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Old 05-01-06, 10:57 AM   #1
NOS88
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Free Enterprise in Cycling a Myth?

My LBS owner just told me they won't be carrying Specialized any longer, because Specialized will only allow them to be a dealer if 75% of their stock is Specialized. He also said he got a notice that Trek will be doing the same thing in the very near future. Although Trek will allow LeMond, Klein, and other stuff they actully build (Big of them, don't you think?)

So, as I'm listening to this, I'm thinking: Is free enterprise a myth? I knew this trend was true in the world of guitars with Gibson getting very heavy handed with folks who want to sell Gibson instruments, but for some reason thought the LBS would be immune. It seems to me the major players in the cycling industry aren't helping the plight of the LBS. What's an LBS owner to do?
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Old 05-01-06, 11:15 AM   #2
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Originally Posted by NOS88
My LBS owner just told me they won't be carrying Specialized any longer, because Specialized will only allow them to be a dealer if 75% of their stock is Specialized. He also said he got a notice that Trek will be doing the same thing in the very near future. Although Trek will allow LeMond, Klein, and other stuff they actully build (Big of them, don't you think?)

So, as I'm listening to this, I'm thinking: Is free enterprise a myth? I knew this trend was true in the world of guitars with Gibson getting very heavy handed with folks who want to sell Gibson instruments, but for some reason thought the LBS would be immune. It seems to me the major players in the cycling industry aren't helping the plight of the LBS. What's an LBS owner to do?
I like Specialized stuff. I mean, I really like Specialized stuff. But this is one complaint I have about them also. You just cannot find deals on their products because they won't allow their retailers to even sell an INNERTUBE online at seemingly cheaper than MSRP.

Trek and Bontrager are the same way. I like Bontrager Race Lite tires (they're just about indestuctable and light), but you cannot find anyone that's willing to sell them online. That's keeps the price artificially inflated.

Ebay still has some deals, but you can't always find what you want when you want it.

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Old 05-01-06, 12:26 PM   #3
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This isn't unlike what has happened in the auto industry. In the 50's and 60's you often saw dealers selling multiple lines, especially with European cars. Shoot, sometimes you saw lawn mower shops selling some of the lesser known marques. But the manufacturers realized that they could sell more cars if their own dealers weren't competing against themselves. If you were a MG/NSU/Simca dealer and you had a customer walk in and want a small, economical car, which one did you push? So the manufacturers put pressure on the dealers to get rid of the in-house competition and sell exclusively their line.

Dealers had to make the decision whether to comply or lose that line. One decision involved sheer volume, and since the Japanese cars were popular and were selling, most dealers that had them chose to go with them--a smart move in retrospect. But where are the European cars/dealers now? Seen a new Citroen, MG, Lancia lately? Or an Isuzu for that matter? They're gone from the American market. Bad decision on the part of the manufacturers to force exclusivity. Sales of European cars didn't just decline, they flat stopped.

So bike manufacturers are putting pressure on the LBS's to become exclusive. The thought is that the LBS will sell only brand x, it will make more money because they're not playing brands off against each other. The down side to this is that there isn't a lot of profit in a bike to begin with, and bike sales aren't typically the main money maker--repeat customer service and accessory sales make far more money in the long run. If you tell most LBS's they have to be exclusive, they'll tell you to go jump in the lake. They can't afford to to sell only one line of bike. Or if they do comply, they have to raise prices to make up for the loss of the other brands.

Only the big box stores make money on bicycle sales. My guess that if this is pushed, in the future if you want a Trek or Specialized you'll have to go to Sears or WalMart, cause they're the only ones who can make money on the sales (high volume, multi product lines, etc). All in all this is very short sighted on the part of the manufacturers to pressure LBS's. Everyone will lose. Even them.

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Old 05-01-06, 12:35 PM   #4
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It's free enterprise to demand of a reseller that 75% of your stock is their particular brand.
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Old 05-01-06, 02:14 PM   #5
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Specialized sounds like they're pulling back the hammer to shoot themselves in the foot. Our local three-location Specialized dealer is already having to carry Diamondback as its lower price-point brand because of S's bracket-creep. If they carry through with a 75% rule they may wind up with no dealer base at all.

That's free enterprise at work, though: a mfr trying to set quotas and a local retailer telling them to shove it and dropping them.
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Old 05-01-06, 03:32 PM   #6
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One of our local LBS's (farily small shop that caters to a broad cross section of riders) no longer carries Trek because of their changing marketing position.........he's not real happy with Trek-essentially they quit filling his orders in a timely manner. The closest Trek dealer is now 25+ miles further away.
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Old 05-01-06, 05:23 PM   #7
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Although Mountain Cycles has gone out of business for other reasons, This local web log series of articles shows the predatory marketing practices that Specialized uses to beat down the small companies who dare to compete.

