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Trek to start selling directly

Old 08-12-15, 08:33 AM
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Honestly, those are the only precedents I could cite. Trek is not eliminating the bike shop from the business b/c it would undercut its own dealers.

They had to make both the dealers and consumers happy so this is what they came up with.
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Old 08-12-15, 08:49 AM
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Originally Posted by cale
You're not bringing up similar examples. This (the Trek program) is different from direct to customer sales which eliminate the bike shop.
From what I know of Trek's intentions, this is exactly right. As I mentioned above (post 16) the Trek proposal looks very like what Giant is already doing in the U.K.: it will allow customers to choose/order/pay online, with pickup/setup at or through a Trek dealer. Very different from Bikes Direct etc.
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Old 08-12-15, 08:53 AM
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Originally Posted by downtube
Trek is supposedly charging 6k to get setup online plus 3k per year. I would guess returns are the dealers problem.

Thanks,
Yan
A link to the charges reference would be helpful. The Bicycle Retailer article link offered in the second post of this thread didn't say anything about these charges. Not that they are unreasonable for the referral service Trek will provide.

As for returns, they are a big problem. Nobody wants bikes that are special ordered (extra small or extra large frame sizes, just one example) sitting in their shop. And how will Trek transfer "ownership" to the bike shop? After all, the bike (unreturned) will be sold to the customer with the shop earning an assembly/set-up fee. How does the returned bike become the property of the bike shop if it doesn't purchase the returned bike from Trek? It is almost certainly more complicated than the "...dealer's problem" you suggest.
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Old 08-12-15, 08:59 AM
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Originally Posted by NormanF
Diamondback sells through Amazon. Its been very successful for them and people are happy they can buy a bike they want online with few hassles. I picked up my Schwinn from a bike shop online about couple of years from Michigan and in the past year I bought my Marin from eBay.

Bike companies can either accept people are going to circumvent their ban on online bike sales or they can give them what they want. As I said, people don't need to be protected from themselves.
The Diamondback brand was moved from bike shop sales to mass-retailer sales a number of years ago. I AM surprised that Amazon is selling them but only that they are able to work within the margins Amazon sales demand, not the sales model itself.

Schwinn has been out of the bike shop sales business for a very long time.

Not sure why you're restating something, "As I said, people don't need to be protected from themselves," which is unrelated to my comment. But I agree that consumers want convenience and best-price.
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Old 08-12-15, 09:14 AM
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Originally Posted by cale
A link to the charges reference would be helpful. The Bicycle Retailer article link offered in the second post of this thread didn't say anything about these charges. Not that they are unreasonable for the referral service Trek will provide.

As for returns, they are a big problem. Nobody wants bikes that are special ordered (extra small or extra large frame sizes, just one example) sitting in their shop. And how will Trek transfer "ownership" to the bike shop? After all, the bike (unreturned) will be sold to the customer with the shop earning an assembly/set-up fee. How does the returned bike become the property of the bike shop if it doesn't purchase the returned bike from Trek? It is almost certainly more complicated than the "...dealer's problem" you suggest.
The comments on the bicycle retailer article is the reference.

Thanks,
Yan
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Old 08-12-15, 09:21 AM
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cale,

In the comments some owners also refer to the margins, it seemed they would be lower for internet sales. However that was not 100% clear...In general margins in the industry are between 30-40%. People were talking about 20-25% margins online, hence I naturally assumed they are lower.

Thanks,
Yan
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Old 08-12-15, 09:26 AM
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Originally Posted by cale
A link to the charges reference would be helpful. The Bicycle Retailer article link offered in the second post of this thread didn't say anything about these charges. Not that they are unreasonable for the referral service Trek will provide.

As for returns, they are a big problem. Nobody wants bikes that are special ordered (extra small or extra large frame sizes, just one example) sitting in their shop. And how will Trek transfer "ownership" to the bike shop? After all, the bike (unreturned) will be sold to the customer with the shop earning an assembly/set-up fee. How does the returned bike become the property of the bike shop if it doesn't purchase the returned bike from Trek? It is almost certainly more complicated than the "...dealer's problem" you suggest.
Don't know if any of Trek's proposed terms are public knowledge yet, but returns could, I suppose, be covered by something like this: https://www.giant-bicycles.com/en-GB...rns.Procedure/

The example may not hold, of course, in part because U.K. consumer laws are possibly quite different from those in the U.S. (and Canada), but it's a possible model.
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Old 08-12-15, 09:28 AM
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Originally Posted by downtube
cale,

In the comments some owners also refer to the margins, it seemed they would be lower for internet sales. However that was not 100% clear...In general margins in the industry are between 30-40%. People were talking about 20-25% margins online, hence I naturally assumed they are lower.

