Shimano and the local bike store

There has been a lot of discussion about Shimanos price policy and the fact that the big online stores like Wiggle sell Shimano parts cheaper than small local bike shops can buy them. Bike store owners are angry.

Some bike shops even de-listed Shimano completely and don’t carry them anymore. This is not only logical from a business perspective, but also good for everyone on the long run. Why?

I know. It sounds like the end of the local bike store. If people buy all their stuff online, the local bike stores won’t make any sales, and will have to close. But that isn’t necessarily the case. It all depends on what you think a “store” is and does.

Retail is changing. Online is taking over. I’ll spare you the thousands of studies, facts&figures, and everything about Amazon. You know it, I know it. What is happening now is that this retail disruption is arriving at the notoriously conservative bike industry. With a few years delay, but still it seems to have caught everyone unprepared.

I’ve been saying for years now that if your business model as a retailer is being the middle-person between the producer and the consumer, you are in deep trouble.

Today, bike stores are beginning to feel it.

There will be no way that the operations of a local brick-and-mortar can be cheaper than the economies of scale of a large online operation. Even if the small shop gets the same wholesale price as the online store, they will eventually lose out, because there simply is no way they can live on small margins like online stores.

What can local bike stores do about it?

You will never be able to compete against big online retailers on a price basis. This is the race to the bottom of margins you cannot possibly win. But you can differentiate yourself from the online stores, and provide something that the online stores can’t. And that is a lot. Because all that online stores are able to do is sell things cheap.

Be a social spot. Provide expertise and consult in fit and equipment choice. Offer help and orientation to notoriously ignored audiences. Do great service. Build incredibly nice bikes. Be all of that, or just some of it.

But actually help people, and charge for that, instead of trying to sell them something. Selling will be a part of the online ecosystem. Helping, encouraging, growing the sport will be your part. Get used to the fact that customers will arive with their hands full of boxes of bike components and a frame you helped them select. They bought all of that stuff at an online retailer, but you will build their bike. And charge for the help with the selection, and the build. Think about what that will do with your inventory costs!

And don’t reduce yourself to shelf space when talking to brands. Choose the brands you like, and offer them visibility and the opportunity for clients to try them out. Be a brand showcase, then it doesn’t matter if they later buy online or at your store. (Yes, this means charging brands for carrying them in your store)

Welcome to the service economy.