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Trek to begin online bike sales — Dealers will assemble bikes and get a service commission
Published August 3, 2015
by Stephen Frothingham
MADISON, Wis. (BRAIN) — In a first for a major U.S. bike brand, Trek Bicycle will begin sales of complete bikes to consumers via its website in late September. Bikes will be shipped to the brand's retailers — not direct to consumers — for assembly, and retailers will receive a service commission on each sale.
Trek also will begin online sales of parts & accessories from its own brands, including Bontrager and Electra, as well as other bike brands including Park Tool, Garmin, Finish Line and Burley. Trek will deliver these products direct to consumers, but local retailers will also receive a service fee.
Trek president John Burke revealed the plan Monday evening to several thousand Trek retailers at the company’s annual Trek World dealer meeting here. He said the plan had been in development for about two years and called it the “largest investment Trek has ever made.”
“It’s been a massive investment,” Burke said, then referred to his father, Dick Burke, the co-founder of Trek. “One of my father’s business maxims was, ‘we play offense.’ So, we sat around and watched the online thing and that’s been OK — it’s been a great learning experience. Now it’s time for us to play.”
Burke cast the online sales program, called Trek Connect, as part of a larger investment in increasing the profitability of the brand's U.S. dealer base on several fronts. Trek will offer tools to help dealers increase sales to women, which Burke said will amount to half of all bike shop sales within five years. Trek is expanding its business management education programs, and will offer new marketing tools including comprehensive seasonal promotions with store displays tied to quarterly print catalog mailings.
And — in an announcement that drew applause from the dealers — Trek is launching a service department education and certification program. Burke said service currently accounts for only 7 percent of revenue for most shops, but produces nearly a quarter of gross profits for those shops. So increasing the volume of service business is a clear path to increased profitability — and survivability, Burke said.
"I've seen stores that sold a lot of products go out of business. I've never seen a store that did a lot of service go out of business," he said.
Trek is building a 5,000 square foot service education center at its Wisconsin factory and will begin classes in January. It expects to train about 1,000 service personnel next year.
In addition to mechanic and service manager training, Trek will offer dealers help with service department displays, fixtures, tools and systems that will lead to some stores being designated as Trek Certified Service locations.
’Not huge at first’
Burke and other Trek executives said they are not planning for a huge volume of online bike sales immediately. But they said it’s clear that consumers want to shop 24/7 for bicycles, just as they do for other products. Burke began his presentation by showing slides of e-commerce sites including Chain Reaction, Wiggle, Performance and Canyon Bicycle.
As part of the check-out process, consumers will be asked to choose the local Trek retailer who they want to service their order. Consumers will not be able to choose “none of the above.”
The chosen retailer will receive a service commission equal to their normal margin (which varies depending on the size of the store’s business with Trek) minus an estimation of the costs that Trek shoulders (and the retailer avoids) in making the online sale. That includes the cost of carrying the inventory, shipping, and sales. The bottom line? Retailers will receive roughly 80 percent of their normal margin on these new sales.
Burke said the bikes would all be shipped from Trek's warehouse to fulfill each order, and would not be taken from a dealer's existing inventory. Trek will ship them at the same level of assembly as other bikes shipped to dealers.
The redeveloped website will combine Trek’s and Bontrager’s sites, which are currently separate. It will offer live chat consultations on bike fit and selection. In addition to the online purchase program, the site will add a new feature that allows consumers to see if nearby shops have specific products available for in-store purchase.
All Trek dealers will participate in the online sales program, but they can opt out of the delivery service if they choose, or they can specify to what distance they are able to deliver.
David Sanborn of David's World Cycle in Orlando, Fla., said he loved the idea of delivering bikes that were bought online.
“Some people are just too busy to come pick up a bike. But we can go out there in our van and bring along some accessories … That’s where the relationship will begin," he said.
Sanborn, who operates 12 stores, was one of a handful of dealers that consulted with Trek starting last year on developing the program. He said if the program takes off, the look of his stores might change.
“In a few years they might be smaller stores (with fewer bikes on display),” he said. “It might be something to think about when it comes time to negotiate new leases. Maybe in five years I’ll have 12 people driving around delivering bikes,” he said.
Chris Kegel, CEO of Milwaukee’s Wheel & Sprocket retail chain, said Trek's service commission plan appeared “fair and realistic.”
“Customers want to be able to buy online so I think overall it’s a positive move,” Kegel said.
