Distribution structure challenging: Cristóbal Pérez on the future

In part 2 of this 7 part feature series, Cristóbal Pérez – a seasoned cycling industry professional with a track record of leading change – explores what the future could bring to our industry; the good, the bad, and the ugly. In each of these there is opportunity – if you can embrace the change required to unlock it.

Across the series Cristóbal will pose challenging questions, as a means to explore potential for future growth.

Distribution challenges.

Saying that the panorama is changing or that it is going to change means being as iterative as true. But in our days, the future is not what it used to be. It comes faster, changing, and more challenging.

In the trading landscape, distances, delivery times, prices, and user demands set the new pace. Also, the tolerance from users is lower now, and absolutely noisy. Nowadays, we should get to know our clients and understand their requests and the consequences of them in a unique über market wanting to be local. All those factors and a lot more put in jeopardy what we knew so far and pushed us to rewrite the formulas.

In that good old trading world, a maker, a distributor, and a dealer worked together to put the merchandise in the hands of the client. But according to different rules.

That user/buyer/purchaser was happy in the ignorance of what was happening out of their nearby world. Sometimes, the desired product range was partially ignored, hence, he/she did not miss it. He/she did not know about pricing overseas, not even 100km. from home. So, the deal was a local matter.

In those days, brands, distributors, and dealers did what they understood as the best regarding price, range, availability, margins, and service. Days of wine and roses, of understanding, of long-lasting alliances, of domination.

Then, the Internet.

The user takes (more of) the control of everything. He/she knows everything, sometimes more than the other actors of the channel. Prices worldwide, the whole range, options, variations, accessories, sizes, and colours are visible and available easily. Everything. In public spaces such as forums, the truth, and some other apocryphal truths go back and forth seeking an allocation on the mind of someone. A click away.

The media breaks into the scene and one smartphone and some talent are the basics to provide a piece of information globally reachable. As never before.

Now, companies have to rethink their status, size, and future. Unite to survive. The resulting new company is larger and sometimes funded by someone aiming to boost their business, in English, and make the most of their money. Money hunger.

Then, they go global, with wider portfolios with the focus on multiplying the turnover of the mother company according to the investment. The prices are now alive, variable, sometimes weak, and visible to everyone. Stability becomes transparent and vulnerable when it fails.

Production and forecast mistakes pour a price war before a user avid of discounts because is that what the brands taught him. This affects the traditional distribution structure.

In a different field, the interaction of the client with the brand (and vice versa) is more and more patent and needed. Unavoidable, I would say. Marketing strategies become key and effective. It is all about knowing your client and reacting.

This new place is more exigent, more agile, and is thirsty for investment and clear ideas.

Get ready for the attack on the traditional brand/distributor/dealer.

The new brands should have a strong self-awareness and resourceability. Country branches of some brands act as one and only brand distributors. And they hit the bar. So, it is possible. But, what about the distributor? Some run ten brands. And they can make it well. But here starts an evolutive selection of priority brands. Yours might become “one more”. Some other distributors handle two hundred (two hundred). Then turnover snowballs. The more brands you distribute goes against the quality of everything around sales. Sometimes of sales themselves too. Yes, there is a balance, I know.

For the distributor, in some cases, the brand is replaceable after a phone call. Watch this! I do not mean that this is the rule, but not an anomalous situation.

When it comes to the distributor and dealer, it is not uncommon that the situation gets worse. It is more numerically based. Thus, the distributor replaces or complements the existing dealer with a new one “because you do not reach the forecasted bikes”. A vague and unilaterally handled reason that could come either from a huge stock in the distributor/brand stocks. It could be easily wrapped up with the statement: “Buy or I could take the brand somewhere else.”

On the dealer’s side, leaving a brand and/or taking another one might simply come from fashion, because the new one “sells more” or from a disagreement in payments, warranties, or local event support, just to say a few. Anything fits here. After a phone call.

In many cases, the liaison among brand/distributor/dealer is based on the “this one buys and pays” golden rule. As a consequence, the rest of the nowadays essentials that are needed to position the brand and create awareness are forgotten.

For the upcoming times, things such as added value, service, retail, selective criteria, etc. should prevail. So, the old-time distributor and dealer roles fade away when the D2C (direct-to-client) option comes across. In other words, if the distributor and dealer are a mere extension of the brand’s warehouse where bikes pile up, what’s the deal for the latter ones?

For those brands that see that formula based on bike programmation and invoice due payments as a poor future alternative, reaching the client directly is the only option.

Say Canyon. You name others.

In doing this, the values of the brand, its image, service, and strategy will be the same that the company thought of to be competitive in the new market. No more A Brand bikes on B Brand displays. No more POS material with outdated pictures. Forget or minimize the impact of service issues, the lack of knowledge of the product features, a non-existent or poorly managed website where the brand is buried amongst other brands, and things that nobody understands why they occur.

Are the distributor and dealer doomed to disappear facing the push of merciless brands wanting all the margin for themselves?

No. Probably.

Why could it not happen? Because the brand cannot reach every corner of the territory, or provide global service and coverage.

The relationship between the brand and its external network, if that is the option, should be driven by the same principles, values, and shared strategies and goals. Everyone should be important to everyone. Efforts and resources should be focused on a common mantra: survive in harmony.

Brands like Nike decided to reduce drastically the number of market touchpoints by thousands. Then, they went all the way for forty partners. Next, they had to reconsider the situation because they realized that they could not do it all and reach everyone and everywhere. However, the selection criteria were more strict and in perfect communion with the huge number of Nike’s distribution options. Be it physical or electronic ones.

Apple products are solely available at their stores and web, except for the well-acquainted Apple resellers, a mimic of the mother.

You can only buy a car at the brand dealers. Many are concessionaries and some are directly owned by the brand. But you see no difference. The same for their marketing actions, communications, image, look and feel service…

Now, with Stellantis brands and Mercedes dealers, the cars that you will buy there will belong to the brand itself. The dealer will become a commisionist and service provider, that understood as an additional source of turnover. So, prices, discounts, strategies, and resources will be the same all over the network. No difference for the users.

What is clear, is that the existing distribution structure in the cycling industry goes against our performance and future. We need to move forward and find a feasible solution to be able to cope with the challenges ahead, especially with the new clients arriving looking for new and different kinds of “shops” similar to the ones they are used to going to, name it cars, fashion, assorted services…

Some solutions make no sense, others might have them after an adaptation, and other new ones will come far from our imagination. There are only two viable choices here.

To follow or connect with Cristóbal on LinkedIn, click here.

To read part 1 of the series, ‘Unavoidable change: Cristóbal Pérez on the future’, click here.

Part 3 of this series – Tools to survive (and thrive) – goes live in 2 weeks: 12:30 UK / 13:30 CET, Monday 13th of November.