Behind Trek's Click-And-Collect Sales
People take notice when one of the world's largest bike companies announces that they'll be initiating an online ordering system that, at least at first glance, seems to remove much of the important interaction between the consumer and their local shop. We tend to be a defensive bunch when the topic of online sales comes up, especially when it involves your local shop and a company like Trek, which can lead to emotions possibly clouding our early judgement.
With that in mind, and now that the fire from Trek's August announcement has died down, we reached out to both Trek and one of their largest competitors, Giant, in order to better understand the "click-and-collect" buying option.
The Click-And-Collect Process
There are upsides and downsides to click-and-collect sales when it comes to both the consumer and your local bike shop, but before we get to those we should understand how Trek's online ordering system works.
Let's pretend that you want to purchase a new Fuel EX 5 29, and like most of us who are always thinking about a new ride, you go to the company's website to do your homework. On the EX 5 29's homepage you'll see that it actually tells you if that very bike, in the size and colour you want, is already at your local shop, which would give you the option of either going down to pick it up or at least seeing it in person. You'll also spot two buttons on that same page: one will say "Find a retailer," and the other will read "Buy now." The latter is pretty self explanatory, and because you've earned it and you can't keep that finger from doing what it wants to do, you click it and order up your new bike by entering your credit card information.
Your new machine will ship from a warehouse in Wisconsin to any authorized Trek dealer in the United States, and you'll have to choose which shop you'll be picking your new baby up from. That LBS also has the option of delivering the bike to you (possibly for a fee that would go directly to the shop), which would save you a trip but still ensure that the bike is built up correctly and nothing is about to fall off. Trek will not ship the bike directly to you - it must first go to your local shop to be put together by the pros - but they will ship accessories purchased at Trek online to your house if you want them to. Theoretically, if the LBS that you shipped the bike to offers a delivery service, you might not ever have to step foot into a bike shop in order to get your new Fuel EX.
That might sound like a poor imitation of a bike sale for those who've spent a lot of time in a shop, either as a customer or as an employee, and it needs to be mentioned that the apparently streamlined online sales system doesn't quite pay out to the shop in the same way that a traditional sale would: the LBS receives 80% of the margin that they would have made had the bike been sold in person and for the same MSRP. To be fair, there's a good chance that an old fashioned, non-virtual sale would have seen the bike go for a bit less than the advertised MSRP, so simply saying that the shop will end up making less on all of the bikes sold online versus those sold under their roof is probably as accurate as your Strava times.
A healthy margin is key for a shop of any size to be able to keep the doors open, so the smaller numbers attached to an online sale could easily be viewed as a very, very bad thing. But it isn't quite that simple...
The Upsides to Click-And-Collect
There are some real upsides to the click-and-collect system for both consumers and the local bike shops who will be assembling and delivering the bikes, despite the initial uproar about Trek's plans. I reached out to Eric Bjorling, Trek's Brand Communications Manager, to hear some of those pluses, as well as to get his take on a few minuses.
While a lot of us feel more comfortable in our local shop than we do in our own homes, and we might have no issue getting our questions answered or finding what we need right away, many others feel intimidated by what can look like an exclusive club from the outside. Remember the first time you walked into a new class late? It felt like you weren't wearing any pants and everyone was watching you, didn't it? While the large majority of us savor that face-to-face time with the sales or wrenching staff at the shop, some others could be pretty nervous about the very same thing. Now, with Trek's click-and-collect system, someone who would love to start mountain biking but is put off by the thought of walking into the boy's club that is your local shop can pick out a new bike and do most of the leg work without feeling like they don't have pants on.
No bike shop wants to make you feel like you forgot to get dressed before walking out the door, and a good, professional shop also won't try to pressure anyone into a sale, but the truth is that not every salesperson has the tact to know the difference between gently pushing you towards the correct bike and just wanting to move another bike out the door. This is where the consumer could benefit most from the click-and-collect approach: a no-pressure, virtual sales floor that's actually their living room. Sure, the bike isn't right there in front of them, and there's obviously no proper substitution for a real test ride, but there's also no shop rat with bleached tips and an earring asking you over and over again if they should ring the bike up.
