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Distributors Dip Into Complete Bike Business

Published April 1, 2010

BY MATT WIEBE

SANTA FE, NM—BTI, which started as a distributor for hard-to-find suspension parts, will begin assembling Cinelli and Commencal bikes at its Santa Fe, New Mexico, facility this month.

J&B Importers, which already sells tens of thousands of Sun Bicycles to dealers, is stepping up its assembled offerings of Origin 8 fixie and urban bikes.

These distributors aren’t expanding their complete bike business because their sights are set on being the next Trek or Specialized, but because their customers are pressuring them to change their business models.

“Established dealers are tired of being told how to run their business and the high pressure tactics of some of the big bike brands, so bikes they can buy with no strings attached are increasingly attractive,” said Andrew Wright, BTI’s president. “And new shops getting started can’t get signed up with big bike brands so they are turning to us.”

J&B Importers product manager Chris Dupuis said pricing is just as appealing as their low-pressure approach.

“We are offering $350 bikes in product segments less traveled by big brands. I’m not entirely clear on whether our pricing, niche product or business model has the most appeal, but I will say it is very good business,” Dupuis said.

While J&B’s fixie offerings have always been a good business for the distributor and continue to offer the company impressive growth, sales of its Origin 8 bikes for urban riding have taken off in the last two years.

Hawley is debating whether to jump into the complete bike business. Marketing manager Dave Goeppner said the company is feeling the pressure from its customers. “We’re making a commitment to bring in more fixed-gear and extending our lines, but there is still that question, are you a P&A supplier or a bike supplier? We are trying to keep to P&A, but the pressure is growing to offer bikes,” Goeppner said.

Historically, distributors have carved out their business on being P&A suppliers. The pressure to change their business models is coming from new customers. BTI’s Wright said the sheer volume of new business has swamped its accounts department. Goeppner said Hawley has opened hundreds of new accounts in the last two years, and J&B’s Dupuis said, with a smirk, that he wants to keep the size of the company’s new business under the radar.

Euro-Asia manager Dave Lundegard said it, too, is opening lots of new accounts, but he’s not sure it’s that much different than prior years. But he acknowledges that the company also is feeling pressure to offer complete bikes.

“We have been there and done that in the past with fixies. That’s a huge market for us, but no fixie customer wants the bike you build,” Lundegard said. “No matter what we offered, someone would want tubulars, or silver instead of black. It’s safer just selling all the parts.”

Distributors don’t have a good read on what kind of shops their new accounts represent. However, they guess service business is a larger part of their business mix than in a traditional shop. It appears that as these businesses mature, they are doing more complete bike sales.

“We tried to launch entry-level Commencal product a few years ago, but there was no interest from our dealers and we killed the program. Now just two years later, dealer interest in entry-level product has totally changed and the bikes are selling very well,” said BTI’s Wright.

Wright believes the change in dealer sentiment stems from two recent happenings. First, the recession has increased interest in entry-level product. Second is the number of new dealers BTI has added over the last two years.

“It used to be that new small shops served niche or boutique markets like high-end road bikes, 29ers or fixies. Given the success of our Charge bikes and entry-level Cinelli and Commencal offerings, I think small shops increasingly are selling to customers that need a bike to get around on,” Wright said.

J&B’s Dupuis agreed. “These new shops are serving college kids and others that are looking for a cheap bike,” Dupuis said. “These service shops have helped their customers keep their old bikes working. When they or their friends are looking to get something new, they want to buy it from the same place.”

Large brands are developing cheaper products that are cost competitive with distributor bikes, but they aren’t connecting with the new bike customer.

“Trek and Specialized offer well-rounded product lines. They have bikes close enough in price to our
Charge models that I don’t think cost is a factor,” BTI’s Wright said. “I think the difference is the shop. If you are interested in cycling as a sport, you go to a traditional dealer. If you want a bike to get around, you go to a smaller, service-oriented shop.”

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