By Ryan Atkinson
Editor's note: Ryan Atkinson is the president and co-owner of SmartEtailing.
I'm sitting at a coffee shop in Santa Cruz decompressing from an intense couple of days of learning. While much of the bike world was getting amped about Sea Otter Classic product launches, industry leaders got together to talk big picture in Monterey at the Bicycle Leadership Conference. The BLC is always a valuable opportunity to take the pulse of the industry and learn new perspectives.
Most attendees were from the supply side of the industry. There were a few independent bike retailers there, but notably, REI and Walmart both had staff attending.
For retailers who weren't able to attend, here are some key take-aways from my notes.
1. Troublesome sales trends
In 2018 IBD channel sales were flat, with the rest of the bike market (big box) down 3.3%, largely as a result of store closures. There has been a 7% decline in bike unit sales and 2% decline in dollars across the total US bike market since 2017.
This enduring trend of declining units and underwhelming dollar sales performance contributed to an unsettled tone among presenters and attendees.
As a marketer responsible for retail sales growth, I tend to migrate my thinking to the opportunities and not focus on the negatives.
- Growth is happening in electric and gravel
- The pre-owned market is largely untapped
- 50,000 baby boomers are retiring every day in the US
- Most dollar growth in retail is coming from online sales
- Speed to market and product launch is critical
- Product innovation is driving sales
- Increase sales velocity of products to maximize margin
- Select brands and retailers are thriving, counter to broader trends
2. E-commerce is fueling retail growth
Matt Powell from the NPD Group chooses to use the phrase "blended retail" to describe what he sees as the need for brands and retailers to offer consumers multiple paths to purchase. He and other presenters were adamant that an engaging and operationally excellent physical retail presence is valuable to industry performance. But there is no longer an option to look at online and offline as an either/or scenario. Brands and retailers need a blended approach.
Taking a snapshot of the current market, Matt shared, "we expect the online channel to be the primary source of growth for industries we track, virtually all of the growth we saw came from online." This lines up with what I've been sharing about mass market retailers experiencing a much higher rate of YOY growth online versus same store sales.
I strongly encourage local bike shops to ask yourself if you want that growth to happen inside your business, or outside your business.
The traditional roles of a physical store were to merchandise product, convey product information, and close a transaction. These things can now be completed in different ways online. Nobody expects online to replace physical retail, but the fundamentals that made brick and mortar defensible 20 years ago don't exist today.
3. Brands are under pressure to adapt
Selling direct to consumers is no longer a question. There was only one supplier at the conference who stated that they were not considering a D2C strategy. This ship has sailed and retailers need to assume that brands have an obligation to make it easy for consumers to buy products directly on a brand website. At SmartEtailing, our goal is to use our Buy Local Now functionality to help independent retailers participate in D2C sales in the best possible way.
Guest speakers were definitive in reminding brands not to be fooled into thinking that D2C sales will lead to higher margins. Tom Stockham outlined several costs that most brands don't consider when establishing a D2C strategy.
- Customer acquisition costs are higher than expected
- Brands have to build IT and e-commerce infrastructure
- New fulfillment demands emerge beyond established operations
- The cost of returns is a drain on profitability
This same speaker suggested that brands will benefit by developing more empathy for retailers when they establish D2C tactics. Brands will realize the challenges retailers face in winning and converting consumer sales. He believes D2C strategies will help brands become better partners to retailers.
4. Improving the retail experience is top of mind
Much of the conversation was about online strategy, but retailers were definitely not being tossed aside. First, everyone realizes that the majority of channel sales are happening through the IBD today and that cannot be overlooked.
I've been at conferences like this before where there was a tone of "judgment" from brands as they fretted about retailers not evolving fast enough. This year was very different, there was a higher degree of understanding about how under capitalized retail is and how many demands there are on the time and resources of owners.
The keynote speaker, Doug Stephens, author of Reengineering Retail, made a chilling statement about Amazon: Amazon has registered over 500 trademarks for private label brands. "Amazon is pulling the biggest bait and switch in the history of retail," he said.
While Amazon may provide near term sales growth opportunities for brands, long term, success could lead to risk. In that scenario, the physical experience of great brick-and-mortar retail is a competitive advantage for brands.