 | In order to protect all of our retailers, we will be standardizing pricing. You will not find Trek or Bontrager products on third party sites. We are not interested in being the discount shop. - Eric Bjorling, Brand Communications Manager, Trek |
 |
 Both Trek and Giant believe that click-and-collect sales stand to benefit bike shops when done correctly. Photo Matt Wragg |
How does a customer ensure they're getting on the correct size of bike, though? ''We're offering a number of ways, including online chat and the language 'If you are unsure as to the size bike you need, please visit your local Trek retailer,''' Bjorling explained. ''We will be working on more ways to ensure proper size choice in the future, but the best way to determine size if you're unsure has always been and will continue to be visiting a shop.'' Trek does also offer a return policy in a worst case scenario - the bike must be in new condition, Trek will credit the customer's credit card and the shop will be billed for the bike at their retailer level - but Bjorling also believes that the number of return bikes will be very minimal: ''We believe returns will equate to a very small number and average out to a bike or less per shop per year. To the doomsday theorists on this, I will say that Trek has built a company on 40 years of working with, and taking care of, our customers. We will continue to do so.''
Those returns won't likely come from the high-end market, either, says Bjorling, as riders who are spending big coin are far more likely to want that face-to-face interaction and the relationship with the shop that comes from it. ''Bikes of a certain price and sophistication are going to continue to be mostly sold through brick-and-mortar because the consumer is making an investment and wants to ensure they have what they want,'' which is probably true. Bjorling says that it's a different story on the other end of the consumer spectrum, though: ''Bikes at more entry level prices or new customers who may be more apt to shopping online are going to be interested in models that are more likely to have higher inventory levels at retailers making it easier for the shop to be able to sell that bike.''
There are upsides for the local shop as well, some of which are arguably even more advantageous when you consider how much of a battle it can be for a small business to keep their head above water. One of the most notable is how your LBS won't have to stock as many bikes in what is probably an already cramped storage area and, even more important, that their booking order (an order where a shop commits to the bikes they'll need for the coming year) won't have to be as large. That means they'll owe less money when the terms come due, and they won't have to gamble as much on the upcoming twelve months. That last point is a massive plus when you consider that a rainy and cold spring can cost a shop a huge amount of money in sales due to less people coming through their doors, especially if they were expecting a profitable season.
| Let me tell you a few things that I know for sure: the bicycle is a technical piece of equipment. The bicycle comes in various sizes. The bicycle needs to be serviced. None of those can be done most effectively online. All of those are better off in person - it's a better experience at a bicycle retailer. If we're talking about books, if we're talking about an iPad, I get it, but if we're talking about making sure that you're buying the right bike that's the right size and you're forming a relationship with somebody who's going to take care of it for you, I'd want to buy that bike at an awesome bicycle retailer. And there's a lot of them out there. - John Burke, Trek CEO, talking to Pinkbike in 2013 |
Trek worked with some of their shops in order to suss out any issues with the click-and-collect system, running a pilot program with more than thirty of their retailers over the last two years to fine tune the setup and to learn from the shops about anything they might have missed. ''Their feedback was integral in designing the program and process,'' Bjorling explained of the multi-year trial program. He also made it clear that shops aren't required to be part of the system, should they not have internet access or simply choose to not be a part of it. ''There is no qualification process. If you wish to opt out, you may do so but you will sacrifice the opportunity to earn service commissions on online sales and your store will not appear on the locator page when a customer goes to complete their transaction.''
It's also important to remember that, for all the uproar that Trek's August announcement caused, one of their major competitors has already had success with the click-and-collect approach. Giant has employed such a system for over two years now, albeit not in North America, and An Le, Giant's Global Marketing Director, says that things have been going well. ''It’s been pretty smooth so far, in both the business model / process aspect as well as the IT infrastructure side of things,'' Le said of Giant UK's use of the still novel online sales system. ''Having said that, this is still a new way of doing business and we are constantly learning how to improve it daily. But because we started this process a few years ago, we have a good start on this click-and-collect approach.''
Regardless of success in the UK marketplace, Giant hasn't yet implemented click-and-collect sales in the United States, with Le citing significant differences between e-commerce in different parts of the world. ''Among those differences are the size of the country and the sizeable number of Giant retailers in the USA,'' Le explained. ''The success of such a strategy is in the details and high level of execution. If we embrace this opportunity, it will be done at a super high level, supporting our investment in our brick and mortar retail partners.'' Again, both Trek and Giant are stressing that connection to local bike shops.
