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.

Berkley Downtown Development Authority

I have decided to volunteer with the Berkley DDA. Basically, my drive behind this is twofold: first, because I live here, its in my best interest. Secondly, Berkley is in dire need of some branding. The city does not seem to have a strong image with the folks that I've talked to. Why not? Unfortunately, I can't answer that without some wild speculation, but I'm good at wild speculation, so here goes...
Berkley for a while had a campaign that was "Berkley is unique" - the goal I think (can't stress enough, this is all speculation/personal opinion), was to not get lumped in with Royal Oak and become something different than that sort of restaurant/bar scene. While it may be unique, that doesn't really communicate a strong message of what it means for the community to be unique.

However, having said that, there are a lot of things that the DDA and city overall does very well. The city hosts a very successful art fair, a Dream Cruise parade/party, and a holiday parade. In the last year or two there are several new businesses that have been attracted to Downtown Berkley. I know there has been parking issues in the past, and the DDA is actively working on those issues.

So, I'm tossing my hat into the ring to help. Here's an except from the letter I am sending them that talks about my vision for Berkley:

For Berkley’s downtown to flourish, I envision a community that has several anchor businesses that provide a wide variety of options for individuals who wish to keep their dollars in the community, with a wide variety of business types (e.g. restaurants, bars, clothing shops, music shops, etc.). I recently saw an estimate of the amount of dollars that Detroit residents spend outside the city of Detroit, indicating how much “lost” revenue there is for Detroit businesses. I think a similar study for Berkley would be a fascinating and eye-opening assessment of how the DDA needs to target businesses to move within the city.

In my unresearched, personal opinion, I believe there are two key demographics that are driving the future of the downtown in Berkley – families and the “subculture” of young urbanites who use scooters and bicycles for transportation. The Berkley DDA should focus on attracting business that fit these niches (or really ANY niche as long as it is well defined and substantiated) for its downtown business development work. Catering to both groups will hopefully result in an attractive, lively downtown with strollers, scooters, and pedestrians sharing the pavement on their way to local businesses.

Keeping your market small

I brewed another batch of beer on Sunday. This time I decided to do a stout for the winter. I love the process of brewing beer, but the experience of buying the supplies was yet again very, very annoying.

First off, I do not care for the homebrew stores that are closest to me. I do not care for them at all. They are dirty, have terrible customer service, and are difficult to navigate. So, my expectations going into the experience were low. Very low, actually, because I called ahead to find out that they did not have everything I needed. The only store that had everything was over an hour drive away. I decided not to make the drive and set out for the store closest to me prepared for disappointment.

I my expectations were actually exceeded. Here's what I don't get:

• I don't get why they can't just simply sweep the floor. Buying grains means there are grains on the floor. Simply sweeping a few times a day would do wonders. Perhaps this is too much to ask, but I don't think so, since the guy behind the counter was watching videos online at the counter until I interrupted him with a question.
• I don't get why staff can't be (even mildly) helpful. I have been brewing for about 10 years, but I'm still learning. I asked what I thought was a simple question about brewing with fruit (which I've only done once with no success) and got a response so convoluted and filled with brewer's jargon that I was in worse shape than before I asked. When I asked for further clarification, I got a big sigh and referred to a book.
  
• I don't get why product can't get replaced in a timely fashion. The grains sit in big tubs in this particular shop. When the grains are gone, in theory, these get replaced from the sacks of grains in stacks on the floor behind the tubs. Of the 5 types of grains I needed, I found 2 were out. When I asked for these grains, I was told that they'd restock them "soon". Their "soon" must have a different reference point than my "soon" since there was no activity in that particular direction. I found the bag for one, opened it and took what I needed, but couldn't find the other.
  

On top of all that, I went home without everything I needed, because I already knew they were out of one of the hop varieties I needed, and as mentioned I couldn't find all the grain I needed.

And that was all just from one visit.

Ok, so I recognize that this particular shop is probably particularly bad. But having been to 5 different shops around the Detroit area, I can tell you that this is the norm, not the exception. Most people will say something like "Oh, its because homebrewers are such a small market" or "its just not viable as a standalone business in this market."

Sure that may be, but with "service" like this, is there really any question why?

Surviving the holidays

If you watch or read the news or generally have see any business news at all, you will see that the economic outlook for the holidays as we know them is not so good (particularly in the D). How will your business fare in this environment? I've got three ideas that will help you answer that question positively:

• CRM - Yep, those three magic little letters that are often hard to define. For the purposes of this holiday season (and beyond), I'd think of CRM as a tool for holding on to your current customers. To me, this seems of key importance right now. Doesn't now seem like a great time to launch a loyalty program? What about website revisions that make it more interactive? What about becoming more connected via facebook, myspace, or other web 2.0 sites? Do you currently have a system for customer feedback? Basically, the goal is a two way conversation that allows current customers to interact and feel like they are a part of your success.
  
• New Incentives - why do you have loyal customers now? (If you don't know, see Research below.) How can you tap into their loyalty to spread the word? Maybe a "bring a friend" incentive. Perhaps its time to do some impromtu sweepstakes, party, or other creative event to bring in new traffic. What companies are around you? What about a special incentive for their employees or a new supplier and family discount?
  
• Research - it may seem counterintuitive to be spending money on something right now that may not have a direct ROI calculation. These items are often the first to cut. However, I would argue that now is the PERFECT time for this. You have to better understand what consumers are willing to spend money on, why they spend their money with you vs. competitors, and what they "can't" live without. This doesn't have to be complicated. You could offer a gift certificate to get folks to come into the shop and sit down with you to talk. You could set up a short online survey using one of the many online survey tools (I personally like surveymonkey.com) or set up a new topic for improvements on your forum. I see this as an excellent the start to a conversation with your customers (see CRM above).

Any of these will give you something positive to present to customers, employees, and investors, rather than just the doom and gloom that all of them are getting anyway.

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.)