Editor's note: On Monday we published a Rick Vosper column in which Vosper explained some of the dynamics in the industry this fall. Rick suggests that 2020 has shifted the balance of power between suppliers and retailers, with the balance tipping more toward the suppliers. Giant Group USA's general manager, JT Thompson, responded to Rick with an email that Thompson also shared with BRAIN's editors and agreed to allow us to publish. With some light editing it appears below.
BRAIN editors continue to attempt to understand and report on what the heck is going on out there. Suppliers and retailers are coming off a season of remarkable demand tied with supply shortages. They are entering a winter of unprecedented uncertainty. As JT points out, each retailer's situation is unique.
Rick's column (and JT's response) offered some insight into the situation and we are developing several stories for our next print issue on related subjects. The more voices we can hear, the better, so please feel free to share your thoughts in the comments below or by emailing BRAIN's editor in chief, Steve Frothingham.
Dear Rick,
I hope all goes well for you.
Long time since we spoke when we were both part of Team Specialized.
I write to you today to call out some misstatements and not all together truths. I think this opposition is pretty common for people who come from marketing (you) and sales (me). Let's just say it looks different from that safe chair you sit, and your 5th quarter assessment. It's a little different when you are intimately involved as the action takes place inches from your face. It was quite generous of you to share such a perspective with the industry in BRAIN. However, like any and all human issues there is no general point that is accurate. We are in a very unique business that is most effective when digging deep into specifics; every retailer and every human experience in the cycling life has a unique perspective or need. I'm going to answer your points but not in the order you wrote them. I will take what is most important first.
Through six points, you call out that suppliers are getting fat and happy while shorting their retail channel partners. Maybe some are! I loudly and strongly oppose you on this in regards to Giant Group.
Keeping inventory lean? What??? Not at Giant; We want the growth as bad as anyone, if not more. After this sprint stops, we are planning on being in a forward position for our dealers, so there is no holdback. We are doing all we can to procure stock and get it to our retailers first. Our profit structure is completely based on wholesale, no difference (online or offline) in profit result, but there is a bigger benefit to placing bikes at retail while retail inventories are alarmingly low. Retail health is the ultimate priority to Giant; Retail healthy = Giant healthy!
Retail inventory placement has absolute priority, and we allocate based on the following priority; Giant Store, Giant Partner Store, Premier Retailers, and order date.
Our margins have not decreased, they have been consistent for eight years now.
Our current incentive structure enables our retail family to earn rewards and margins that deliver well over 40% aggregate margins across our bicycle offering.
Every time we sell a bike on Giant E-commerce we share 100% margin with stocking retailers – BOOM! It does not matter if it comes from Giant stock or not.
· Fact; as we navigated this crazy COVID-19 demand, we disabled Giant's direct inventory feed in order to highlight in-store inventory and encourage retail engagement.
· When a bike is bought direct from Giant, the customer pays a $30 S&H fee. For bikes already on the retailer's floor, that fee is rewarded to the building/delivery retailer. How many retailers charge for freight?
· We applaud retailers who deliver a pro build and charge for it – well worth that execution as it improves the rider experience and reduces long term cost. We are developing strategies to highlight these retailers on our website early next year.
· I would argue our web execution is most attractive to dealers with our 0% APR financing as well. We offer this promo to consumers with no additional cost to the dealer. The dealer gets a sale with a higher average selling price and greater opportunity in margin dollars.
Our terms are as generous as ever, we have not pulled back as other brands. However, one must understand credit is an earned right for on-time payments. Those who do not pay on-time have not earned Giant financing support or priority of supply.
You might not be aware but freight costs and complexity are a massive headwind. They are the biggest fixed cost for most brands. We are dealing with a lack of steamships, containers, dock workers, truck chassis, and truck drivers. And please note that every consumer good wants into our country prior to the holidays, which has created massive volume. And yes, the 301 tariffs is still causing massive bottlenecks. Cost is up huge, so freight minimums must increase to have an impact on this higher cost. I suggest retailers get comfortable charging freight; what other premium consumer good does not charge freight? It's not auto, boat, motorbike. The current freight giveaway at bicycle retail is broken.
We are not just a supplier; we build, engineer, and cook the food we serve — farm to table my friend! No bicycle brand in the world of cycling is as integrated as Giant. Most importantly, we cheer our retailer's success because their health is our health.
If there is one thing you can remember about Giant; we are not a competitor to our retail family. Our complete focus is deeply rooted in Retail Support.
In the future please do not include us in your general statements that include brands that sell direct, develop their own retail stores, sell to mass, sell with no distribution discipline – anywhere and everywhere, don't share their profits, and most of all, use the dealer as a necessary evil. Giant brands are in a polar opposite position to your generalized supplier call outs. We are NOT a competitor to retailers and we strive to help our RETAIL families thrive. We have our retailer's back, and they have ours. Please stop your generalizations when it comes to Giant Group. My phone and email is available for you and the BRAIN team should you wish to gain a thorough and accurate understanding of how Giant Group operates in the U.S. market.
Take care and be safe. - JT