And The Downsides...
There seems to be a lot of upsides to the click-and-collect approach, but there's one big downside to note, at least for the consumer: the pricing of all bikes will be set in stone, meaning that the MSRP is what will be charged to your credit card if you order your new Trek off of their website.
Sure, this means shops won't get roped into a game of price-matching, but one of the big reasons that most people order things from online sources is the lower cost compared to buying the same item in person, often being able to save big coin by turning to websites like Chain Reaction Cycles for their needs. This is a touchy subject and not one that I'm trying to pass judgement on, but it's hard to argue against this approach if you're on a tight budget and need some parts in order to keep your bike going, or if you just want to save money. But those who purchase a new Trek online won't be saving any money - they'll be paying the MSRP for the bike. ''In order to protect all of our retailers, we will be standardizing pricing. You will not find Trek or Bontrager products on third party sites. We are not interested in being the discount shop,'' came the reply when I questioned Bjorling on the subject.
 |
| While there's no substitution for knowledgeable and friendly staff, Trek and Giant believe that there's room for doing business a different way as well. Photo Matt Wragg |
That means they'll be no haggling over the price of the bike, which can certainly be seen as good news for the shop, but also that the customer won't be able to say, 'How about that price including the tax?' or something similar - you'll be locked into paying the sticker price. That said, it's the shop's prerogative when it comes to offering discounts on anything else sold with the bike, say a helmet or riding clothes that might be needed, and a shop likely wouldn't move too much on the price of a current model year bike regardless.
| The way consumers buy bikes and gear is rapidly advancing and we want our retailers to win as the environment changes here in the USA. - An Le, Global Marketing Director, Giant |
The Future
Is the click-and-collect system just a stopgap until computers rule the world of bike sales? I hope not, and I seriously doubt that will ever happen.
A pessimist (or, depending on your outlook, an optimist) might see Trek's click-and-collect incorporation as a half-step towards true mail order sales, but Bjorling is pretty adamant that won't be the case. ''We believe the best way we can guarantee a great experience with our brand and our product is through our retailers,'' was the response when asked if Trek might consider taking the same route that brands like Canyon and YT have in the European marketplace. ''There is no doubt that there are some very strong online-only brands making some serious inroads into a number of markets. We believe the future of successful retail will be omni-channel and that retailers that provide great service and a number of interaction points are going to be very successful. For now, we're focusing on rolling this out in the US and will continue to evaluate future opportunities for Trek and our retailers.'' Giant's An Le echos Bjorling's sentiments, saying, ''Our decision will be based on whether this model can enhance the strength of our retailer’s business in an evolving marketplace, as well as better serve consumers with access to world-leading products." In other words, despite the doomsday scenarios that some commenters threw out there, I'd wager that neither company will be going the consumer direct approach that Canyon or YT uses.
The ability to track down the exact bike you want while sitting on your couch, find out if it's available and then have it shipped to the closest shop to be assembled by professionals (who get paid for the bike and their time, don't forget) is a good thing, but let's also not forget this important fact: Trek and Giant's main reason for attempting to sell bikes at full pop on the internet is to reach those customers who would not set foot into a retail shop, a tactic that lets them capture a slice of the ever growing number of monied customers who are becoming online shoppers.
The internet (including social media and smart phones) have created an arm's-length community, and there's a degree of freedom in that. People use those channels to avoid face-to-face interaction while doing business that might not happen otherwise, and while that might sound like a sort of virtual shopping mall from a dystopian future to a lot of us, it will be just one of the avenues available for customers from here on in.
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They obviously cut out the middle-man, which in turn allows them to sell their bikes cheaper.
So now you're gonna have to pay full-boat retail for a Trek, you won't be able to see it in person before you buy, and
you're gonna have to wait for it to ship from Wisconsin to your LBS.
And I can already see Trek shops pulling the 'Freight and Setup' crap the powersports industry has been beating customers up with for years. Now a bike with a $4k MSRP is gonna cost you an additional $500+ for 'freight and setup'. Afterall, the bike HAS to be shipped to your local Trek store, and they HAVE to 'set it up' for you, so whadaya gonna do?
