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Distributors Offering Freight Incentives

Published March 1, 2010

BY JASON NORMAN

SANTE FE, NM—In the wake of higher rates from carriers such as FedEx and UPS, bike distributors are lowering shipping costs, trimming delivery times and expanding freight incentives to remain competitive in a buying environment where retailers are relying heavily on just-in-time (JIT) inventory.

Bicycle Technologies International (BTI), for example, recently introduced 3Day at Ground, which upgrades dealers to UPS 3Day Air service at economical Ground rates.

“This allows us to be more competitive in the Northwest and Eastern Seaboard,” said Preston Martin, vice president of the New Mexico-based regional distributor. BTI estimates dealers in nearly half of the lower 48 states will experience faster delivery on their orders.

While BTI considered building a second warehouse to accomplish these goals, Martin said that it was more cost effective to introduce 3Day at Ground. Plus, it didn’t involve managing multiple inventories, Martin added.

For regional distributors such as BTI, it’s even more important to be innovative and competitive with shipping rates to keep its long-distance retailers.

Servicing retailers in a timely and expedited fashion has never been more important as most retailers are keeping inventories lean. And national and regional distributors are doing what it takes to adapt.

“We have seen more shops going to a JIT approach,” said Steve Hawley, president of The Hawley Company. “We have stressed this for years with our accounts, so we’re really glad to see it. We’re not really doing anything differently; we’ve always been known as a JIT distributor and have stressed to accounts to ‘let us be your warehouse, buy what you need as you need it.’”

Still, The Hawley Company in South Carolina lowered its freight credit level 25 percent in January and February, according to marketing manager Dave Goeppner.

“We have a number of things planned for 2010 to increase our dealer’s profitability,” Goeppner said. “We will be offering instant rebates on orders as well as free product. In addition, we are running special terms from now through mid-summer that allow dealers to choose between significant early pay discounts and extended dating.”

Florida’s Custom Cycle Supply, a BMX parts distributor, lowered its free freight levels from $700 to $500 during the month of February and has been emailing sales fliers to dealers. Owner Jeff DeVido hopes this gives them some incentive for bigger purchases.

Distributors are doing all of this despite higher shipping rates from FedEx and UPS.

FedEx Express rates on U.S. and export services went up an average of 3.9 percent and FedEx Ground went up 4.9 percent for 2010. UPS also announced a 4.9 increase.

“Basically, we absorb the annual UPS and FedEx rate increases rather than pass them along,” Hawley said. “In order for us to do this, we find ways to improve our operating efficiency not only within our shipping department but company-wide. We also look for ways to grow sales. By being a more streamlined and efficient operation and one that is also growing, we are able to absorb the freight increases and still maintain our service level.”

Other distributors are expanding their number of locations to better service customers. Next month Quality Bicycle Products is opening a distribution center in Utah.

“Having a facility there will allow us to reach a larger portion of our customer base in two days or less via ground service, which will reduce some dealers’ freight charges,” said Todd Cravens, director of sales and customer service for QBP. “We are opening modestly and will learn an enormous amount as we refine our systems to support two distribution centers.

“Keeping items shipping on the ground is many times greener than sending packages via air, so this play also supports our long-term sustainability,” Cravens added.

Seattle Bike Supply went with that approach years ago and has seen it pay off.

“We made an investment in our infrastructure by opening four warehouses in the U.S.—approximately 85 percent of our dealer base is within a two-day shipping schedule from one of our four facilities,” said Chuck Hooper, president of Seattle Bike Supply. “If you go to three-day shipping, we service over 90 percent of the dealers in that time sequence.”

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