Sunday, December 18, 2016

Change is hard and so am I

The Internet is a sore subject for US bike shops, look in any bike industry online forum and the complaints are the same:
"Competitive cyclist is killing my margin"
" is selling Shimano for less than wholesale cost"
"Jeff Bezos just had sex with my girlfriend"
It would seem that the Internet is only really good for getting a sweet deal or bitching about customers going elsewhere for sweet deals, something has to change.
Change is scary, just ask the CEO of Circuit City

If you are an bike industry lifer, chances are you don't want to change. "Why should I change, I'm perfect!" If you really were perfect you wouldn't be worried about the Internet and would have stopped reading after the Bezos joke, since you are still here I'll let you in on a secret:

The industry doesn't care about you, the industry cares about profit.

Since we are being honest with each other let's admit that you don't really care about the bike industry either, you ALSO care about profit. You don't don't actually care if big bike companies go under or other bike shops fail.  Bike retailers are reliant on manufacturers determining and enforcing prices desperately hoping that MAP + Installation fees will put food on the table. It is easy to focus on the microcosm of staying afloat but what needs to happen is evolution not mere survival.
Change is Scary just ask any former manager from Borders Book Store

Your bike shop is competing with the Internet but, your bike producer is competing with the Internet too and you should be prepared for a change.  Canyon Bicycles are coming to the US market in 2017 and they cost the end consumer less than any other major brand by eliminating the storefront. Trek, Specialized, Cannondale and Giant will need to fight back by lowering MSRP while maintaining wholesale cost, killing your margin. Be prepared for ALL 4 major bike brands to implement online sales in the next three years. While you're at it, be prepared for customers to be able to buy anything online in less than a decade. 

How can bike shops compete with Amazon? Start by Price matching.


 Amazon assembly service charges $150 for the same Raleigh single speed cruiser that you can get pre-assembled in a bike shop. Amazon assembly is often performed by untrained assholes more adept at setting up Frigidaire than front derailleur. Amazon won't even inflate your damn tires! Inflating bicycle tires is not included in this service. Some pros may be able to inflate tires for an additional fee.  If bike shops began charging for bike assembly  then the shop owners can control pricing instead of the manufacturer, you could even inflate tires for free, because you are such a nice guy. Professional assembly is required by each of the big 4 manufacturers but the dealer agreement can be changed at any time and shops should be prepared. Start the new year by adding $150 build fee to each bike sold then, give a $150 discount, it's the same price you are charging now but, by giving the labor a monetary value you can more easily transition to a business model that charges for builds in the future.
An average shop builds between 400 and 800 bikes a year; consider the margin if you added $150 of labor to each of those bikes, what would an extra 60k-120k of cash do to your net profit?

Of course you can't price match everything on the Internet.  An article about selling  tubes for $4.29 caused minor uproar among industry folk and, Amazon sells 10 packs of tubes for $35 with free Prime shipping, that's darn near wholesale! Even Performance Bike sells tubes for approximately 5.25 apiece when you buy 4. People can buy tubes online or even down the street for less and, finding tubes for 70% less than your price makes you look like you are price gouging, regardless of MSRP. Stop fighting your way to the bottom of the tube price war, change.
Change is scary just ask anyone who ever worked at Blockbuster Video.

Stop selling tubes, start selling flat repair.

Sell flat repair for $30 with a 30 day guarantee and no mention of the tube pricing. Some people may get a few extra tubes out of you but, most people aren't trying to scam you and don't want to be bothered with return trips to the shop, they just want piece of mind. This guarantee goes both ways, it guarantees that customers will come back if something is wrong. If you miss a thorn while fixing a flat your customer will be upset that the flat you just fixed is flat again, if you are lucky that upset customer will come back and you will fix it again (for free), if you aren't lucky, they will go to another shop down the street.

I am basing flat repair pricing on my Fiance's perception of value. My fiance is a brilliant law student, she shops online for sales and even has an app called Honey that searches for discounts codes on ANY website when you get to the payment screen, but she is not a bike industry person. When asked how much she would pay for a flat repair her answer is "I dunno, fifty bucks?". She reminds me that most of our customers are NOT industry people or even people that have any preconceived notions of what things should cost.

Your customers may never understand the difference between a $400 bike and a $300 bike with a $100 build fee but, our focus should be on keeping them engaged in the bike shop experience not trying to fight the way they want to shop, or the multi-billion dollar companies that don't really care about you. The time to change is now. 
Change is Scary just ask the dinosaurs.

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