Stumptown

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Old 05-01-06, 05:59 PM   #8
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Essentially, Trek and Specialized do it because they can get away with it. The Feds have
neither the time nor the personell to prosecute every restraint of trade case that comes
down the pike. You practically have to be a Microsoft ot ATT to grab their attention.
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Old 05-01-06, 06:24 PM   #9
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Originally Posted by Dogbait
Although Mountain Cycles has gone out of business for other reasons, This local web log series of articles shows the predatory marketing practices that Specialized uses to beat down the small companies who dare to compete.

Stumptown

Dogbait
Actually, Mountain Cycle has not gone completely out of business. Here is the April 3 article from Bicycle Retailer:
"Kinesis Trims Fat at Mountain Cycle, May Sell Brand

APRIL 03, 2006 -- PORTLAND, OR (BRAIN)—Kinesis Industrial, parent company of Kinesis USA, is restructuring its business model after laying off most of the management team at its Mountain Cycle brand. Talks also are underway with several potential buyers of the brand.

In March, Kinesis laid off almost all of its Portland based Mountain Cycle staff.

“When it was started in 1987, Mountain Cycle pioneered motocross-inspired monocoque suspension frames for the emerging downhill MTB scene,” said Michael Chen, Mountain Cycle’s president. “After a string of misguided niche-market introductions like our road and cyclocross frames, Mountain Cycle’s core customer didn’t recognize the brand any more.”

Going forward Mountain Cycle will return to its core business—freeride and extreme terrain bicycles.

Kinesis hopes that it may be able to announce the new owner of Mountain Cycle at soon as Sea Otter. Until then, daily operations for Mountain Cycle are still happening at the company’s headquarters in Portland. Any parties interested in buying overstock inventory or capital assets such as manufacturing equipment or team vehicles should contact Michael Chen at (503) 294-1012 ext. 11. "

Down but not yet out. On the Stumptown/Stumpjumper thing - - I think the Bothell (Washington) Stumpjumpers Motorcycle Club ought to sue Specialized for copyright infringement, since the BSJs were the first to officially associate "Stumpjumper' with two-wheeled woods riding way back in the late '60s.
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Old 05-01-06, 06:50 PM   #10
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How strange... My LBS is a Specialized dealer (also Bianchi, and several other brands). Specialized is DEFINITELY NOT any more than 40% of the shop's stock, but I've heard nothing about them being dropped as a dealer.

Does Specialized plan on sending out a spy with a calculator to count bikes and check percentages? Sounds like wishful thinking on the part of Specialized to me. Tell your LBS to keep Specialized and just give'em Enron'd numbers.
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Old 05-01-06, 07:44 PM   #11
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Quote:
Originally Posted by Bockman
It's free enterprise to demand of a reseller that 75% of your stock is their particular brand.
True, but it's still pretty anti-consumer. Fortunately, I have bought only two new bicycles, the 1962 Bianchi Corsa and the 1971 American Eagle Semi-Pro / Nishiki Competition, and have been happily buying used bikes ever since.
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Old 05-02-06, 01:33 PM   #12
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Quote:
Originally Posted by old99
This isn't unlike what has happened in the auto industry. In the 50's and 60's you often saw dealers selling multiple lines, especially with European cars. Shoot, sometimes you saw lawn mower shops selling some of the lesser known marques. But the manufacturers realized that they could sell more cars if their own dealers weren't competing against themselves. If you were a MG/NSU/Simca dealer and you had a customer walk in and want a small, economical car, which one did you push? So the manufacturers put pressure on the dealers to get rid of the in-house competition and sell exclusively their line.


John in Oregon
I am in the motor trade and watched this happen. One of my customers (Competitors?) had this happen and he refused to change to one brand- He was a big retailer and felt that the Manufacturers could do without him. He finished up - instead of selling MG-Rover, Fiat and Light commercials, Changing over to Japanese cars. Admittedly at that time not a large Market share, but Suzuki- Honda and Mazda did not make a bad car in those days. (about 12 years ago)

MG-Rover have gone bust- Fiat do not make a GOOD car for the UK market, And the light commercial company went Bust years ago. He now has 6 garages- and a house in Florida-, a villa in Spain, a $2,000,000 boat and a manager at every garage. His bikes by the way are Harley's.
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Old 05-02-06, 01:51 PM   #13
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Bike shops who carry the mass produced lines like Trek, Specialized, Giant etc. get hammered on warrantee stuff. Those bikes are very poplular but not good bikes. They are simple and good enough for most people.

