Chain Reaction Bike Shop

Chain Reaction Cycles – again the world’s biggest bike shop?

This is confusing – a new report by the European bicycling trade publication Bike Europe talks about the ‘low’ growth of Chain Reaction Cycles (CRC), calling them the world’s LARGEST bike store. In this blog we recently looked at stats from previous years showing that Wiggle had taken over from CRC based on total sales volume: Has Wiggle beaten Chain Reaction Cycles to the Top Spot?

While it may just be simple rivalry, being the biggest, or the largest or the best is still a selling point. And perhaps it is just in the detail, with LARGEST being about range, they have just over 66,000 products for sale. This may… or may not include product variations (eg, black, white, silver or S, M, L, XL).

In comparison, Wiggle list just over 12,000 products, a mere 18% of the range from CRC. But considering Wiggle have recently been top-dog in sales turn-over, it certainly suggest that a broad product range alone is not the sole indicator of success. Until the reports for Wiggle are out, CRC probably are the Largest while Wiggle may remain the Biggest.

Make no mistake, these are both massive stores with a large customer base. The Bike Europe article talks about Small Growth of only 6% for CRC. They compare this growth to smaller (undisclosed) online bike shops which is where some criticism of this comparison is warranted.

At the top-end in a saturated market with fierce competition from direct competitors and new and niche players, growth is tough. Cycling is growing but the new bike stores, particularly outside of the UK with retailers who serve local markets and are an alternative for new buyers (to the big overseas retailers). Younger online bike stores can also afford to be more dynamic and cater to niche markets.

But critically, is exponential growth always the perfect measure of success – what about stability and sustainable turnover with stable or efficient profit margins?

A few interesting statistics, from the 2014 financial year reporting, the CRC turnover was £153 million with pre-tax profits of £4.8 million. The margins are low in the high turn-over world of online sales and it seems that Chain Reaction Cycles have been concentrating on streamlining – with much less overseas publicity and advertising as in previous years.

Bike Europe also reports that staff numbers have been reduced from 612 to 540.

 

Trek Online Shop

Trek create their own Internet (shop)

The market size of the big brands allows them the opportunity to do business on their own terms, for example many of the big brands such as Specialized and Trek no longer exhibit at bike shows such as Eurobike and instead run their own dealer events and customer demo days. And they have also controlled online sales, the popular online retailers Wiggle, CRC, PBK and Ribble don’t sell Trek online. 

Trek and Specialized belong to the few brands that have prevented sales through the big online retailers and a quick search confirms. Wiggle provide a “not found” for the search term Specialized and Merida while for the search term Trek the big bike brand has some competition from a nutrition brand.

Screenshot from Wiggle:

Wiggle Trek Bicycles

Chain Reaction Cycles however take a different approach, while they don’t have Specialized or Trek in stock, they have plenty of positive results in searching for Trek, Specialized and Merida, however all promote their own inhouse brand called Vitus. They are ‘managing’ the search results to push their own gear.

chainreactioncycles trek bicycles

 

Runout Stock

It is common practice for brands to offload their old season products at good prices and the online retailers are good outlets as they have massive amounts of traffic and also operate on lower margins. This can be a Win – Win situation for the brand and retailer (and customer) as dealers are not able to offload the stock. It does however mean that the retailers may not stock new equipment. And some brands resist the online retailers regardless, and any stock that comes through are from rouge distributers.

 

Trek Connect Retail Marketing

This is the name of the new service going on trial for two years and open to 30 Trek dealers in the United States. The brand is supporting these dealers with an online sales platform which includes the dealer in the loop.

The big problem which dealers have with the internet is that they are cut out, the brands on the other hand don’t immediately lose-out with internet sales because they are still making sales. However in the long term it upsets the bike shops and the brand can lose retail support which is still crucial, particularly for higher priced items such as complete bikes which a majority of customers still prefer to buy instore.

With the new Trek online shop at trekbikes.com, the dealers will receive a ‘service commission’ and customers encouraged to pick up the bike instore. Any bike ordered goes to the dealer anyway who will assemble the bike and can delivery or hold it for the customer to pickup.

