CyclingTips - Latest Comments in Support Your LBS?

Re: Support Your LBS?

Lance — Fri, 28 Aug 2009 09:37:05 -0000

SuperCheap Auto tried the LBS game with Goldcross Cycles (11 stores in Melbourne and a couple in S.E. QLD). Their annual report details how dismally distributors treated them and how they lost millions. $19.1 million in sales and $4.0 million in losses after store development costs.

Ouch. No doubt this has effected the groups share price. (just published today by Sydney Morning Herald)

http://newsstore.smh.com.au...

Re: Support Your LBS?

Lance — Fri, 28 Aug 2009 05:35:05 -0000

Oops, the bike on the wall at Cafe Racer is in fact a Ridley. But it was a Malvern Star 'cause I asked!

I saw Kevin (rep. of Mr. Ridley in Oz if I'm not mistaken) at Racer this morning. Armed with this info you've just pointed out, I'll pose the question next time I see him and see what he says (then he'll figure out I am - doh! there goes my credibility again).

Do the manufacturers push the product and not the distributors? Well that depends on who is more powerful. If you sell milk, then you probably have a weaker position with Woolworths than if you're Apple selling iPhones to Optus (Apple condition: no competing product within 2 meters of an iPhone display. Actually the Optus network begs Apple to let them have some but technically it's called a sale).

So I imagine the Pacific Brands, Ridley, Oppy example falls somewhere in between. So the manufacturer may be expected to contribute to the cost of TV ads to suck the product through the channel. However, an exclusive changes that a bit because there is only a single route to the market.

And so maybe the complaints listed in this thread just gained a bit more weight. Distribution is even more concentrated than I thought.

I've also read the cyclebits post a bit further down. I reckon it may be time for someone to lodge a complaint with the ACCC (http://www.accc.gov.au/cont....

Perhaps the management at Cyclebits.

Then we could have a test case around the internet breaking this perceived market abuse. I have no doubt there are many cycle-lawyers reading this right now. All they'd need is some funding mechanism to start the legal feeding frenzy (errr... process) in motion.

Business case for lawyers: Just imagine the cost of discovery on any/all of the parties! Many sizeable distribution operations could be joined. The distributors may need an assessment of how much trouble they could be in. You'd better show them those judgements pointed out earlier.

Oh gee, that all sounds very expensive to me.

"Friends of Cyclebits"

Re: Support Your LBS?

Michael — Thu, 27 Aug 2009 02:26:35 -0000

Pacific Brands also have the Ridley distribution agreement. I found that out through having a warranty issue with my Ridley Noah Frame recently...luckily i bought through the LBS and they took care of everything (I spent less than a day without a bike - thanks to TFM and got a new frame in the process!). If Pacific Brands is pushing the Oppy you would have the question their logic - are you sure it isn't the manufactures that push the products not the wholesalers and distributors??

Re: Support Your LBS?

Michael — Thu, 27 Aug 2009 02:16:14 -0000

Saw this on an Australian website - http://www.cyclebits.com/

Interesting to hear what they think about the wholesalers here.

IMPORTANT ANNOUNCEMENT: cyclebits.com will cease trading as of 30 June 2009.
cyclebits.com has ceased trading as of 30 June 2009. We appreciate the loyal clientele who supported us. Our goal from the outset was to bring competitive prices on cycling consumables to training cyclists and triathletes. Had we gained the support of Australian distributors we feel certain that we would have been able to be competitive, however it would appear that the vast majority of Australian wholesalers are happy to lose millions of dollars to the huge overseas online stores in England, Ireland and the US and refuse to supply Australian online stores.

It is with regret that we have elected to cease trading.

- Management

cyclebits.com

Re: Support Your LBS?

Lance — Tue, 25 Aug 2009 20:22:44 -0000

Hi Tim,

This point of view more or less discounts the investment made by the sales channel.

Let me explain. Essentially, the first and most direct point is, the manufacturer has carved off a piece of territory and handed it exclusively to a distributor in return for some "things" like advertising and promotion.

Take the (over used) example of Specialized. In Australia, the distributor ploughed in some hard earned cash to throw TV advertising aimed at us all during the TdF. Mike Tomalaris won't be drawn on how much he coughed up for the TdF TV rights to Aumery Publications in France. Nevertheless, I reckon it was a lot for poor old SBS. Specialized/Avanti spent good money on placing their dealers and products in front of the SBS TV audience.

They (Specialized/Avanti) want their money back (and then some). The distribution agreements reflect this. Your proposition is that anyone should be allowed to compete and bypass the channel and deprive Specialized/Avanti of their return on advertising. So a competitor could benefit from Specialized/Avanti's advertising and brand building.