Seems like Trek's pulling a HUGE BONER on this one
Just think about their own words '[...] standardizing pricing [...] we are not interested in being the discount shop'
Trek was one of the few premium brands you could buy the bikes for like 50% off at the end of the season in the internet, but also the local shop was able to choose a margin they would be going for when selling a bike and thus make a reasonable discount for a buyer by cutting the margin. Now Trek wants to control prices all from HQ, pretty much like Specialized, so no discounts and less room for the shops to make a good deal for a loyal buyer.
Welcome to the future.
obviously, the upsell to the ibd from trek is "giving" them the customer they otherwise might not have ever had.
the downside has got to be that it has the strong potential to be the customer the ibd never wanted in the first place.
time will tell. customer service is all that matters... in front of the counter and definitely behind it for ibds. hopefully, trek buy in programs don't choke out their dealers big and small and actually have bikes in stock thru the season. is the online sale customer locked into a specific trek dealer territory?
I've noticed that due in part to their private TrekWorld event, that they really try to groom retailers with a "pitch", much more than any of the dozens of brands we worked with over the years. So no big deal that they drop the news right at TrekWorld... but the first announcement is to a room of thousands of dealers, salesmen, shop staff, and Gary Fisher (Much Respect!), whom all got the trip paid for by Trek, who are shuttled around to the factory, ride the new bikes at a great test track right near by... So now they're sitting in this room, all high on Trek and the news of online sales is pitched to them so they love it. They're being told they are being marginalized and will lose margin in such a way as they can't help but love it.
Then when they get home they either digest the keynote or buzz around, still high on koolaid. for one did this, as I've owned a 2007 Madone 6.5SSL (fixed gear), a Gary Fisher Roscoe (love!), and a 2010 Scratch that is still my shuttle/park/fun trail bike. My point here is that I'm not trashing Trek outright, just the new program.
To me, I think the online program satisfies everyone's needs in the new economy, where "everyone" means Trek.
It doesn't even seem like you guys read the article...am I wrong?
Are you sure Trek dealers will have the option to not participate in the online program? Didn't see that in the article but maybe it's true?
It works good and bad a few ways. Less stock on hand at the bike shop, but more at Trek. There would be plusses and minuses and shioads more that I could think of.
Hopefully i dont sound like an idiot trying to put this into words...lol
All sounds good for big dealers with a large float. Likely be hard for the small shops if they end up having to stock a few extra bikes because people didn't size right... I bet shops will do everything to tell them it's the right size even if it's not just so they don't get stuck forking out cash and with a bike they may find hard to sell...! At the same time, I'v had plenty of shops try to sell me a Large because that's what they had in stock. So glad I didn't get swayed, my XL is perfect.
But, yes.. There's the opportunity for a shop to get some new customers in the door and make a good impression that hopefully keeps them coming back.
I really don't think it's designed to challenge YT/canyon etc, just a way of a customer getting the bike they want when a shop don't or won't stock it.
I know I wanted a session 88 when they were originally launched in the UK and you couldn't get one for love nor money.. But that was more down to not having enough in the country than to shops wanting to stock them.
The YT/Canyon model is great for saving money BUT again having experienced it buying an wicked ltd years ago it's def a system that's not without its faults.
Despite the MSRP being 'set', that is usually an ADVERTISED price (per the contract), so you can likely go haggle with the shop still and they are still going to make a reasonably hefty margin.
It is still missing the point per the other comments - YT & Canyon can sell at significantly less by cutting out the middle man, so despite what the article states, this is still a half-measure. I have a few ideas where this is going to head in the future, the question is whether Trek hasn't thought of this or if this is the 'butter you up' step to the next level of online-direct sales...
I still stand by my initial comments to this news:
It is silly to whine about the 'poor bike shop margins' as they are making healthy margins relatively, plus everyone misses the cost of carrying inventory in these arguments. Holding on to a bike to get 'full margin' for over a couple months is a foolish business decision - automotive dealers know this and act accordingly.
The bike industry can no longer ignore and should embrace a happy balance between 'local shops' and online sales models. The days when parts were listed in black&white catalogs and you could stumble upon some unknown brand at your local shop and they were the only one who could get it are long gone - the internet has made sure of that. The good shops will adapt and still be good shops and in the end the consumer is who benefits from this = lower prices and more transparency.
