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Shop owners, need help please

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Shop owners, need help please

Old 06-08-07, 11:27 AM
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BikeManDan
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Shop owners, need help please

This is slightly off topic but I know shop owners frequent this forum so this is why I placed this here




I am currently in the process of opening an online storefront selling bike parts specifically targetted towards commuting and utilitarian cyclists (More info here). My ultimate goal is to own a brick and mortar shop as well but I am still a college student and do not yet have the full capital or time necessary...yet

I have secured two relationships already with small part manufacturers and am pleased with that. I however want to carry some products from the big names in the industry and that requires going through a distributor.

I have contacted 5 distributors now: QBP, UBI, Seattle Bike Supply, Merrys Sales and Wilson Bicycle Sales. All have stonewalled me stating that they don't do business with "virtual" stores. Merrys even had the gall to undermine me by saying "We only support local bike shops" in a tone befitting a child. I've been treated like the enemy and I don't feel that I am; I am just trying to provide a worthwhile and good service to cyclists and earn a few bucks along the way.

It is my understanding that the distributors are gun shy of the online shops because of pressure from the manufacturers regarding pricing. Online shops have little overhead and can charge less for a product upsetting the bike shops because now they've been undercut. So it seems to me the prices are being fixed in the favor of the bike shops. This doesn't seem like free open market to me.



But alas, to the 64,000 dollar question, are there any bicycle parts distributors that will sell to online shops?

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Old 06-08-07, 11:58 AM
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The simple fact is that online stores are threats to the classic LBS. You have stumbled into one of the great realignment upheavals in retailing history. (And it's not just bike stores, either. E.g. audio/video is even worse.)

This isn't a threat to the "free open market", btw. Although you'd never know it from Basic Econ, price is not the only axis on the supply/demand curve. Accessibility, service, non-volatility, etc. are important to the OEMs and to the distribution chain. They support branding, widen the customer base, and make re-investment yields predictable. While virtual stores compete well in price, they suck at the above.

Try talking to some B&M stores that also have an online presence (if you can find one that will talk) to see how/whether they've leveraged an existing distributor relationship. Then you might propose doing same with a B&M near you.
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Old 06-08-07, 02:17 PM
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Originally Posted by dwoloz
But alas, to the 64,000 dollar question, are there any bicycle parts distributors that will sell to online shops?
First, do you realize how many calls these companies field on a daily basis?

Maintaining a "place of business" with operating hours that is open to the public is about your only hope. You establish that and you will find companies fairly tolerant of your desire to expand your business in the online world. Until then, you're just another guy looking for a hook-up as far as the distributors can tell.

Do you have a business plan on paper that details all facets of your proposal? Like where your start-up capital is coming from? Your level of commitment, as well as expertise in not only the knowledge of bike parts but in business operation? Your forecasts for cash flow, and how you plan to grow your business? In other words, any reason they should take you more seriously than the other 30 guys that called earlier?

Just a few things to think about...
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Old 06-08-07, 02:25 PM
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And be prepared to guarantee a minimum $50+K initial order if you're trying to establish yourself as a new retailer. Distributors rarely offer a discount just because you qualify as a "dealer". The discount is a function of the size of an order.
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Old 06-08-07, 02:49 PM
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Originally Posted by BikeWise1
First, do you realize how many calls these companies field on a daily basis?

Maintaining a "place of business" with operating hours that is open to the public is about your only hope. You establish that and you will find companies fairly tolerant of your desire to expand your business in the online world. Until then, you're just another guy looking for a hook-up as far as the distributors can tell.

Do you have a business plan on paper that details all facets of your proposal? Like where your start-up capital is coming from? Your level of commitment, as well as expertise in not only the knowledge of bike parts but in business operation? Your forecasts for cash flow, and how you plan to grow your business? In other words, any reason they should take you more seriously than the other 30 guys that called earlier?

Just a few things to think about...
This does me no good as the moment I mention to them "online only", I am dismissed without any chance to explain my business or that I have 100k in capital waiting to be invested.
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Old 06-08-07, 09:41 PM
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You are in college and you have 100k to invest in an online biz.

How do you get a million dollars in the bicycle business? Start with 2 million.
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Old 06-08-07, 11:15 PM
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I had another chat with someone at QBP and was given more attitude. I was given the same rhetoric about "supporting the local bike shop".

My efforts at this point are misdirected so I have shifted my plans.

I will now strike a deal with a bike shop in the county that will agree to sell me large quantities of desired product at a discount. I utilize their wholesale account and they get a kickback; win-win. I will not get as good of a price as if I was a dealer but I think it's going to be the best I can do.
I have good relationships with a few shops but it will still be a challenge convincing any to get on board for this.
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Old 06-08-07, 11:46 PM
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Originally Posted by dwoloz
I had another chat with someone at QBP and was given more attitude. I was given the same rhetoric about "supporting the local bike shop".

My efforts at this point are misdirected so I have shifted my plans.

