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JP Gallagher is the President of Gallagher Tire, a leading specialty tire wholesaler based in the US. Assuming leadership in 2003, JP has expertly guided the company’s expansion, establishing warehouses in Southeastern Pennsylvania and Upstate New York and launching the online consumer tire sales website Tires4That.com in 2017. Drawing from his vast experience at the forefront of a family business, he emphasizes the importance of respecting current management practices, and being agile in implementing changes for future success.
In this episode…
What is the key to long-lasting success in the tire industry? For Gallagher Tire, a specialty tire wholesaler in business since 1968, it’s all about relationships.
According to JP Gallagher, who started his career in the warehouse and worked his way up to the executive level, relationships have enabled Gallagher Tire to find great employees and keep customers coming back for half a century. He says understanding what employees are going through daily is very important, as is establishing a level of mutual respect with all team members — a happy team often translates to happy customers.
On this episode of Gain Traction, JP joins Neal Maier and Matt Peters to discuss what it takes to be a successful tire business for more than 50 years. JP talks about the importance of building long-term relationships with employees and customers. He says he and his team members come to work every day and enjoy what they do. JP also shares how the pandemic affected Gallagher Tire and reveals what he anticipates for the future.
Here’s a glimpse of what you’ll learn:
- JP Gallagher tells Gallagher Tire’s origin story dating back to 1968
- The opportunity that gave JP his start in the tire business
- How Gallagher Tire handled dramatically longer lead times during the pandemic
- JP pinpoints relationships as the key to Gallagher Tire’s long-term success
- What does JP anticipate for the upcoming year?
- The leadership advice JP received from his father
Resources mentioned in this episode:
Transcript
Mike:
Hey folks, Mike here. I want to invite you before we get started today, to join us in Durham, North Carolina, September 28th through the 30th at the ASTE Show. That’s the Automotive Service and Technology Expo. You can find out more about it at asteshow.com. That’s asteshow.com. Look for me there, Mike with the Gain Traction podcast. Hope to see you there.
Announcer:
Welcome to the Gain Traction podcast, where we feature top automotive entrepreneurs and experts and share their inspiring stories. Now, let’s get started with the show.
Neal:
Hi, this is Neal Meyer, along with Matt Peters. We’re hosts of Gain Traction where we talk with top automotive business leaders about their journeys. Before we jump in with today’s guest, this episode’s brought to you by Tread Partners. At Tread Partners, we provide digital marketing for tire dealers and auto repair shops. By using our strategy, branding and marketing services, we help shops simply sell more tires. So what are you waiting for? Visit us at treadpartners.com. Today we’re joined by JP Gallagher, President of Gallagher Tire, a Pennsylvania specialty tire, tube and wheel distributor. JP, welcome to Gain Traction.
JP:
Neal, thanks for having me. Appreciate the opportunity.
Neal:
JP, you’re in a long line of Gallagher’s in the tire business. Tell us a little bit about how Gallagher got started.
JP:
Well, the first in the tire business was my grandfather, the original John Gallagher. I’m not sure what year he got involved, but one of the pictures I have in our office in Pennsylvania is of him at a national sales meeting in Atlantic City, standing on the boardwalk with a number of other salesmen, and somewhere on the picture it’s handwritten 1943. So we’ve been in the business for quite a while. Gallagher Tire itself started in 1968 by my father Jack Gallagher and his brother Bob Gallagher. The original location was in Bristol, Pennsylvania, and it was a two-bay garage and they started out just trying to service a neighborhood and growing community just outside of Philadelphia with the help of their father.
Neal:
Well, somewhere along the line, you got a start in the tire business, I imagine quite young. Was tires always in your blood or were you always destined for the tire business?
JP:
Well, growing up around the business, I did not appreciate the hard work that really goes into running even a one-location garage, let alone a multi-location distribution center. My brother and I were hands off most of it, an occasional help for inventory and whatnot when Mom and Dad needed it. But my start was 1996. About a year and a half after graduating from college, I realized that really my best option, kind of my only option at that point was to go to work for Dad, and he always had the door open for me and the door to the warehouse was the first one I had to walk through. And that’s where I got my start.