Thanks,
Yan
Those 30-40% margins contain a lot of dealer support and marketing costs that are directly related to LBS sales. If you eliminate those costs, then it is entirely reasonable to pass along the savings to consumers. This assumes that Trek wants to compete aggressively in the online direct-to-customer sales market. Trek is very business savvy.
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Old 08-12-15, 09:29 AM
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Originally Posted by cale
The Diamondback brand was moved from bike shop sales to mass-retailer sales a number of years ago. I AM surprised that Amazon is selling them but only that they are able to work within the margins Amazon sales demand, not the sales model itself.

Schwinn has been out of the bike shop sales business for a very long time.

Not sure why you're restating something, "As I said, people don't need to be protected from themselves," which is unrelated to my comment. But I agree that consumers want convenience and best-price.
Dorel, the Canadian conglomerate, owns Schwinn, GT, Cannondale, Caloi, Sugoi and IronHorse. They can afford to split sales between the mass market channel and IBS for their bike brands.
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Old 08-12-15, 09:31 AM
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Originally Posted by badger1
Don't know if any of Trek's proposed terms are public knowledge yet, but returns could, I suppose, be covered by something like this: https://www.giant-bicycles.com/en-GB...rns.Procedure/

The example may not hold, of course, in part because U.K. consumer laws are possibly quite different from those in the U.S. (and Canada), but it's a possible model.
You can't get those terms without being or knowing an "insider". I write this because I agree that the devil is in the details.
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Old 08-12-15, 09:32 AM
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Originally Posted by cale
Those 30-40% margins contain a lot of dealer support and marketing costs that are directly related to LBS sales. If you eliminate those costs, then it is entirely reasonable to pass along the savings to consumers. This assumes that Trek wants to compete aggressively in the online direct-to-customer sales market. Trek is very business savvy.
Trek is carrying around a huge number of old school dealers that have no interest in efficient changes ( they are big fans of inefficient changes )....this will be interesting.

I expect the market will be changing in 2-3 years.

Thanks,
Yan
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Old 08-12-15, 09:35 AM
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Originally Posted by NormanF
Dorel, the Canadian conglomerate, owns Schwinn, GT, Cannondale, Caloi, Sugoi and IronHorse. They can afford to split sales between the mass market channel and IBS for their bike brands.
Being big doesn't allow you to afford big mistakes. It just magnifies the impact of those mistakes on your business model. Now, Raleigh USA split bike sales of Raleigh and Diamondback (a brand it owns) because the Diamondback brands is much more closely associated with "youth" sales. It was Diamondback's reputation in BMX bikes and later MTB bikes that allowed them to segment their sales based on whether the buyer was open to shopping at mass retailers and the potential damage such sales would bring to the brand. It is this last consideration that is most likely the reason, I don't know for sure, Cannondale bikes aren't sold direct to customers. To do so would damage the brand.

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Old 08-12-15, 09:37 AM
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Originally Posted by downtube
Trek is carrying around a huge number of old school dealers that have no interest in efficient changes ( they are big fans of inefficient changes )....this will be interesting.

I expect the market will be changing in 2-3 years.

Thanks,
Yan
Agreed, 100%.
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Old 08-12-15, 09:42 AM
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Originally Posted by cale
Those 30-40% margins contain a lot of dealer support and marketing costs that are directly related to LBS sales. If you eliminate those costs, then it is entirely reasonable to pass along the savings to consumers. This assumes that Trek wants to compete aggressively in the online direct-to-customer sales market. Trek is very business savvy.
But a point you are not addressing is, as a consumer, if I'm doing direct to customer ordering, Trek is too highly priced, and too inconvenient. If I am confident enough to order directly, then I expect at home delivery (unlikely from Trek as why would the LBS pay for the privilege to lose money with extra expenses), or wherever I want it delivered, and I'm certainly not paying retail price when others provide similar bikes for much less. As stated by another poster in the FX disc thread, Trek bikes have gotten increasingly dull and generic, so why not go with a much lower cost generic bike?
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Old 08-12-15, 09:44 AM
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Originally Posted by badger1
Don't know if any of Trek's proposed terms are public knowledge yet, but returns could, I suppose, be covered by something like this: https://www.giant-bicycles.com/en-GB...rns.Procedure/

