23
Dec
09

Shifting the Bike Industry Paradigm

Like many cyclists, I’ve got a good relationship with my LBS.  While I could save a buck or two or ten by scouring eBay and discount sites, I appreciate the value of having somebody there for me to throw my bike in disgust at after my drivetrain tried to morph into an automatic with a spastic clutch during last week’s race.  The caring bike shop owner takes time to look over the carnage of carbon, aluminum and steel while I rail on about how my mechanical issue dropped me from a surefire 9th place all the way back to 14th and theorizing on how to explain to the international cycling media the reason for my mechanical issue without upsetting my sponsors.  (For the record, my sponsors are there because I’m apparently semi-likeable and a good cycling advocate.  The only international cycling media I’ve ever addressed was getting my blurb in Road Bike Action’s “Why we Ride.”)

I have what many would call a cycling gear ‘addiction.’ Over the course of the year, I probably average spending $500/month at the shop.  But, I don’t envy the shopping torture that I put my LBS owner through to earn that money.  Back in the day (as the kids say) when I managed a big box bike shop, the company’s mantra was a religious large scale purchase of closeouts.  I became a swami of off-season sales.  However, this knowledge engrained itself into my buying habits and constantly has me waiting for the unfortunate cycle of late season shedding of existing inventory and closeouts available from the manufacturers.  The 2008 parts will be just fine, thanks.

Given our national/global economic downturn, everybody expected the bike business to blossom.  Thoughts of America actually accepting the bike culture entered cyclists’ collective consciousness, if for no other reason than one less horn-honking jerk to almost run you over on the morning commute.  Why then are bike inventories after the season 39% higher than a year ago with 97,000 road bikes (up 88% over last year) and 202,000 hybrids (up 214%) sitting in warehouses? Yes, people kept their wallets closed overall during this crisis.  However, I see it as an exacerbation of the perpetual cycle the industry drives.  What bikes people did buy were previous year’s closeouts…they wanted more for their recession dollar.  The industry is out of touch with actual buying trends – they don’t know what is selling or why.

The bike industry needs to look no further than the American auto manufacturers to realize they need to make a paradigm shift.  For decades, the American automakers had to each year come out with new models and new features to supposedly keep up with the competition.  Meanwhile, over in Germany, companies like BMW and Volkswagen operated on keeping the models the same with small improvements each year and only making significant changes every 5-10 years.

I just purchased a 2008 Trek Fuel EX 9.5 frame to build to my spec recently.  It cost 43% less than a new one.  My buyer’s remorse kicked in when looking at the 2010 version and questions of “how will I live without ABP RACE and DRCV?” arose.  After asking Trek, there’s no performance difference between the ‘08 ABP and ‘10 ABP.  The reviews of the RP23 shock on the ‘08 overall were glowing.  Apparently, if I launch myself off a cliff, the DRCV might be a good thing.  I’m 38, I race XC, I live in the Midwest and ride trail…isn’t happening anytime soon.  The moral of the story – despite the cavalcade of new acronyms, the performance difference is incrementally minimal in 99% of the cases year-after-year.

Given my rant, here are my three recommendations to help fix the bike industry.

1)      More model consistency year-after-year.  If a frame has no significant changes other than the color of paint and the components are 95% the same, don’t create 5 new marketing terms for how the new one is better.  Let your LBS be able to sit with a 2009 model next to the 2010 model and say “they’re both great bikes.  The 2009 is $150 less because it’s last year’s model, but they’re essential the same bike.”  The typical now statement is “the 2010 has the hypersonic formed chainstays for greater vertical compliance.  Riding the 2009 is like putting a jackhammer under your saddle, which is why we’re discounting it $2,000.”  Forcing your LBS into a market where they have to reduce to a 5-10% margin after August 1 is just brutal.  Doing this also provides more value to closeouts by retaining retail value and ideally, larger margins.

2)      New retail cooperation paradigm.  Many think the era of the LBS is over and manufacturers just need to go the direct-to-consumer model.  Nope.  Disagree.  Could list pages of reasons, starting with cyclists need the service/education/communal connection, but you already quit reading 200 words ago.  Certain manufacturers cut their own throats with a dealer network by allowing large volume discounters to snatch up remaining product and advertise a 25 – 70% discount.

Existing dealers are stuck with current inventory and really would like to find a way to ship it back, preferably with a bag of flaming poo inside.   Manufacturers, launch websites that sell bikes at retail price but direct the sale to their nearest LBS dealer.  Dealers can pull from existing inventory or get new product shipped in.  Instead of bailing out with deep discounts on late season inventory, list national sales prices that follow the same procedure.  Ideally, the manufacturer’s benefit by getting a more accurate and timely production model, both gain inventory turnover and higher annualized margin.  Yes, I can already hear the wailing of the Jensons, Chain Loves and CBOs of the world, but rather the industry be healthy then have fattened vultures.

3)       A gift bag containing DZ-Nuts, Hammer Gel, bike mini-tool, the Zen of Pedaling and a video on how to use the aforementioned products with every bike purchase.

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