The first shoe dropped not quite four years ago, when Trek president John Burke announced to a rather nonplused retailer audience that his company was henceforth in the business of selling its bikes direct to their customers. And that the retailers were going to like it, whether they liked it or not (As it happened, a BRAIN web poll found that a bit less than half of Trek dealers supported it at the time, but perhaps that's changed.)
Those bikes, Burke said, would be fully supported by the audience members and the rest of Trek's 1,500-ish local retailers. Not only that, but the entire new business model would be perking along like tickety-boo by the end of September, a little more than 30 days away.
It wasn't, of course. But you have to admire the sheer audacity of the move. Of all the brands in bikedom, Trek presumably had the greatest investment in its retailer base, the most reason to stick with the status quo, and the least reason to rock that particular boat. But rock it they did, and depending on who you talk to, they rocked not just the boat but the entire market it floats in as well.
To say the Trek Connect initiative was unprecedented would be an understatement. It wasn't merely unheard of: more importantly, it was unthought of, at least among IBD bike brands. The rest of the industry literally had no idea how to react. As I pointed out in a related piece earlier this year on whether bike omnichannel was actually moving the sales needle (I'm still skeptical), when I reached out to five of Trek's leading competitors for comment, all five of them declined to say anything about it at all.
But one by one, they all followed, even if it wasn't until March of this year that the final shoe dropped and Specialized became the last of the major brands to adopt its own Click & Collect model. But even now that the sales floor is effectively carpeted with dropped shoes, it's still not clear that omnichannel will ever be the big moneymaker it's ginned up to be. And that's not really the point, anyway. Because when you look at the question through the channel lens, it's not as much about who gets how much of the sale, but about who owns the customer in the first place.
Supplier's-eye view of Click & Collect
From the supplier's viewpoint, Click & Collect is the holy grail of sales tools. Seems obvious, right? You close the sale, take the customer's money, and fulfill that sale through a local retailer, who delivers a happy customer by taking care of all the messy, uncertain and downright frustrating parts of the sales process, including warranty and after-sale service.
There's a lot more for the supplier in the C & C model, too. The supplier not only (usually) makes more profit, and gets paid for the sale immediately, but also (usually) auto-ships a new bike as replacement for the retailer's inventory, and bills for it into the bargain. If that particular size wasn't in inventory, the supplier may even get to ship two. Plus, in the supplier's eyes, every C & C sale is incremental — that is, it counts as a new sale the brand would not have gotten through the normal dealer-driven channel process. Never mind whether this notion is actually true; in every company I'm personally aware of, C & C sales are considered a separate revenue stream for accounting purposes. The significance of this accounting practice is hard to overestimate.
But supplier benefits go even deeper, back into the overarching industry distribution model that defines how suppliers and retailers work together to sell bikes to consumers in the first place. All the way back, in fact, to the transition away from the post-World War II Bike 1.0 dynamic of franchised Schwinn dealers.
More about that another time, if there's interest. But the upshot of Schwinn's decadelong battle with the Federal judicial system and ultimate humiliating loss before the Supreme Court was the reincarnation of the independent bicycle dealer, as defined in the all-too-familiar authorized dealer agreement. Never mind that the SCOTUS decision was reversed just a few years later; Schwinn and the rest of the bike business had already moved on, and so shall we.
Under the IBD model, what goes on inside the retail store is essentially a black box to the supplier. The supplier can use various marketing strategies to build awareness for its brand. It can provide inducements (think gnarly videos, man, or interviews with star riders, or other devices) for the consumer to come to its website and find out about the brand's various offerings. Nowadays, the supplier can even refer the potential customer to a specific local dealer that has that very model, and with the right size and color in inventory, too.
But the one thing all that marketing can't do is guarantee the retailer is actually going to sell that bike to that consumer.
This drives suppliers nuts.
Because nothing prevents a retailer from selling that hypothetical customer a completely different bike instead. Maybe because there's another brand on the retailer's floor from a competing supplier that's got a lot of inventory stacked up in the backroom and a preseason payment coming due. (I've personally seen the viral, gut-level, urban-legendesque effect this notion has on supplier paranoia, and with brands of all sizes, too.) Or maybe the sale is switched to another brand because it really is a better choice for that particular consumer for any number of perfectly valid reasons. It doesn't matter. In the supplier's world view, the dealer has just sold something out from under them and switched what the supplier sees as "its" customer to a competitor.