The example may not hold, of course, in part because U.K. consumer laws are possibly quite different from those in the U.S. (and Canada), but it's a possible model.
Makes sense that Trek would offer to take the bike back for a restock fee, or allow the bike shop to keep the bike and re-sell to another customer, with probably some sort of additional discount to ensure the dealer doesn't lose money. Definitely an issue that any shop owner would want resolved up front, since under the current model they "own" the bike that is sold to the end user, while being a pass-through in the new model. Or perhaps they're just given a slightly larger share of profits on all sales if they agree not to return any non-defective units.
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Old 08-12-15, 09:46 AM
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Most of us know that most bikes are pretty similar for a particular market. We go to the shop to ride them, and usually for whatever tiny reason, one will be noticeable better fit for us as a individual, and that's what we end up going with. With Internet sales, that option does exist, then it becomes a price for specification game. Where can I get the most bike for a particular price. On these grounds Trek will lose badly with this model.
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Old 08-12-15, 09:54 AM
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Originally Posted by quicktrigger
But a point you are not addressing is, as a consumer, if I'm doing direct to customer ordering, Trek is too highly priced, and too inconvenient. If I am confident enough to order directly, then I expect at home delivery (unlikely from Trek as why would the LBS pay for the privilege to lose money with extra expenses), or wherever I want it delivered, and I'm certainly not paying retail price when others provide similar bikes for much less. As stated by another poster in the FX disc thread, Trek bikes have gotten increasingly dull and generic, so why not go with a much lower cost generic bike?
I recently read that Lexus (the Toyota brand) will include a new "fixed" price model (remember Saturn sales?) because customers don't want to dicker. I loved dickering but I know a great many people that don't. LBS sales are a lot closer to being like old-fashioned "dicker for a price" sales than this new model of sales. I read (imagine) a trend away from the dicker model in these sales but it may be an experiment of sorts. (Saturn sales.... well they weren't great.)

Saying that the Trek is too high priced and inconvenient sounds like your opinion.

Trek won't ship to the customer because they HAD to give the LBS something to compensate for the potential lost P&A sales. Making the customer go to a shop to pick-up the bike offers the LBS a path to recover those sales.
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Old 08-12-15, 09:57 AM
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Originally Posted by quicktrigger
Most of us know that most bikes are pretty similar for a particular market. We go to the shop to ride them, and usually for whatever tiny reason, one will be noticeable better fit for us as a individual, and that's what we end up going with. With Internet sales, that option does exist, then it becomes a price for specification game. Where can I get the most bike for a particular price. On these grounds Trek will lose badly with this model.
You discount the value of the Trek brand, probably the single most important "feature" they offer. You may not care what your bike is worth after receiving it but if you try to sell bike A (Motobecane) and bike B (Trek), there is a real and valuable difference between the two bikes even if they are otherwise "identical".

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Old 08-12-15, 10:51 AM
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Originally Posted by quicktrigger
But a point you are not addressing is, as a consumer, if I'm doing direct to customer ordering, Trek is too highly priced, and too inconvenient.
My bad, I wasn't clear. It isn't that I think customers don't want to get a Trek for a lower than retail price, I do! The consumer knows that the Trek brand is valuable. Just as Honda and Toyota buyers know that the brand they buy is valuable. (I certainly don't mean the only valuable brand or the most, etc.) The value is the confidence that the brand name puts in their minds. That confidence was built on the backs of bicycle retailers so Trek isn't going to "stab them in the back" so to speak. At least, I don't think they'd be that stupid.

What is best for Trek is moving as much product as possible. They are like a pump on high and they want to go even higher. What is probably holding them back is transaction speed, not production capability. They need as many transactions as possible. Direct to consumer sales add bikes to the pump.

