'If you control the service, you control the customer': Bob Sumerel Tire bundles diverse products and services

Bob Sumerel Tire Co. sells new truck tires. It makes and sells retreads. The company provides road service and yard checks. It also reconditions rims and, most recently, rolled out a trailer maintenance service.

All of these products and services are profitable in and of themselves, says CEO Bob Sumerel. But combined into a single package, they enable the Erlanger, Ky.-based dealership to secure existing customers and win new ones.

"And by bundling all of this together, we get a better gross profit margin," says Sumerel.

All together now

Bob Sumerel Tire has 10 commercial locations and 25 retail stores in Kentucky and southwestern Ohio.

While fewer in number, the commercial outlets make up 60% of the company's overall sales. The dealership services several large fleets such as Ryder, UPS and Waste Management, plus a number of smaller operations.

Regardless of their size, most fleets are busier than ever, and would rather entrust tire maintenance to tire experts, according to Sumerel.

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"They want you to manage their tires -- whether it's new tires, retreads, flat repairs, service calls or other problems. They don't want the aggravation. They want to concentrate on their customers and hauling freight and doing what they do best."

That's where the 38-year-old dealership's experience, regional footprint and economies of scale enter the picture.

"It's become harder for the smaller players," says Sumerel. "We go into a fleet and are doing all of their tire business, then some Tom, Dick or Harry drives up and says, 'I have a special on a certain size of tire today.' They look at him and say, 'I'm sorry, we're with so-and-so and they take care of everything we have.'

"It's harder for some guy to come in and drop off four or six tires at a time. He's on the outside looking in."

The dealership's bundling strategy also helps its salespeople get their feet in doors that might otherwise have been closed to them.

"We may go into a fleet that we're not doing business with and sell, for example, our trailer maintenance service, and all of a sudden they say, 'We like the way you do things. Maybe we ought to talk about a tire program.'"

Retreads are a must

In some ways, retreading is the foundation of Bob Sumerel Tire's commercial business.

The company has five retread plants. They are located in Erlanger; Winchester, Ky.; and Dayton, Columbus and Zanesville, Ohio.

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Combined, they produce about 700 units per day, including some light truck tire retreads.

All told, retreads make up 25% to 30% of Bob Sumerel Tire's commercial sales.

"We market retreading as a piece of the total package of solutions and an integral part of lowering our customers' costs," says company President Todd Sumerel. (Brother Craig Sumerel, also a company president, runs the firm's retail division.)

Retreads are vital to any commercial tire operation, according to Bob. "If you're going to a fleet to say, 'We're going to take you out of the tire business,' how are you going to do that without retreads?

"With what you're paying for a quality new tire, to get your value out of that casing you need to retread that thing. We can give the customer as good or better mileage out of a retread than he got out of a new tire for probably a third of the cost."

The dealership uses fleet surveys and yard checks to determine what tires need to be retreaded and when. It puts some customers on regular survey schedules. Other times, Sumerel's people work around the customer's schedule.

"We look at it as, 'What's the best solution for the customer?'" says Todd. "For some customers, it's better to put a new tire on; for others it's better for a retread. The criteria we use is how rough they are on tires, how many repairs they need, what their wear-out rates are and if they are generating casings. If they're generating a lot of excess casings, it's a great (opening) for retreading.

"For some customers, retreading may not be the most important thing. It might be fuel economy. It might be downtime. We listen to what is critical to them and come back with a solution."

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Bob Sumerel Tire's retread sales have been good despite escalating raw material costs, according to Todd.

That doesn't mean the dealership isn't being squeezed. The cost of rubber, for one, has forced the company to pass some expenses down to customers.

"Because fuel prices are so high, our customers are watching every penny," says Todd.

Commercial shake-out

Bob Sumerel Tire's size and reputation make it more than a magnet for customers. Smaller tire dealerships who are thinking about exiting the business also flock to the company.

Bob says he is talking to four or five potential acquisitions at any given time. "On the commercial side, there are a lot of roll-up opportunities. On the retail side, there aren't many. Much of retail's growth has to come through brick and mortar."

Acquisitions take time, according to Bob -- sometimes two to three years to seal a single deal.

"Talking to someone about selling their business... it's like their first-born child. Do they really want to do this?

"Then you have to evaluate the business and what it's worth. A lot of people want to maintain their style of living. Many times what their business is worth and what it takes to support their lifestyles are two different things.

"They say, 'This is what I need to live on.' We say, 'If we're going to buy your business, this is what we need to make out of it.'"

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Bob has walked away from past deals because both parties couldn't reach a compromise.

"But in the end, they've always come back and it's worked. It has to be a win for them and a win for us."

He keeps the transaction as simple as possible, keeping lawyers out of the picture until they are absolutely necessary.

"When we do a deal, we come to terms and the principals will sit down and put on paper what they are. Then we say, 'OK, we have all agreed to this and this is what we want to do.' Then we have a meeting; they bring their attorney, we bring our attorney. And we say, 'Here it is, boys. There's no negotiating. It's all right here.' We want to get the deal closed as painlessly as we can."

Another secret to acquisitions? Staying in close contact with competitors, says Bob. "Sometimes your competitor wakes up one day and says, 'I want to get out of the business. Who am I going to sell to?'"

New blood, new ideas

Trust between customer and dealer is paramount on the retail side, according to Craig, who says his sales force influences buying decisions 75% of the time.

"People come in say, 'You have a great reputation, you stand behind what you service, what should I put on?'"

Bob says he wishes it were that easy on the truck tire side, where he says about half of the dealership's tire buyers purchase what the company recommends. A lot of that, he explains, is due to national account contracts.

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"For example, with Ryder, it's all Bridgestone and Bandag. It's all set."

Bob Sumerel Tire also sells Michelin, Bridgestone, Firestone, Cooper, Yokohama, Continental and General brand truck tires.

"You have to earn (truck tire customers') business every day. And if you don't, someone else is going to be in there earning it. You can't take it for granted. We spend a lot of money on salesmen and vehicles and so forth to do this."

Pounding on doors will always be important, he explains. "If there's a substitute for it, I don't know what it is."

While many commercial dealerships poach salespeople from their rivals, Bob Sumerel Tire likes to hire non-tire people.

"We're not interested in going to a competitor and hiring their salespeople, because if they're any good, they already have a job. We're interested in hiring good people and training them in the way we do business."

People from outside the industry bring fresh, non-traditional perspectives with them, says Bob.

But the process of hiring non-tire people isn't cheap or easy, he says. It often takes 12 months to bring a new employee up to speed.

The Sumerels sometimes make exceptions. They hired their current southern regional manager, Tim Stover, from another dealership in 2005.

Stover, a commercial tire veteran, is used as a benchmark when they evaluate new prospects.

Having the right people in place -- and keeping them there -- is part of the company's bundling strategy.

Bob Sumerel has no illusions about what it takes to thrive in such a hyper-competitive segment of the industry. "For us to be successful, we need to dominate the markets we're in."