The Last Mile is a common problem among all kinds of logistics providers. If you're delivering 100 packages by truck (or phone connections via wire or cell towers, or schoolkids via bus), there's a constant operational cost per mile. That means the cost of the first miles can be shared among all the deliveries. But for that last one, the proverbial last mile of service, the entire cost is borne by the last stops on the route, making them exponentially more expensive to deliver to than the ones at the beginning.
The Last Mile problem is why, 70 years after commercialization of cable TV, folks who live out in the sticks still have to use satellite dishes for cable and internet and 1920s-era technology twisted-pair cables for their phone connections. Farther back, it took a literal act of Congress, the Rural Free Delivery Act of 1893, to get mail to the rural houses and farms of 19th century America.
With bikes, the Last Mile problem comes not in literal form, but from the self-evident fact that a bicycle needs to be properly assembled — and hopefully checked and tuned — before it's safe to be ridden by the average consumer.
Just ask the Walmart corporation. A few years after ditching its contract bicycle assemblers in favor of the same retail store employees who put together barbecues and patio furniture, the world's largest retailer found itself on the receiving end of a more than $5 million class action complaint filed in U.S. District Court. The 2017 action alleged improper assembly, lack of training for assemblers, and failure to adopt basic best practices like assembly checklists for its "free in-store bike assembly" program. As best I've been able to determine, the filing was withdrawn at some point. But the principle is clear: lack of professional assembly produces lack of professional results.
Which brings us to the ongoing question of direct-to-consumer sales of bicycles.
The bad news is, we can't tell if there's any good news
One of the toughest things about writing editorials for the bike business is its appalling lack of quality information. Case in point, how many IBD-level bikes get sold consumer-direct each year? Are they really taking over the market, as many dealers and suppliers fear?
Nobody really knows. Because there are no real mechanisms in place to capture this critical information. But there are some things we do know which can help us make educated guesses.
At the end of the day, something like nine out of 10 consumers still prefer to buy their bike-shop quality bikes in bike-shop quality bike shops.
Since 2016, for instance, imports of all bikes with 20-inch wheels and up across all channels are down by not quite 10%. In the same time, units sold-in to retailers by the BPSA (now PeopleForBikes) are down about 13%. The good news, such as it is: due to rising price points, the value of BPSA shipments to retailers are down less than 2% in constant dollars. (The hidden bad news: as retail margins continue their steady march downward, retail profit dollars have necessarily decreased more than that 2%.)
Unless there's some huge increase in consumer demand for IBD-quality bikes unknown to anyone in the industry, and unless that demand is being met entirely through B2C sales, I'm going to go out on a limb and tentatively conclude that direct-to-consumer sales of bike-shop quality bicycles remain a relatively small fraction of the total volume of the specialty retail market. For purposes of conversation, let's put a stake in the ground and say that number probably south of 10%. And are likely to stay that way. And for the record, everything I've been able to learn is that Click & Collect sales by bike brands are a tiny fraction of that sub-10% total.
Put another way, the same reasoning tells us that at the end of the day, something like nine out of 10 consumers still prefer to buy their bike-shop quality bikes in bike-shop quality bike shops. Even better, regardless of how they want to place their order or where they want to take delivery or how many of them have an entire Park Tool catalog worth of equipment in their garages, the overwhelming majority of American consumers still want their bikes professionally assembled and prepped before they head out on their first ride.
The accepted industry wisdom — that in 10 years some large majority of IBD-quality bikes will be sold consumer-direct — just doesn't match up with market reality.
In fact, if they want to grow, consumer-direct bike companies need bike shops a whole lot more than bike shops need consumer-direct bike companies. Which means that just as with mail delivery, phone and internet connection, and getting kids to school in the morning, the ultimate fate of consumer-direct bike and e-bike sales lies in the hands of Last Mile solution providers.
(Much) more about this — including a better framework for delivering last-mile service and what it mean for the future of the specialty retail channel — in Part Two.
