Wiggle Chain Reaction Merger Romance

Wiggle and Chain Reaction Cycles Romance put to the Test

The merger of the two biggest online bike shops, Wiggle and Chain Reaction Cycle is now being put to the test by being referred to the Competition and markets Authority (CMA) in the UK. Reported on BikeBiz, they have noted that the CMA are surveying bike and Parts and Accessories suppliers who need to respond this week. 

Online retail can be a double-edge sword for bike brands. On the one side, online shopping in booming and it provides an opportunity to sell a lot of stock to this growing market. On the other, online shops compete with the traditional bricks and mortar bike shops and the distributers who are also vital for marketing the brand and customer service.

Suppliers can be pressured into discounting their stock for online retailers – it means lower prices for customers online while distributers and bike shops who have traditionally supported the brand pay more for the stock and have increasing online competition.

The Wiggle and Chain Reaction Cycles entity has not released details about changes and whether both brands will continue to operate independently. For customers, it is likely that the brands will remain separate and behind the scenes, management, supply-chain and logistics can be optimise.

 

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

 

Shhh Shimano

Is ‘Shimano’ a naughty word?

There are so many good things to say about the Shimano brand in the world of cycling (not to forget, they are big in fishing). Even if you you have a budget Shimano groupset, it will still be well designed and will continue to perform as long as you look after it. And Shimano has also lead the component market without the teething problems that have held back SRAM or the chains of nostalgia which hold back Campagnolo.

Customers are happy, but a lot of bike shops and even their own national Shimano suppliers are having second thoughts. So why the discontent, it is the legacy of Shimano distribution which allows the European online bike shops access to super cheap wholesale pricing.

The Bike Dealer Blog recently published a blog post, The “S”-Word: Dealers Speak Out and discussed the American perspective of the Shimano distribution strategies;

Shimano American management claimed it cannot do anything to control European distribution, a part of the world that doesn’t allow MAP or MAP enforcement.

An example is given of a California bike shop owner who complains that the Shimano 105 5800 groupset is available online from European retailers for $382.49 while his wholesale purchase price is $500.

This scenario is similar in other countries with not online the bike shops, but also the Shimano national offices facing stiff price competition from their own brand, and little power to act for fear of being cut-off.

The Bike Dealer Blog quotes a Texan bike shop owner (which I assume is unrelated to the ex-seven time Tour de France winner),

Here’s the problem. Which bike company wants to bankrupt itself to make a point? You can’t avoid using Shimano components on your bike. You can’t even work on phasing them out, except at the low end, and if you try to do that, Shimano will strike back by making their parts cheaper and thus your competitor’s bikes a better value.

For a bike dealer to shift to SRAM or Campagnolo also involves its own challenges. Aside from missing out on the strong “Shimano” brand and having to service this brand anyway, what is stopping SRAM and Campagnolo from also tapping into the lucrative European internet retailer market?

While the European online bike shops are branded with the blame for killing local bike industries, and while the distributers and bike shops call their customers ‘heartless’ for buying online, it is the brands themself who have ultimate control. These big brands however have been caught by surprise at the power and speed of the internet and the subsequent price discrepenies which make customers happy and bike shops unhappy are a legacy of deals and arrangements which can’t be changed overnight.

For young brands the lesson is to establish globally consistent pricing which ensures that bike shops and distributers can compete on price. And consistent pricing makes customers happy, they no longer pay a ‘massive local premium’ for the same item.

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

Are Online Bike Shops Guilty of Exploitation?

The headlines from November 2011:

Chain Reaction & Wiggle guilty of “exploitation”, says US store

The US store in question is competitive cyclist and a shop blog post was posted by company founder Brendan Quirk. Mr Quirk (and co.) sold the online retailer to Backcountry.com in August 2011 and Quirk left employment with Competitive Cyclist in April 2014 to take a role with Backcountry.

In the blog posted titled Definitely Not Wikileaks, Quirk argues, “I kept thinking that Chain Reaction and Wiggle aren’t winning in the high-end US marketplace because of a strategy. They’re winning by exploiting a market anomaly. Exploitation is not a strategy.”