See "Porters Five Forces" - Buyer Power and the Threat of Substitutes (in regards to brand) have changed significantly, and the big 3 (Specialized, Trek, Giant) are slow to respond to their 30-year-old supplier-dealer-shop business models.
What is the reason for a consumer to do this?
People buy bikes online because they are much cheaper than buying in a shop. They make the decision that in order to save a substantial amount of money they will accept the downsides of not being able to sit on it, assembling it themselves (takes 20 mins) and dealing with customer service over the phone and email.
They don't order online because they are scared to enter a shop.
I am no longer the direct sales evangelist I once was due to a poor experience with Canyon. However, I cannot see Trek's strategy being able to prevent the online guys stealing market share at an increasing rate. This a half way house strategy which sounds like they didn't have the balls to make the transition to online like Commencal have done.
The fine print of the new dealer contract, the way it has been interpreted by us, is that if the size is wrong, then the customer gets their money back from the SHOP, not from Trek, and the shop then HAS to stock the bike.
Here in VT, we have three types of customers: a bunch of stubborn older people who refuse to change their ways, a bunch of less-informed older people who buy their bikes online because they're cheap and then they realize their "simple bike" is a whole lot more complicated than they thought, and college students who are also less informed about their buying decisions with bikes because they don't have the money to invest into it or they simply are inexperienced.
We also have a fairly limited range of what kind of riding is readily available to our locals. It's all XC single track and long, long road rides. Thus, the Domane, Secteur, Roubaix/Ruby, Fuel EX, Epic, Stumpjumper and SuperFly are our most popular "more expensive" bikes. Imagine if someone wants a Session, or a Slash, but they accidentally order the wrong size. It will literally never sell from our shop because nobody there wants to drive further than 30 minutes to get to the nearest lift, and nobody wants to pedal a Session around the TAM.
Our college students aren't going to benefit from this system at all, either. They live close enough to us that if they "need" to order a bike they'll walk into our shop to do it.
Our "good riders" will not benefit from this either because they already frequent the shop and know our management enough that they know if they place a deposit, we'll order them the bike.
Out last segment of customers is what will kill us, if we pick this up. If some uneducated old woman orders a bike for herself online, there's so many places human error could get her to order the wrong size of a bike, which we're then stuck with.
If TREK would pony up and buy the bike back, without leaving it on the dealer's tab, and pay for shipping back, then more shops could feasibly do this. As it stands right now, it's not going to happen for us.
I focus on selling someone a bike that they enjoy riding, and that they will get a lot of use out of. The problem with Trek's new system is that most budget conscious people looking for a bike to commute on will end up buying a 7.0 FX, which has many things wrong with it, and long term will cost the owner much more than the $90 they should have originally ponied up to get the 7.2 FX.
The value of going to a bike shop lies in the collective years of experience that it's employees has. They're the ones who will tell you where your money is best spent, and they'll be the ones who are more familiar with the local flora and fauna of bicycle ownership and riding than Trek's website could ever be.
"The fine print of the new dealer contract, the way it has been interpreted by us, is that if the size is wrong, then the customer gets their money back from the SHOP, not from Trek, and the shop then HAS to stock the bike."
This is how it was explained above
" Trek does also offer a return policy in a worst case scenario - the bike must be in new condition, Trek will credit the customer's credit card and the shop will be billed for the bike at their retailer level"
I read it the EXACT same way you did.
So Trek makes out either way, and the dealer-the one who had NOTHING to do with the sale, ends up OWNING the bike.
But don't worry about it man, 'cuz Bjorling sez"'We believe returns will equate to a very small number and average out to a bike or less per shop per year".
It's really funny how he has no problem making this point, when Trek isn't the one who's gonna have to PAY for said returns. Of COURSE he's gonna say that. He has absolutely NOTHING to lose!
I'd be REAL curious as to what the existing sales and service agreement(s) say. I'm willing to bet each dealer is gonna see a HIGHLY modified S&S agreement next go-around-if they already haven't.
At least it will be an opportunity for those who want no part of it to get the 'F' outta Dodge
I think Burlington has turned you rather bitter towards your bike community. Time to get back to the woods and reconnect with the awesome people that make up 95% of my customers. Those guys are nothing but amazing from the young college kids kickin around our shop, pickin up tips, to the old foagies rockin around on 30 year old hardrocks nipping at the heals of your full-sus on the trail.
