Bike dealers torn on the impact of Specialized direct offering

It’s been just over a month since Specialized broke the internet (at least a small corner of it) by announcing a move that many arguably saw coming from one of the top tier cycling brands and with the dust settling reaction remains mixed.

Unsurprisingly, consensus in the retail network tilts toward the negative, with criticism ranging everything from gripes on the brand’s foundation being tied to the bike shop, right through to complaints that Specialized are dictating repair pricing for dealers who opt to handle their bikes. However, in a video titled Specialized go direct to consumer? Is this the end of the local bike shop?, a balanced view is given by UK stockist and two-branch bike shop J’s Cycle Shack.

James Wagner, co-owner and star of the J’s video below is upbeat, conceding that the natural order of the world’s trade at present is consumer-centric, but that does not necessarily mean the end of the road for the retail partner who has valuable expertise that cannot be obtained easily via direct means.

“From our point of view, initially when you look at it you think ‘Oh my god, they’ll cut us out, we have all these bikes, it will be a disaster. It’s not like that at all.

“I think what Specialized has done here is looked at an issue and reacted to the situation in front of them, which is more and more people are buying bikes online. What that creates is a service issue. The internet can’t fix your bike and long has it been the bugbear of the local bike shop seeing bikes bought online brought in store and these go to the back of the queue. What Specialized has done is updated their business by offering that bike online, making it more accessible to that customer if we don’t have in stock, made it available to be collected in store and set a framework for service and warranty by select retailers. I think it’s a great idea and other brands will follow suit. What this is creating is ultimately the best thing for the ned consumer.”

The news did not just generate a strong reaction at retail. Giant USA were among those large brands to strongly rebuff the move away from a solely dealer delivery, though other more agile brands are likewise using the turbulence to lure shops with the pledge of retail only delivery.

In the background, CyclingIndustry.News’ house research has shown a steady trend of adjustment of shop floor space and market make up, with many dealers wary of margin erosion on bike sales in the face of supply chain pressures ramping up on each link in the chain. This trend has been vastly exacerbated by the pandemic’s ripple effects on supply and pricing from raw material right through to delivery to the end-user.

Our new 2022 report (available to buy here) now illustrates a deeper shift from full retail, toward full workshop, or mobile, with 32% of respondents now prioritising service over sales. 37% expressed a significant concern over the advance of the consumer direct model and the potential phasing out of retail partners.

Understandably, not every stockist is convinced that the move will not have a sharp impact on revenues.

Energise eBikes penned an open letter to Specialized UK quickly on the back of the announcement, which can be read in full below:

I am writing to you both to express the concerns that we have in relation to the decision which Specialized have made to start selling products direct to rider.

We value the relationship that we strive to build when our customers visit us for the first time. We spend time with them in understanding, through asking appropriate questions, their requirements and identifying the products that meet their needs and expectations.

Once a suitable product has been decided on, we then accompany the customer on a considered test ride to reinforce their decision making. All of this helps to build a strong level of trust in both ourselves and the brands that we sell.

Maintaining a consistent and high level of footfall is key to the survival of the high street store. The introduction of direct to rider will greatly decrease our footfall and undermine the work and efforts that we have made in building our business.

In going direct to rider, Specialized are taking away the customer experience and disjointing the customer from their local bike shop.

Many of our sales throughout the year are from repeat business and customer recommendations. Direct to rider will have a severe negative impact on our repeat business as it does not allow us to build a relationship with the rider.

Furthermore, the lack of a commission for the LBS that would be the end users’ local shop does not follow what other brands who support us offer. Many other brands provide us with a fair commission when goods are purchased from their website for delivery direct to consumer. This helps to support and grow the LBS, without whom Specialized would have no dealers to help undertake warranty repairs for the products that were sold direct to rider. This would be a negative result for the Specialized brand.

As an example, we used to be a Brompton stockist before Brompton had their own retail stores. On several occasions we spent considerable time discussing and demonstrating the product to potential customers only to find that in not having the colour option that they wanted, the sale migrated to Bromptons online web shop. This resulted in us not only losing the sale but losing the time that we invested in the customer. Brompton, like yourselves, did not offer a commission on the sale. This experience resulted in us dropping the Brompton brand from our range.

It certainly does not feel coincidental that direct to rider is being launched at the same time as the revised warranty charter. Specialized needs it’s dealer base to support the warranties on bikes being sent direct! Again, without the dealer base how will Specialized cope?

It would appear that Specialized want all the rewards for selling the product without the hassle of dealing with irate customers when things go wrong. Instead, the stress and frustration are being handed over to a shop that has not had first contact nor developed a relationship with the customer.

One final point.  We understand that you are implementing a click and collect from the dealer offering the dealer 50% of your standard stocking margin. As a brand Specialized provides typically 10 points less margin than other brands we stock and certainly is the lowest margin of any brand we offer.  To have further erosion  of what is already a low base is completely unacceptable.  Altogether this scheme is ill considered, one sided and would prompt us to consider whether we continue to stock the brand at all.

I doubt we are the only retailer expressing our concerns and would like to know what plans Specialized have in supporting its network of dealers with appropriate commissions on direct to rider and click & collect sales?

Retailers have previously discussed the subject of direct to consumer sales on CI.N’s trade-locked Facebook Group, which you can apply to join here.