Years of overcapacity and discounting are giving way to something rather different and the bicycle retailer is at an interesting crossroads, argues one anonymous industry veteran…
The arrival of corporate money post 2008 significantly changed the IBD landscape. Profit margins, not the greatest even beforehand, were driven down further as big investors grew both bricks and mortar and online capacity. Discounting was adopted as a primary tool to try to develop scalable businesses, but scalability was never proven and much of this capacity had now disappeared; witness what has happened at Evans Cycles, Cycle Surgery and Cycle Republic.
A shortage of stock has allowed many manufacturers to dodge the issue, for now, but retail representation could be a real issue going forward for them. Some have flirted with B2C or omni-channel, selling simultaneously to the trade and consumers, to capture the retail margin, only to find that selling to end customers bears its own challenges.
For bikes, at least, omni-channel is unproven, especially for electric bikes where test rides are a powerful sales tool and after sales support important. The problem is that after years of arguably mixed support for their IBD channel, manufacturers are now finding their retail channel lacking. B2C has lost its allure for many. Many viewed the apparent success of Canyon with envy, but Canyon was unashamedly B2C and even Canyon had its problems with poor customer service, forcing it to invest in brick-and-mortar service capability.
Anecdotal evidence points to a wave of outside investor interest in the retail channel. Will suppliers just take the money, like last time, and sign up whatever new dealers have the cash, or will they be as driven by quality parameters?
A few of the more enlightened are looking at working with fewer but better retail partners, co-investing in a better retail experience for end customers. Innovative consignment stocking initiatives, bespoke shop-in-shop formats, better prime retail locations now that high street rents have fallen significantly, onsite car parking, co-marketing and, crucially, more focused product offering. All backed by selective distribution agreements to control the trade’s worst enemy, the blunt tool of price discounting. Rather than having a mediocre dealer in every town, they are looking for regional super dealers who can efficiently process volume and give customers a great retail experience. The greater the price point, and electric bikes are by nature a higher price point, the further the customer will travel, at least regionally. Think supercharged concept store lite.
But should retailers be wary? After all, they’ve been led up the concept store path before and with mixed success. The problem before was that of conflict of interest and the threat of B2C weakening the hand of the IBD; this time the waning interest of suppliers in developing B2C and omni-channel presents forward thinking IBDs with a real opportunity to forge strong, equal and mutually beneficial partnerships.
Retailers don’t need to scale by opening smaller non-prime locations, rather they need to invest heavily in super regional destination stores with good logistics, catchment areas of large population, easy parking and, ideally, a demo capability.
Manufacturers need to be seeking out cycle retail partners with proven ability. The cycle industry has some unique characteristics that can trip up outside investors, even those that have enjoyed great success in other sectors. Bicycle retail is like no other retailer channel, as perhaps Mike Ashley and other corporates have found out to their peril. There is a bewildering number of SKUs, new technologies and product thrown at the retail channel with little manufacturer support. IBDs are largely left to fend for themselves with little effective warranty backup.
Road race bikes, endurance bikes, internal cabling, electric shifting, tubeless tyres, gravel, gravel adventure, electric bikes, different motor systems, control apps, social media and other marketing, warranty… IBDs are being pulled from pillar to post and need bigger profit margins and more support in order to pay retail staff appropriately in a more technical landscape than ever before. A skilled bike mechanic arguably now has a wider skillset than a main dealer car technician, but earns only half as much.
So, what does the future hold? Electric bikes and e-mobility are a real game changer, increasing the addressable market substantially to include almost all the population and not just the enthusiast. Witness Raleigh’s marketing to The Caravan Club membership, that’s lateral thinking that has paid dividends. These ‘non-cyclist’ cyclists welcome, if not demand, a better retail offering, one that is cleaner and more welcoming. Successful retailers will sell lifestyle and mobility solutions, the product itself will become less important. Electric bikes are sold differently to performance carbon road bikes.
There’s a great opportunity for all, a situation where supply, or rather the right supply, will fuel demand. All product is selling through in 2021, regardless; there is too little supply to satisfy demand, so there is little short-term incentive for change, but this will soon pass and forward thinkers will enjoy a first mover advantage.
So, what’s it to be at the retail crossroads: forwards, backwards or sideways…