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Old 07-10-09, 10:42 AM   #1
billyymc
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LBS vs Bikedirect (and the like) -- how to compete?

First, I apologize in advance if this turns into a BD sux thread.

I'd like to hear from people who own or work in a bike shop, or anyone who has insight into the industry (I don't).

How can the LBS continue to compete with the Bikesdirect model (and whoever else uses a similar business model -- I assume there are some, but dont really know who they are). I know the stock answer is "we offer more service and expertise" -- and that counts some, for some people. But people have gotten so used to buying expensive and complex items over the intertubes that I must assume that the internet bike sellers are really eating into the LBS bike sales. Maybe not?

There have been similar discussions regarding the ski industry over on Epicski.com. Some shops have responded by increasing what they charge to mount bindings on skis purchased elsewhere. Some shops are trying to make it up in services. Bootfitting is still a staple (it's generally not good to buy ski boots without a fitting). But the reality is ski shops are struggling big time. The economy, of course, doesn't help. And when I can get skis and bindings for 50% of price of my local shop by buying over the web, even if I have to pay for the mounting (some web shops will mount for free, many won't) -- hard to resist.

The BD value proposition can look very very attractive for some of their bikes -- the component groups are very solid for the price point. In fact, when a newbie goes to a bike shop to buy a bike and asks what the difference between a $500 bike and a $1200 bike is -- they almost inevitably get a response like "mostly the components" If they then go look at BD website and see those same components on a $600 bike -- what conclusion do you think they will draw. The LBS is essentially promoting the BD model to their prospective customer.

Having Target sell the Forge line of bikes at the price point they're at can't be very good for LBS business either I suppose. Users seem to have pretty favorable experiences.

Disclaimer - I have no affiliation with BD. I once owned Target stock. I have a great relationship with my LBS. That wont' keep me from at least looking at BD in a few weeks when I start shopping for a new bike for my 11 y.o. daughter.

BTW, if this has been discussed before - sorry. I searched, but couldn't find this kind of discussion among the many BD bashfests and shillfests.

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Old 07-10-09, 11:03 AM   #2
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Not much a LBS can do.

Storefront and employees to keep the doors open are all costly. Having stock on-hand and built is costly. Having stock you just can't sale that sits on the floor for months makes it even more costly. Insurance and the other things all play into that.

A couple of guys with a warehouse and bulk discounts from vendors because they sale to a market of millions instead of a market of thousands can't be helped. If I do a drop ship from vendor sales model then I can easily get away with a markup of 10% over cost on the bike, and again, because I am selling multiples of the same bike in the course of a day instead of one or two a season I can get a much better cost basis on the bike.

For the consumer that is only looking at that bottom line there is almost nothing you can do to earn their business. Time to turn your LBS business into a service point instead of a retail point. However, there are a few people (I was one of them) that saw the long term benefit of buying locally. I want choice locally, I want stock locally, and I want to be able to walk in an get a minor adjustment for free locally. That is because I plan on riding this same frame with minor upgrades for a long time. If I bought the latest frame every couple of years and could wrench them myself in most instances then I would be purchasing online and using the spare cash to stock parts and tools in my home.

More power to the LBS store owners, but we are going to see more and more brick and mortar places close their doors IMO.
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Old 07-10-09, 11:19 AM   #3
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I don't see what BD has over any LBS? They sell you a bike based on components. They have a limited number of frames. Want a trek, specialized, cannondale, etc... you are not going to find it at Bikes Direct. Want a bike that is set up and fits properly? You are not going to find it at Bikes Direct. Want to save a few bucks, you'll find it at bikes direct.

Kind of like a tailor made suit. I am not going to take my own measurements and order a suit online because it is a little cheaper and comes with nice buttons. Then have to bring it to tailor to get it fitted right. I am going to buy a tailor made suit from just that, a tailor.
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Old 07-10-09, 11:49 AM   #4
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I don't see what BD has over any LBS? They sell you a bike based on components. They have a limited number of frames. Want a trek, specialized, cannondale, etc... you are not going to find it at Bikes Direct. Want a bike that is set up and fits properly? You are not going to find it at Bikes Direct. Want to save a few bucks, you'll find it at bikes direct.

Kind of like a tailor made suit. I am not going to take my own measurements and order a suit online because it is a little cheaper and comes with nice buttons. Then have to bring it to tailor to get it fitted right. I am going to buy a tailor made suit from just that, a tailor.

Not a real big market for bespoke suits anymore is there? Sorta proves the point that the LBS has a real challenge ahead. Just like the local ski shops. Home Depot vs Local Hardware store.