I will now strike a deal with a bike shop in the county that will agree to sell me large quantities of desired product at a discount. I utilize their wholesale account and they get a kickback; win-win. I will not get as good of a price as if I was a dealer but I think it's going to be the best I can do.
I have good relationships with a few shops but it will still be a challenge convincing any to get on board for this.
Agreed, it will be a tough road getting any legitimate shops to go along with a kickback scheme to gray market goods. After all, they are not only risking losing their accounts, but could even be sued for breach of contract. JMO, but if you can't do it with integrity, then you are the reason that vendors are so resistant to deal with any "virtual" stores, and why the LBS may see you as an enemy.
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Old 06-08-07, 11:56 PM
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Back that train up

I've been trying my god damn hardest to do this legitimately but I have been STONEWALLED for no reason other than the mindless rhetoric of "Online bad, LBS good"

I'm not giving up, I am going to make this happen whatever way necessary
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Old 06-09-07, 12:01 AM
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Even if it's illegal or puts others' livelihoods in peril?
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Old 06-09-07, 12:09 AM
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How is it illegal for a shop to sell me product? I ask that in all honesty because I really don't know


Are we all just to assume that selling any sort of bicycle equipment online is wrong? What is so wrong here? How am I supposed to get product? I am not a criminal. I am trying to be involved in what I love and earn an honest wage.
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Old 06-09-07, 12:20 AM
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I am glad I am not the only one!
http://www.branfordbike.com/shimano/brain.html

The above article is exactly my experience and describes my findings of price fixing and dirty anti-competitive trade
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Old 06-09-07, 12:43 AM
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If their contracts specify that products are not to be sold under a certain price or through an online store, then if they knowingly resell to you for that purpose, they're breaching their contract, and you are an accomplice to that breach.

I know it sounds like I'm just being harsh, but that is how it works. When you propose to "go through the back door" and to "make it happen by any means necessary", it smacks of justifying unethical actions.

I am in no way trying to say that you can't do anything you set your mind to, but if that's the policy of the vendors, then going behind their backs and dealing with LBS's in the back alleys could land you in a lot more trouble than you may be willing to deal with.

An unnamed retailer got into a lot of trouble with Shimano a number of years ago due to playing games with buying OEM parts packages and even complete bikes, then selling the parts off at extremely low retail prices that other vendors couldn't touch. Some might call that smart business, the clients saw it as an unbeatable deal (which it was compared to vendors playing by the rules), but Shimano saw it as a violation of their contracts, a devaluation of their perceived value, and cutting out everyone else from a market that the unnamed retailer was only a small portion of, relatively speaking. Even if that story is a mere rumor, it shows why vendors wish all their retailers to have a fair chance at competition: It actually encourages fair trade.
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Old 06-09-07, 06:29 AM
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You left out two big names: J&B Importers and The Hawley Company. J&B would probably be your best bet.
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Old 06-09-07, 06:35 AM
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Another thing is, an online store can more easily exploit distributor priced good for themselves and their friends. It doesn't take an existing shop to sell bike products online, and a fair few distributors I know have made their accounts with the LBS I work at by first going into the shop, talking to the owner, then setting up an account.
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Old 06-09-07, 09:46 AM
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Originally Posted by dwoloz
Are we all just to assume that selling any sort of bicycle equipment online is wrong?
Of course not. But the manufacturers and distrubutors do have a legitimate interest in making sure that their product gets sold through reputable retailers. Trek or Specialized can (within certain constraints that vary from state to state) pull their product from any dealer that doesn't abide by their rules. Why can't any other manufacturer do the same? Internet retailers do exist, and the distros a manufacturers hold them to similar standards. It's legal.

You've probably gotten the brush because, as another poster mentioned, QBP or BTI gets so many calls from chumps who just want to buy stuff at wholesale. I guarantee that you'd get a different reception if you had existing contacts in the industry. You might try spending some of that $100k on an experienced industry "consultant" who could get you in the door. Connections are priceless.

Another thing you'll need is liability insurance. The distributors will specify how much they need you to have. If you have that lined up, along with a well-researched business plan and a consultant who can call some friends in the industry, your job will be much easier.
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Old 06-09-07, 03:21 PM
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Originally Posted by dwoloz
How is it illegal for a shop to sell me product? I ask that in all honesty because I really don't know...
It may not be illegal, but it could violate contract terms by which the retailer was granted its dealership. (Depending on state commercial code that may not be permitted.) The immediate form of relief would be for the distributor to yank the dealership. Talk to an attorney about this before you start asking questions of local retailers.
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Old 06-09-07, 03:34 PM
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A few more thoughts....

As you venture into the world of online sales, you will find that little other than price matters to those shopping your site. They may love the info you provide and marvel at how well it is presented, but when it comes time to buy, they will, with little exception, go with the cheapest.

As some of the posters in your other thread said:

It's a crowded market place. Personally, I don't really care where I purchase from. Price, taxes & shipping are my bottom line.
And from another:

+1 .... I'll research from other sites, but it comes down to (the price) when I click the final "Purchase" button.
So what makes you think you can be competitive, while representing the manufacturers whose products you sell in the best possible light, rather than just being another conduit for the lowballers to price shop, and still make any money?

Again, do you have a complete business plan? Are you ready to go to Interbike and present it to people face to face? How bad do you want it?

I promise you will get nowhere on the phone. The phone is lazy. So is email. How about a nice letter to a distributor, with a simple business plan enclosed, with an offer to fly or drive out and meet them. Have your company charter in hand, along with your tax ID number and vendor's license. That may get their attention. But until you appear serious about the business, you're just another guy with an expensive hobby who wants to hook himself up. Until you have a retail location though, you can pretty much forget about the whole thing.

As for Shimano, let me put it simply:

Shops are where new cyclists come from for the most part. Enthusiasts generally prefer to shop online, but if there aren't new cyclists emerging, there will be fewer ever getting to the "enthusiast" stage. Manufacturers are beginning to believe that shops must be protected if the industry is to survive and flourish. If fewer people opt for cycling(and there's a lot of competition from other sports), because there's no easy access, local hub of experience and activity, the industry as a whole will suffer.

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Old 06-09-07, 09:32 PM
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Originally Posted by dwoloz
I will now strike a deal with a bike shop in the county that will agree to sell me large quantities of desired product at a discount. I utilize their wholesale account and they get a kickback; win-win. I will not get as good of a price as if I was a dealer but I think it's going to be the best I can do.
I have good relationships with a few shops but it will still be a challenge convincing any to get on board for this.
It is extraordinarily dangerous to rely on a single shop for the security of your business. It may be against the agreement for the shop to act as anything other than an end seller. Even in the event it starts out OK, the terms may later change, you may be suddenly cut off, and your business will be in jeopardy.

Your "it's not fair" attitude will gain you no friends in the business. If you want to play, you have to either abide by the rules or find very creative ways to bend them to your advantage.
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Old 06-09-07, 10:38 PM
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I know how you feel. I have been trying to get the local college or any college to hire me to teach mechanical engineering. They will not do it, Just because I do not have a "degree", I am somehow unqualified. What gall they have. I can't believe they would make me follow the ruleset that every other educator they have hired has had to follow. I think I will sue.
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Old 06-10-07, 09:44 AM
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Originally Posted by BikeWise1
A few more thoughts....

As you venture into the world of online sales, you will find that little other than price matters to those shopping your site. They may love the info you provide and marvel at how well it is presented, but when it comes time to buy, they will, with little exception, go with the cheapest.

As some of the posters in your other thread said:



And from another:



So what makes you think you can be competitive, while representing the manufacturers whose products you sell in the best possible light, rather than just being another conduit for the lowballers to price shop, and still make any money?

Again, do you have a complete business plan? Are you ready to go to Interbike and present it to people face to face? How bad do you want it?

I promise you will get nowhere on the phone. The phone is lazy. So is email. How about a nice letter to a distributor, with a simple business plan enclosed, with an offer to fly or drive out and meet them. Have your company charter in hand, along with your tax ID number and vendor's license. That may get their attention. But until you appear serious about the business, you're just another guy with an expensive hobby who wants to hook himself up. Until you have a retail location though, you can pretty much forget about the whole thing.

As for Shimano, let me put it simply:

Shops are where new cyclists come from for the most part. Enthusiasts generally prefer to shop online, but if there aren't new cyclists emerging, there will be fewer ever getting to the "enthusiast" stage. Manufacturers are beginning to believe that shops must be protected if the industry is to survive and flourish. If fewer people opt for cycling(and there's a lot of competition from other sports), because there's no easy access, local hub of experience and activity, the industry as a whole will suffer.
Bikewise you are in business now or were at one time. You couldn't have phrased it better. The OP was definitely done by someone with no practical business experience. The "school of hard knocks" changes everything you learned in college. Business if for the RUTHLESS. Nice guys seldom succeed. A sad but true fact.

Tim
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Old 06-10-07, 10:47 AM
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One more piece of the puzzle: the wholesalers are competitors, but as with any business, they're also all friends. They talk amongst themselves, and if one blackballs you you're probably done before you start with the rest of them as well. This is not necessarily legal, but it's how the industry works.
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Old 06-10-07, 10:48 AM
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i've been working on a similar concept but in the b&m style. basically i've been told that unless the doors are open 5 days a week, 8 hours a day, don't bother calling the distributors. i'm moving forward with marking up retail, mail-ordered in from somewhere else, on a consultant-style timeline. hyper-inefficient? undoubtedly, apparently it just takes a good salesperson.
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Old 06-10-07, 11:50 AM
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Originally Posted by cs1
Bikewise you are in business now or were at one time. You couldn't have phrased it better. The OP was definitely done by someone with no practical business experience. The "school of hard knocks" changes everything you learned in college. Business if for the RUTHLESS. Nice guys seldom succeed. A sad but true fact.

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Rockin' it everyday at www.bikewiseoxford.com - I love bikes! I hate the bike business!
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