Kegel was more excited about Trek’s service certification plans, a concept he has worked on developing through CABDA and the NBDA. “It’s long overdue,” he said.
Doug Coulter, owner of Scott’s Bikes in Cleveland, Tenn., applauded Trek’s decision to take action in the face of a rapidly changing marketplace.
“I think our industry is changing and we need to take the bull by the horns,” said Coulter, whose father started the family business in 1964 in Connecticut. “If we are going to carry on, we have to look outside the box,” he said.
Trek is also launching a bookkeeping service, called Ascend Bookkeeping, which it has been test-marketing for about a year. Burke said the aim was to give retailers that same kind of book keeping services and analytics that Trek has, tailored specifically for bike retailing.
Burke also told retailers that selling e-bikes was a clear path to remaining viable and growing in the coming years. He said Trek is currently selling on 2 percent of the e-bikes in the U.S., while the company has a marketshare of over 30 percent in bicycle sales overall, and about 40 percent marketshare for pavement bikes. Trek is launching three new e-bikes at Trek World this week.
Why Are Bicycle Sales Declining (for the 14th year)?
by Walker Angell on July 29, 2015 in Bicycling, Economics
The Bicycle Shop business in the U.S. is tough. Margins are thin, future sales tough to predict, good employees hard to find, and manufacturers refuse to protect bricks & mortar dealers from lower price online competitors. To owners, shops often seem more a labor of love than a source of income.
The National Bicycle Dealers Association (NBDA) recently published a report that really brings this to light. It focused on the continuing decline of bicycling and bicycle sales in the U.S. for the past 12 to 14 years. In 2000, 43.1 million people rode bicycles six or more days which is 148 riders per thousand population; by 2014 this had declined to 35.6 million or 111 riders per thousand.
17605016006_4f3a5477c2_zIn 2005, 67 bicycles were sold per thousand people and in 2014 this had fallen to 57 per thousand. Perhaps worse, sales of bicycles with a 20” or larger wheel size have fallen from a high of 67 per thousand population around 1974 to just 39 per thousand in 2014. The number of bicycle shops has fallen by 18% over the past decade while combined sales floor square footage has remained stagnant.
None of this is new. It’s been the number one topic of conversation for over a decade among bicycle shop owners.
I often wonder if the major impediment to sales growth is that U.S. shops are largely and often exclusively focused on recreation rather than transportation. U.S. shops are selling something that isn’t very critical nor even very useful for many people, instead of selling a valuable necessity.
An average person will only do something recreational for a short bit before they move on to something else. Many are also hesitant to spend money on recreational pursuits. This does not a broad, diverse market make.
There are certainly people who are devoted cyclists who will ride frequently throughout their lives and buy a lot of cycling stuff. These are very few, though, and unfortunately for local bicycle shops are also more likely than the average consumer to purchase online, especially highly profitable accessories.
Photo: Henry Cutler, Workcycles (Amsterdam)
Even the majority of papers and articles about getting more women riding bicycles (and buying bicycles and accessories) focuses on fitness and recreation rather than daily transportation. One woman told me that she’s visited two woman-owned shops in other cities and both were great at telling her about women-specific bicycles and lycra and classes for adjusting a derailleur, but neither had a clue about her need to take her children to school, bring groceries home and not wanting to worry about anything mechanical beyond air in her tires. This, by the way, goes for most guys as well.
The Death Cycle
Our current recreational focus has resulted in people having a garage full of bikes that aren’t very durable, go out of adjustment quickly, are uncomfortable to ride, and can’t easily be ridden in ordinary clothes.
14120816937_e153bed0df_zSo, we have millions of bikes hanging in garages, collecting dust and rarely ridden. Who wants to change in to shorts, search for wherever they put their helmet last year and struggle to get their bicycle down from the ceiling before trying to find the pump for the now flat tires and all only to then ride a bicycle that’s uncomfortable and has out of adjustment clackity-clacking gears? And this is the simple process for those who don’t load them on their car to drive to some place that they feel is safe enough to ride (I’ve always found it fascinating how many more bikes on cars I see in the U.S. than The Netherlands).
Worse, because people don’t want to ride their uncomfortable pants-leg eating bicycles, they are missing out on what may be the best source of routine activity available and they become overweight or obese. If you’re overweight, you’re even less likely to want to ride your out-of-adjustment bicycle. BTW, I’m not blaming our poor health and obesity on the bicycle industry; Wendy’s Baconator, among many others, contributes it’s share.
