The jumping off point for this piece is a conversation I had with a friend of mine who owns a bike shop, what one might even call a successful bike shop, free of debt, with manageable overhead, and a long, loyal client list. The thing he and I talk about more than anything, understandably, is the future of bicycle retail, because despite his success, he’s not sure he sees a clear way forward.
The crux of the issue is this. There was a global pandemic. Demand spiked. Everyone wanted to ride a bike. As a result, margins were better than ever. Shops were selling everything that wasn’t nailed down. It sounds like a dream scenario, and in some senses, it was. However, on the supply side, companies were having trouble taking advantage of the demand spike. They couldn’t get new product from their manufacturers. So, they opted to move as much of their revenue to direct sales as possible in order to maximize their margin. In a way, the pandemic expedited a trend that had been gathering steam, a readjustment of revenue channels, in light of limited supply (or demand for that matter), to bring more profit to the supplier (I’m separating suppliers and manufacturers here, because most companies don’t make their own products in today’s bike industry).
My friend, in reading the writing on this particular wall, wondered, “Does it make any sense for shops to sell products that are ‘commodities?’”
You can buy a commodity anywhere. Its quality isn’t determined by where you source it. For example, a shop can’t add to the quality of a pair of bib shorts or a floor pump. They might offer the convenience of letting you try them out, but the product itself isn’t enhanced by anything the shop does.
You may have noticed, for example, that shops are stocking a lot less clothing than they used to. Guessing what sizes people need, handling constant exchanges, and then discounting what doesn’t sell at the end of the season is more than they want to take on. Humans are quite accustomed to buying clothing online now, and shops are mostly content to let the suppliers manage the hassles now.
What we find on shop floors today is a cursory inventory of basics, a few floor pumps, a few helmets, a few locks, the sorts of things that might be added onto a bike sale or be needed right away, so that the customer doesn’t want to wait a few days to receive it in the mail. The scenario I’m describing isn’t an absolute. Obviously, shops still have stuff to sell. But the trend is clearly in this direction.
What we’ve learned about customer behavior in the Internet Age is that they don’t assign value to products being in stock or being testable. They place a higher value on having the things they buy delivered to their homes. And so, naturally, suppliers are happy to ship things direct to consumers and keep all the margin for themselves. It’s not an evil idea. It’s a natural consequence of selling commodities at a time when transactions can be handled online, and the delivery methods are simple.
A successful bike shop, then, has to differentiate itself from their retail competitors, but also from the suppliers who can sell directly to their customers. In simple terms, “Why would anyone buy, stock and sell a bike their customer can buy directly from the manufacturer for the same price or less?”
Of course, there are rational reasons. It’s good to have a local professional assemble your bike and have familiarity with it for future service, but what we are seeing is that mostly consumers don’t think about these things. They think of each transaction as it appears in the moment, without projecting future hassles or costs. The cheapest, most convenient approach wins the day. Again, not evil. Just how it is.
So this particular shop owner is trying to reimagine his shop providing only products and services to which he can contribute real value. You might be able to imagine what some of those things are, pro level mechanic work, custom bikes, accessories to which they might have exclusive access in their market. The big brands have tried to tiptoe down a line with this kind of market protection, paying commissions to local shops for product delivered into their territories, even requiring pick up at the local shop.
But this slope is slippery, and the suppliers themselves are fighting for market share. They err on the side of winning the sale and worry about the local bike shop later.
It was a fascinating conversation for me, not because any of these ideas were new to me, but because it’s the first time I’ve heard a shop owner articulate a vision for a shop premised on these ideas. It’s like, everyone has seen this thing coming, but I haven’t seen anyone really radically change the way they do business to opt out of what has become an untenable paradigm for many retailers.
What will the consequences be?
I think shops will become both bigger and smaller. We’ll see more chains and more corporate stores whose model depends on high volume. Think BestBuy for bikes. And we’ll see more small studios and service-oriented shops, focused on high end products and service (including bike fitting), with a very thin assortment of commodities on hand, carefully chosen to maximize differentiation and profit margin. In this paradigm, service will become more expensive, since it will be the primary driver of foot traffic.
Time will tell whether consumers will warm to this model. Many younger riders won’t know any different. Many older riders may simply accept this as how things are. I will be very interested to see how the shop owners I know pivot, and whether they themselves will still find the same joy in what they do.