I know this was off the topic I just don't want people to get a skewed idea of the bike community around here and how they interact with their LBS'
Cheers!
Thanks for picking up on that. We do have an awesome community here- I love working with the shop I'm in, and I really enjoy going around to other shops and trying out tons of different riding. The community around Pine Hill Park, the TAM, the Kingdom Trails, Killington, and so many other local venues for riding- they're all great places. People around the shop I'm at just don't know enough about them or want to go that far 'out of their way' to get to these other places.
What do they do if you decide to stop carrying Trek, just screw you out of that cash?
If I had to tell the mechanics in my workshop that they had to wait a 1/4 (3 months) to get paid for all the bikes they had assembled for 'click and collect' customers, there would be a mutiny.
If what you say is true and the retailer has to carry the cost for 1/4 before getting credited, its gonna murder small business cashflow, especially if the new internet bike shopping route takes off
To agree with you in a different way - it is amazing how uneducated and ridiculous the typical 'consumer' is; either completely stupidly price sensitive or 'picky' about dumb shit. From my experience:
Everyone thinks their bike is 'extremely expensive', from $500 to $10k. Then they are shocked that the garbage Suntour fork, QR axles, price-point components have issues. I heard people complain years later that their tires were falling apart (yah, duh!) and they thought they bought a 'quality bike' for a few hundred dollars. Others would complain about rust and after a short conversation you'd find out they left their bike in the backyard in the elements for years without service!
They have cut out distributors, but is there any saving to the consumer? NOPE! Less margin for the shops (but less to do), any cost saving passed to the consumer? NOPE!
It's a worse deal for everyone concerned except Trek.
I'm sure corporate HQ feel pretty smug about this new strategy, I personally hope it kicks them square in the bollocks and companies like Canyon and YT continue to tear them a new arsehole.
If you're getting into mountain biking, you're going to meet so many people on the trails. Most bike shops have so much wisdom and experience that you can learn from & there's really no point spend $XXXX on a bike if you aren't willing to learn, socialise or develop in the sport from others who have the experience.
I haven't tried walking into my local shop without my pants on, but fairly sure if I did, they'd just offer to sell me the latest TLD shorts (probably at a discounted rate just to stop the horror). And yes, I'm tempted to do this.
The art of marketing is to find good arguments supporting your actual opinion, not to base your opinion on good arguments.
Anyone who believes they would make those changes to help the local bikeshops reduce their storage costs must be going full retard.
They do it for da ca$h moneyz and only for that.
Apple on Wednesday: "Meet the Apple Pencil"
Many of us may have noticed that if you go into your local bike shop they carry much less high end gear than they did 15 years ago. This is the effect of internet/mail order. Why should your LBS carry a bunch of parts and bikes that they are not going to make any money on because they had to stock them (overhead) for so long and then sell them at a discount, when the supplier of said parts is going to cut a cash deal with a large online company and allow them to make more money than you. Obviously, Trek isn't doing this as stated with their price fixing method they will use. But this is their direct competition.
The third paragraph was the most telling. The one where Trek talked about unprofessional bike shops. Notice at the end where they said that bike shops are needed for service and interaction? Notice they didn't say sales. What they would love, and they know they may need to do to compete with YT etc., is to cut the dealers completely out of sales altogether. As someone who worked inside the industry for a long time one of the biggest hurdles we have is that bike shops don't make much money, thus they can't pay for great staff. As an industry company a lot of time and money is spent trying to educate and indoctrinate (drink the Kool Aid) shop staff. After all of this almost half of all customer service calls are from customers who went to their LBS but didn't get the correct answers. And if 100 people call to complain a thousand just walked away and bought something from our competitors. Fixing this and delivering a core marketing message costs companies like Trek millions.
I see this as a half way mark. Trek would love to go all the way, but they have spent the last 20 years investing in the LBS model and they don't want the backlash that will come from just cutting out the dealer, knocking off 30% from their prices and raking in the money in the long run. Small steps baby...small steps.