If we won a contest and could pick any bike for say under $2500, I think very few of us would pick one of those. I bought a Giant for the same reason people buy bikes at toy stores. The price.
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Old 05-02-06, 02:17 PM   #14
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Originally Posted by capejohn
Bike shops who carry the mass produced lines like Trek, Specialized, Giant etc. get hammered on warrantee stuff. Those bikes are very poplular but not good bikes. They are simple and good enough for most people.

If we won a contest and could pick any bike for say under $2500, I think very few of us would pick one of those. I bought a Giant for the same reason people buy bikes at toy stores. The price.
That is one of the most warped and OCP'ish responses I have ever heard.
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Old 05-02-06, 02:45 PM   #15
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Quote:
Originally Posted by capejohn
Bike shops who carry the mass produced lines like Trek, Specialized, Giant etc. get hammered on warrantee stuff. Those bikes are very poplular but not good bikes. They are simple and good enough for most people.

If we won a contest and could pick any bike for say under $2500, I think very few of us would pick one of those. I bought a Giant for the same reason people buy bikes at toy stores. The price.
So if you won, you'd buy a ???
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Old 05-02-06, 02:58 PM   #16
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Quote:
Originally Posted by capejohn
Bike shops who carry the mass produced lines like Trek, Specialized, Giant etc. get hammered on warrantee stuff. Those bikes are very poplular but not good bikes. They are simple and good enough for most people.

If we won a contest and could pick any bike for say under $2500, I think very few of us would pick one of those. I bought a Giant for the same reason people buy bikes at toy stores. The price.
I may not be too crazy about some of their marketing practices, but I would say that all three companies provide good products. I would be very happy with any of their $2500 bikes. BTW, I say that as someone who dearly loves the hand-built lugged steel bikes of my youth--two of which I still ride regularly.

Do I detect the beginnings of a flame war?
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Old 05-02-06, 03:55 PM   #17
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Quote:
Originally Posted by capejohn
Bike shops who carry the mass produced lines like Trek, Specialized, Giant etc. get hammered on warrantee stuff. Those bikes are very poplular but not good bikes. They are simple and good enough for most people.

If we won a contest and could pick any bike for say under $2500, I think very few of us would pick one of those. I bought a Giant for the same reason people buy bikes at toy stores. The price.
Really -- "...not good bikes"? Hmmm -- let's ask Lance, Jan, Liam, Christophe, etc. etc. etc. Gee, if I could (which I can't, but if I could) spend up to $2500 U.S. on a bike, I wouldn't consider Madone/Pilot, TCR/OCR Composite, Roubaix, Stumpy, Anthem, 8500/Fuel, etc. etc.?? Guess not; just a label away from X-Mart bikes, those. Geesh! Now, obviously the racing gods don't ride 'production' bikes in the strict sense, but nevertheless -- pretty close, and seems equally obvious to me that 'trickle down' really does work here/benefit us mere (financial and athletic) mortals, as, frankly, do the cost benfits of mass production. Would I love an IndyFab, Seven, etc.? As far as aesthetic appeal, and perhaps the appeal of a 'custom build/fit,' absolutely, but it ain't gonna happen for me; however, from a functional AND quality point of view I don't think I'm missing anything. Rant over!

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Old 05-02-06, 05:10 PM   #18
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I love the idea of a contest with a $2500 bike as first prize! Can we do that in here?
Sure can! You donating the bike?
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Old 05-02-06, 05:27 PM   #19
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How strange... My LBS is a Specialized dealer (also Bianchi, and several other brands). Specialized is DEFINITELY NOT any more than 40% of the shop's stock, but I've heard nothing about them being dropped as a dealer.

Does Specialized plan on sending out a spy with a calculator to count bikes and check percentages? Sounds like wishful thinking on the part of Specialized to me. Tell your LBS to keep Specialized and just give'em Enron'd numbers.
That's what I was thinking too. My guess is that the OP's LBS told him just the half of the facts that the LBS was willing to share. Several years ago Specialized made a commitment and literally bet the company on their LBS dealer/partners. Specialized agreed to eliminate internet sales and, in return, made some merchandising demands on their dealers. As an example, Specialized used to sell off their discontinued models through Supergo. Today discontinued models are only sold through Specialized dealers.