How often does this sale-switching happen in the real world? There's no way to know for sure, but I'll bet a week's pay right now that it's a vanishingly small fraction of what most suppliers think it is. And of course, it can go the other way sometimes, but in the supplier mindset, those sales don't count.
So the real, deep-down reason suppliers love Click & Collect is that it gives them the illusory sense of customer ownership. There's another reason for C & C which we might consider legitimate too, but we'll come to that reason presently.
Retailer's view of Click & Collect
Retailers in general are not big Click & Collect fans. In the retailer worldview, the consumer may have an interest in a particular model, may have done all kinds of research, but the bike they've spent so much time drooling over may not really be the best choice for them. Maybe the customer actually needs a different size (one retailer tells me that even typical thousand-dollar-and-up customers are unaware how much geometry varies even within individual brands). Or the short headtube race bike they've been lusting over is really not a great option for the kind of riding they'll be doing. Or the color looks different in sunlight. Whatever. The point is — and here's a huge difference between retailers and suppliers — retailers tend to see a successful sale as one which produces a happy and hopefully long-term customer. Suppliers tend to be concerned with moving units.
So one problem with the supplier-driven C & C model for retailers is that it's at least somewhat less likely to produce that happy customer without a lot of extra work. And the retailer knows this from years (and at an institutional level, even a century or more) of real-world experience. Once again, the actual numbers aren't important, because they aren't really the point. We're talking about how different links in the supply chain see the world around them.
Retailers tend to see a successful sale as one which produces a happy and hopefully long-term customer. Suppliers tend to be concerned with moving units.
In the retailer's world, the C & C model often means more work for them, not less, just because the customer walks into the store with the technical side of the sale already completed, and the retailer may have to undo some or all of it in order to come out on the other side with a happy and hopefully loyal customer. And that means the retailer has actually earned more of the profit on the C & C sale, not less. The brand's piece of the pie comes solely from its ability to capture incremental sales from the blue ocean of potential customers, something it is better positioned to do by virtue of its (usually) larger size.
Then too, retailers tend to see C & C sales as a zero-sum game in which the sales made are almost always sales they would have made anyway, except now with less profit to them. As before, the net reality isn't the point.
At the end of the day, the prevalent retailer view of Click & Collect is that the supplier is literally competing against its own retailers, both for the actual sale and for control of the sales process. Which is to say, control of the customer.
And they're literally right, at least about the competition part. But both retailers and suppliers are also literally wrong about the control part. Because in the world of internet sales, customers ultimately control themselves.
Finding the pony in the pile
One of my mentors in the bike biz was the late industry legend Bill Fields, known in his day as "The Godfather of American Bicycling." Bill used to refer to his job, which often involved creating agreement among various competing factions in complex brand acquisition deals, as "trying to find the pony in this pile of horseshit."
In the case of Click & Collect, we're looking for the wrong pony. And, if I may say so, using the wrong shovel to do it with, too.
Fact is, customers don't belong to either the brand or the retailer, if they ever did. In our postmillennial world, consumers now have more control of the sales process than at any time in human history. And if some portion of those consumers want to buy bikes online at 3:00 in the morning in their Spiderman or She Ra Underoos, both the supplier and retailer darn well better learn to like it. Or else risk losing those customers altogether.
In the case of Click & Collect, we're looking for the wrong pony. And, if I may say so, using the wrong shovel to do it with, too.
That means every brand, every supplier and yes, every retailer needs to be in the C & C business. But the overall model needs to be built around getting more consumers on IBD-quality bikes, getting them committed to the purchase earlier in the sales cycle (which lowers what we marketing types call "cost of acquisition" and thereby increasing profitability), and keeping those customers loyal to both brand and retailer for the rest of their bike-riding lives.
It also means a huge shift in industry mindset at all levels, and frankly, it's one where retailers are already way ahead of suppliers. The name of the game is not cannibalizing existing sales to move a couple of margin points from one link in the supply chain to another. It's about effectively using technology to lower cost of customer acquisition and increasing the value of more customers over a longer time. And here's the thing. Brands and their retailer partners who do this successfully will ultimately triumph. And the rest — the ones devoting themselves to squabbling over bits of crust rather than focusing on the pie itself — won't.
