Townley: Is this the beginning of the unravelling of the 70-year old American dealer association?

By Jay Townley, Gluskin Townley Group

On Friday, December 1, 2017 Bicycle Retailer And Industry News (BRAIN) ran an article in its online edition about the National Bicycle Dealers Association (NBDA) announcing that Todd Grant’s final day as president of the organisation was Thursday, November, 30.

The reasons for Grant’s separation were explained by Brandee Lepak, chair of the NBDA board of directors as: “Recent sudden and significant income loss from our traditional outside sources along with our over-investment in capital spending necessitated substantial expenditure reductions,” and she added that “we appreciate Todd’s service to the NBDA. His efforts representing and supporting independent bicycle dealers were appreciated during this disruptive period of dramatic change in our industry.”

While not the largest of the American bicycle business not-for-profit trade associations, the NBDA has been a source of support and resources for bike shops since it was founded in 1946 – 70 years ago. Todd Grand came onboard in September 2015 so he led the dealer association for 27 months, during which time he steered the dealer association away from its supplier score-card and recommended and negotiated the NBDA acquisition of Barnett’s Bicycle Institute (BBI) that graduates between 280 to 300 or so certified mechanics per year.

Bicycle Retailer And Industry News (BRAIN), is at present the only remaining domestic bicycle business trade publication, which is owned by Emerald Expositions is operated under license by NBDA Services Inc., a for profit division of the not-for-profit bicycle dealer trade association with the former dealer association executive as president. Under this license BRAIN has been a source of revenue for the NBDA.

Also the Interbike Trade Show has an Endorsement Agreement with the NBDA whereby the dealer association endorses and promotes the trade show to its members and the channel of trade in addition to producing education seminars during the trade show. In return Interbike pays a fee to the NBDA that is paid periodically during each year of the agreement.

In its July 1, 2014 issue BRAIN published a front page article that jumped to page 30 titled Leading an Industry nonprofit: lucrative work if you can get it. Among 24 bicycle business not-for-profit Associations, the NBDA ranked 23rd with the total amount of its annual revenue in 2012 of $720,704 and annual budget of $644,438.

“Recent sudden and significant income loss…”   

The revenue came primarily from membership dues, and payments from BRAIN and the Interbike Trade Show. The December 1st BRAIN article about Todd Grant’s separation quotes the NBDA chair person as saying that: “Recent sudden and significant income loss from our traditional outside sources…” which I assume means income loss from membership dues, BRAIN and Interbike, since there wasn’t sufficient time for BBI to become a “traditional outside” income source.

The same article also quotes the NBDA chair person as saying “…along with our over-investment in capital spending necessitated substantial expenditure reductions.” I also assume this could refer to the acquisition costs and payments to BBI and the costs associated with the recent move of the NBDA office to Colorado and related infrastructure and changes in expenses.

It is my understanding that the NBDA had built up a financial reserve of close to a million dollars that the board had already started to dip-into prior to September 2015 for various projects and also used for the executive search before hiring the executive it just separated from the association. After September 2015 the board, along with the new association president, continued to deplete the financial reserve until it now is basically exhausted, leaving the NBDA with no financial backup. To be clear, there are no allegations of illegality, but there are allegations of very poor decision making.

What followed from the end of 2015 to the present, according to one observer I talked to, was a lack of vision and no transparency on one hand with a lack of demands for accountability on the other hand.

This resulted, by the end of November 2017 in no fiduciary accountability on the part of the association executive and no apparent action on the part of the board to exercise its obligation to be a fiduciary for the association.

Resisting change

In an article titled Why Associations Fail on the Virtual Management website resisting change is prominently listed among the ten reasons with this comment: “Change is a constant for businesses and membership organisations alike. With decreasing revenues and external pressures, non-profit organisations are increasingly called upon to make dramatic changes.”

In his December 5th, 2017 opinion piece in BRAIN Dan Sotelo said: “It’s the end of the road for the IBD.” He went on to say:

“What the current IBDs need to do is bite the bullet, stop resisting and alienating online consumers and just face the fact that the internet is here to stay. Like it or not big bicycle brands sooner or later are going to cave into internet sales in order to survive, thus leaving stubborn IBDs high and dry.”

I submit that Dan Sotelo has identified a key issue where the dealer association has resisted change and in so doing has placed itself in opposition to the desire of the majority of American consumers and the customers of the bike shop channel of trade for changes in the way all retailers, including bike shops do business.

Accept irrelevance – or not

The December 1st article concludes with this statement: “For the immediate future, the NBDA’s board, which is composed of retailers, will be leading the 70-year-old association.”

One of the ten reasons given for Why Associations Fail in the Virtual Management article is: accept irrelevence. The only not-for-profit association representing bike shop owners has seriously stumbled and can either continue as a shadow of its former self, and accept irrelevance, or the current board of directors can reinvent the association and embrace change rather than continue to resist it and in so doing realise success from failure.

The Mission of the NBDA hasn’t changed. If it can stay true to that mission and truly serve and appreciate not only its membership, but all types and forms of American bike shops, and keep its eyes and ears attuned to the reality of serving the consumer market around it – and understand that it is not the failure itself that is important – it is the failure to learn from the failure and move on to the future, that is the biggest challenge and opportunity for the NBDA.  .

For full disclosure – the Gluskin Townley Group has conducted research projects for the NBDA since 2000, the most recent being in 2017. 

For more from Jay Townley, head here.