And after about a year and a half of loading trucks, driving trucks, putting away product and getting to know the business from the bottom levels, I was able to move into sales and spent a number of years in sales, learning that, and kind of meeting with my father on a daily basis, just trying to better understand the management side of things. And so after about six, seven years, my dad decided to retire in 2003, and that’s when I became the president of Gallagher Tire.
Neal:
So Gallagher is what I would call a specialty wholesaler, right? I mean everything from OTR to ag, to industrial tires. Has that always been the focus for Gallagher?
JP:
Primarily since I’ve been around, that’s all we’ve sold. I knew a little bit about light truck tires when I first got started, but the shift to specialty started well before I arrived. And this goes back mostly to the relationship my father had with Armstrong back in the day. There were certainly a lot of consumer tires that were made, but I’m not sure at what point, my guess is somewhere in the early ’80s, my father started to realize the value in selling farm tires, construction tires, and that was a big shift for them throughout the late ’80s and ’90s to move away from the consumer side of the business to focus on the specialty. So again, that’s what I learned, but our history is a little diverse, but right now it is 100% specialty.
Neal:
Especially being in ag and OTR, I’m sure through the years, you’ve seen every kind of fluctuation economically or inventory wise, and I feel like some of those industries have been hit even harder than others. Talk to us a little bit about what you’ve seen through the years and how you’ve dealt with it.
JP:
Well, I think we certainly have not experienced the size proliferation like the consumer side, and I’m very thankful for that because we don’t have enough warehouse space to handle 30 different backhoe sizes. So, we’re a little lucky there. But throughout the years, what I would say is the biggest change is just where we’re getting our tires from. When we were buying Armstrong primarily back in the ’80s, it was domestically made. When we first started with Carlisle on the lawn and garden side, that was almost entirely made in the US. So the shift to overseas production has had major implications on how a distributor like Gallagher Tire has to operate. No longer can you look at two to three-week lead times. It’s 2, 3, 4 months in most cases. And as we can discuss about the pandemic, we saw lead times up to 18 months. That’s obviously not the norm. And God willing, we’ll never go back to that.
But doing business on a 60, 70% purchase level of containers is a challenge. We’re fortunate to have some domestic production, but the overseas business is the bulk of it, and it’s challenging to manage that in good times. It’s downright impossible to do it like we had to the last couple of years. We’re doing our best. We’ve gone from just construction and farm to adding the material handling, wheels, inner tubes, and we foam fill, and the addition of sealant and balancing products has also helped us broaden our offerings, if you will.
Neal:
Well, let’s talk a little bit about the pandemic. I mean, when you go from being able to accurately forecast an inventory to suddenly those lead times quadrupling, how do you handle that? I mean, what do you do?
JP:
Well, we gave ourself a nice real challenge heading into the pandemic. We took two warehouses in 2020 and consolidated into one larger one, where we are now in Pennsylvania. So we were very excited for an opportunity to grow our business, increase our deliveries, and going into the I guess it was 2020 we had built our inventory up moving into a new location. So we were very excited. And then when the pandemic hit, that was a very nerve-racking time, but fortunately the tire business was able to function, not 100%, but a lot better than some of the other poor businesses like restaurants and retail stores. We were able to operate, and we were lucky in the sense that we had the extra inventory because a lot of people throughout the second quarter, third quarter, when the pandemic started, they were not ordering. And thankfully we had some product to help get some skid steers and farm tires out there to those consumer people that also sell a little bit of a specialty.
So for a while, we were enjoying the sales aspect of it. I don’t think anybody enjoyed the dealing with the masks, the wiping everything down and fumigating offices on a daily basis. That was tough. There were many days where I was the only person in the office and I had 15 people in the warehouse, but we kind of had to keep a barrier up because if any of our drivers got sick or the warehouse guys got sick, we weren’t able to operate. So it was a challenge that I hope none of us ever have to face again.
Neal:
It sounds like an extraordinary operational challenge, if nothing else. I mean, not to mention all the inventory and cost fluctuations and everything else that came along with it. Has that market settled down finally? I hate to say back to normal, but are things reasonable now?