Trek Bicycles Website

 

Measuring Success

There are a number of angles to approach the move by Trek and predict the success. From a dealer perspective, the Trek brand is trying to support them and generate sales. And very importantly, providing a commission for sales.

From a brand perspective, they have to support their dealers and see the popularity of the internet and don’t want to miss the train.

From a customer perspective it can be viewed more critically, what is the actual benefit for the customer? Often customers are looking for the lowest price when buying online and have a number of ‘brand independent’ retailers who are competing for their dollar. A dedicated Trek Online store won’t compete with other online retailers or bike stores, the prices need to be regulated so that it isn’t creating a disadvantage.

For a customer, the online access however may provide some advantages such as:
• Faster and quicker overview and selection of the preferred bike and parts
• A larger range and more options than available instore (though Trek have the instore Project One concept)
• Convenience when a store visit is not possible

Buying online does assume that the customer can chose the right bike and right size so this may be an area for confusion, if a customer purchases online to discover instore that the bike is the wrong size. It is the fault of the customer, though the dealer will probably have to help resolve.

The biggest volumes of internet sales in the bike world is in parts and accessories, for customers there can be some convenience in saving a trip to the bike shop… but this is about bikes so the online purchase option for Trek bikes may be more ideologically important than for actually generating sales. The online shopping isn’t competing, rather is another doorway to Trek.

The new retail concept launches in September 2015 for the US and Bike-EU reports that this is a pilot program which will trial for two years.

Geo restriction Country Blocking

Geo Blocking Sales for bikes and parts

Traditional geographical boundaries meant that was always a regional focus to the sale of bikes and gear. Of course the key brands were available, though always through local agents such as the distributer / wholesaler / importer or a national branch of the bike brand. 

Mail order made it possible for enthusiasts in remote continents (i.e. Africa, Asia and Australia) to have some access to speciality gear, there was usually a long wait and premiums for currency exchange.

With the ride of online shopping, sales initially were regional and for successful shops who adapted, they become international. But there were two effects:

Firstly, the products were no longer just ‘niche’ and hard-to-get products, rather they were everyday parts and accessories which were already available ‘locally’.  Customers were buying because it was cheaper… not because they couldn’t get it from their local bike shop.

Secondly, brands were now selling to the same buyer, but not via their local importer and bike shop and for many brands it raised questions of warranty and supporting the traditional retail channels.

 

However, the customer was usually a winner.
The customer has the same item for a lower price and are comfortable buying online so it is also convenient. Of course there are risks such as warranty issues and customer service challenges when dealing with the overseas shop. The end effect is that the bike rider has the same item… and the brand still sold their product.

 

Geo-Restriction and GeoBlocking for bikes and gear

Mavic was a very early adopter and for years they have been blocking Wiggle and Chain Reaction Cycles from selling their wheelsets to selected countries overseas. Other brands such as Continental have remained readily available.

Of course for customer who really wanted the Mavic wheels there were a few ways around restrictions such as using a 3rd party service to mask the country of origin and in cases it allowed delivery to an overseas address. Sometimes a bit of juggling the cart (selecting £ and UK delivery, adding the item and then changing currency and location) or simply ignoring on-site notes of restricted delivery… and letting the wheels simply turn up a few weeks later.

For ‘direct to customer’ brands such as the German brand of Canyon bikes and brands which are simply unavailable and unsupported in some countries, mail-forwarding can be used and is a service which is becoming increasing popular in the U.S. for example. A last resort is an international flight to Europe when the cost of flight and expenses is lower than the cost of purchasing locally.

 

How do retailers GeoBlock?

Wiggle detect a visitors location and when the product isn’t available they suggest that the product is no longer available, rather than not available. A challenge being that the products can be easily found on the wiggle site and only when selecting an unsupported delivery destination are the products suddenly out of stock.

Product No Longer Available

Search Engine Optimisation dictates this approach, it is better to include a product in the inventory and then try and guide a customer to alternative products, rather than to lose them completely. Of course customers who also notice this and over time simply may not visit.

