business model.
The new warehouse, a 128,000-sq.-ft., so-called “super distribution center” opening this month in Union City, Calif., will extend TWI's service area northward and encompass the whole state.
TWI also has warehouses in Fountain Valley, Redlands, Santa Fe Springs, Sylmar and Corona in Southern California, with more than 80 trucks that provide twice-daily deliveries to independent tire dealerships.
“We've laid in a strategic expansion plan and this expansion into northern California is that first big move for us. We have on the drawing board, and are looking at, numerous warehouses in the western part of the U.S.,” said TWI President Dan King. The wholesaler also is looking to add warehouses within the state starting next year to fill in service areas, he told Tire Business.
“The biggest challenge has been trying to transition the organization to be better, so that includes coming out with the new Tire One program and expanding into northern California,” he said, adding, “We knew it was going to be, but we knew we had to do it. That's been a really, really big challenge.
“Also, the other big challenge is making sure we're serving that independent dealer because they are, of course, vital to who we are, but also they really rely on a distributor. It's so important to them that they get the product they need at the right price when they need it, and we got to be there for them.
“So we are challenging ourselves to constantly get better at that.”
For the rest of the year, TWI will be focusing on implementing the Tire One marketing program, which offers a package of benefits for its independent tire dealer customers.
Earlier this year TWI partnered with U.S. AutoForce of Appleton, Wis., to help develop AutoForce's Tire One dealer marketing program with the goal of better serving their respective customers.
Mr. King said many of his customers don't have access to vital business programs, such as website design and advertising support, which Tire One provides.
The Tire One program “is going to be a major focus for us in the coming years. We're going to keep it growing and expanding. We're going to try to listen to the independent dealer—what can help their business—and we're going to continually add benefits to the program,” he said.
Some of the benefits offered through the Tire One program include: cus-tomized web-site design; an e-commerce platform; ad-ver-tising assistance; direct mail support; local pricing analysis; a national warranty program; and discounts as well as benefits from vendor partners.
“It's a good all-encompassing program, we believe, and it's getting really good reception so far,” he said.
Another challenge for the distributor has been the uncertainty surrounding the U.S. Commerce Department's pending decision on when and how much countervailing and antidumping duties to impose on Chinese-made passenger and light truck tires coming into the U.S. However, supply and pricing so far have not been impacted, Mr. King said.
The distributor delivers passenger, light and medium truck and industrial tires and stocks more than a dozen brands, including Accelera, Bridgestone, Continental, Deestone, Doral, Falken, Gladiator, GT Radial, Hankook, Kumho, Nexen, Sumitomo, Toyo, Yokohama and Zenna.
“It's created more of an issue of an unknown of what's going to happen, rather than directly having an impact on supply or even an impact on our pricing,” Mr. King said of the pending duties increase. “The pricing is staying down low right now while the government is trying to figure this out. We're getting plenty of supply.
“We have great relationships with our offshore partners, so we've been lucky in that regard in that we've got good partnerships. We've seen no interruption in supply and, for now, the costs of the product are not too dramatically different than it has been.
“We've kept our stock high, definitely, because we want to make sure that if there is any interruption that the independent dealers don't feel that interruption...but we haven't had any issue yet with any lack of supply from many of our partners at this point,” he said.
The bigger issue for the company, according to Mr. King, has been recovering from the protracted labor dispute at 29 West Coast shipping ports that created a backlog of tire shipments earlier this year.
While the countervailing and antidumping duties loom, there is no shortage of Chinese-made tires in California. In fact, Mr. King said the state is inundated with tires imported from China and sold by upstart brokers.
“Pricing has been extremely competitive,” he said. “A lot of people were able to get their hands on the product before the duty issue. We definitely saw a demand for that kind of product.”
Before the Commerce Department announced plans for imposing the duties, Chinese-made tires were “flooding into southern California and at some really unbelievable pricing. (There were) brands no one's ever heard of from manufacturing plants no one's ever heard of. So there was a lot of uncertainty about it,” he continued.
“That kind of influx has really been reduced since the duties came up. Brokers that would broker anything—that's really calmed down.”
Amid the wave of low-priced tires, TWI has tried to stay loyal to its supply partners.
“We try to stay consistent with our partners. We try not to shift to the latest and cheapest product out there. We want to make sure we know the partner and we know the manufacturing facility,” Mr. King said.
“We want to make sure the product that we are selling to the independent dealer is a product we feel comfortable with. So we sometimes just have to suck it up and know that there are other products out there that might be lower (priced), but we try to build the proper brand from our offshore partners and we think ultimately, in the long run, it helps the independent dealer.”
The industry itself is relatively flat this year, due to sluggish consumer confidence, he said.
“We've been a little concerned that consumer confidence, when it comes to buying tires, has not come back. After the recession, it got hit pretty hard,” Mr. King said. “A tire purchase is a very big purchase for a consumer. It's an inconsistent purchase. It's one they don't really like. And so they tend to back away from it when they can and we saw that after the recession.
“It started to come back where the independent dealer felt there was a good consistent growth of consumers and (now) it's kind of stabilized a little bit. It hasn't grown to the level that we would expect yet. So the independent dealer is still struggling.”
Mr. King has seen a growing consumer interest in lower-priced Chinese brand tires. “They see options out there that are lower (priced), so they have tended to look at some of those products more than they maybe would have in the past.”
The attraction of Chinese brand tires is higher in California than in the rest of the country, he said, mainly because the state is inundated with low-priced Chinese imports, creating a very competitive market.
Overall the wholesale market is stable, he added.
“The amount of choices the independent dealer has, the amount of SKUs that they have to consider, they have to rely a lot on a distributor to inventory that product basically for them,” he said.
Mr. King, declined to reveal sales figures, but said he expects TWI to end 2015 with double-digit growth, as it did in 2014.
“We feel the focus we have on the independent dealer, the new programs that we have, the brands that support us, we expect the same thing. Although the independent dealers themselves are not necessarily growing quite a bit, they're kind of stable. We still expect to grow. We think we have the right tools to grow.”
TWI has survived in the competitive California market by following its philosophy to “have the right inventory, invest in inventory, invest in (twice-a-day) delivery, have the right brand partners so we can bring good consistent programs to the independent dealer,” Mr. King said, adding: “It's not necessarily this unique special kind of thing, it's just that we stay consistent to it and we listen to the independent dealer and we're committed to it.
“We are constantly challenging ourselves to get better at it and we think the independent dealer appreciates that.”