Are online retailers in countries outside of the US ‘exploiting’ or are they ‘competing’? Before we answer this, lets concentrate on the accusations. Discussing how the online retailers Wiggle and Chain Reaction Cycles have such a competitive advantage, Quirk turns to the difference in enconomic-geographic influence, “Because they’re based in Europe, Chain Reaction and Wiggle have the advantage of buying their goods directly from manufacturers.”

While it is true that distribution channels / processes between countries different, CRC and Wiggle don’t exclusively purchase directly from the manufacturers. But Quirk acknowledges the role of the manufacturer or brand, “Whenever we ask manufacturers why they don’t have global pricing parity, they plead the same case: They’d love nothing more, but they have no enforcement mechanisms.”

Analysing this, under the assumption that the brand / manufacturer sells a product at the same price, price differences creep in with mark-up from a distributer but it suggests that rather than a common 50% markup by a retailer, that Wiggle and CRC have much lower margins. The UK stores are not bound by the Manufacture Suggested Retail Price (MSRP) where-as the US stores are.

Considering that Wiggle and CRC are retailing within the law with this approach, are they guilty of ‘exploitation’ because overseas cyclists chose to purchase from them rather than paying a premium to buy locally? Hardly, though it doesn’t stop others from feeling threatened by online retail. Spanish bike shops joined efforts to protest against Chain Reaction Cyclists and in Australia, the cycle retail representative body is lobbying for regulated taxes on imports.

In the public sphere the brands are quiet, they are doing good business and reaching the customer. Customers who chose online are growing to understand the pros and cons, while the price saving are hard to resist. Online retailer have reduced overheads and are competing in a growing market. This leaves traditional retailers and wholesalers who are used to the classic supply chain but now feel threatened. Some chose to adapt (such as shifting brands to the those that maintain consistent pricing so that retailers are not undercut). Some chose to fight a losing battle.

While the end-consumer would prefer to pay the lowest price, they may still choose a local bike shop if they value the service. But it is difficult to consciously spend more money for the same product in situations where there is no added value, such as chosing between competive cycling (as a US resident) or chosing overseas. What ‘Value proposition’ do competitive cyclist offer in this situation?

Consumers may not want to hear this, but pricing can be managed, brands have the power create consistent pricing and allow for a level playing field. Why should a distributer and retailer stay with a brand that is actively undercutting them?

 

Photo: © Dauld

American Online Bike Shops

America leads online retail… but not for bikes

The United States is the birthplace of the internet (DARPA) and is a nation defined by Start-Up success. Amazon is the worlds greatest online retailer and much of the world’s online entertainment comes courtesy of the US and American based services. But in the bike work, the United Kingdom is the worlds leader – this doesn’t make sense at first glance.

Why is the UK different, there are a number of influences and we will briefly explore a few.

 

Mail Order History

Of course mail-order existed in the US, but in the days of old the back pages of UK cycling magazines were filled with super deals from mail order companies. This was a strong culture in the UK and progressed naturally to the internet. While it didn’t mean the same retailers made it across, many customers were comfortable with the approach and the internet make it easier still.

 

Distribution

Different nations have practices for distribution, some brands have a tight control over distribution, some distributers have a tight control over brands and retailers. This also extends to brand reps and whether they are independent or employed by the distributer or brand and how they have built personal and brand loyalty.

The effect is that in one country, online retailer access and cooperation can be easier, while in the other there are restrictions and limitations which affect availability and price.

 

Shipping Costs

Where store prices for certain products online in American stores can be competitive, or cheaper – often shipping costs is a killer. Why does it cost $200 to ship a $500 wheelset from the US? Why does it cost $600 to ship a bike? The UK have been filing back postage costs – and while a buyer still may have customs and local taxes, the shipping costs are marginal. Then again, some of the biggest US online bike shops simply don’t sell some, or any products to customers overseas and cut out a massive audience.

 

Customer Service

Purely speculative of course, but perhaps local bike shops in the US had great customer service; Sunny side up and you’ll come back now you hear. The transition to buying online was slower and it is only a matter of time before a few clever business owners learn the tricks of the UK retailers and apply locally.

