By Colin Ross
Editor's note: Colin Ross is the global sales manager for Linus Bikes. This guest editorial is in response to the ASE bankruptcy and the guest editorial from Don DiCostanzo that BRAIN published earlier this week.
The recent Chapter 11 bankruptcy filing by the owners of Performance Bicycle should be a wake-up call for every bike brand who thinks that a vertically integrated delivery process is the answer to their market struggles. Even with the competitive advantage of an established retail network, the manufacturing group with the 11th largest U.S. bike brand (as measured by IBD penetration) wasn't able to overcome the baggage that came along with the Performance stores and develop a successful retail strategy.
While I agree that shoppers are looking for a pleasurable shopping experience (and the data certainly supports that idea), consumers are also looking for confidence in their decisions. This confidence can come from being able to compare the options and choose the item that fits best. That's a sentiment that hasn't been lost on the most successful car dealerships. Even a cursory exploration of the top-volume auto groups in the U.S. shows that each auto group owns multiple dealerships representing a wide range of tier-one and tier-two brands, often clustered next to one another so that their customers can comparison shop without losing the sale. This is even more evident when you look at the struggles that single-branded stores have had in other retail areas. For every successful retail concept like Apple, you have a Samsung Experience Store, a concept that has evolved multiple times since its launch in 2013, but one that has still failed to grab consumers' attention in the same way that Apple has.
For single-branded retail to be successful, a consumer needs to either be nearly certain of their choice before they enter a store (like they are with Apple) or the perceived risk in choosing wrong needs to be low enough that they aren't worried about the consequences. I haven't lost sleep over my choice of coffee, and if Starbucks is wrong I can generally afford to buy a second cup of coffee. Neither of these conditions is true for the average bicycle buyer, which is why Apple can command 44 percent of the U.S. cellphone market, and by best estimates no major bike brand accounts for more than 25 percent of the U.S. IBD market.
What does this mean for the bicycle industry? Even if we accept Don's premise that " ... successful tier-one brands that have their own single-branded stores are clearly performing better than the rest of the industry," it's unclear that the causality runs the direction he claims. Does the ability to leverage brand size to take over more floor space in an existing successful retail store show that the brand is providing the success? That seems doubtful.
The strength of the bike industry is the "I" in IBD. By maintaining their independence, each retailer has the freedom to customize his or her selection to the local market in a way that a centrally run chain cannot. By evaluating your market you have the opportunity to build an appropriate portfolio composed of the right selection of tier-one and tier-two products, including product that focuses on categories that are overlooked by major brands. If you can accurately satisfy your niche, or attract a traditionally overlooked audience, you can ensure your consumers will pay the premium associated with immediate gratification.
If a so-called "top-tier" brand isn't spending its marketing dollars to drive prospects to your store, the answer isn't to realign yourself under their brand name but to find a partner that's willing to support you. Which is not to say that this is an easy decision for a brand. At Linus, we have spent a significant amount of time evaluating the trade-offs associated with driving consumers into multibrand IBD's. Even with the downsides Don cites, we have decided to forgo the revenue from online sales that is supposedly "necessary to survive," and realigned ourselves behind our multibrand IBD partners. Given the current evidence available, we have very little reason to believe that there is a sustainable future for the bike industry outside of the existing IBD channel.
As the bicycle market changes, it has evolved to survival of the fittest. When we have an economic downturn, who do you think will be best positioned to adapt? A retailer who has tied their success entirely to the decisions of one large brand, or one who has the flexibility of multiple brands, and the depth of product to survive the failure of any one partner? I think any dealer who was a Schwinn Total Concept Store would be happy to tell you the answer.