You peronally might not see BD (and other internet bike sellers) offering anything over the LBS, but clearly many do. My point is to talk about how the successful LBS will respond to that, rather than deny it.
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Old 07-10-09, 12:05 PM   #5
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Really depends on the LBS... BD is cheap and quick. Get your bike and get on with it.

At a "good" LBS you can ask questions and get immediate answers, get fitted, take the bike for a test ride. Some LBS even allow free tune-ups and minor work on the bikes you buy from them. Plus, there is the personal touch and many times a feeling of camaraderie.
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Old 07-10-09, 12:23 PM   #6
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1) Figure out a way to get government money or regulations that help your business.

2) You need to find out what it really costs to do something stop doing anything that does not pay.

3) Sell bike tours, bike repair classes and other stuff.
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Old 07-10-09, 01:53 PM   #7
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The BD value proposition can look very very attractive for some of their bikes -- the component groups are very solid for the price point. In fact, when a newbie goes to a bike shop to buy a bike and asks what the difference between a $500 bike and a $1200 bike is -- they almost inevitably get a response like "mostly the components" If they then go look at BD website and see those same components on a $600 bike -- what conclusion do you think they will draw. The LBS is essentially promoting the BD model to their prospective customer.
Only if you don't know what you're looking at.

If you know anything about specing bikes, then you'd spot one overriding trend with just about all the mail order bike companies: they cheap out on the parts that matter. They can get away with it too considering they don't offer service after the fact. Cheap bottom brackets, cheap headsets, cheap unsealed hubs...all the stuff that makes a bike last longer is downgraded and often not even listed. Compared to a bike shop that has to honor a 1-year warranty on all parts, it's obvious to me that the mail order bikes are built specifically to showcase the parts that consumers look for as a defining factor of component level...even if that's a poor measure of overall bike quality.

I feel sorry for the consumer that buys into industry buzzwords like "hydraulic brakes"....even when the brake is of the poorest quality, known for leakage problems, has poor service parts availability and guaranteed to require regular maintenance...or replacement with more durable parts. You may also notice that when branded parts are specced, it's almost always the budget version ("Oh wow! A Tora fork!" too bad it's the coil version no better than a bottom line Dart). IMO it's barely a step above the Xmart philosophy that it only has to last long enough to be ridden out the door.

Perhaps the LBS should thank the mail order co's for putting out shady bikes to fool consumers: It'll guarantee lots of service labor in the near future.
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Old 07-10-09, 01:56 PM   #8
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BD ads should come with a warning: You get no help. If you are not a skilled bike-mechanic who has built at least one bicycle up from the frame - this BD bike will cost you more money to get it set up properly. Do you know the difference between a brake-cable and a gear-cable? You have no real-time warranty. If you are a skilled mechanic - this could be a good deal. IF it arrives in perfect condition - and quite often it won't. If you don't have the skills to adjust and grease and properly tune this bicycle, add at least $200 for a (likely pissed-off) bike-shop to do this for you. If you have technical questions, feel free to call the factory in China. Or come to such places on the internet as bikeforums.net and try to ask questions there - where sight-unseen bike-mechanics may be able to help you. You will get no help in setting-up your new bicycle from Bikesdirect. You take responsibility if you do it wrong and end up hating bicycles as a result.

Did I leave anything out?
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Old 07-10-09, 03:20 PM   #9
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...Want a bike that is set up and fits properly? You are not going to find it at Bikes Direct.
If you already know what size bike you need and how to set it up correctly once it gets to your doorstep this isn't an issue.

Using your clothing analogy- I can hem my own pants.

That said- I still love my LBS(s) and continue to support them as well. I have 1 BD bike (which is running an IGH wheel purchased from an LBS) and 2 bikeshop bikes (plus my wife's bike would make 3 bikeshop bikes)

I believe there is a place for both and I hope that LBS's and BD will both be successful as the economy (hopefully) recovers.
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Old 07-10-09, 06:40 PM   #10
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Wordbiker - good post, good information.

But none of these address what LBS are doing to counter the competition offered by BD and the other online bike sellers. We can debate the merits of the online strategy and their bikes, but it really doesn't answer what I was wondering about. Will the LBS become even more relegated to serving only "serious" riders who understand that there is more to a bike than the frame and the deraillers?

Panthers - I get all that stuff. A lot of people are buying bikes on the internet regardless. Sure, they may end up having a bad experience -- but the LBS still has lost out on a sale.

