With the MADE bike show in the rearview mirror, I got to thinking about how the “builder” part of the industry feels separate from the “manufacturer” part of the industry. The builders, typically one or a few people, make bikes one-at-a-time and usually sell directly to their customers, although sometimes at retail. The manufacturers have their bikes built in batches, usually overseas, and sell at retail, but increasingly direct-to-consumer as well. It’s a paradigm that developed over decades, but more and more it appears to be breaking down, because manufacturers are abandoning retail and builders need a broader customer base to survive.
Let me just dig into that briefly.
The internet has allowed manufacturers to reach their customers in a way they couldn’t before. They needed retailers to spread the message and represent the product. These needs have diminished as websites became destination marketing vehicles and then further as ecommerce infrastructure developed. Builders didn’t, traditionally, have the access to the same technologies as manufacturers, but also, their custom frame prices were usually much higher than that of “manufactured” bikes, not to mention, their products were more complicated. To keep prices down, builders needed to cut out the shops and go direct, both to foster a differentiated customer experience, but also to keep prices lower. Finding margin for a retailer could make a builder bike prohibitively expensive, further shrinking their potential market.
But things have changed since this paradigm established itself, so I propose a new alliance.
Before I get into it, let me disclose my personal interest in all this. I’ve sold custom bikes via retail for a long, long time now. I’m advocating for a position that benefits me, BUT I also think this approach benefits consumers and independent bike shops now in a way that it might not have before, so hear me out.
The goal of my proposal is to expose riders to better bikes, to preserve and grow small businesses, and to challenge the big manufacturers to consider their pricing and supply chain models.
To achieve these things, I think as many independent bicycle shops as possible should bring a custom builder into their product offering. It is no longer the case that manufacturer bikes are less expensive than builder bikes, so the builders can include a margin for retailers without pricing themselves out of the market. By gaining access to retail, builders can grow their markets. By offering builder bikes, shops can differentiate themselves from one another in ways they can’t by selling manufacturer bikes, which are, by their nature, commodities.
To make the new alliance work, shops will need to add fit areas and fitting expertise. That’s going to get more riders on better bikes, and it’s going to give riders a reason to shop locally instead of going consumer direct with a manufacturer bike. The competitive pressure will push manufacturers to streamline their supply chains and stop depending on retail to warehouse so much inventory, which would stabilize retail (and even out the fluctuations in the global bike market to some degree).
There has been an awful lot of downward price pressure on bikes at retail for the last three seasons due to a massive over-manufacturing and over-stocking of commodity bikes. With the level of discounting going on, shops aren’t making close to the margin they need on most bikes. At the same time, the big companies are transitioning to the direct-to-consumer model as quick as they can. Most of them already have a hybrid, D2C/retail system in operation. This has unquestionably eroded retail margins.
Simultaneously, loads of shops are finding out how hard it is to make money at service (and that’s a whole story unto itself), even as service rates shoot up. So where are they to turn for the margin they need to sustain themselves?
This is where my idea arrives, killing two poor birds with a single, cruel stone.
The truth is, the big bike companies mistreat their retailers, because they can. The power imbalance is massive, and a lot of shops feel they need that anchor brand way more than the brand needs them. That leads to all sorts of bad decisions and disadvantageous situations. Allying with a builder wouldn’t solve this problem entirely, but it could make a difference, returning the shop to the nexus of manufacturer and builder, strengthening, in one way or another, all three.