Error 404 Page Not Found

Chain Reaction Cycles likewise have the product available in their directories for SEO purposes, however appear to favour an approach of sending visitors with an incompatible destination to the homepage. This can usually lead to the customer wonder ‘what just happened’ and trying a few times. Within their search database the term “Mavic Ksyrium” with a UK destination and GBP selected shows 25 results while with Australia as a destination and AUD there are only 8 results.

Among the Australia results are a few Mavic wheelsets which are apparently not blocked. Perhaps clearance or hard to sell wheelsets.

Mavic Ksyrium UK

Mavic Ksyrium Australia

 

Evans Cycles takes a different approach. In the past they haven’t appeared to block brands for sale, though more recently have changed tact. During testing there was also blocking on some Shimano parts which is unusual as Shimano and SRAM virtually never have geo-restrictions, sometimes the big online retailers sell before local bike shops overseas can even get stock.

Customers from ‘incompatible’ delivery destinations will see the complete range and receive no information or notice of restricted availability (with their overseas location and currency selected). First when the customer tries to check-out and pay are they informed that they can’t purchase. How annoying!

Evans Cycles Unavailable

 

While Evans do allows their own system to be circumvented, this process will not be documented. And there are also many other retailer to chose from. From the big ones, with our example of Mavic, Ribble have a single wheelset in their database, without any restrictions for people outside of the UK. Likewise ProBikeKit have no apparent restrictions however are focussed on UK customers and seem to neglect customers outside of the UK when it comes to customer satisfaction.

Hargroves Cycles is also in our database however doesn’t sell outside of the UK….

Actually they do, but unlike their competitors Hargroves don’t allow the destination to be selected by (potential) customers while browsing. Country selection is hidden inside the checkout process and their overseas delivery charges are hefty in comparison. In favour of Hargroves is their extensive range of our example brand ‘Mavic’.

 

Where does this leave the customer?

Some brands block some online shops from selling to customers in some countries. It depends how determined the customer is, where there is a will, there is a way. The inconsistency by many brands who try to block will leave loopholes. When online retailers in England wont sell, what about Northern Ireland… or a German retailer?

For brands there are also consequences. Some customers who experience these road blocks may return to local bike shops or local online bike store. Some brands require their products to be sold in-store, even if you are in South Africa for example, South African online retailers are not allowed to sell.

But some customers will simply walk away and turn to other brands, brands which are comparable but which they can purchase through a channel which they prefer, and for price they feel competitive.

 

Brains Travel on Bike

Do you lose your warranty when you buy online?

I was reading a 2012 article on Grey Market imports – which was defined in the article as anything purchased overseas and not through the ‘proper’ local channels. The grey market is actually more than this, but that is a conversation for another time. 

The author of the article quotes a US bike shop owner (with names and details removed) and the following caught my eye.

When one buys from these companies they are: a) putting money in the pockets of somebody unknown, b) hurting the local economy, c) getting products with no warranty whatsoever, d) dealing with poor customer service after the sale – try to return something to them e) Could be in violation of U.S. Custom’s import tariffs

Briefly addressing a) and b), if a customer buys a Shimano or SRAM item locally, it shouldn’t be forgotten that in most cases the item has been manufactured overseas and the chances are that  the brand is overseas (i.e. the Headquarters are not in the same country unless you are from Japan or America). Point taking, adding in the local importers and retailers gets more money moving in the local economy when buying locally. But the fact is that if you really wanted help the local economy you would only buy locally produced and manufactured items. With food and some consumables this is possible but the reality is that bike and cycling gear manufacture is usually cheaper in Asia, all of the big brands manufacture there and it means that ultimately there is a flow of money out of the country.

In perspective, the comments are dramatic and about creating guilt among customers who wonder why some items cost a fraction of the price overseas and their local bike shop isn’t doing anything to provide enough advantages to purchase from them.

 

No warranty online… really?

Sometimes warranty replacements are easier online – from the comfort of home you send in a photo and provide details. A few days later a courier comes and picks up the item and a new item is delivered. It can be that simple, but of course it can be a real pain.