So far as a spy to count bikes? Yup, all of the bigger companies actually do that. They have outside sales reps who visit every dealer and who control dealer appointments. Their requirements are kind of a sliding scale based on any number of things. Suffice it to say that a dealer who sells a lot of Specialized bikes is going to be able to get away with some things that small dealer won't.
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Old 05-02-06, 06:22 PM   #20
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Capejohn.let me apologize for being the first to jump on your comments and diverting this thread. But, Jeez, what a strange position to take on this of all forums. No wonder we decided to let the North have Massachusetts in 1865.
My Mom told me something when I was 11 after I had made a remark about the clothes worn by a boy at church and I have followed this advice ever since "Do not talk about money. If you have it, they will know you are bragging. If they don't, you will embarrass them and may lose a friend."
I find our culture and our bike shops veering away from this simple idea and we can see the results on the bike paths and in the work place.
Let us celebrate two wheels and not a head badge! Let us encourage more people to pump up those old tires in the garage and head down the drive, the devil take the marketeers who expect us to follow their whims.
And in closing, to make this post revelent to the poster, I miss the wood floors, variety of bikes, and people who genuinely enjoyed putting people on two wheels.
P.S. Big Paulie, I'm with you! As long as it includes pie. Found the loveliest bakery about 25 miles from home. It has got to be the best
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Old 05-02-06, 09:12 PM   #21
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[QUOTE=NOS88]My LBS owner just told me they won't be carrying Specialized any longer, because Specialized will only allow them to be a dealer if 75% of their stock is Specialized. He also said he got a notice that Trek will be doing the same thing in the very near future. Although Trek will allow LeMond, Klein, and other stuff they actully build (Big of them, don't you think?)
QUOTE]
Interesting, One of the larger chains in the general Raleigh-Durham area sells both Trek and Specialized. I wonder if Trek or Specialized will threaten to move out of over 15% of the LBS shops in this area by telling that firm 75% of their floor bikes must be their brand (either Trek or Specialized)? If one of them does move out, I wonder how fast Giant, Fuji, Kona, Raleigh or Cannondale will run into that chain to stock their bikes? Or will both Trek and Specialized be satisfied with less than 50% of that firms sales (They carry a few other brands as well).
Specialized and Trek must be careful, they hardly have a monopoly and the competition is not exaclty inferior. Just ask capejohn.
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Old 05-03-06, 06:50 AM   #22
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After reading some of your responses, I went back to my LBS and asked more questions. He indicated that there is a difference between a store that sells a particular line and one that is a 'dealer' or authorized dealer for the line. For him, he could continue to sell different lines, however, he reports that his profit margin decreases considerably if he is not an authorized dealer, and he can only be an authorized dealer if a specific percentage of his stock is of that brand. He also reported that his experience was that service he received from the company dropped significantly when we was not an authorized dealer. This was manifest in the slow filling of orders, phone calls not returned, and the resolutions of complaints, warranty issues, etc. moving with glacial speed.

He went on to say that both Trek and Specialized are moving toward what he called "concept stores". These are apparently stores that highly focus on the specific brand (and their full line including accessories) with allowances for some other stock. As an example, he indicated that he could keep his perferred status with one company but must stock a specific percentage of his helmets with their merchandise, and then the company also indicated which other brands could be used to make up the other percentages. (He was actually talking about Trek and the other helmet line he was "allowed" to carry was Giros.)

So, I took a quick look at three other stores within a 15 mile radius of my home and found that all of them that were identified as authroized dealers for a specific brand seemed to have the same thing going on. When looking at helmets, as the sample, I found the majority of models from which to choose were in fact from the company for which the LBS was an authorized dealer.... and.... in every case, there was only one other brand with considerably fewer choices from their line. My subjective view was that all of the alternate brands had models that seemed to be of lesser quality or much higher cost for similar features.

So, all this has reinforced that being an LBS owner has headaches that are, for the most part, well hidden from the consumer. They get squeezed from both ends. Company's that want to control how they run their business and consumers who want everything today and at prices similar to the mega chain stores or what see on e-bay. This morning I'm amazed that there as many still in business as there are.
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Old 05-03-06, 07:11 AM   #23
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...being an LBS owner has headaches...Company's that want to control how they run their business and consumers who want everything...I'm amazed that there as many still in business as there are.
+1 That's why I support my LBS when I can (even to the point of paying more when I could get an item for less elsewhere). It's in my interest to have a well-stocked, competently-staffed, customer-friendly LBS available to me!
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Old 05-03-06, 07:14 AM   #24
Blackberry
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Join Date: Feb 2004
Location: Charlottesville, VA
Bikes: Lemond Victoire, Cannondale.Mountain Bike, two 1980s lugged steel Treks, ancient 1980-something Giant mountain bike converted into a slick tired commuter with mustache handlebars, 1960-something Raleigh Sports
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This morning I'm amazed that there as many still in business as there are.
Thanks for the very interesting info. As someone once said, "Anything is easy--if you don't have to do it yourself."
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