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Old 07-10-09, 08:29 PM   #11
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But none of these address what LBS are doing to counter the competition offered by BD and the other online bike sellers.
I dunno. LBS's for the most part sell decent bikes and back them up with knowledge and service. BikesDirect sells crap and their customer service sucks. I don't see where the models are competetive.

And yes, I've bought a bike from BD. Never again.
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Old 07-10-09, 08:45 PM   #12
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I dunno. LBS's for the most part sell decent bikes and back them up with knowledge and service. BikesDirect sells crap and their customer service sucks. I don't see where the models are competetive.

And yes, I've bought a bike from BD. Never again.
Doesn't matter if you don't see where the models are competitive. There is clearly competition between internet sellers of bikes vs the LBS. Maybe I should'nt have brought BD into the fray specifically, but they are a big, obvious competitor -- go look at how many bikes they've sold on Ebay, and tell me none of those people would have bought from their LBS if factor X was different. My point is - what is Factor X that gets those people to the LBS vs BD? Clearly BD sells some relatively expensive bikes -- so it's not as if all their sales are going to folks who would have otherwise bought from Wallyworld.

Maybe BD just elicits too much emotion for a discussion that won't end up like "BD sells crap" I don't really care (for the purposes of this thread) if they sell crap, or if they don't. There are clearly a lot of people who perceive real value there -- and BD and other big internet bike sellers are using a different business model than seen in the industry previously (right?). So is this a game changer for the LBS?
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Old 07-10-09, 09:01 PM   #13
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Apart from the bike, my shopping for bike stuff ismostly impulse buying, when I see something I fancy in the bike shop. If bike you want isnt the exact thing that BD has in their site you are out of luck, whereas a bike shop will swap out a component for you. Bike shops can make their money by hiring enthusiastic students as mechanics at minimum wage and charging $40/hr for labour. There is money to be made out of servicing BD, Target and Walmart bikes.
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Old 07-10-09, 10:54 PM   #14
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Panthers - I get all that stuff. A lot of people are buying bikes on the internet regardless. Sure, they may end up having a bad experience -- but the LBS still has lost out on a sale.
That's why I included the part of the LBS to take this glossy mouse-trap for correctly setting up as being 'pissed-off.' Surely you don't think I'm even slightly supportive of BD and similar? I'm not. First thing that meets my eye today in the forums was a thread by a person who just crashed their brand-new BD contraption. Those bloody things turn-off people to bicycles and bicycling. It's like selling someone a "Do-It-Yourself" Junior Surgeon Kit. "Why pay for the hospital? With these easy step-by-step directions, you can remove your own appendix for less than $1.00!!"
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Old 07-11-09, 12:04 AM   #15
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I've harped on this til I've been blue in the face, but one more time:

Smaller LBSs need to follow the Ace /True Value model of owning a group cooperative distribution system, buying huge quantities of stuff directly from manufacturers and even commisioning factories in China to make private label goods (of high quality).

The dilemma now is Big Shop A which has 1 or more LBS outlets plus an internet sales operation gets most-favored-customer prices. It usually sells stuff at MSRP and gets great margins AND does beaucoup volume. Little Shop B with one outlet pays least-favored-customer low-volume prices. If it charges MSRP its per-sale margin is lower than Big Shop A's, and it doesn't do many transactions.

A group coop enables Little Shop B to make the same margins as Big Shop A or even fatter, depending on the operations cost of the coop's distribution system, because Little Shop B is aligned with 2000 other brethren, and they order vastly more product volume than Big Shop A, so they get prices nobody else does (except bike mfrs for OEM components).

If they wisely pass on the savings to customers (e.g. charging below MSRP, either by confronting mfrs who cannot legally dictate retail prices, or by pass-aggressively just holding a lot of "SALES" every major holiday, tax quarter, owners' birthday..), they win. They're local, ready to provide service on competitively priced products.

I've had it with my LBSs that are bending over and taking it in the rear from distributors and mfrs, then are passing on their predicament to customers by charging above-MSRP to make what they feel are "fair" margins because they're too lazy to get their own costs down and then make the same margins charging MSRP.

I'm on the fence with internet sales taxes, but they're coming as states grapple with budget shortfalls. They will help level the playing field too.

OEM diversions and moonlight production of unauthorized goods with brand names that brand owners don't get paid for, which is a form of insider piracy, will have to be attacked.

LBSs can thrive, they just need to wake up and organize.
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Old 07-11-09, 12:42 AM   #16
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Unless you are an experienced home bike mechanic I cannot recommend buying a new bike from an internet seller.

