When I read Rick Vosper’s October opinion/analysis piece, headlined "Nearly half of U.S. bike shops don't carry any Big Four brands," my obvious reaction was: “but more than half do.”
And it must be pointed out that the stores that carry a Big Four brand sell far more than half the products being sold in the dealer channel. I believe that a counterpoint to Rick's column is necessary for bicycle retailers who are looking to bring on a brand from the Quadumvirate (Rick's term) or perhaps those who are considering opening or purchasing a store. They should consider both the positive and negative implications of working with a Big Four brand.
My experience is that a Big Four brand is crucial for building a business that will typically generate significantly higher income than a store without. Bicycle retail's most efficient path to prosperity is aligned with a Big Four brand. Specifically, I lean toward Trek, Specialized, or Giant. Those three brands each have somewhat different but compelling value propositions. Cannondale is in the Big Four — but parent company PON could be an entirely different discussion due to its brands having a lot of autonomy, making Cervelo or Santa Cruz important for certain stores. I love an excellent, somewhat esoteric little bike or service-centric shop as much as you do, but the reality is that making a good living in bicycle retail often requires the volume of sales from a Big Four brand. While this opinion might not be universally popular, it is recognized by industry retail giants and many successful single- and multi-location retailers.
Before delving into the merits of selling a Big Four brand, let's address some challenges. Foremost is the commitment required. While framed as a "partnership," it is not usually warm and fuzzy. A fair exchange of value is imperative in dealing with a large company's goals and needs. Expect substantial pressure to perform, potential demands to cease selling competing products, and a perception of losing your store's independent status in favor of becoming a stooge for the brand. Overzealous purchasing may lead to credit difficulties, especially painful when you are all in on one vendor. Even if you're giving your all to represent a brand, there's a risk of being dropped or having a nearby competitor opened to boost the brand's sales. Additionally, the brand might face challenges such as supply shortages or a lack of compelling products, highlighting that the experience isn't always favorable.
What helps propel retailers selling Big Four brands to success? It's straightforward — name recognition, consumer trust, and extensive marketing. This is complemented by tight working relationships, dedicated salespeople, programs rewarding retailers, training, warranties, reliable product supply, quality, and demand with a capital D. For an in-depth report on the differences in demand, by examining which brands are searched for most, refer to Two October Fall 2023 Bike Industry Search Demand Forecast, Section 4, which utilizes data from Google Keyword Planner. The substantial difference in brand search data numbers highlights the built-in demand that is challenging to replicate for lesser-known brands as a retailer.
Financially, the terms offered by the Big Four provide a significant boost. Utilizing sales data for strategic planning and accurate forecasting allows for the advantageous use of generous credit terms — a virtually interest-free loan, particularly valuable in our current cost-of-money climate. In contrast, smaller brands often offer limited or no credit allowances, resulting in the need to wait for last-minute inventory, tap into cash reserves, run up credit cards, or resort to pricey bank lines of credit.
Workstand IQ, particularly its Inventory Management System, is a valuable tool for guiding purchases. Intelligent data utilization not only informs purchasing decisions but serves as an effective means to navigate conversations with “enthusiastic” salespeople, grounding discussions in objective numbers. Collaboration with a vendor who understands you are not using emotion but rather solid data fosters a collegial working relationship, aligning both parties toward the shared goal of selling their products while making good decisions. Overbuying can lead to a cascade of negative issues, with as many or more stores going out of business due to inventory mismanagement as to insufficient sales volume. I have spoken to many retailers who feel their problems will be solved with just a little increase in sales volume and are often loathe to consider right-sizing inventory levels.
As a business, efficiency and the ability to turn products are critical to your profitability. Simply comparing margins can be tricky considering the enormity of purchasing from more and more vendors, entering and paying invoices from many vendors, inability to develop prosperous relationships, and needing to be thinner on a brand's product physically and knowledge-wise. Fewer vendors translate to downstream benefits such as fewer invoices, orders to place, easier-to-attain terms and freight breaks, employee product knowledge and ease of training, and better general representation.
I would like to address one more thing Rick said in his October column: “As we've seen over the past decade of consistent product oversupply, excess stock is an integral part of the Quadrumvirate business strategy.”
I do not believe that bicycle companies would risk their business health by overproducing anymore than I think retailers would intentionally overstock their stores. I do know and agree that oversupply has often been a real problem in the bicycle industry. This constant oversupply is more likely because, as an industry, we have never really shared data transparently between channels, and we should all admit that the industry is full of enthusiasts with love for the products, which can make even the most data-driven person say yes when the data says no. If brands could see in real-time what was selling, being discounted to move, and sitting stagnantly on retailers' floors, we would most likely see significant improvements in the supply chain. We all know that there is currently too much inventory in the channel and would agree the entire industry got ahead of its collective skis. Let’s do better in the future!
I’d like to highlight that many in our industry are pointing fingers at some of the more prominent brands for starting the discounting. It didn’t matter who went first; we were all going to end up on the discount merry-go-round after the COVID spike due to getting the forecast wrong. Very few brands have been immune to excess inventory. I’d argue that those most viewed as having started first could play into the argument that those brands had a bigger megaphone … thus adding a bit of proof to the point that they are more visible.
Bicycle retail is tough, and if I were to jump back in the game today, I would only consider doing it with the plethora of advantages having a Quadumvirate brand provides to succeed. Beyond that, I would use best-in-class solutions to support my business by vigorously managing my inventory, displaying it to my customers 24/7 online, and communicating with them regularly through text messaging and email. Developing a highly productive service department has many benefits beyond just the dollars and sets the stage for a shop's local reputation. Of course, hundreds of other little things that need to be done daily to run a good business cannot be overlooked. I speak with succeeding and struggling retailers daily, and the commonalities of the recipes for success are just as easy to identify as those that cause unprofitability. As we continue to work through the challenges caused by the COVID-induced surge in sales and subsequent oversupply, some retailers will adapt and continue to prosper. Some will not, as the model subtly shifts in ways none of us can totally predict. Basic business fundamentals, however, will always remain the same.
David DeKeyser spent 28 years taking out the cardboard, owning and operating bicycle retail stores. Since 2019, he has focused on helping bicycle retailers improve their businesses, open new stores, or consider selling them. He can be reached at bikezest@gmail.com.