IBD partners are the likely winners. While the concept of direct owned physical stores came up, most brands simply don't have the resources or desire to open stores. The bike industry is still very much counting on the IBD to meet the consumer need locally.
Doug Stephens notes, "an awesome store experience in a market leads to a 27% increase in online sales in that market." That fact really resonated with the audience so this concept of a holistic approach to retail distribution was pervasive.
5. The channel for electric bikes is uncertain
Pay attention to electric bikes. There is no guarantee that the U.S. will follow Europe where electric bikes are dominating the market. But the sales growth indicators in the US are all pointing this way, along with demographic changes. An aging population of boomers will seek the accessibility and utility-minded millennials appreciate the mobility solution.
It's important for retailers to understand that the electric bike channel is not established yet. Distribution is up for grabs. Bike retailers don't own this space.
Consumers can buy now from bike shops, dedicated electric bike retailers, or online, but with car and motorcycle companies entering the space there will be a competition to win consumer loyalty by brands with much larger budgets than bike brands.
Bike retailers should continue to commit to establishing themselves as an electric bike destination to gain traction before the channel shifts. Remember, committing is about more than stocking product. You need to market the product you stock.
6. Indoor cycling is driving new people to the sport
For a variety of reasons indoor cycling is a bright spot for the industry. The rise in Peloton, with their massive marketing budget, has led to applying the SAAS model to fitness. Consumers are flocking to cycling and that presents immediate opportunities to sell shoes and apparel. Long term, great bike shops have the opportunity to convert these new users into outdoor cyclist buying new bikes.
Much of the conversation around youth cycling, and youth outdoor activity in general, focused around the role that video games or e-sports plays in your participation decline. Rest assured that the industry leaders are taking this issue very seriously and are acting.
But for adults, e-sports is actually a win for cycling. The digital experience with software like Zwift is getting cyclists riding more and in new ways. This is having an immediate impact on smart trainer sales, and long term could have an enduring impact on how we sell bikes to a swath of consumers.
7. Ride Spot is awesome
PeopleForBikes launched Ride Spot. This is a great digital platform to help make it easier for new cyclists to discover great places to ride. They built the platform with independent bike retailers front and center. PeopleForBikes considers bike shops a part of a community's cycling infrastructure and aims to make it easier for bike shops to engage consumers on an ongoing basis around riding bikes.
8. The pace isn't fast enough
I've been coming to this conference for almost a decade it still feels like the bike industry is stuck in quicksand. It is taking too long for the industry to adapt infrastructure to match the modern consumer. I don't see enough investment happening broadly in IT at brands and suppliers, and there largely isn't a proactive effort to engage retailers in a cohesive strategy around digital marketing.
I'm not saying there isn't progress. I'm very lucky to work with some very progressive brands that are years ahead of their competitors. But, similar to how many bike shops are going to suffer from a lack of digital innovation, I worry that the supply side of this industry is going to suffer similarly.
Our internal sense of urgency for SmartEtailing to provide an easy and comprehensive solution is intense. We simply have the best reach and the most complete feature set available. The pressure is on us to engage as much of the channel on our platform with our current tools, then continue to evolve our tools to meet channel needs in new ways.
9. This industry cares
I think this can get lost in the day to day tension that exists between competitors or between suppliers and retailers. I talk to a lot of retailers, and I hear frustration in almost every conversation. But the reality is, this industry is full of leaders who came from bike shops, have great relationships with shop owners, and want bike shops to be successful.
If you are a shop owner, I encourage you to try and keep your energy focused on growing and adapting with the tools and partnerships you have at your disposal. Accept that there is always going to be some tension in the industry, but don't focus on it.
As business leaders, we need to accept the realities of our situation and make the best decisions we can with the tools and information we have. You don't have enough capacity to invest your time in bellyaching about the way you wish things were. How you spend every minute of every day matters. Where you put your mental energy matters.
Do your best and know that on the whole, the industry is on your side.
10. BPSA and PFB merger
The big headline from the conference is the proposed merger between the Bicycle Product Suppliers Association and PeopleForBikes. It appears likely that this will go through.
I left this topic to the end because to me it makes so much sense. To my previous point, the industry pace is too slow. Hopefully combining financial and operational resources can lead to more results. I acknowledge that there are some risks and downsides, but every strategic decision does. I think this is worth the risk.
Thanks for taking the time to read some of my notes.
