Good time to be a bicycle dealer?

It's summer, which means I've been spending a lot of time behind the handlebars. I've also been spending a lot of time in bike shops - broken wheel, bend chainring, frayed shifter cable... its been a rough summer on both the road and mountain bikes. But this has gotten me in to talk with and hang out with some of the great folks that run independent bike shops around town. Based on these conversations, I can tell you that its both a good and bad time to be in the bike business.

Let's take a closer look:

First, inventory is a huge challenge for bike shops. Most of the bike shops I've visited have got their inventory under control. They have been focusing shifting their mix of inventory towards the products that are selling (basically away from mid-range road bikes) and reducing overall inventory. This is a tough balancing act for bike shops, particularly in the summer.

Next, as with all businesses in a downturn, its very important to find the "right" niche and keep laser sharp focus on that niche. This is where many shops are struggling. The high-end bike business has been hit particularly hard by the downturn. Shops that depend on this high-end bike business are going to have to be focused on connecting with their customers in a valuable way (rides, accessories, sponsorships, etc.). Shops that are focused on mid-range bikes are finding increasing competition from online and big box shops. Either way the solution remains the same focus, focus, focus.

Finally, I have found that shops that have the traditional bike shop attitude are losing the battle. If you ever shopped at a bike shop in the 1990's, you know the what I'm talking about. The "holier-than-thou" talking way over your head attitude that I am constantly railing against. Most shops are doing much better with this, but I still run into it. Particularly for some reason in shops that work with a lot of triathletes (Do they like that attitude? Seems doubtful).

Is it a good time to be a bike dealer? Well, its definitely a tough time, no question. But there are opportunities if you can nail down a specific niche market that you can market to, reduce inventory costs, and still keep service friendly and with a smile.

Portland Design Group

A new company launched in Portland (of course) featuring new high-design bike products, called Portland Design Works. They don't have many products listed yet, but based on what they do have now, I'm eager to see what they come up with. It will be interesting to see how their national distribution works out (if at all). I think they would not be doing too poorly, though to start with web and mail-order sales and build that first.

Oh, and I'm partial to their "Panda Treat Grips"... that's good stuff.

Here's the press release from them:

Portland, OR- January 19, 2009-

Industry veterans Erik Olson and Dan Powell have launched Portland Design Works (PDW), a new brand of urban bicycle accessories with a focus on simple, beautiful design. The first two categories of product, grips and inflation, will begin shipping in mid-February and can be viewed on the new PDW website, www.ridepdw.com. Cargo racks, tools, mini-pumps and fenders will be available by late spring.

PDW is still finalizing their national distribution lineup, but hopes to have their goods available nationwide by summer. Products will be available direct to bicycle shops in the city of Portland, and Powell and Olson will deliver the orders by bicycle.

“We want to be a part of the community, to have a connection,” says Olson, “plus making deliveries by bike is a great excuse to get out and ride.”

Olson and Powell last collaborated as the general manager and sales/marketing guy, respectively, for Planet Bike. The new venture is a dream come true for the native Midwesterners, who are excited to be living in Portland.

“You’d start a surf company near great waves, or a wind farm on an enormous plain. Likewise, we moved to Portland because its bike-friendly culture allows so many folks to get around easily by bike,” says Powell. “We wanted to design and test our gear in that great urban cycling atmosphere.”

PDW is a member of 1% For the Planet, an alliance of businesses that donate at least 1% of their annual revenues to environmental organizations worldwide.

Sales Peddaling Away from the Shop

I had a conversation with a shop owner near my home the other day who was complaining that he is starting to lose more shoppers to the internet over bike pricing. He was telling me that margins are so thin that he can't match the pricing information that customers often have when they come in.

I wondered about this. Is there really an epidemic of shoppers who visit shops then buy bikes online instead of at their local shop? This owner was actually complaining about a specific shopper who was looking at a very expensive tandem, used a lot of their sales time doing test rides, getting price quotes on various options, then just disappeared. The shop owner happened to run into the guy at a charity ride with his wife on their brand new tandem they purchased online.

I wanted to find out if this is a true epidemic or just a few (really annoying) instances. In my search, I found a consultant to bike industry, Jay Townley, who is very well respected and does a lot of speaking engagements with various bike business expos (including Interbike this year). He's been in the business for years, and has some very interesting market research and well thought out retail strategies that he shares with shop owners and bike industry execs.

I ran across a webpage of his that appears old (2006, I think) that discusses the challenge facing bike shops of "Over Educated Shoppers (OES)". I couldn't believe what I was reading. The basic premise is that:

"An overly educated shopper profoundly reduces close rates and diminishes the effectiveness of an under-educated sales staff.

The OES (overly educated shopper) walks into your store knowing more about your products than your staff does! Because of internet search engines like Google and Yahoo, your average shopper has spent over 10 hours educating himself on your products."

He also mentions that:

"The predominately brick and mortar bicycle shop is now challenged by the new information age where anybody can be a retailer because of the power of the Internet. At a recent conference, a representative from eBay presented research showing that the Internet will influence nearly one-half of total U.S. retail sales by 2010!"

