How to Retail in the modern age:
What most LBS still don't understand about online retail
The local bike shop, or LBS, has been a long standing staple of the cycling community ever since bicycles have been around. It can be argued that they were some of the first service centers of any kind, since the automobile came after the bicycle and it was probably sometime afterwards that the concept of a auto shop became established. Since it's inception, the modus operandi for shops has been the same. The focus has been on retail and service, with retail slowly becoming the emphasis of where a bike shop tries to profit. Service has been steadily ignored, even though most shops continue to operate almost solely on profit that is made from their service. Because shops are managed by passionate cyclists and not objective businessmen, many times a bike shop can become a showroom for bikes that may not actually sell to the public. Every time I walk into an LBS, the store layout is almost identical. Three quarters or more of the store space is dedicated to retail, with the most expensive bikes being showcased at the front while the more inexpensive or middle of the range bikes are towards the rear. There are unnecessary products on display that take much needed inventory space because they are aftermarket accessories that can easily be purchased through a store catalog if that arrangement were to exist. Shop employees are mostly a sales team looking to steer the customer away from fixing the bike they already own and selling them on the next year's model, all in an attempt to clear their inventory off of their shelves. The small service center in the back of the shop is usually run by a skeleton crew that becomes backed up on repairs during the peak summer months. Bike shops like these have a well known reputation of treating customers like they were shopping at a jewelry store or looking to buy a Mercedes. Aloofness and lack of basic customer service skills are a common experience, unless someone is looking to buy and has the means of obtaining that 15,000 dollar Colnago that is sitting on their shelf.
The average lifespan of a bike shop like this in a given area is about 5 years. While there are some cases of shops thriving on this business model, those cases are far in between and those shops have been around for many decades. Even in this case these shops may only appear to be thriving and expanding to cover their profit losses. Some shops deliberately locate themselves in well heeled areas, because they know that their customer base will cater to them instead of adapting to their customer base. For those shops that continue to operate on the same old, tired out business model; I have news for you. There's a tidal wave that has been building at sea for some time now, some would say it's a tsunami, and it's going to wipe you guys off of the map if you don't change. "What is it?" You may ask. It's called online retail. With a discreet click of a button, customers can get exactly what they want, without being judged, pre-qualified or coerced into buying a product that is more expensive and that may not suit their needs. "But what about service?" There are mobile bicycle repair guys for that now. Bike shops everywhere have been put on notice. Some are adapting, some are resisting change, some are badmouthing the new competitors and some are running scared. Those who adapt from the same old business model will live on to introduce cycling to a new generation of cyclists and consumers. Those who are set in their ways are doomed to failure. So the question remains, how does a bike shop survive in this digital age?
Service!
Service. That's right, rolling up the sleeves and getting dirty. Being a shop mechanic, not a salesman. Having a service focused and dedicated shop is the key to long term survival in the new digital age. The current service model has to change. The repair shop cannot be understaffed, underpaid or under talented anymore. Mechanics have to be trained and certified, especially in lieu of all of the new technologies that have come out in recent years. A capable mechanic needs to now know to to bleed hydraulic disc brakes, convert and service di2 technology, update hardware and software on a Bosch electric motor and so on. These are skills that need to be taught by the industry across the table and made available to anyone who wishes to learn them.
Some more established shops may want to consider running pick up and repair shuttle services for their customers. This will provide the same convenience of mobile bicycle repair even though it may not provide same day service. Some shops in my area already have a mobile service shuttle as part of their overall outfit. While still more expensive than an individual mobile bicycle mechanic, they are at least on the right track to meeting the demand in their area.
Eliminating Inventory
When a new customer walks into a bike shop, there is more than a good chance that the customer has already done some online perusing and has a basic idea of what he or she is looking for. Therefore, it isn't necessary or cost effective to have a bike of every kind and every size on the shelves. Why not display one bike model in one size, fit the customer on a jig and order the model that they are looking for? Maybe to make it more enticing include home delivery if they spend over a certain price? Mattress shops and furniture stores do it, why not bike shops? That would cut the inventory room needed by over 60%. A bike shop could therefore require less square footage and could be located in a variety of places. That would also reduce the amount of sales people needed on the showroom floor. That payroll savings could go into hiring qualified bike mechanics. If I leased overhead I would carry no more than ten types of bikes and have each model on display in a neutral size, like a medium. The rest of my shop would be focused on service.
Bike shops need to eliminate the practice of buying large purchase orders from suppliers with a conditional manufacturer discount. Most of these suppliers require a six month repayment on their purchase orders, meaning that the store needs to sell through their supply in six months or less, otherwise pay a full MSRP price back to the supplier. What this has done is led many local bike shops into a perpetual cycle of debt. According to the book Leading out Retail, after all store operating expenses are covered a there is only a 10% profit margin to be made on a single bike purchase. If that same bike goes on sale for under MSRP price, then the store will sell that bike at a loss. If a store stocks items that do not sell or always sell at a discounted price, that store is taking on massive amounts of debt. In time that store will no longer be able to operate if all it's customers just window shop and do not buy anything. Let that sink in for a moment. Most bike shops, especially the ones with the 15,000 dollar shiny Colnagos, are hemorrhaging in debt.
Change that Attitude
99% of the things that happen to us are a result of our attitude. Successful people are responsive to suggestions and willing to learn. A successful business will put their customers first. They will listen to their customers and make changes according to what the needs and demands of their customers are. It is not the customers' responsibility to keep bike shops in business. It is the bike shops responsibility to gain the loyalty and trust of their customers. The success or failure of a local bike shop falls solely on their shoulders. While online retailers may eventually takeover the retail market, bike shops can still excel in services. That is one thing that the online world will never be able to do. Becoming service providers for online bike manufacturers is also key. Knowing how to repair a Canyon or a Haibike E-bike is going to be paramount in the near future, and is something that I have personally discussed with shop owners. They need to be open to the new arrivals. The world wide web, the free market and the global economy are actually a good thing for the bike industry. It takes a half-glass full and innovative approach to see things that way.
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