The pain can involve packing and taking time to post, having to cover postage costs yourself and then waiting. Sometimes the customer service is poor. But generally as a customer you have rights and the retailer (from whom you purchased) should resolve any issues. And generally they do, sometimes better than bike shops.

Have you have made too many trips to the bike shop? “Come back on Tuesday”, so you make the trip to the shop and return on Tuesday to discover that they have forgotten you, and forgotten to call. Your chances of having a warranty replacement are that same as online. With online orders you have to wait, but instore you may have to wait, sometimes the shop sends it to the distributer who then needs to send it to the brand and that can take months. With an online purchase it is common for online shops to ‘cut their losses’ and make it easy for a customer by quickly replacing (and resolving the warranty replacement with the brand later) or in some cases to suggest the customer keep the part and a new one will be sent.

Customer service can be poor online, but the big online shops such as Wiggle and Chain Reaction Cycles are out their to win and retain customers. Their customer service has been boosted dramatically in recent years and all of the serious online bike shops know how important this is to their business.

There are rogue online bike shops out there, probably plenty so there is safety in sticking with the big stores (which in turn makes it tough for new and honest business). Comparing to local bike shops, are they all honest? Do they all look after you after the sale? Some bike shops don’t even look after you the moment you walk in the door.

I can tally some great experiences in local bike shops, but also some shocking experiences and in the face of growing online competition its a wonder that some bike shops believe that they can survive with their poor customer service and shonky service.

 

There are good and bad retailers online and offline. As a customer you shouldn’t feel pressured to buy from a local bike shop who isn’t looking after you, guilt-tripped because you are killing the economy. But the local bike shops can lift their game and become a better option for you… because their service is better and they look after you. As a customer take time to know the risks of buying online, such as not being able to try before you buy, but if you are buying from a reputable online retailer, the chances are that warranty and customer service is just as good as in store.

 

photo © Vanessa Gutierrez

 

IBD Annoyed bike shops importers

How to annoy bike shops and importers

Some bike shops get annoyed the minute a customer walks through the door, but that’s a different story. Good bike shops welcome customers with open arms and but there is a sure-fire way to get the staff to quickly turn against you. 

Local bike shops, independent bike dealers and bicycle retail chains face stiff competition from online retailer. A few dabble, succeed or even embrace online retail (and concentrate on bike servicing which online retailers can’t provide), but many can also compete against online retailers. This is not usually on price, but by providing the service and local engagement which Wiggle, Chain Reaction Cycles and co. simply can’t provide.

The easiest way to annoy staff at the bike shop is to ask them to price match an online price. Price matching an (overseas) online retailer will often knock out the complete margins and in many cases the bike shop may be paying a higher wholesale price than the online price.

But there is another way to frustrate your bike shop beyond tears, if you have purchased something online that has broken, take it to your bike shop (rather than to where you purchased) and attempt to get them to resolve the warranty claim. You, as the ‘bad customer’, are the idiot in this case. But this still happens. People try their luck returning their online purchases to the bike shop.

This scenario is made worse when it takes time to determine that the faulty equiptment was not purchased locally. People mnay attempt to contact the importer directly and waste their time before the importer determines that your wheelset was purchased overseas. (There are some good news stories where the shop or the import still look after the customer regardless, they really need be be commended for this).

Of course it can be costly, time consuming and frustrating if you purchase online, the equipment fails and you have to convince the online retailer that it is a warranty replacement. In many cases, this is where your local bike shop simply win through better customer service.

Outside of the bike world, big brands such as Apple offer worldwide service, but as a brand they also have much strong control over their retail outlets. Giant Bicycles is in a similar position with their Giant Bicycle stores and limited online availability.

Consumer protection laws change between countries and even states, the rule of thumb is to return items under warranty to the place where you purchased. And if in doubt, you can enquire with the brand.

 

photo © Bruce Turner

Local Bike Shop Online Store

Can a local bike shop make it big online?

This is a loaded question, most of the worlds biggest online retailers started out as local bike store who did the right thing at the right time in the right place. Local bike shops have made it big and many others are trying.

The real question is, “why do some bike shops make it and others fail?” If the successful online shops did the right thing and the right time in the right place, what are the wrong things?