JP:
Well, I guess one of the biggest fears that we had towards the second half of the pandemic was what’s going to happen when the shipping rates start to decline? Are they going to decline rapidly and really leave us with a lot of product that’s overvalued? And I think while the freight rates didn’t come down overnight, they came down fast enough to cause a lot of harm for many of us that we were finally able to get a lot of prop.
And what I think a lot of people outside of the industry don’t understand is that, yes, you can have a $10,000, $15,000 tariff on a container. Well, that’s fine if that container’s got 1,000 iPads, but if it’s got 1,000 tires on it, that $15,000 surcharge spread across $50,000 worth of material is a 30% increase, where it might be 5 to 8% on other products. And that’s where we have been affected the most coming out of the pandemic because the factories suddenly had room to breathe. They were able to produce a lot of product, and then the demand for container spacing went down very quickly. So unbeknownst to us and many other wholesalers, there was suddenly a lot of product floating in the second half of ’22. We received over nine months’ worth of inventory in a three-month window.
Neal:
Wow.
JP:
All with close to peak surcharge dollar values. So that’s been the real challenge for us, and I imagine many others, Q4 of ’22 through this year so far.
Neal:
As we were talking, I was thinking about the impact of tariffs for big OTR tires, but I had not considered a container load of ATV tires, of golf cart tires. That’s a far different markup, or not markup, far different cost per unit. My gosh, that makes life a real challenge.
JP:
Yeah. I think going back to the larger stuff, I’ll never forget, we got a container of 18 farm tires with a $9,000 to $10,000 surcharge. That was lovely.
Neal:
Profit flies out the window, it becomes a real struggle just to bring [inaudible].
JP:
Yeah. Selling below cost brings a whole new meaning to things.
Neal:
Yeah, no kidding. No kidding. Well, clearly Gallagher’s emerged from the pandemic stronger than ever and growing. A lot of this has to go back to culture and the way you run the company. Talk to us a little bit about some of the things that have led to your success.
JP:
Well, working for my father for seven, eight years and a few years just after he retired, he would come in and just be a nice sounding board for me, the first lesson going back to the first door I walked through was really the warehouse door. Being able to do everything, or at least understanding the job and understanding what the employees are going through on a daily basis is very, very important. I try to establish a level of respect both ways with the employees, knowing that I’m willing to do anything. I’m willing to push the broom, load the truck, unload the truck, but I also appreciate the fact that they’re doing it every day now. And there are some days that it’s pretty tough, but if we can all respect each other and understand that the role that each individual plays is part of the big picture, then we can work better.
So knowing the employees, getting to know them on a personal level and just understanding that they have challenges, just like I have challenges. Seeing the guys show up during a snowstorm to help unload a container that we were going to get hit with demurrage charges, you know have some special people working for you. And that’s not just the operation side. The daily task of collecting money, paying bills, that’s not easy. And while I don’t have very much experience in it, I appreciate what the administrative side of our business does as well. We would not be able to function without those people. And we have a great team both inside the office and outside in the warehouse. It’s been great. And as we’ve grown, I’ve been able to find some great employees through relationships and add some true value to our company.
Neal:
You said the exact word on my mind, and it’s relationships. We hear here over and over that distributors really can thrive when they’re able to build strong relationships inside and out. That sounds like a core tenet for Gallagher as well.
JP:
Yes, absolutely. And on the customer side as well, we have customers that we’ve been doing business with for about as long as we’ve been open for business. So, 50 plus year relationships. It started with my father and even going back to my grandfather, some of the folks. The business is a unique one. Lots of challenges for all of us as we know. But in the end, I think most of us would agree that it’s a great business to be in. It’s hard. It’s hard as heck, but when you can enjoy the people that you work with, the customers that you service, and when you can call those customers partners, that’s a great thing. We’ve been very lucky to have a very large group of core customers and just some phenomenal employees over the years.
