Cycling Industry News recently ran this story about retail profitability in the cycle trade. It outlined how 42% of stores may currently be loss making. If taken completely at face value this represents a worrying trend for the industry.
My guess is a few of those are new stores, who may expect to make a loss for the first year or two. And there may be a few who own their premises and the balance of profit and loss between the two businesses may not be such an issue for them. And as that story also points out, investment in premises or stock may be a one-off in one financial year.
But, if your store is genuinely or consistently loss making this really leaves you with four choices. Close, sell (if you can), reduce your costs or grow your sales. I’ve witnessed a distinct tendency for many to “just work harder” – longer hours and more repairs. But eventually you come to this cross roads. And the choices you face when you get there may be many and varied.
The Store Next Door
Let’s say the store next door to yours comes up for rent. It’s half the size and half the rent. Do you downsize and halve your overhead? Or open a dedicated e-bike store, coffee shop or fitting studio? And which route you choose will likely depend on your personality. We are all “hard-wired” to some extent as thrill-seekers or risk-avoiders. The bike trade has other biases too, products and brands you care about, price-points, for example. These in built biases can affect your thinking more than you know. So this is where getting a second opinion can come in very handy indeed.
Specifically, I’m going to suggest talking to your Sales Reps and Agents. I know this happens to a degree. But I’m suggesting you actively make a plan to “benchmark” your business with a panel of reps. Why? Because your staff, customers, family and accountants are “familiar voices”. They know you, they know the business and cannot help but consciously and unconsciously filter what they tell you. What you may be lacking is “the kindness of strangers”. Outsiders who can give you a fresh angle, unimpeded by any baggage and whose only vested interest is seeing you succeed.
Think about it, most reps cover 100-200 stores across 3-4 counties. They’ve seen bike shops of all shapes and sizes come and go. They’ve seen areas become over-served and under-served. Ask the most experienced reps what they would do in your shoes. They’ve quite literally seen it all.
There are a lot of very wise heads out there. They know which stores are going to work and which aren’t. Often we exchange a few words when a new store opens. It varies from “Brilliant, just what the town needed!” to “Hmmm 50/50” to “Yeah – 6-12 months – vanity project, no chance”. We see it coming, well most of the time. An awful lot of what I write down comes from those other reps*.
Seek a Variety of Opinions
Perhaps also ask the least experienced, the youngest and the freshest faces. Why? Because while those of us with more experience have the benefit of time served, the youngest reps are more often in tune with technology and new consumer habits and attitudes. Their views may be equally insightful for your business, especially when it comes to your website and Social Media presence.
You could go further. Ask a bicycle rep and P&A rep. Ask one from a big brand** and one from a small wholesaler. Perhaps ask a man and ask a woman. Or maybe a rep that you already know and trust – and one that you don’t. Quite likely you need 4-5 different opinions.
I know many shop owners who actively avoid cycle trade reps and I guess if all someone wants to do is sell you something, that’s understandable to an extent. So this time, turn the tables, it’s your turn to ask for the meeting and ask the questions. All that it’s going to cost you is a few uninterrupted conversations away from the shop (not just the quick “how are things” chat we all do already).
It’s also your turn to pay for the coffee – and just make it clear they are not bringing their latest bike or lighting pre-sell package to this meeting. They likely have 2-3 observations they’d love to share with you in any case – and not just about the category of products they sell. Just making it clear that you’re having a re-think and you’re open to ideas and suggestions may bring out more than you know.
You might be the sort who likes a free-wheeling conversation and keeps everything in your head. Or you might like structure and want to make notes and compare the views you get from different reps. Now, if you’re the latter, here’s a few “textbook” questions, you might want to pick two or three from here? They could be useful in taking a step back from the business and looking at it with fresh eyes.
Find the right Answers by asking the right Questions.
1. Is my shop the right size? Does it feel over or under stocked compared to other stores?
2. If you were opening a bike shop right here today, from scratch, what would you do?
3. Compared to other stores in your area, how do you rate my website, location, parking, store front, product selection, merchandising, staff interactions?
4. What do you like about my business? What don’t you like?
5. What product lines, services or activities would you stop, start, continue?
6. Is my area under or over served with stores compared to other areas?
7. What do you generally observe about “shops who are getting it right”?***
8. Where is the industry going and am I picking up the right trends?
9. Do you think my store is welcoming? To both the young and old? Men and women? Enthusiasts and new customers?
10. Does my product selection and price points suit the local area, or am I missing out on any local demographic section?
I’m not saying Reps or Agents know how to run your business, but they are perhaps the best people to open your eyes to all the options you may have. You might also discover, along the way, which of your reps has the best understanding of retail. Or who has your best interests in mind and can add value to your business long term. The worst case is they don’t tell you anything you didn’t already know. And discovering that you do in fact “know it all” is, in itself, new information.
So when that store next-door comes up for rent, you might already know which way to jump.
* Which reminds me. Although I count myself as one of these ‘wiser heads’ – the only difference between me and them is that I like to write things down. So I’ll be consulting a panel of reps and business owners for my next article: Why bike shops fail – the Top 10 Pitfalls to avoid.
** While many of the big brands have a very professional retailer support package, invariably there will be slant towards their product line. A concept or tied store may be in your best interests. Or it could turn out that a service shop, hire fleet or just selling Bromptons is your best bet, for example.
*** Please don’t ask your Reps for specifics about your nearest competitors, that’s not cricket.
Copyright John L Styles August 2018