 

Lack of Genuine Committment

There is a different between trying to be successful online, and actually committing to online retail. The common scenario is that the local bike shop decides it wants to go online – pays a web design company $10,000 to create a shop and struggles to get sales. When they do get sales, fulfilling orders is messy and in no time the online inventory is out of date, along with the software and it discarded as an expensive failure…. because ‘the internet doesn’t work’.

The web design agency play a role in the demise for failing to educate the bike shop and showing them the big picture. And the cost conscious bike shop all too easily ignores or overlooks key parts of online retailing. As noted in an earlier article, If you build it, they won’t necessarily come.

Part of genuine committment is a vision to look beyond the word of the one-dimensional web design company and take the initiative to understand the building blocks. Also to question information, to analyze, to research and make smarter decisions.

The building blocks for successful online retail

A brief and incomplete list of some of the key building blocks:

Marketing: whether big or small, you have to invest in marketing. You have to spend money and the smart retailers also discover the best channels and keep trying new approaches.

Fulfillment: A massive topic, and for the sake of simplicity includes logistics. This is ensuring that the inventory is current, that delivery projections are up-to-date through to processing the order, packing, dispatching, delivery and tracking. All along keeping the customer informed and happy.

Customer Service: As with traditional retailers, customer service can make or break you. Of course the customer service requirements for online sale is different, but customers want immediate satisfaction and immediate answers. Word of mouth is just as important for online retailers and negative customer experiences are amplified even further in the internet.

Technology: From responsive websites to cater to smart phone and tablets to effective order process as well as clever technical integration and Search Engine Optimisation (SEO) and Search Engine Marketing (SEM). You need an expert at your side who knows technology.

Price: The internet makes it inherently easier to compare prices, as long as the retailer is trusted the the lowest price wins. Why pay more for the same product (an online retailer can hardly sell their ‘customer service’)?

 

The Visionary

Any bike shop can set-up online, but a visionary does more. They understand the potential of online to their business, they understand the change or adaption required. They invest and continue to drive, often employing specialists which push their online retail abilities beyond others.

It means that online retail is not for all, traditional businesses certainly shouldn’t ignore online retail (they need to adapt to remain competitive) but if a retailer isn’t truely dedicated to opening up online retail, they are often better off investing in their core business.

But their are plenty of sales out there, and just because one retailer is popular, it doesn’t mean they can maintain. Management and profit orientated decisions can taint a retailer leaving gaps for young online retailers who can do it better.

 

photo: © ubray

Wiggle Gold Loyalty

All you have to do is spend money

The Wiggle Gold Loyalty Program came up in October, it was nice to be informed that I am a valued customer and a Gold Member… whatever that means. I assumed it meant deals of some sort although generally am only interested in gear I need, rather than impulse buying anything on special.

The bizarre… even confronting news is that I have to spend $150 to remain a member. After making the grade, and not even really knowing the benefit or criteria for eligibility, I have to buy something, I have to spend money to retain the Gold status.

What is it all about – lets take a look at the Wiggle Loyalty Rewards Page (UK version).

What is the eligibility criteria?

  • Gold Customers have spent over £100 in the last 365 days

  • Platinum Customers have spent over £500 in the last 365 days

The average online purchase is less than £100 however it making two purchases a year totalling £100 is realistic, a couple of tyres and inner tubes will hit the mark so achieving Gold status is relatively easy.

Platinum is harder to acheive – buying a complete bike, a wheelset or generally spendig a lot of bike gear will get you there.

What are the benefits?

Gold Customers receive an exclusive 5% discount off the list price of all products that have not already been discounted. They also exclusively receive a 5% discount off the list price of all products including all bikes and frames. These discounts are not available to standard customers. Gift vouchers and memberships are not included.

And Platinum get 12%… which is remarkable saving… except it applies to the list price. Let’s release the cynic and ask which products in Wiggle are discounted and which products in Wiggle retail for the ‘list price’?

The common theme for the online retailers is to have discounts of the RRP (Recommended Retail Price) and during sale time, the discount applies to the RRP – meaning you pay the same price… sale or not. A sale just looks better.