Matt:
I’m in the backyard where you guys are located and have worked in the wholesale tire distribution. And I’ll say that Gallagher has a great reputation in the industry. I mean, it’s just not even in our own backyard, but I have interactions with business owners and distributors, manufacturers and retailers across the US that have at some point in time, traded with Gallagher Tire. And you guys have a great reputation. Congratulations.
JP:
Thank you, Matt. Appreciate that. It helps to know that when we all have to get up every day and head to the office. And we enjoy what we do. We are far from perfect, but the most important part is that we’re trying to get better as people. We’re trying to get better with technology. And, again, ultimately it’s that service level that brings people back to calling us or using our website nowadays.
Neal:
Well, JP, by the time this airs, we’ll be in Q4, which is amazing to think that ’23 is almost over.
JP:
Yeah, no kidding.
Neal:
I’m going to ask you to get your crystal ball out. Looking at 2024, and especially we were chatting a minute before, over the past 15, 16 years since the Great Recession, it feels like no two years have been the same. So as you look towards 2024, what do you anticipate?
JP:
Well, I think the best way to answer that is to look back at the time period of since we’ve had the Great Recession, how many times have all of us said, “I’ve never seen anything like this. I don’t know what is going on in our industry.” I have the history to go back into the ’90s other than working in the warehouse. But did my father say that very often? Unfortunately, I can’t ask him that. But we have seen unprecedented fluctuations in price costs, everything that we have to do to run our businesses, whether it’s the trucks that we use to deliver, the fuel that we put in them, the cost of employee.
I really don’t know what ’24 is going to hold for us as far as challenges. What I do feel like though, is that we will have a little bit of stability. And when I say a little bit, it might only be a couple of quarters of cost certainty on our products. The labor market is still extremely challenging, and I don’t know how much better or worse that’s going to get over the next six to 12 months. Fuel has been fairly steady, and I hope that that remains there. So maybe ’24 is a year where we can finally get back to receiving product in a normal fashion, whether it’s one week or two weeks for domestic and 90 days, give or take five days, on container orders, that would be great. That’s how we can make some money. When we know with certainty that the product is going to arrive, then there’s not going to be a 20, 30, 40, 50% surcharge on it. We can deal with a lot of challenges, but those are very, very tough to get through.
Neal:
I think every distributor and retailer as well listening, hopes you’re right.
JP:
I think so.
Neal:
I think we’ll all be better all for it. Well, one of the ways I like to wrap this up is to ask a tough question. Through the years I know you’ve received tons of advice. What’s the best piece of advice you’ve received, something that you look back on and use in your operation?
JP:
That’s a good question. I’ll go back to my father. And really it goes to how are you going to be the leader of a company? And that the leadership isn’t pointing and telling. It’s talking through, asking, being willing to take suggestions. If your employees are vested, they’re going to be much better employees and internal partners. So work as a group and lead as a successful president, whatever the title may be, because of who you have working for you and with you.
Neal:
I think you just gave us an excellent insight into why Gallagher is so successful.
JP:
We try and be the company that has the knowledge to get the right tire to the right end user. And in today’s world where most sales are done over the internet, we want people to have the option to call us and to know that we’re going to give them the best value back for their needs.
Neal:
Well, JP, I can’t thank you enough. I certainly appreciate the time and the wisdom. If people want to learn more about Gallagher Tire, where should they look?
JP:
Well, we do have a very good website for our customers. We have the typical About Us page, and then we also have what we call the G Tire University where we put resources, whether it’s load index charts, or just any bit of information that somebody might want to know about the products that we sell. That’s been very useful for many people. But if you want to learn about our company, come visit us. We’re always happy to give a tour, and I’m always happy to answer a phone call.
Neal:
That’s fantastic. We’ll put a link to the site in the show notes. JP, it’s been a pleasure.
JP:
Neal, Matt, I certainly appreciate the opportunity and certainly enjoyed the conversation.
Neal:
Thank you, JP.
Matt:
Thank you, JP.
Neal:
Take care.
JP:
All right.
Announcer:
Thanks for listening to the Gain Traction podcast. We’ll see you again next time. And be sure to click subscribe to get future episodes.
Transcript
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