A version of this feature ran in the September 2021 issue of BRAIN.
BOULDER, Colo. (BRAIN) — For our September magazine edition, we asked our State of Retail panel members: What are your thoughts about click-and-collect, omnichannel sales, and brands that sell directly to consumers?
Direct-to-consumer: It’s not something most small IBDs enjoy hearing. DTC brands often act like they don’t need the help of IBDs to sell their lines. They forget that direct consumer contact and a high level of service is required in the cycling industry. They instead tell consumers that a bike is 95% assembled, which is a deception, and then the consumers assume the IBD service department is ripping them off.
Brands need to realize we're all here for the same thing, and they need shops as much as we need their products. If brands are going to sell DTC, they need to respect the fact that retailers have gambled on their product. Discounting prices, which they can afford to do because their margins are double what mine are, is like betting against your own team. It’s a lose/lose situation.
One example of this was with an accessories manufacturer that sold us a $2,500 order. The very next day, a customer came in and wanted to buy a particular item of theirs. When I rang him up, he showed me that his "online sale" price was below my wholesale cost! I confirmed the pricing with the sales rep, refused the order, and asked for a refund. We’ll never carry this manufacturer’s items in our shop.
There are two DTC approaches at play that I see: brands that bypass the IBD and brands that supplant the IBD. I guess both are concerning? Our current bike brands — Specialized and Giant — take a “click-and-collect” approach, and it has been fantastic in that it sends customers to our store to pick up their bikes and we still make close to the same margin. There's also the hope that they come back to us for service and accessories. We are definitely seeing loss of sales due to DTC purchases — for example, Canyon Bicycles — but for now, it's a tiny percentage of our overall sales, and we are not concerned.
If I had to guess, we are probably losing parts and accessories and clothing sales to DTC, but it's difficult to measure. It’s fairly rare when someone will bring in a part for us to install. We try to support brands that uphold minimum advertised pricing and select brands that we feel are a good fit for our customers and that bring us a reasonable margin, whether or not they are DTC.
When a brand that we partner with chooses to incorporate a DTC component, our loyalty to that brand plummets, and we double down our efforts with our partners who continue to put their retailers first. Partnering with brands that solely maintain and support a dealer network is a huge priority for us. Customers are drawn to DTC brands because of the price point and often ask us why they should consider one of the brands we carry instead. We highlight their longevity and business practices, the support they offer to us at the shop that also benefits the customer, and the quality that the customer gets for reduced headaches down the line.
Offering a service program with a bike purchase and being available in-person goes a long way in setting us apart from a faceless DTC purchase. Inevitably, we still lose some sales to DTC brands given just how many are out there, but we’ll still welcome customers who have purchased those bikes with open arms for service or advice when we can.
So far, direct-to-consumer and omnichannel sales haven't been a challenge to our business. Having a wide background in other industries, I can understand why brands offer DTC. We do carry some brands that offer omnichannel programs, however, the benefit has yet to be seen because of today's inventory challenges. I try to select the brands and products that my customers are asking for, so the fact that a company may offer direct-to-consumer sales has not been an issue. I’m much more concerned with my direct competition, whether that is a shop that’s across town or one that’s online.
If our customers have an interest in purchasing from a particular direct-to-consumer brand, we aim to have a relationship with that company. Having been open for 14 months, we’ve had a good amount of time to determine which brands are most often sought out, and we will gladly work with these brands if the relationship is financially amicable. Due to bicycle supply-chain constraints, our customers have utilized a few DTC bicycle manufacturers because they preferred not to wait for a product to arrive at our shop for them to purchase. However, most customers are willing to wait for products from the brands we sell due to their long presence in the industry and the high quality of product they will receive.
When selecting which brands to carry in our store, we check to see if they sell on Amazon, if they are direct-to-consumer, and if they offer a click-and-collect option. Once those important questions are answered, we can make an informed decision if that brand will be a good partner for us.
We had a brand that was DTC, and we ended the relationship due to lost sales. It was obvious how many customers came into the store, gained the knowledge needed, walked out, and ordered online. The DTC approach definitely increases sales for a brand, but it does not increase customer loyalty or the same customer experience of shopping locally. It benefits the brand in the short term.
We currently work with a brand that is a click-and-collect, offering consumers the option of shopping in the store, from home, or the combination. This is where omnichannel shines. We still get our share for our work with the consumer, the brand sells more, and the consumer gets great local customer service, a service package, and a full warranty. It's a win-win for all.
DTC market growth is inevitable. It’s a paradigm shift that all industries appear to be experiencing. Our brand partners all have some version of online sales, and we have no choice but to adapt. COVID’s impact on our supply chain has dramatically impacted our ability to provide product, both in bikes, accessories, and service parts. In some instances, it has benefited our business when a customer brings a bike in for assembly because we can educate them on the value of buying locally, and we get an opportunity to sell add-on products, accessories, and potential future sales. The local bike shop must be the advocate for the concept of “Ride Local/Buy Local,” and we must demonstrate to our suppliers that we are critical to their success because we offer local stock and customer service.
How a supplier handles its DTC relationship determines whether or not we support its strategy. If its approach is to create a partnership that fosters a profitable local presence with the IBD, then it is a win-win. For example, Giant/Liv shines the best for us. With them, the margin we earn is the same whether the consumer purchases bikes and/or accessories online or in-store. Giant/Liv develops their processes with the IBD’s profitability and longevity in mind and the online store complements rather than competes with us.
I assemble and provide service for many online bicycle purchases, so I have a positive feeling about direct-to-consumer sales. Manufacturing companies need good mechanics to assemble their bikes to get them ready for customers. Since my shop is a used bikes shop that does a ton of service, direct-to-consumer sales help my shop by driving people to me for assembly and service. Direct-to-consumer will only continue to grow, and the bicycle and parts shortage will also continue. As always, I urge all bike shops to put a "Cash For Bikes" sign in their windows, be picky, but buy and sell quality refurbished used bikes and parts.
For us, direct-to-consumer sales is a big factor in selecting the brands that we partner with. We prefer to align ourselves with manufacturers and brands that support the foundational level of the bike industry: the brick-and-mortar bike shop. One example of how a brand's DTC sales have helped us is that we are seeing bicycles brought in for assembly and service that were purchased through the DTC programs. We also participate in broadcasting our inventory through our large suppliers. It has proven beneficial with more inventory exposure to the public.
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