They will fight you.

That brand is powerful (Specialized). People buy it because Cancellara rides that brand in the TdF on TV. That sort of promotion costs *BIG* bucks. Crikey Cancellara's annual salary alone probably puts him in the top 100 salary earners in Australia. Every Specialized owner has paid for that. And willingly too I'll bet.

That's marketing.

Compare that to the Ridley brand (McEwan used to ride these - don't know what Katousha rides). They're probably more expensive, comparable quality maybe even better. But no distribution (sorry distributor - but that's my perception). No TV ads, hardly anyone knows Robbie used to ride one, and Cadel. All this equals low sales volumes. Now if you had a lazy couple of mil. you could get that distribution agreement and go for it. That would inject some competition into Australia.

Pacific Brands is having a crack at it with the Malvern Star Oppy. Haven't seen many yet. They have one stuck up on the wall at Cafe Racer. Maybe they can do it. It pretty much comes out of the same factory in Taiwan if you believe the talk around the place. But Cancellara doesn't ride one (and you can bet this single fact eats them right up too).

Oops I'm raving on again... sorry.

Anyway this is the "value" distributors bring to the table. And it is proven to work. No channel equals no sales.

Can the Internet break this old addage? It is working for some there can be no doubt about that. Can it scale up to kill off the distributors, that's another question. Maybe. Are the distributors moving to the Internet and competing with themselves (and their own LBS resellers)?

Re: Support Your LBS?

Danny — Tue, 25 Aug 2009 10:12:01 -0000

I agree with most of the posts here about the overpriced LBS'. I am building a high end bike from ebay and internet shops. I could never afford the same bike if I bought it from a shop. Yet despite all of these protests the shops dont seem to be closing down. I can only guess that the bloggers here are a minority and eithr the majority has not yet discovered PBK or Wiggle etc. or they have buckets of money and prefer to spend it locally.

Re: Support Your LBS?

Timbo — Mon, 24 Aug 2009 22:26:26 -0000

Great topic.

This reminds me of the snowboard/ski industry to be honest.

My thoughts are:
- if a shop is not adding value, they shouldn't be selling that item (think, tubes, nutrition etc)
- if they can add value (think, a ski boot fitter), then you show them loyalty

Shops are businesses. There is no, and can not ever be an, excuse for allowing exclusive contracts etc (which if you think about it might even breach TPA) that allow for the construction of pricing in a manner that reduces competition. If you are losing money on a line, don't stock it. Whingeing and protecting sales and having this whole emotional byline about jobs etc is ridiculous. This is how countries allow immoral farm subsidies to inefficient and poorly managed farms.

Either get can-do about your business and manage it properly and add value and be competitive, or don't be in the business.

Simple.

I support a Mel bike shop - highly visible - because
- they treat me as a person, not a piggy bank
- I give them free advertising and send them sales, so I get a discount

So, it cuts both ways. I'll quite honestly say I buy commodity items online and put them on myself. And they will just have to live with it. It's not their fault, I think the distros have a bit to answer for here to be honest.

This goes to what was said above about:
- making people feel like a part of the clique or a real person, and
- being more than just a bike shop

It all goes to being a smart business manager, and if you have read Godin, Lindstrom, et all, you'll know what I mean.

Sweet as

Tim

Re: Support Your LBS?

Drew Johnston — Sun, 23 Aug 2009 20:07:52 -0000

Lance,
Unlike the mobile phone sector there seems to be very little real competition in the local cycling industry.

Perhaps the ACCC should investigate the way that cycling gear is priced, and the exclusive distribution deals. But at the end of the day, one thing we can do is vote with our feet - which many of us our now doing.

The other industry that is simliar in my mind is Winter Ski Gear (my other passsion): where you can usually save 60-70% off the prices in Aussie retailers if you buy online, or even more if you buy at a store in Canada or the States.

Re: Support Your LBS?

cyclingtips — Sun, 23 Aug 2009 03:57:20 -0000

local racing

Re: Support Your LBS?

Steffo — Sun, 23 Aug 2009 03:55:55 -0000

Sun Tour or TDU?

Re: Support Your LBS?

cyclingtips — Sun, 23 Aug 2009 02:52:00 -0000

Steffo, don't be too surprised to see PBK sponsoring a team here in Melbourne this summer.

http://www.pbkblog.com/?pag...

Re: Support Your LBS?