The writing has been on the wall on this subject for 20 years. When Specialized lost their frivolous patent on the Horst Link is when this went from enthusiasts buying parts to complete bikes. Started back when Arnie Nashbar first printed his catalogue. If you ever picked up his catalogue or one like it and were excited to go over every page, you are the problem. Or the answer, depends if your asking Trek or YT.
If you look at Specialized here in the UK, there are 'cutbacks' at the distributor. Their 'concept store' in London has been dropped by the new owner and turning back into a regular cycle store
Hell, even the managing director has just taken a "leave of absence"!
www.bikebiz.com/news/read/richard-hemington-no-longer-in-day-to-day-charge-of-specialized-uk/018367
@Ripnshread "This is the effect of internet/mail order. Why should your LBS carry a bunch of parts and bikes that they are not going to make any money on because they had to stock them (overhead) for so long and then sell them at a discount, when the supplier of said parts is going to cut a cash deal with a large online company and allow them to make more money than you." This is EXACTLY the point. If you are reading this and haven't heard of the 'long tail', google it now. Ever heard of a little startup company called Amazon.com? They have made sure that this old-school business model is on the way out... And shit, on that point, I just recently ordered some small parts from Amazon.com that were shipped direct from the manufacturer in China!! It is only a matter of time before this continues with the Amazon.com juggernaut and the vast majority of small parts, even complete bikes, will be made available directly from the manufacturer at significantly reduced prices. And if retailers / distributors haven't planned for this, they are screwed.
I worked at the big red S for a short stint, and it is ridiculous how behind-the-times their business model is. From my entirely personal viewpoint, I would not buy one of their bikes because I think they will be gone in the next decade. Anyone laughing at this should lookup the business history of some 'unsinkable' businesses like Enron, Braniff, Kodak, Schwinn, Circuit City, etc....
Welcome to the internet age, boys and girls!
You make some interesting and apt comments
The difference with Giant compared to Specialized and Trek (except for their miniscule volume, "halo" Project One domestic manufacturing operation) is that Giant is "the" manufacturer for many brands including their own Giant and Liv labels. The bulk of the "brands" are simply design/marketing companies employing sub contractors like Giant or Merida to manufacture their goods - which adds a layer of cost.
If you look at Giant's pricing for 2016, at least here in the UK, you can see Giant starting to really flex its muscles regarding pricing and specification.
I believe their global product managers (one of whom is based in the UK) have been instructed to put the boot into Specialized / Trek and add value whilst decreasing pricing to give Giant a big increase in customer's 'perceived and actual' value whilst combating the direct selling model - ironically Canyon are Giant's largest carbon fibre customer outside of their own labels!
What I find more interesting is how long will it be until their UK distributor becomes irrelevant or shrinks to become a small sales / aftermarket support office with a handful of staff (like Canyon have in Kingston, London, UK) whilst the domestic warehouse remains to directly ship bikes to retailers.
If I look at the Giant bike stock sitting on my shop floor, its all owned by Giant (consignment stock). We are only invoiced if this stock is sold to a customer. If it is not sold by season end, its recalled and next MY stock is placed in the store. This is a very different model compared to Specialized and multi-brand stores I have worked for, where the retailer had to forecast and buy in all the bike stock. Giant can do this because they are a $2 billion+ annual turnover company with considerable financial clout.
Many of the aftermarket parts we receive for our Giant customers come from an off-shore warehouse in Northern Europe. The bikes we sell that are not available from our shop floor, are pulled next day from a domestic warehouse.
The other shops in town with other brands will have stock as per usual, a good range of sizes and colours. Who do you think is going to get the sale? The guy who tells you to jump online to order it? Or the one with enough balls and commitment to the product to have it on the floor READY TO RIDE.
Yah, the Big 3 bike brands (and industry in general) are behind the times, especially in recognizing the impact of the interwebs on commerce.
I applaud Chain Reaction, YT, Canyon, etc for being the companies that have the balls to force change.
1. People are afraid to enter a shop becuase they feel out of place? Well then, why dont you stay home and get home schooled.
2, Speaking of which, John Burke, the CEO OF TREK said himself that "The bicycle needs to be serviced. None of those can be done most effectively online. All of those are better off in person - it's a better experience at a bicycle retailer." Well then, WHY DONT YOU BUY YOUR BIKE AT THE SHOP AND START THAT INEVITABLE RELATIONSHIP? At least now when you walk in they will know you are, why you chose your bike, and how to best take care of you.