Of course, as I mentioned this is old, it's a sales page, and perhaps he would choose to rephrase this now. But the idea that the problem with retail bike shops is that their potential customers are "over educated" makes my skin crawl!

The problem is exactly the opposite. If you have customers walking into your shop that are spending more time getting educated on bikes than the staff that you have on the sales floor, you are doing something wrong. Will your sales staff have all answers to all the questions? No, most likely not, but the answer is out there and a good sales staff will find it for the customer (preferably while the customer is there).

There are two shops that I know that both started as online shops only and then as sales grew, they got a bricks and mortar space. They have customers (as most businesses do) that do a lot of their information gathering online, then visit the shop when they've narrowed their choices. Both use their website as a funnel to bring in more qualified shoppers. Neither have ever complained to me that their customers are "too educated."

But getting back to the case of the shopper who buys online....

I guess the answer to my question, is basically, yes, there probably are a lot of folks who buy are shopping brick and mortar then buying online. And, yes, this is probably something that's growing. But it is all going to come back to service. Shops will never get all the sales (for example: the one sale described above, its obvious that shopper was planning to buy on price. period. He just wanted some test rides first. Annoying, but part of the business).

The best bet is to offer service and a sales experience that will make folks want to spend their money with you. Arm your sales staff with the tools to answer questions (or find answers) and provide value add recommendations that can't be done via a webpage (such as custom fit, custom build-up, after sale service, etc.). It will also help for sales staff to stay on top of Internet pricing and be prepared to defend your pricing to the customer that may (or may not) challenge it.

Personally, I can't imagine buying a bike online, but then I love the shop experience. (When its good.)

Interbike 2008

This week is the Interbike Expo in Las Vegas. It is the premier bike industry show and showcases new products, people and trends in the bike industry.

This year they are doing an Urban cycling fashion show to showcase the equipment and clothing for the increasing cycling as transportation trend:
"A self-propelled cycling art and fashion show, Interbike's latest addition brings the cutting edge of urban cycle culture to life"

This is another example of business lagging the trend. I can tell you that just from the communities I interact with here, this trend of urban cycling has been growing for a couple years now (and if I can see that from my seat here in auto-centric Detroit, what does that say about the trend in forward looking cycling communities on the west coast!)

I applaud Interbike for adding this LONG overdue fashion show, and I'm looking forward to the seeing reaction to this show.

Bike Sales Skyrocketing

I recently read on M-bike.org that bike sales are skyrocketing. This is good news being related from a survey from Bikes Belong. Additionally, there are some very interesting details in the survey results that certainly would help with the service department at bike shop.

First, the survey highlights from Bikes Belong:

The majority of retailers who responded said their sales of transportation-related bicycles, accessories, and service have increased in 2008 compared to 2007:

• 73% said they are selling more bikes.
• 84% said they are selling more accessories.
• 88% said they are selling more service.

Is this increase in sales because of high gas prices? Most retailers who we surveyed think so:

• 95% of shops said customers cited high gas prices as a reason for their transportation-related purchases.
• 80% of retailers said gas prices were helping them sell more bikes for transportation.
• 86% thought accessory sales were getting a boost.
• 89% said they were selling more service because of high gas prices.

Sounds like good news? Well, it is, but the most interesting tidbit from this survey I think comes from the service side. The survey also found that a vast majority of surveyed shops believed that 75% of summer business was from people bringing in old bikes to be repaired, vs. 25% who shopping for a new bike. One shop is quoted as saying this is up from 50% in 2007.

As a shop finds their service sales increasing because of increased use of older bikes for transportation, the customer service in the service department may have to adapt to a new type of customer. Specialized shops that are used to the lycra crowd will have to make sure that their service folks are ready to respectfully and profitably serve those who don't know a sprocket from a spoke and just want a bike that goes.

Here are three key customer service items that shops need to make sure they're addressing:

• Match recommendations to the rider - If your shop specializes in tri-bikes, but you are starting to see older single or three speed bikes, make sure your techs know what sort of parts are going to give the best value (cost vs. performance) to these types of riders (or partner with another shop that you can endorse for these folks).
• Watch your mouth - Most techs are ARDENT cycling fans (this is great - they wouldn't be very good at their jobs if they weren't!). They tend to be able to talk very specifically about which parts are better for bikes. But customers who are switching to bikes for transportation are unlikely to be able identify specific Shimano shifters, and may not even understand some basics (like the difference between one-piece cranks and higher quality three-piece cranks). Make sure that all techs are assessing and talking with customers at their level, not the tech's level. If you don't think they can, have someone else talk to the customers.
  
• Service follow-up - it astounds me how almost no bike shops do follow-up to make sure the service experience was satisfactory. I've only ever had one shop follow-up with me after service. Yes, this can take some substantial time in the high volume months, but even if you just follow up with new customers, it gives you a chance to make a real connection with customers.

How does your shop service rate? Don't know? Try having one of your friends mystery shop your service department.

Reference:
"Bikes Belong Survey Report: Impact of Gas Prices on Bike Sales" - August 2008 - Bikesbelong.org (pdf)