So does is this 12% saving for Platinium and 5% for Gold members a genuine saving possibility, or will I be ineligible? The Terms and Conditions explain:

The Gold and Platinum prices are applied to the list price of a product. If that product is already discounted below the Gold / Platinum price, you won’t receive any additional discount

For now, this isn’t transparent and doesn’t warrant spending $150 on something I don’t need just to be part of a member program where I probably get greater savings on the list price anyway because it has a sale price. Wiggle are a pretty good online retailer and while this incentive looks good at face value, it appears to missing real value.

 

Look out for End-Of-Season specials on Bikes and Gear

Many of the big brands have already announced their 2015 bikes or cycling gear and products. You will even find some bike shops stocking next years gear. The fact is, new is sexy and for some strange reason, next seasons gear or next years gear always looks better.

The other fact is, most of us are not performance cyclists and the one percent saving will make zero percent difference (just don’t tell the marketing departments). The real effect is that often last season’s bike or gear may be substantially reduced and you could save hundreds of Dollars, Pounds or Euros for a bike which is almost the same as next years model.

Some brands are trying to buck the trend by removing the ‘year’ and ignoring seasons as a bike model generally has a life span exceeding one year. Often after a few seasons (and a few paint jobs and accessory changes later), a top model bike may be relegated and replaced, but still remains in the program as it was a good bike.

Bike shops need to clear their floor stock and/or warehouse stock for the new gear so you need to keep your eye open from between October and February, more specific time-frames will depend upon your country’s sale trends as well as the individual brands time frames for supply. Don’t be afraid to ask “when do you expect the new bikes in?”

Online retailers however may have different cycles when it comes to new season gear. Local bike shops are often first inline and online retailers are second-in-line as they are the ‘clearing houses’. This means that online retailers may get new season stock much later however once again, it depends upon the brands and their relationship with the retailer.

The bottom line

If you chose last year’s bike or gear, the chances are that the savings you make over the new year and new season equipment are far great than the difference in performance benefit. Of course there may be differences and the new gear is new – so if you want New and can afford New, go for it.

Field of Dreams Movie Poster

If you build it, they will come.

Derived from the classic move Field of Dreams (1989) with Kevin Costner. “If you build it, he will come.” has spawned an entire legion of believers that simply creating something is enough to guarantee success.

A great movie, but in the real life of business and specifically online shops, if you build it they won’t come. Not without promotion and marketing.

There are a lot of online shops out there, many unsuccessful. But some do a fair trade and limit their real potential when they fail to stay current (technology, design, marketing, inventory) while others have achieved the critical mass and in addition to continued marketing, can rely on a solid customer based.

Marketing and promotion can take many forums, and there is no single perfect way to market – some retailers location a single high achieving channel while others have grown organically and saturate.

If you build it, that’s a good start. But if you market it, you increase the chances that they will come.

Here are some ideas: How bike shops win customers in the modern age

Customer Service verses Company Policy

Sorry Sir, but if you refer to our Terms and Conditions, page 53, paragraph 7.3.8 it states that…

That’s right, the customer is always right unless they are wrong. Or if the ‘customer service’ staff feel that the customer is defrauding the shop and succumbing to customer needs is a sign of weakness.

Most problems raised by customers such as non-delivery, late delivery, incorrect charges, wrong or faulty or broken parts are genuine. Without suggesting that a Local Bike Shop will always resolve a customer problem perfectly – online retail is built upon reducing overheads and this is frequently interpreted as meaning reducing customer service.

A return customer is cheaper to acquire so it is worthwhile for a retailer to focus on existing customers, ensure customer satisfaction and benefit from repeat business and customer referrals.

Without diving into all of the ways that retailers have been known to avoid customers and their duties, there is an easy way to reduce overheads. And that is, quickly solve problems to the advantage of the customer.

Rather than standing behind the rules and company policy, make it easy, make it fast and take a hit with replacements and refunds because this is an investment. The marginal losses (much of which can be recovered) is a marketing investment. The best online shops are the ones that solve problems quickly and have customer friendly terms and a customer friendly approach.