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Burley Renounces Costco Decision

Published January 11, 2009

EUGENE, OR (BRAIN)—Burley chief executive officer Michael Coughlin says he erred by deciding to sell the company’s 2008 overstock through Costco and Costco.com.

“It may have been a good financial business decision, but from the standpoint of our bike shops it’s a sign that we’re not committed to the channel and that’s not the case,” Coughlin said on Friday.

Burley arranged to sell about 1,000 units through the wholesaler in a one-time deal to quickly get rid of some leftover 2008 Delite, Solo and Rover trailers.

Burley built the trailers in August with the intention to carry them over into 2009, but by the end of November, preseason orders were all for the upgraded 2009 ST versions.

“So we’re sitting here at the end of November saying, ‘OK, we have all this product that we don’t have a home for, how are we going to get rid of these?’ We wanted to keep them out of the bike channel and we wanted to get them out of the market fast,” Coughlin said, explaining why he chose Costco.

The idea was that by keeping the product out of the specialty channel, Burley wouldn’t clog the market, which could make it more difficult for dealers to sell ’09 trailers.

But after talking to a few of Burley’s top retailers last week, Coughlin realized offering the product to dealers at discount prices would’ve been a better option even if it would’ve taken longer to get rid of the overstock.

That way, specialty bike shops would’ve had a chance to participate and Costco’s discount prices wouldn’t decrease the value of bike shops’ Burley inventory.

“In hindsight, we will never do it again,” he said.

Burley informed its distributors of the plan to sell through Costco and fielded a handful of phone calls last week from retailers concerned about the decision and how it would reflect on Burley’s brand image.

Coughlin predicts the product, which makes up less than 2 percent of Burley’s annual units, will be sold through Costco within 30 days. About 10 percent of the stock, or about 100 units, will be sold through Costco.com while the rest will be sold in stores, Coughlin said.

Burley is certainly not the only supplier to offload overstock outside the independent bike dealer channel as evidenced by discount Web sites like Sierra Trading Post, which offers marked down inventory from a range of bike companies.

Late last year, Orbea opened its first concept store in Little Rock, Arkansas in order to sell dated stock and demo and blemished bikes.

“All of us have a problem dealing with this inventory, and the current ways of dealing with it—sending it to Sierra Trading, dumping it south of the border or forcing dealers to take the product—are not good options,” Orbea USA’s managing director Tony Karklins told BRAIN in January.

—Nicole Formosa

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