3. Did they mention that SHOPS HAVE TO PAY TREK BETWEEN $5000.00 and $10,000.00 to be a part of this program?!
4. This takes advantage of shops and makes them a buffer for all of the warranties and problem shooting letting trek off easy.
5. A shop doeesnt have to stock as many bikes? BULLSHIT. Any shop with internet access can walk you through just as easy and order you a bike at 100% of their normal profit.
Mike is full of shit, does anyone really think he weighed in on any of the downsides? Hardly scratched the surface. How much did trek pay you for this? Or how much product did they send you?
3. Did they mention that SHOPS HAVE TO PAY TREK BETWEEN $5000.00 and $10,000.00 to be a part of this program?!
Can you confirm this information as fact? Is this buy-in up front, or is this the minimum 'in-store inventory' quota to meet before qualifying for the program? Seems unrealistic for them to have a straight up cash buy in to support this program.
You are right on point 5 though - any dealer has access to the B2B business site where they can check inventory levels and order that bike beforehand, this simply gives the consumer some transparency into that system. This was inevitable though, don't know why there has to be some cloak of secrecy as to what sizes/colors/builds are in-stock to order.
Also, I'd venture to guess that a lot of you comment-trolls are regular online shoppers. Support your LBS with your actions, not just your words.
Will you limit inventory of product to your dealers to keep for yourself?
How long until you start clearing out old inventory at a discount direct?
Its a big ole can of worms
If Trek is gonna do this, they need to understand that paying for a bike without even seeing it and fitting it or riding it is a gamble sometimes and that they need to lower the prices for that.
I bought a YT blind because there is no where in the US to ride it. But im satisfied
Meaning that brands like Canyon or YT bypass the law (in France) because they sell the bikes in pieces. All the pieces are the box but the client have to do some of the assembling (- Ikea style yeah !). I know that the dirt jump bike that are sold without a front brake can't be sold in France because it doesn't respond to the criteria.
So this click and collect system is a good way to satisfy everybody, but then the brand can't sell "cheaper" (has Canyon and YT say) because you need to find a way to pay the guy who build the bike thus the MSRP.
However the margin may be smaller for the retailer but he doesn't support the risks of the stocks management. Basically a double-edged situation.
The law is not well respected but if someone checks you can get a fine or worst.
I'm pretty sure they use the "bike kit" loophole, no pedals means it has to go to a workshop before riding
Trek giving the bike shop 80% of the normal commission would have resulted in them getting more money than whatever they got from me in that transaction.
80% of the margin on a bike sold at full MSRP is more than 100% of the margin on a deeply discounted bike.
I hate to say it but trek has really dropped the ball. If I was to buy a trek, I'd still do everything myself, but pay more. I think I'll be looking else where, which is a shame because the 2016 bikes look good.
that's the problem I find in the UK (London in particular) where rent prices are so high that only big chains like Evans can keep open. There is no relationship built. You are just one of their 3 milion customers this week.
This would be illegal in the UK as you cannot legally tell the retailer what they should charge. You can make a recommendation but no more.
Trek will get round it by saying that the store can reduce the price if they want (and cut their own margin).
I'm pretty meh on this, because I personally think Treks are overpriced and overrated and they'd be low on my buy list. But I can see why dealers would be annoyed. The wrong size return in particular is asinine. If Trek sends it, they should get it back - not dump it on some dealer who had no say in it.
My guess is that it doesn't really affect the LBS' margins that much if they are making 80% of normal margin but not having to finance the holding cost of having the bike on the floor in the first place. But, I do agree that having the LBS own the bike after a botched online sale is not the right approach- they should at least offer the shop a healthy discount on that bike.
The biggest thing that Trek is doing is limiting their availability to people like us, who do hunt for better deals online, who know that paying 1/2 for Bike X is a better deal than paying full price for Bike Y, who do like going to bike shops, and who do try fit. What Trek is saying is that we aren't an important piece of their business model.
No big deal to me, there are plenty of great brands out there.
and the upside as the article said on buying in an Lbs is haggling. I bought my GT avalanche 2015 for just around $525, while online it retails for around $700. Gotta love your LBS.