Steffo — Sat, 22 Aug 2009 23:04:22 -0000

Wade Kudos for ditching the net ads and choosing to support the local shops who are the guys who support the local racing scene. When I see wiggle pump in some cash to sponsor the sun tour or a Melbourne club team, then maybe i will buy online. But for now it is the local industry that supports the sport so I will choose to support them.

Oh and on that note everyone should go buy a Jayco. They just put an extra $3,000,000 sponsorship into the AIS for next year.

Re: Support Your LBS?

Aimz — Thu, 20 Aug 2009 23:00:48 -0000

Hi J,

My LBS (Cyclespeed in Gardenvale) do actually run a saddle testing program. Same deal, you pay a deposit, and can then try as many of the saddles in the shop as you need to until you find the right one. Once you find the right one, you pay the difference.
Took me about 4 to get the right one! I think the record is over 10 though.....

Re: Support Your LBS?

Anonymous — Thu, 20 Aug 2009 18:45:25 -0000

Until the local bike industry embraces online sales and removes a so called genltemans agreement to sell products online, consumers will be paying for the over inflated costs. How many times have you seen with reputable bike stores where the bike is only avialble for sale in store.

For example, a high end aluminium frame can be purchased in the US for AUD$1200, in Australia the same frame costs AUD$3000+.

Re: Support Your LBS?

smoke dog — Thu, 20 Aug 2009 02:59:46 -0000

i dont have clients coming into my office with 6 packs of beer/pizza/blank cheques for my service so why should i treat a bike shop like this?

Re: Support Your LBS?

Jon — Wed, 19 Aug 2009 00:12:03 -0000

agreed, it kind of reminds me of the large record companies attempts to deal with online music distribution.

Re: Support Your LBS?

Lance — Tue, 18 Aug 2009 22:24:44 -0000

I think "only" is a bit strong. The distribution channel does a bit more than that (I hope). I'm sure they add value somewhere (don't they?).

Here's a pic of one distributor's warehouse demonstrating the scale we're talking about. Distribution is a *big* job not to be taken lightly.

http://twitpic.com/ebpno

They actually help bring cycling to the masses on an industrial scale (which we all want - and there's no point showing a factory photo in Australia/NZ because pretty much nobody here makes bikes on that scale).

Distributors please say something.

Re: Support Your LBS?

Justin — Tue, 18 Aug 2009 20:35:03 -0000

Hmmm thanks for the clarification Will - I must admit I kinda left after I found out and didn't ask alot of questions...

I guess in that case it's a bit more understandable, although I still think the only person it ends up punishing is the customer who was actually going to spend their $$$ in the shop... I mean the douchebags who would just come in to try stuff on won't be phased - they'll still just order online...

Re: Support Your LBS?

Anonymous — Tue, 18 Aug 2009 19:50:00 -0000

The distribution agreements suck and only keep prices high. I play a different sport with expensive equipment and found Easton have their licences set up so that noone overseas can ship their product to Australia. So instead of paying $500 for it in a store here, I buy a competitors, similar, item online and pay $150-200. (In cycling terms, think buying SRAM instead of SHIMANO and you'll get the idea.)

Re: Support Your LBS?

Lance — Tue, 18 Aug 2009 19:07:45 -0000

BryceRider is right on the money here.

The ACCC proceedings and their success in the courts clear evidence that bicycle sector has no issues with engaging in illegal retail price maintenance type activities.

Outstanding research there BryceRider (obviously a lawyer).

On the other hand how does a manufacturer get distribution within Australia? Distributors obviously invest in the manufacturers product line and stock warehouses with materiel. Distributors then become something of a monopoly by virtue of an exclusive distribution agreement enforced under external foreign law.

Perhaps this monopoly aspect is what gets up peoples noses here in the Australian context.

And that is where the Internet helps. It breaks monopolistic distribution agreements to an extent.

However, those manufacturers will naturally try to kill any bike shop that attempts to grey import products to sell against their channel (which cost them a lot to setup). Imagine grey Specialized bikes for example (please don't sue me, it's just a hypothetical. To my knowledge Avanti and Specialized do not engage in activities noted in those court judgements).

So the internet may not help the LBS to scale up what many individuals do via ProBikeKit, eBay etc.. etc. I see lots of people get a small club together and buy 50 tyres and 10 chains. But that's a long way from 5,000 tyres and 300 bikes in direct competition to the distributors.

Why doesn't it happen if there's such a big difference in price as noted by almost every post so far.

Why doesn't PBK just set up an office right here in Melbourne and sell Shimano at ridiculously low prices?

Re: Support Your LBS?