Originally Posted by quicktrigger
If I am confident enough...
Who wouldn't you be? Imagine the sales at BikesDirect if they were selling TREK's for the price they sell Motobecanes! It would boost BikesDirect sales to the point where they could afford to order proprietary hydro-formed tubing, BB standards all their own, etc. There wouldn't be any physical difference between the two brands.

BikesDirect can ship to you directly because they have no dealers to hurt. At least, not yet. See comment above about "stabbing" for reasons why you (Trek, in this case) wouldn't want to cut them out.


Originally Posted by quicktrigger
...to order directly, then I expect at home delivery (unlikely from Trek as why would the LBS pay for the privilege to lose money with extra expenses), or wherever I want it delivered, and I'm certainly not paying retail price when others provide similar bikes for much less.
Two points:

A) There will be expenses incurred by Trek for the program (staff expenses, inventory/distribution, etc.) so unless you think the program is of no value to the bicycle retailer, why not charge for it? The value is the referral business. Trek imagines additional sales from the Internet-based direct-to-customer scheme for both itself and the retailer. I pointed out in an earlier post that P&A sales are important and making the customer pick up their bike helps retailers hold onto those sales. Parts & Accessories typically carry a higher margin for the retailer so they are highly valued. That's the value to the retailer that makes participation (it's voluntary!) worth charging for.

Additionally, Trek is specifically interested in boosting sales to women. The Bicycle Retailer article specifically mentions training and support for sales to women. I'm going to go out on a limb here, but I think that, as a broad generalization, women are turned off buy the old-school "boy's club" environment that has pervaded many bike shops. (I certainly don't include Performance or Trek's retail outlets in this generalization of the stores themselves.) So women are a prime target of direct-to-consumer sales and Trek (possibly most retailers too) wants those sales to be of Trek bikes, not some other brand.

B) You wrote that you wouldn't pay extra for the Trek bikes because similar bikes (costing less) will ship direct to you. That's an opinion. It may be held by many, but the majority of buyers are paying extra for the Trek name. We could argue endlessly about whether this makes any sense and it really comes down to the entire "capitalist" model of economics. I can't be bothered. Fact of the matter is, you and I know they're paying for the name and doing it in droves.


Originally Posted by quicktrigger
As stated by another poster in the FX disc thread, Trek bikes have gotten increasingly dull and generic, so why not go with a much lower cost generic bike?
I do... sometimes... but a lot of people don't. Bikes aren't always bought by rational-minded people. Go in for a bike to "just get some exercise" and walk out with some carbon fiber wonder. If you want exercise, the rational mind says, get the heaviest and worst-rolling bike you can fit. You'll get a TON of exercise. Haha

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Old 08-12-15, 10:57 AM
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Originally Posted by cale
Saying that the Trek is too high priced and inconvenient sounds like your opinion.

Trek won't ship to the customer because they HAD to give the LBS something to compensate for the potential lost P&A sales. Making the customer go to a shop to pick-up the bike offers the LBS a path to recover those sales.
Of course it's my opinion based upon the assumptions I stated. But that is all that any of us have at this point, is our opinion. And yes, I discount the "name", as I have seen so many "brand names" blow in in just a couple years. Dell and Gateway computers are excellent examples. Sony does not carry the luster that it once did. And in the bike world, many many "brands" have blown it. Schwinn is and obvious example. Trek is not beyond going the same route. And yes, this is my opinion.

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Old 08-12-15, 11:40 AM
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To be sure, some people buy the name. But there are allot of those kind of bikes around already. Bread and butter type sales, tend to be much more price sensitive, and those are the ones that keep the doors open. To be clear, I'm not advocating that Trek turn their backs on the LBS for internet sales. I'm just saying the type of shopper their internet sales will attract are almost certainly expect a price break for their troubles as is typical in internet sales. That will be a problem for this model that Trek is wanting to use. Beyond that, Trek does have allot of their own branded and spec'ed parts etc. That falls under proprietary components if carried too far, and proprietary components (if too many) drive away sales. Compaq computer from the 80's-90's went this route, and it was a significant part of their downfall, as you had to pay exorbitant price for replacements that failed at a high rate requiring another replacement.

