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Vosper: From relations to transactions

Published April 8, 2024

I was talking to one of my longtime cycling industry friends a couple weeks ago. They're a 50-year industry veteran who's still involved with the day-to-day business of their company. As always, we chatted about the state of the industry, and toward the end of the conversation, they said something that brought me to a full stop.

"Rick," they said, "the entire cycling industry is evolving from a relational business model to a transactional one. And I don't think there's any way back from that."

In case you're not familiar with those terms, they're pretty simple. A relational model is one driven by relationships. A transactional model is driven by, you guessed it, individual transactions.

So a transactional approach is all about the immediate sale. If you don't get the sale, nothing else matters, and what happens to the relationship as a result is a secondary consideration.

A relational approach is one where the long-term relationship is the big picture and whatever sales (transactions) come out of it are the result of the relationship and, more importantly, the quality of the relationship. Mutual interest, where both parties benefit, trumps the immediate self-interest of either party.

To put it another way, transactional interactions are about ends — what you get — and relational interactions focus more on means — how you get it.

Obviously, all business interactions have elements of both, but on the whole, some tend to be primarily transactional and some are relational.

Now think for a minute about a typical interaction between vendors and retailers. Relational or transactional? I'm willing to bet that if your interaction happened in the past year, it was mostly transactional. If it happened before 2019, it was probably more relational.

What changed over the intervening five years? Short answer, everything.

Blame it on the internet

The fact that online sources are so often cheaper is essentially just a bribe to lure customers away from a relational interaction they might otherwise prefer.

The traditional business relationship between bicycle dealers and consumers was strongly relational. The customer came in and bought a bike (which, since 2010, has netted the retailer essentially zero), then kept coming back to purchase equipment, accessories and services, which provided the dealer with enough profit to stay in business. Eventually the consumer bought another bike from the retailer and the process began again. Maintaining the relationship between the two was important because both parties benefitted from it. Interactions between retailers and suppliers were more transactional than between retailers and customers, but still skewed toward the relational side of the scale. Interactions between suppliers and their dealer partners (back when I could write that phrase without feeling the need to put it in quotes) were built for the long term and intended to last for decades. Nowadays, those interactions are much more transactional in nature (remember the COVID-era ordering demands?) and, as a consequence, partnerships between brands and dealers have become more volatile.

What caused these changes was the internet, and more specifically, the internet's consumer buying behavior during the COVID crisis, roughly 2020–2022. For the first time, many consumers became comfortable with purchasing big-ticket items online, and that included bicycles. Bike brands abetted this transactional behavior by stepping up D2C and Click & Collect efforts. (Regardless of how suppliers like to present it, C&C is very much a form of consumer-direct sales, since the brand "owns" the consumer and takes their money; the dealer is merely an assembly point and fulfillment mechanism for the consumer-direct transaction. Smart dealers will use C&C transactions as an opportunity to create a relational dialog with buyers, but more about that in a bit.)

The online purchase of a bicycle is exactly as transactional as any other online sale. The consumer may be happy with their purchase or not, but will never feel the same kind of relationship they would with a live, in-person dealer. Smart dealers may work to turn the online transaction into a traditional bike shop/rider relationship as part of fulfilling the sale, but this all happens after the fact and may or may not be ultimately successful.

Equipment and accessory purchases were likewise made online, and are likewise purely transactional. The fact that online sources are so often cheaper is essentially just a bribe to lure customers away from a relational interaction with a dealer which they might otherwise prefer.

The only reliably relational aspect to the dealer/customer interface now comes in the service category, as many retailers have noted. And of course, even in-store buyers have become accustomed to a more transactional relationship with retailers. So even the service category is affected by the new way of doing business.

A new beginning

As one retailer commented on Facebook recently, "Concept stores are bland and feel like just shopping for groceries."

None of this is either good or bad. It is simply the way things are, or more correctly, the way things are becoming. The industry can either adapt to the long-term changes in buyer-seller relations, or ignore them at its peril.Naturally, shops will want to do everything they can to preserve their high-quality relational interactions with consumers wherever they can. And there will always be customers who value that relational way of doing business and are willing to pay for that privilege. But dealers must also face the fact that many of those interactions — and those customers — are gone forever.

There are two ways this can go. One is to make the dealer's business more transactional and concentrate on closing more sales with more consumers as rapidly as possible. But this just isn't the way a typical bike shop is set up and frankly, it's not why most dealers got into this business in the first place.

Nor are company-owned or "concept" stores the answer. No matter how hard the owners may try, the corporate nature of the store always comes through. As one retailer commented on Facebook recently, "Concept stores are bland and feel like just shopping for groceries."

But as Mike Sinyard told me more times than I can count, every problem is an opportunity. The challenge lies in seeing that opportunity and acting on it.

The real solution for the independent retailer is to make the bike shop environment even more welcoming, more relational than it has been in the past, and use this model to bring in new customers who appreciate that relational way of doing business.

This can take many forms, from creating a kid-friendly customer waiting area to transitioning to bikes-and-coffee/bikes-and-beer operations, and hundreds of variations in between ... including ideas nobody's thought of yet.

What's interesting about this changing scenario is that those least able to make the pivot to new methods of doing business are often y the ones most invested in the old ways ... which is to say, those who have been most successful under the old paradigm and therefore have the most to lose by changing. And that goes for suppliers as well as retailers.

Either way, if you thought the post-pandemic market was chaotic, you ain't seen nothin' yet. Hold on tight; it's going to be an intense couple of years.

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