Comment: Is the internet the problem for IBDs?

Words by Ceri Dipple, long-term bike shop worker and industry commentator

I should probably introduce myself to start with. I opened a bike shop when I was 22 and thought I knew everything. It turns out I didn’t know much at all, so I’ve spent the last 10 years learning about business and retail through countless mistakes. Why should you continue to read this if I’ve spent the last 10 years making mistakes? Why, because I’m probably no different to the next guy. In a world of business, the truth is that no matter how big the company, most of us spend our time making it up as we go along…

So often we hear about how the internet and online retailers are the problem for the independent retailer. You could sit down with a coffee and spend the next five minutes reading about how rosy life would be if the internet didn’t exist but let’s be honest, it’s not going anywhere. The question for the independent isn’t how you beat the internet, there would only be one winner, the question is whether the internet is the problem in the first place.

Online retailers are actually no different to every other retailer. They don’t have the rent and rates that a smaller high street retailer has, but they do have significant costs when it comes to their websites. The online retailers took advantage of a rapidly growing marketplace and that allowed them to scale quickly. They still buy product from distributors, or directly from brands in some cases but they are retailers, just like the independent.

So, if the internet isn’t the problem, then what is? 

Firstly, I’m not a huge fan of the word ‘problem’, it sounds negative and when I explain where I see the ‘problem’, I risk alienating those very people who I believe have a significant amount of power in solving it. However, if the problem can be identified then a solution can be found, so, what is the problem?

The problem is the traditional retail model itself and the inefficiency of distribution within. It’s outdated and slow to respond to consumer demand, which often leaves too much product in the marketplace and when supply outweighs demand, you end up with the current state of affairs.

Traditionally, a brand sells to distributor, distributor to retailer and retailer to consumer. That all made sense 25 years ago, but with the evolution of the internet and technology, and with consumers offered a myriad of ways to purchase products, the traditional retail model needs to adapt. The retailers are the first to go, but longer term, distributor and brands will be the biggest losers.

Are distributors and independent retailers, friend or foe? They should be friends, without one, the other doesn’t exist, but this often isn’t the case and many don’t have a positive working relationship which is part of the problem. It always makes me smile when you hear a retailer telling a distributor how they should run their company, but likewise, a retailer hears that on a regular basis from a helpful account manager. If everyone started to work together and do what they do best rather than worrying about what the next guy is doing, then the distribution of product may start to head in the right direction.

At the moment retailers are focusing on increased margins, but in reality, does 1 or 2% make a difference on a relatively small turnover.  Surely the retailer would be in a better position if their gross profit from retail sales increased.  One way this can be achieved, is by better management of product distribution; it may mean a reduction in margin for the retailer (yes I have just said a reduction in margin!) but if it’s given away at the point of sale, then what value did that have in the first place?

If distribution is to change in a way that allows the independent to survive, there would need to be a shift in focus by the distributors from sell in to sell through. It’s great to get brands in front of new customers, but if they don’t sell through then the product has become a threat to the retailer, how is that managed from a distribution, brands perspective? At the moment there isn’t anything in place, it’s often seen as the retailer’s problem but in reality, it’s an industry problem, and that needs to change. Without the retailers, there is little need for distributors, and without distributors, it will become a significant challenge for many existing brands to survive.

So if the model and management of product distribution is the problem, the question is, how does it evolve in order for both distributor and independent to survive and be profitable?

I’ll leave that for another coffee…

Ceri spoke as part of CI.N’s Seminar Series at The Bike Place Show earlier this year. Missed her talk? Catch it right here: