The Changing Face Of Bike Retail

In the last couple of years there has been steady growth in the number of conversations about the retail future of the bicycle industry; they range in topic, from what size of wheel to offer to how "evil" the Internet is for local industries.

Announced in New Zealand today; the purchase in one of the largest online retailers by a traditional "big-box" retailer. The company purchased is Torpedo 7, known in New Zealand and Australia for keen pricing and fast, reliable shipping. The purchaser is The Warehouse, the local analogue for Walmart / CostCo.

The Warehouse has become known as 'the category killer' in New Zealand, it's the shop where you can pretty much find everything you want, though not always the brands you'd recognise. It's where you can buy a Kony branded LCD TV or a Diamond Back branded mountain bike for under $250. They are about providing goods at bargain prices. Now they want to aggressively grow their business and recently they have been purchasing other retail groups, such as Noel Leeming, an electronics and white-ware retailer.

Their plan is two-fold, increase reach with diversified retail brands and improved purchasing power across the whole group of companies they own. For example customers of The Warehouse really want to see more known brands they can purchase, such as Sony, not Kony and purchasing a leading retail brand will make this happen.

Torpedo 7 has a, shall we say, fractious relationship with distributors in New Zealand. That is because much of their stock is sourced from alternative (but still, authorised) suppliers, not the local distributors, which does cause tension if you take your bike or parts in for servicing with your mechanic. Some local distributors have been know to turn down warranty claims/repairs on components they know came from Torpedo 7. However that is starting to change, as now there are some local distributors work directly with Torpedo 7.

I have purchased items from Torpedo 7, and so has pretty much everyone I spoken with. Generally we are all buying parts, accessories and components in a way that's convenient and often a lot cheaper than a visit to a store.

The investment in Torpedo 7 will not just give The Warehouse access to some new brands, but also to their excellent on-line purchasing and shipping model, which is currently a weak area for The Warehouse. For Torpedo 7, they should gain assistance with product sourcing and logistics.

What does this mean for customers.. well right now not much, Torpedo 7 will continue to offer great prices on products and The Warehouse will continue to make available cheap, basic bikes to customers. 

The future becomes a bit more hazy, because if The Warehouse moves from their range of basic bikes and accessories to carrying more improved products and a bigger range, to begin offering in-house mechanical  repairs, then local bike retailers will start to hurt, especially as The Warehouse has a trusted and known policy of providing refunds/warranty support/loyalty and offering no-fuss finance.

Does this mean bike shops will shut down? - I think it'll hurt existing branded/franchised stores first rather than independent retailers, because they are they ones who have been moving closer to the model operated by The Warehouse, which is lots of branded stores in lots of places and carrying stock that is easy to sell and offers the best margins.

Does that sound damning..

Well it should, because the conscious move by retailers to this model has made the experience for customers so much less that it should. 

Here is an example, in my letter box last week arrived a full-colour 8 page brochure for a nationwide chain of stores. They have some great core brands, and featured inside some nice AM/trail bikes I was very keen to go have a look at, so during my lunch hour I drove to the store closest to me. I was approached by a keen in-store person and I asked about the bikes… they looked at me a bit quizzically and then stated that they had none of those models and would not be getting any of them. I could order one; i.e. buy one.

So why did they have none… no-one seemed to be able to answer, including the manager.

Out of curiosity I tried another branch of the same chain and got the same answer, though they said another branch should have them as "that branch" was the "mountain bike" shop. Feeling up to the challenge, but short on time, I called that branch to see if they had them in stock… err, that would be no.

Thee gave me a similar answer to the first store, they could get whatever I wanted to order, but had none on hand and would not be getting any… so what was the point of the brochure… I'd guess it was to get customers in store and sell them the on hand stock, the problem I can see is what I saw was not even close to what was featured, unless you wanted a 29" had-tail, which each store seemed to have many of... very many! Essentially it felt like a bait and switch, offer something attractive, but sell something else.

I've struck similar problems trying to buy my oldest son a suitable bike. He's ready for a 24" wheeled bike, I don't want to go crazy spending money, but I think it's not unreasonable to expect stores to stock something with a proper alloy frame, reliable components, reasonable wheels and be able to handle the Auckland bike parks… the answer is yes, it's unreasonable, I cannot find such a beast in Auckland and have been told there will be no new stock until around October.

Meanwhile these retail chains claim that customers are using on-line purchasing to bypass them, that their stores are just places customers come to and try something before ordering elsewhere. I agree that this does happen, but mostly it's because the retailers do not stock what customers want, they carry a limited range or only offer limited brands, which drives the customer out of the store and straight to buy on-line.

So you think the answer would become an independent… ummm not really, because the distributors are becoming more aggressive and forcing independents to restrict themselves to a limited number of brands. Some distributors refuse to deal with independents because they already stock certain brands… which seems very short-sighted, because a sale is a sale.

I think there is potential in the deal The Warehouse has done with Torpedo 7 to do the following:
  • Get more brands for Torpedo 7
  • Get better bikes into Warehouse stores - and customers riding better bikes
  • Get better support for bike riders into Warehouse stores
  • Get the bicycle retailers to lift their game and provide better service, range etc for customers
Image: Torpedo 7

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