Specialized calls for dealers to drop brands

MORGAN HILL, CA (BRAIN) — Specialized has sent amended dealer agreements to select retailers asking they stop selling certain competing brands.

In one copy of an amendment obtained by BRAIN, Specialized requests the recipient stop buying Giant bicycles and accessories as of Aug. 15, terminate the Giant account and begin to sell down existing 2012 Giant inventory. The agreement also requires the dealer to provide Specialized with an inventory of current Giant product on-hand.

In a statement, Specialized founder and president Mike Sinyard characterized the move as an opportunity to strengthen its relationship with dealers, and indicated that Giant wasn’t singled out in the amendments.

“We want to support retailers who align their business with ours. We believe in the IBD and are always looking to strengthen our partnerships with the best retailers in every market. We don’t target specific brands; we invest in retailers who focus on Specialized,” Sinyard said.

Certainly it has become common practice for large suppliers, in this industry and others, to ask retailers to distance themselves from other competing brands, particularly if that supplier is providing incentives such as store improvements, preferred shipping and improved product availability. It’s a tug-of-war that’s not likely to end as competition increases in a flat industry. Specialized isn’t the only brand playing the game, although it has gained a reputation for its heavy handedness with retailers over the years, pushing them to stop selling other top-tier brands like Scott, Cannondale and Trek.

The company sent a similar amendment to retailers last fall asking certain dealers to stop purchasing Giro shoes. That situation ended up in the courts when Giro owner Bell Sports sued Specialized for unfair and unlawful business practices. Easton Bell Sports dropped the suit two months later.

John Thompson, who worked in sales at Specialized for 14 years and was director of U.S. sales before resigning last November, now finds himself on the other side of the fence as executive director of sales for Giant. It’s an interesting position as he attempts to shake his hard-nosed reputation and gain market share from his former employer and Trek by implementing less aggressive tactics.

For Thompson, that means offering better freight programs, better terms and leveraging Giant’s manufacturing expertise to promote shorter lead times, which equals more turns and less pressure for large preseason orders.

“If the retailer has a good sense of what works at retail, we’ll win and we’ll win as a friend in mutual success not as a bully method,” he said.

Thompson said he didn’t know how many amendments were sent to dealers that carry both Giant and Specialized, but added, “I know there are dealers that have stepped away from us because of this.”