 

America in Isolation

The proud British folk don’t always like the responsibilities of belong to the European Union (remember, the UK is still a world leader… right) but even with the English channel separating the UK from mainland Europe, the trade between the Western European developed nations is roaring. The geography and historical trading during the last two millenia means that this is ingrained in Europen society – success and growth means serving customers in other nations.

By no means is America cut-off, but beyond Canada and Mexico, customers in other developed nations are a long way away.

 

Online sales is booming

And while these were just a few suggestions, as the planet (and hopefully eventually the politicians) slowly realises how good cycling is, the entire cycling industry will still see a massive growth in customers and the door is open with plenty of scope for new shops to grab a healthy slice of the pie, be it in America, Eastern Europe or at the source, Asia.

 

Shifting Expectations when Buying Online

When you go to your local bike shop and order a bike or gear that they don’t have in stock, it can take time. Typically you wait for the next delivery from the wholesaler, sometimes they stuff up and it takes forever but there are expectional circumstances when the bike or gear comes in quickly, you get the call – though still have to make the second trip to pick up.

From the comfort of your home (or workplace) you can place an online order – and with standard delivery it needs to arrive as fast as possible. Customers have different expectations online – the online world needs to be fast and a delay that would be normal when dealing with a local bike shop is a late delivery.

The big online shops such as Chain Reaction Cycles and Wiggle have packing and dispatch all figured out – providing the items are in-stock, your delivery can be on its way the following day. Sometimes when certain items are delayed, the remaining available items will be sent immediately so you have most of the things you ordered sooner.

For established retailers, the delays are all with the delivery companies. Just like a missing sock in a washing machine, there is a fair amount of mystery why package A arrives in 3 days and why package B arrives in 6 weeks – no one really knows but it costs the customer service hours pacifying irate customers.

But fast turnover times is supported and promoted by the retailers, so customers don’t have unreasonable expections rather online is a different game. The retailers on-top of their delivery partners while maintain customer satisfaction and drive repeat business.

Are you a scumbag if you buy online?

The worldwide cycling industry would like you to believe this. But the worldwide cycling industry also facilitates online shopping, the online bike shops have to get their bikes and gear from somewhere and you can’t believe that a brand doesn’t know who is selling their genuine bikes or parts and accessories.

You are a scumbag if you go into a bike shop to look at gear, to try it and to take time from the staff when you intend to buy the same thing online. This is known as Showrooming and is tackled in the online BBC article: The peril of ‘showrooming’.

Your not a scumbag if you go into a shop and browse, or if you are genuinely looking to purchase but don’t find what you want.

It is a fine line, but the nature of retail, even before the internet was that customers compared anyway and want the best deal. And good staff will look after you.

The hard to devour line is “traditional bike shops will disappear.” Cyclists will be left with nowhere to service their bikes (and are probably not patriots if they are buying from overseas shops). Why is it the consumers obligation to pay a premium for the benefit of somehow shifting supply and demand for an apparent indirect long term benefit?

It is supply and demand, and it demands brands, wholesalers and retailers to change. Don’t showroom – but likewise, if you find the most competive price for a bike or cycling gear online, do you homework, know the pro’s and con’s, but don’t be ‘guilt tripped’.

How bike shops win customers in the modern age

The modern world is online. That doesn’t mean that ‘offline’ is out of the picture, rather to be viable online and offline, the internet needs to be part of the strategy.

But a lot of traditional businesses were caught out but the internet. Amazon has redefined book shops and with the kindle, digital tablet to read books, it is also redefining books.

In the cycling industry, magazines traditionally played a pivitol role along with the stock in your local bike shop. The internet not only provides a massive range but it is also where cyclists look for information. Readership and subscribers levels of magazines continues to fall. [2012 State of the Media Report].

It means that online advertising is the key and explains why many previously young and unknown brands who invested heavily in online buyers with aggressive online advertising have suceeded. Infact, the advertising spend of online retailers is in correlation with the size, and guess who the biggest spenders have been… Chain Reaction Cycles and Wiggle.

Strong retail brands and chain store who were slow to move still have the advantage of a strong offline customer base and have been able to rapidly modernise their digital communication and sales – so have a chance. Even traditional bike shops still have an opportunity to catch up however without the know-how and first-mover advantage, it may only be catch-up.