IRVINE, CA (BRAIN) — Shimano American, in a major shake-up of its U.S. distribution network, will cut the number of distributors selling Shimano components from 18 to six effective Jan. 1, 2014.
The decision to streamline its distribution network, said Yutaka Taniyama, vice president of Shimano American’s bicycle division, will ultimately benefit its retail customers.
“Independent bicycle dealers have been and will continue to be our key customer base. By having a direct business relationship with them, we will be more aligned with their businesses, have closer relationships with cyclists, and offer more support and effective solutions to dealers’ challenges in the market,” he said.
Next year retailers must either buy their components directly from Shimano American or from six authorized distributors—Giant USA, Trek Bicycle, Quality Bicycle Products, KHS Inc., Seattle Bike Supply or Raleigh America.
Canadian retailers can purchase Shimano parts through Cycles Lambert in Levis, Quebec, or through Shimano Canada. Cycles Lambert will be Shimano’s only authorized distributor in Canada.
In addition, effective Jan. 1, Shimano pedals will be sold dealer direct. Shimano American and Shimano Canada will be North America’s sole distributors for pedals, wheelsets, shoes, eyewear, apparel, bags and Shimano’s PRO line of parts.
“We believe that this change is required by the rapidly changing market,” said Taniyama. “Our U.S. and Canadian IBDs are very important customers. We see them struggling, and competition is becoming harder and harder.”
Shimano has invested heavily in IBD support programs including on-the-road tech reps who meet with retail shop staff, marketing and business solutions, and online training programs, he noted.
“While we are ending our business relationship with many of our great distributors, we greatly appreciate all of the support they have provided to Shimano and to dealers,” Taniyama said.
“The conversations have been very difficult, but distributors understand our direction and our thinking behind that decision, and I realize that they are not happy about the impact on their business,” he acknowledged.
Taniyama is right about that. The more than half-dozen distributors BRAIN talked with and who face a Jan. 1 cutoff from Shimano were either angry, resigned or a bit of both.
J&B Importers’ Ben Joannou Jr. said his father was among the first Americans to order Shimano components directly from Japan—a relationship that’s more than 40 years old.
With 11 warehouses scattered around the U.S., J&B’s impending loss of business will hurt. “I’m not happy about it,” he said Thursday night from his Miami, Florida, office.
Steve Matill, director of bicycle sales at Hans Johnsen in Dallas, Texas, said losing Shimano’s business would have an impact on his company’s operations. “It was a good part of our business and a major component line that we offered our dealers. But we’ll figure out what to do; we’ve lost bigger accounts,” he said.
The Dallas company services scores of dealers in Texas, New Mexico, Oklahoma, Kansas, Arkansas and Louisiana. “Shimano’s decision will ultimately have an impact on the level of service dealers receive,” he said.
Steve Hawley, president of the Hawley Co., offered a pragmatic view of Shimano’s sweeping changes. “Here’s the bottom line: They started years ago selling dealer direct. In fact, they’ve had a dual distribution policy for some time. Shoes are direct only, along with some other products. In the back of my mind, I’ve always thought at some point they would go entirely dealer direct,” he said.
Shimano’s Taniyama, however, said the company needs the support of select distributors to help manage thousands of IBD orders. “The reason is we want to make sure that every IBD would have access to Shimano components,” he said.
Distributors say that lurking in the background of Shimano’s decision are dealers’ and distributors’ complaints about Internet sales from Europe—primarily by Wiggle and Chain Reaction. Taniyama declined to discuss Shimano’s pricing policies or its relationship with overseas online sellers.
But several distributors said that by cutting its distribution network in North America and subsequently tightening margins on its remaining distributors, the effect could lead to a more level playing field in terms of component pricing for IBDs.
Many retailers and some distributors have complained bitterly over the past few years that online prices make them look like they are gouging customers when they check prices online.
One distributor said he has no problem with prices on U.S. websites like Colorado Cyclist or Jenson USA. “It’s Wiggle and Chain Reaction that’s the problem,” he said.
Steve Flagg, president of QBP and one of six distributors to continue distributing Shimano components next year, was reluctant to discuss issues surrounding margins and pricing. “There are legal issues and some sensitivity that makes this really difficult to talk about,” said Flagg, who has a reputation for candor when discussing industry issues.
What are the legal issues?
“Antitrust, collusion, pricing — those are the issues that make this a difficult thing to discuss,” Flagg said.
Read the Aug. 1 edition of Bicycle Retailer & Industry News for an in-depth report on Shimano’s upcoming distribution plan for North America. Read Shimano's press release.