As the calendar moves to mid-October and we stumble into the final quarter of what is possibly the most schizophrenic year in bicycle industry history, let's step back and take stock of the 2020 highlights.
First, there were record low levels of inventory from 2019. Then came the coronavirus, factory shutdowns, and social isolation. Next, a huge boom in cycling participation followed by massive and ongoing undersupply of bikes and many categories of equipment. The net result was chaos throughout the channel. And to this list I'd like to add one more item: outside sales reps, forced to sit at home with no way to visit shops.
In a time when reps' commissions have already been cut by suppliers, it seems an opportune moment to ask exactly how reps add value to their retailers on one hand and their brands on the other.
Defining the rep value-add
For suppliers, the calculation is easy: reps deliver more dollars via increased orders than their commissions cost the company. The equation is a little more complex for retailers. Fortunately, my colleague Ray Keener did the heavy lifting on this topic about a year ago.
In a study for BRAINlast September, Keener surveyed 180 retailers and compiled responses on several rep-related topics (be sure to click the file attachment link for the complete survey results).
A good rep can make the business of doing business go smoothly between the parties involved. A bad rep, on the other hand, can be worse than no rep at all.
Key among these findings came when retailers were asked to rate outside sales reps by how important they were to the retailers' business. Options ranged from highly effective to not effective at all. Overall, retailers rated their outside reps as effective (four out of five points) by almost two to one, with 4.4 as the average score. Dealers further noted there were "a few less" reps calling on them than five years previous.
According to the study, key services provided by reps, in order of importance, are: showing upcoming product, handling warranties, training staff, keeping dealers aware of local market intel and national marketing trends, general business advice, showing POP options ... and, limping in at eighth place, actually taking orders.
Clearly there's a disconnect between what brands and dealers value in a rep. But both groups find reps valuable: retailers say so explicitly, suppliers keep paying commissions.
What I would suggest is that, for both groups, the value of reps comes from their ability to act as a liaison between suppliers and retailers.
Now liaison can be a somewhat fuzzy term in general use, but it actually has a precise definition. According to Merriam-Webster, a liaison is a person who establishes and maintains communication for mutual understanding and cooperation. So the key points are communication, understanding and cooperation, in that order; the three work together as a process. Put another way, the liaison — the sales rep — makes suppliers easier for dealers to do business with, and vice-versa.
That's a huge value add. Reps are the wick between candle and flame, the grease that keeps the gears of commerce running smoothly, the catalyst that facilitates the reaction between two disparate elements whose objectives may even directly conflict. A good rep can make the business of doing business go smoothly between the parties involved. A bad rep, on the other hand, can be worse than no rep at all.
I'm sure you can think of examples of both.
Rep value in the time of coronavirus
So what does all this mean for the lonely sales rep, sitting at home unable to get out and do business with bike shops in a time when their customers are too swamped with paying business to even take phone calls?
Far from becoming irrelevant as liaisons, sales reps — the good ones, anyway — have made themselves more important than ever
The smart ones are already doing it. Which is to say, doing everything they can to promote communication, understanding and cooperation between retailers and suppliers in this very difficult time.
Above all else, that means helping retailers with product availability and allocation issues. Making sure backorders accurately reflect what the dealer actually needs. And, in a time when limited supplies and rapid turns have caused some suppliers to shut off inventory visibility altogether, keeping dealers informed about what's actually available to sell, often on a bike-by-bike basis. In other words, far from becoming irrelevant as liaisons, sales reps — the good ones, anyway — have made themselves more important than ever.
Getting to the bottom line
The value a sales rep adds to the dealer/supplier relationship goes far beyond the next order, the next preseason program or the next quarter's results. In fact, once suppliers realize that retailers are their primary customers, a rep's value extends deep into the roots of customer satisfaction and therefore, into that customer's lifetime value.
What is required here is a fundamental shift, not just in the role of reps, but in the entire retailer/supplier relationship. Brands that figure this out will be the ones to reap the benefits. And the rest will be left by the wayside.
That means dealer satisfaction with the rep may turn out to be the best indicator of how long and profitable a dealer relationship will be. Which means reps should not only be compensated by their individual sales or territory growth, but by how easy they make it to do business with the supplier.
There will always be retailers who say, "just get rid of the rep and give me their commission as margin points." This attitude may be tempting in theory, but it's a false choice and one that ignores the primary value reps provide. (Of course, if the rep fails to provide that value, it's another story entirely.) But compensating reps at least partly by retailer satisfaction ratings will get to the heart of this matter in short order.
Will this actually happen, rep compensation based on dealer ratings? Frankly, I doubt it, at least not in the near term. Because the overwhelming truth is that nowadays (most) suppliers don't see retailers as their customers, primary or otherwise; dealers are merely a fulfillment vehicle to the "real" customer, the end consumer. The hollow phrase "dealer partners" is belied by brands' marketing tactics: when was the last time you saw a bike or equipment ad that even mentioned the retailer, much less their added value? In the eyes of too many suppliers, the dealer is literally irrelevant to the selling proposition.
Fortunately, there is a silver lining in all this. Supplier attitudes are (slowly) changing. More and more, I hear from brands that realize one key to doing more business is to make themselves easier to do business with. Duh.
And that's exactly what good reps do.
So what is required here is a fundamental shift, not just in the role of reps, but in the entire retailer/supplier relationship. Brands that figure this out will reap the benefits. And the rest will be left by the wayside.
As part of this larger puzzle, sales reps and their compensation can be a small but critical step. At least it's a start. Best of all, it's a step that's relatively easy for brands to take, and one that will yield genuine benefits almost immediately for suppliers and retailers alike.
Rick Vosper has been helping companies in the bicycle business solve marketing problems since 1989. Email rick@rvms.com for a free consultation.
