Originally Posted by willtsmith_nwi

Warranties ...

The LBS handles warranty issues with the local customer. In return they get exclusive distribution and a territory.

Very few people would want to buy a bike without ordering it. That means the product must be on a shelf near where someone lives. The LBS fullfills this job. In return, they get the territory and effectively a "warehousing" fee for making the inventory more accessible to the consumer.

If the bike shops didn't have dealership arrangements, they'd go out of business because Wal-Mart would then be able to sell their product. The end result would be crappy bikes for everyone. The bike makers realize this. Only startups will sell direct. Once they get dealerships, they'll no longer do this.