NEWBURY PARK, Calif. (BRAIN) — BRAIN checked in with Giant Group's U.S. general manager, John "JT" Thompson, this week to get his view of how the U.S. industry is handling the COVID-19 pandemic.
Thompson recently released a strongly worded press release titled, "Giant Stands with the IBD." The release outlined some program changes Giant made to help IBDs during the pandemic. It also alluded to other IBD suppliers loosening their consumer-direct delivery programs or allowing retailers to ship online orders more broadly. Giant will "continue to only fulfill bikes through physical pick up or personal delivery from the best retailers," the release said. The release also referred to other suppliers who are "planting their corporate-owned retail footprint" in some markets, and suggested it was time for dealers to "stop supporting suppliers that damage your existence."
Giant also recently let go about a dozen workers in the U.S. The company has previously told BRAIN it did not want to discuss the layoffs. We asked Thompson about the layoffs and the letter in an interview conducted via email. The interview has been slightly edited for clarity.
JT, we are trying to talk to as many retailers as we can about how they are responding to this situation, and also talk to people who talk to retailers. What are you seeing across the Giant dealer base?
Giant retailers are rising to this challenge to support their riding public and markets. IBD retailers are some of the heroes keeping essential employees on the road and able to help others. They also help people cope with this isolation and fitness challenge.
Do you have an estimate of how many dealers are open?
We estimate nearly 85% of our retailers are open in some fashion. Most are focused on repairs and delivering youth, plus recreation/sport level bikes for fitness and transport.
With some shops saying they are booming, while others are closed, what does the big financial picture look like from your perspective? Can you share something about how your overall U.S. sales are trending in recent weeks and what you are expecting for the coming months?
Our current sales remain as expected, but we are preparing for a potential slow down as trails close and more states require lockdown.
Giant recently had some layoffs in the U.S., was that a response to a decline in sales, or more anticipating upcoming declines?
Preparing for the future; furthermore due to social distancing a number of services and industry events are no longer able to be performed.
I’m hearing about a sales shift to entry-level bikes, kids bikes and repair parts, is that what you are seeing? Are you able to keep a good supply of those bikes?
Supply will be challenged. It was challenged with Section 301 tariff issues and now COVID-19 has complicated that issue to a much higher level. We are doing our best work to keep supply levels to demand, but demand has taken a completely different path. So there will be challenges. All retailers and Giant will need to be flexible. We’ll need to sell alternative colors, the model above or the model below. In some cases, supply for certain experiences might be tight, say lower-priced mountain. In that case, retailers will need to sell cross bikes as an alternative. Supply will be tight!
How is your supply chain situation in Asia?
Highly challenging.
Are factories running at full capacity again?
No, all are below capacity, while others are shut down by governmental actions to contain the virus.
How much increase have you seen in online sales?
We have a robust click-and-collect e-commerce model, which is focused on selling retail inventory first and shares 100% of the margin with stocking retailers when they do not have that specific bike or gear in stock. If a dealer has stocked one bike in a family of products in the prior 12 months, they are considered a stocking retailer. So this is business as usual for us. However it is at a higher level now. We are paying our retailers so we can offer our consumer free home delivery, and we reduced our 0% financing threshold to support our retail network.
How are you advising dealers to stay open or close?
Each retailer we work with is independent. They need to understand their market and do what is right for their store and the riders they service, while also obeying local and state laws.
What are you advising stores — those that are either shut down or operating at a reduced level — to do regarding employees - is it best to furlough or lay off, for example?
Stores must make independent decisions. They know their market and situation best, as well as their fixed and variable costs. We would be irresponsible to make a general statement. That’s what is so unique (and cool) about this business: it’s different at every store, every market, and with every rider.
Are you assisting dealers with getting the PPP loans or other government assistance?
We are posting and guiding retailers to use the assets provided by the SBA, PeopleForBikes as well as the CARES act. They are all noted within our B-to-B site. We are also able to provide help if needed.
What is Giant seeing in other markets, like Europe?
I can only speak to the USA.
Your press release this week was pretty strongly worded. Do you think the current crisis is an opportunity for Giant to increase its dealer penetration?
Giant is different, we don’t just say support, we do it. It’s in our DNA. For us, retailers are the core, the glue, and the energy that makes the whole market work. If our retailers are healthy and we support them, we have two companies supporting the effort. That’s more powerful and sustainable.
Your press release also referred to new product in the pipeline and a 30% re-invent of your product line every year.
We do this every year – standard operating procedure for Giant engineering and manufacturing. Consider this fact Stephen, we make our products and are vertically integrated; 98% of the other brands in this market source from third-party vendors and do marketing only.
Is Giant sticking with a regular MY21 rollout or will you delay some launches until after the COVID- crisis?
We are focused on supply. Whatever creates the best case for supply will be executed.
Do you expect to have a summer dealer event?
That is yet to be determined.
I know you communicate with your dealers, but do you have a message for the rest of the industry about how to view this crisis?
We see promising retail performance from a good number of our retailers. This makes us sense that the American public will take cycling more seriously moving forward. We think when we reach the other side of this pandemic cycling will be more highly regarded. Cheers to that! We all know the benefits of a cycling lifestyle: improved heath, lower health care costs, cleaner air, less dependency on an aged and broken transportation system, and more family activity.
My note yesterday to our dealers makes our position extremely clear: Retailers First! Giant is Retail Support and we stand behind the IBD! Retailers need to make a choice to support those who support them. If they don’t choose, they need to live with supply partners who are also competitors. In our opinion, the current dynamic is certainly broken. I hope you post our entire note again as a follow up here; that is our industry message.