Of course it is all speculation from everyone, and not all the details are out. But I just don't see a lure from the consumer end for the limited budget buyer, or the picky hands on buyer. These two groups are the most critical buyer's IMHO.
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Old 08-12-15, 01:01 PM
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Originally Posted by quicktrigger
Of course it's my opinion based upon the assumptions I stated. But that is all that any of us have at this point, is our opinion. And yes, I discount the "name", as I have seen so many "brand names" blow in in just a couple years. Dell and Gateway computers are excellent examples. Sony does carry the luster that it once did. And in the bike world, many many "brands" have blown it. Schwinn is and obvious example. Trek is not beyond going the same route. It's yes this is my opinion.
Oh it hasn't been THAT bad. Dell is still one of the top sellers of laptop computers and the desktop market (where they all started) continues to shrink regardless to the name behind the machine.

I don't recognize a great many mistakes in Trek's past marketing program. (Let's not bring up that one,please.) What I see is a war of big players in a market long overdue for change.
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Old 08-12-15, 01:12 PM
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Originally Posted by quicktrigger
... the type of shopper their internet sales will attract are almost certainly expect a price break for their troubles as is typical in internet sales.
Maybe, after all there are a great many buyers that joined Amazon's Prime membership and they don't generally get the best price when they shop products that qualify for prime shipping.

I don't think there will be troubles, either. The bike shop is there to assemble the bike and go over how it works. Where's the inconvenience? I see the convenience of shopping from your arm chair but not in the delivery option.

Originally Posted by quicktrigger
Beyond that, Trek does have allot of their own branded and spec'ed parts etc. That falls under proprietary components if carried too far, and proprietary components (if too many) drive away sales.
A very narrow portion of bike riders (though, admittedly, the vast majority of BikeForum members) are frustrated with confusing bottom bracket standards. Other than that, the bikes I'm familiar with adhere pretty closely to Shimano, FSA, and Sram conventions where it comes to replacement parts.

The article in Bicycle Retailer supports the idea that people want a different model for bike buying. If it doesn't work, Trek will be guilty of trying which isn't so bad. If it works (I'm certain they have researched the subject using the usual marketing tools), they stand to get a jump on the competition. This could be a very good thing for the company.
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Old 08-12-15, 01:34 PM
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This Trek model reminds me of what Wal Mart has tried to do with their online sales. Pay full retail, and ship it to the closest store (without telling you how long that will take). Best Buy does basically the same model for internet sales. I can't speak for anyone else, but I don't know anyone that shops either internet sales site. Everyone I know goes to Amazon, or Newegg, or similar. IMHO, because the consumer does not benefit in any way. Instead people go to Wal Mart and BB for hands on, or immediate needs. IF Wal Mart has issues making this model have an impact, then I don't think Trek (or Giant or anyone else) can do so either.

I certainly agree, things will be a changing. That writing has been on the wall for some time. However it shakes out, the consumer will have to see tangible benefit for any one model to survive. Bikes Direct provides a price advantage, and that model is unlikely to go away, but it remains to be seen how the others will shake out.
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Old 08-12-15, 02:27 PM
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From a shop perspective -- I work in a Trek shop...

Downsides:
- I don't see any real info regarding returns. Who will own that inventory, dealer or Trek?
- Less inventory on hand; less bikes to test ride. If someone orders a model and size LBS has on the floor, it will still get shipped from Trek. Expect shop owners and managers to react by bringing in less inventory to make up for online sales.
- There are consumers out there who dislike the idea of buying a floor model, thinking that it is a typical retail "display" unit with associated wear, rather than a "new bike." They might buy online rather than from existing inventory.
- Trek decides shop margin rather than the shop.
- If it turns out shops don't need to carry as much inventory, then existing capital like storage space and floorspace is wasted, which could be a big deal for shops with established real estate -- inability to shrink to meet new margins and needs.
- paying for higher shipping costs vs. ganging even individual orders up with larger orders for shipping discount -- freight vs. UPS.

Upshot:
- 24 hour sales, even outside shop hours.
- Someone looking for a Trek who doesn't know your shop will certainly find out about it if they shop online.
- If the site is able to xref a shop's existing inventory, a buyer might enjoy next day pickup.
- Ability to impress with service during initial sale.
- Ability to upsell accessories from existing inventory.
- Less need to manage and display extensive inventory.
- Retail price protection -- no "can I get a discount?" for online sales...

It's probably not as bad a the loudest nay-sayers would have you believe, probably not the online panacea Trek envisions...
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