Plus, we’re also ending up with bikes that either can’t carry anything or get squirrelly when more than a loaf of bread is squished on the rack. So much for useful transportation.
Time for a new bicycle? Hardly. If you already have a rarely-used bicycle collecting dust in the garage, you’re unlikely to want to spend more money on another for fear that it, too, will do nothing but hang in the garage, collect dust and it remind you of this every day it hangs there. That’s not good for sales.
Many people don’t want to be ‘cyclists’. They don’t want to wear lycra or clackety shoes. They don’t want to wear helmets or get helmet hair or drip sweat all over the floor in their favorite cafe. They don’t want to abide by The Rules or build a bicycle repair station in their garage.
16548516873_63839c99a2_zPerhaps most of all they don’t want to be associated with ‘those cyclists‘ — the ones who run red lights when others have right-of-way or block traffic because they-have-a-right-to-the-road (Note: they do have a right to the road, but that’s another topic). They don’t want to be associated with people who have irritatingly bright blinkie strobe lights that blind them when they’re driving. They don’t want to be confused with people whose common pose is an anti-social fist up in the air gesticulating to the car that just passed them too close.
They’ve heard enough anti-cyclist rhetoric on radio and at dinner parties to know that this is a group that perhaps they don’t want to be associated with.
This isn’t a criticism of people who wear lycra and helmets, I have a closetful myself, but simply a note that ‘cyclists’ are not always viewed very positively and this might not be the lifestyle to be selling.
What’s a bike shop to do?
Today we have the wrong bikes for the wrong reason and no place to ride. No wonder sales have been flat, and declining per capita, for 15 years.
18409221660_87bd521b00_zWhat if we turn this around? Give people a good reason and purpose to ride often — transportation. Build safe and comfortable places to ride — protected bikeways. Provide people with proper bicycles that are simple and durable.
1) Sell the idea of riding for transportation. Give people a reason and a purpose to ride every week or every day. Plant the seed that a bicycle is much more than a recreational toy. Someone who rides frequently, like to dinner once per week, is more likely to want to invest in an upgraded bicycle in a few years and more likely become interested in other bicycling, like racing or off-road.
2) Do everything you can to make bicycling in your neighborhood and sales area comfortable and safe for normal average people. There’s a reason that The Netherlands has a busy bicycle shop on just about every corner. Get copies of the CROW Design Manual For Bicycle Traffic, learn it, and promote it. Get involved with the NBDA’s Green Lane Project. Read A View From The Cycle Path and Bicycle Dutch.
18992701501_9b8946a993_z3) Sell bicycles that work for average people. KISS is important — don’t make bicycling complicated. Start each sale with a good city bike. Sell them something that will always be easy and ready to ride and they are more likely to ride often rather than just a couple of times per year. A bicycle that can be ridden in any clothes, that won’t eat their jeans, and that doesn’t require a lot of maintenance.
4A) Hide your inner cyclist (and the associated accessories). Don’t appear to be part of the fraternity. Don’t use buzz words. Don’t try to impress customers with how much they don’t know about The Fraternity.
Don’t tell them to HTFU and learn to drive their bike with 4000 lb weapons disguised as cars. Acknowledge that riding on most of our U.S. roads is dangerous, uncomfortable, and sometimes terrifying. Let them know what you are doing to change this (and maybe enlist their help).
Help average people feel comfortable when they walk in. Don’t make them feel like they’re out of their element and in a place they don’t belong. Rather than posters of racers and off-road folk, maybe have posters of average people riding a bicycle wearing nothing but the normal clothes they wear to work or dinner.
4B) Put bicycle fraternity accessories in a corner or separate room, if you carry them at all. This includes clothing, shoes, helmets, nutrition, and parts.
Imagine if car dealers only sold recreational cars. Cars for racing and off-roading. Cars not really suited to daily use. If part of every sale included a lecture on the need to buy and wear a helmet and safety vest and take a class on repair and maintenance? If your car came without lights or locks or fenders or anywhere to carry anything home from the store. And if it were suggested that you HTFU and learn to operate your car among 200 mph trains.
A bike that’s easy and comfortable to ride is more likely to be ridden, less likely to collect dust, more likely to result in a healthy fit customer, more likely to be replaced with an upgraded model, and more likely to result in people seeing others riding and want one themselves.