Will T — Tue, 18 Aug 2009 16:34:28 -0000

I think maybe they need to spell out a little bit clearer how this "fitting fee/deposit" works.

As I understand it, it is a deposit that can be used against any purchase instore, assuming you don't want to use it against the shoes because the don't fit etc. (i.e. don't like the Sidis but the Shimano shoes fit then can use it against that).

I have no problem with the idea, it is fair enough, especially considering the price of the shoes, and as as far as I know, it is the sidi distributor who is super expensive not the dealer applying ridiculous markup.

Re: Support Your LBS?

Tue, 18 Aug 2009 10:44:30 -0000

Wow, heated thread...

I race and I know quite a bit about bikes. I don't need a shop when I source parts. I can buy them online cheaper and support the online retailer who also pays taxes, employs workers and drives our economy. I have no guilt whatsoever.

There's an online retailer who, for a small fee (that can be applied toward the later purchase) will send you a case of saddles to try... or a bike to demo... this is a brilliant idea yet I've never been to a shop that will let me demo anything... Before I drop $200 on a new saddle (that can be bought online for $110) I'd like to know if it fits me well... When the LBS gets this then I'll start frequenting them more...

Re: Support Your LBS?

awakebikeshopguys — Tue, 18 Aug 2009 08:19:28 -0000

Hi Wade, I've been following this string, holding back, but I gotta say it - you're just doing yourself out of royalties, put the links back up.

The enthusiasts reading this blog and using the links are still going to buy online and/or use the LBS as they were, they'll just go direct and you miss out. If you've got riding colleagues/mates/acquintances that are putting pressure on you tell them as nicely as possible to pull their heads out of the sand, I'm sure the love of this great thing called cycling only takes you so far.

I worked in bike shop here in Canberra until recently (not the owner, but for a few years) and we know fully well what is happening. We service customers bikes all the time with consumables they have brought with them; bar tape, chains, cassettes etc etc etc. After much discussion the alternative was pretty grim. We 'service' the customer or we LOSE the customer.

As a result turnover has actually picked up, as has our customer base and the service book is full, even through winter.

Racers for the most part are savvy and as they go through so much gear are always looking to save money where they can, it's a given. Add to that that most shops will give you 10% discount on parts just for being a member of a club so you margin on those items are cut anyway.

It's the ma and pa riders, the commuters, the weekend wanderers and also hugely the referalls (ie the friends etc of the racers) that pay the bills.

Here is my point - the LBS needs to look after the enthusiast racer (or as we sometimes called the 'alpha racer') as much as financially possible because they are the guys and girls that are often the one that says EITHER - "go and see so and so at xxxx bike shop, they'll sort you out" OR "just go to xxxxx.com and get em cheap".

Sadly, there are plenty of bitter and frustrated people at the retail end of this industry that probably shouldn't be the front guy/girl at the counter, BUT there are also some absolute gems, you just gotta find them, and when you do, look after them and they'll look after you.

I wouldn't advise a punter to rock up with a box load of parts and ask them to perform miracles for $20 per hour, I'd say establish a bit of a rapport, ask them 'what if' and go from there.

Re: Support Your LBS?

brycerider — Tue, 18 Aug 2009 07:18:02 -0000

A topic that is well worn on cycling fora around the world.

I think the distributors here have a lot to answer for.

A recent example - the aussie peso appreciated against the USD to $US0.80 in 06/07 - it was only SRAM that brought down component pricing to any extent. However when the peso tanked again in 08 prices on everything were marched up and bikes specced down ASAP. Now we are back up to over US$0.80 and yet again distributors are quietly pocketing to FX gains. Yes there is stock holding cost and so forth but it just defies logic.

I also point out:
http://www.accc.gov.au/cont...
and this one:
http://www.accc.gov.au/cont...

Anyone else playing the same game?

Do you notice how most shops just pull out the catalogue and quote you RRP? Nothing illegal in that but I dont think they get all that much pricing discretion.

Why can I buy a wheelset worth of DT Competition spokes including postage from Germany for half the price I get quoted locally?

I've tried the support the LBS concept but between the pricing and struggling to find a decent mechanic its tough - so I will stay with the internet for purchases and a copy of Zinn for maintenance......and spend the not inconsiderable savings

Re: Support Your LBS?

Anonymous — Tue, 18 Aug 2009 02:41:12 -0000

I guess thats just the internet in action. You can always walk into your LBS and complain directly, but chances are they wont listen. The LBS's named here aren't the victims, just seeing the comments should give them food for thought, no matter whether they have the persons name or not. They hang a sign over the door and call themselves a bike shop.