Too easy to mess up the assembly and adjustments and you then have no one to blame but yourself. If improperly assembled then the bike can be unsafe or damaged. If the machine built wheels are not destressed, retensioned and trued by an experienced mechanic then they are unlikely to stay true and may suffer from spoke failures.

The way an LBS can compete, at least among knowledgeable buyers, is by offering properly set up bikes and good service, including free service for a year as my LBS and others locally do.

A lot of people do internet shop, myself included. However I limit my purchases to items not likely to need service or have warranty issues.

BTW I note that as far as parts and accessories are concerned more and more brick and mortar bike shops are doing internet sales too, particularly those which have a specialty area of expertise or unusual parts available. If you cannot beat them then join them.
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Old 07-11-09, 04:02 AM   #17
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Bikes Direct is a threat to Local Bike Stores. But that's a good thing! If you were running an LBS, would you just keel over and give up? Would you close your doors and flip the bird to online stores? If you're worth your salt, you wouldn't.

You would adapt. You'd have to offer more competitive prices. Better services. All the things that BD doesn't have. In short: you'd compete. You'd differentiate your product. Aggressively trying to convince online shoppers that your LBS offers a real sense of character. People spend their money where they think it counts. Make that place be your LBS.

In the long run, it's unclear who loses out, LBS or BD. But it's clear who wins: the customers!
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Old 07-11-09, 11:16 AM   #18
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If someone buys fantastic looking (in the ads) machine - and doesn't get it set-up just right - who wins?? Chances are great, as they carry home the parts, they will swear to never look at another bicycle as long as they live. Once burned - twice shy.

Who profits from this? Not the LBS. Not BD. And the person in charge of the money - the would-be cyclist - wins nothing.

This is a lose, lose, and lose situation.
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Old 07-11-09, 02:40 PM   #19
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If someone buys fantastic looking (in the ads) machine - and doesn't get it set-up just right - who wins?? Chances are great, as they carry home the parts, they will swear to never look at another bicycle as long as they live. Once burned - twice shy.

Who profits from this? Not the LBS. Not BD. And the person in charge of the money - the would-be cyclist - wins nothing.

This is a lose, lose, and lose situation.
Also true that the same thing has been happening with chain store sold bikes for a long time, including some relatively decent bikes that have been offered by stores like Costco. Remember that probably 80% or so of the american bike market is chain store sold bikes.

What too many consumers do not realize is that the average bike as delivered to a store is a bike kit. It has been mostly assembled but has not had final assembly done and has not been adjusted. To merely throw the remaining parts on and start riding is likely to end up with a unsatisfactory and very possibly unsafe machine.

Maybe that is why SS and FG bikes have become so popular. No indexed shifting to go out of adjustment and provide lousy shifting. Makes them more idiot proof for the people who do buy on the internet.

To compete bike shops need to emphasize their after sales service and provide a friendly and confidence inspiring atmosphere for potential customers. Shops that do not also do not stay in business for long.
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Old 07-11-09, 07:39 PM   #20
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The best way to battle BikesDirect.com is to not sell garbage.
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Old 07-11-09, 10:03 PM   #21
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Should Mike Judge's 'Idiocracy' come to pass - I'm sure BikesDirect will be the only bike-shop in town. Every town.
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Old 07-11-09, 10:54 PM   #22
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Consider that a 100 years ago, Sears Roebuck & Co. operated a vast mail-order company that sold goods (of all kinds) cheaper than local merchants could. By your reasoning, every other retailer should be out of business now. They're obviously not. And in fact, the largest retailer around now is one who sells goods of all kinds via walk-in stores everywhere.
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Old 07-11-09, 11:13 PM   #23
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I don't think local bike shops are doomed. Evidence? Clothing and shoe shops are not doomed.

I have a very hard time finding shoes that fit. I would never ever buy shoes mail order. Same is true for me for pants aka trousers. Most shoes and trousers which are numerically my size just don't fit me.

Other people have other reasons for going into bricks and mortar shops. Some want personal service. Some want to learn before buying. Some don't trust themselves to choose from a web page.
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Old 07-11-09, 11:39 PM   #24
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Some look at the glowing, pretty pictures and lower prices....and paint themselves into a corner.
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Old 07-12-09, 12:02 AM   #25
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In the long run, it's unclear who loses out, LBS or BD. But it's clear who wins: the customers!
I don't want the customers to win or lose.

The best business model is the Win-Win. Keep trying to cheat the LBS owners and employees out of making a living and no one worth a crap will be able to work at one. Offer fair compensation for good service...and perhaps you'll get good service.
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