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Suppliers Sound Off on Chain Reaction

Published February 3, 2011

LAGUNA HILLS, CA (BRAIN)—The letter from a group of Spanish dealers heard around the industry earlier this week has literally set off a chain reaction of online discussion between consumers, retailers and some suppliers.

The Spanish dealer group led by Promobicis owner Christian Tidow published the open letter to the industry at antichainreaction.com (click on above link). The group is asking for a “full commitment” from suppliers that their products will no longer be sold at Chain Reaction Cycles.

“Our stance is to focus on continually improving our own company and ensuring we provide all our customers with great products and service," said Chain Reaction's Michael Cowan. "We have great relationships with our many industry friends and suppliers and we try not to get caught up in industry politics.”

While a few suppliers chose not to comment in regards to doing business with Chain Reaction Cycles, Bicycle Retailer and Industry News did find some willing to discuss their product being sold at the Ireland-based Internet discounter seller.

The BMX brand Mirraco, for instance, has bikes being sold through Chain Reaction Cycles. When Mirraco decided to part ways with Trek as its exclusive distributor of Mirraco product a couple years ago, president Jim Ford wanted to make sure the company’s new distribution, specifically in Europe, not only understood and were motivated to sell BMX, but that there was an online sales component as well.

“What we found in the European market in general is that a lot of the BMX business is done by online sales,” Ford said. “If we wanted to move forward and grow the business we were going to have to address it and give it a try.

“And so we did that, and I’d say with the exception of Chain Reaction, there’s been basically no negative feedback at all,” he added. “It’s worked out well. We don’t have one distributor complaining about another distributor. We haven’t had any issues like that.”

Ford, like most suppliers in the industry, knows that certain online sellers such as Chain Reaction are a hot button topic. But it’s an issue with a lot of grey area, too, in terms of where online sellers such as Chain Reaction get their product.

“I think specifically they [Chain Reaction] get product through our distributor in the UK,” said Ford, whose UK distributor is IMG Distribution.

In terms of addressing the Chain Reaction situation with IMG as it pertains to Mirraco, Ford said they have had a few conversations with them regarding the matter.

“The distributor is aware of the situation and the dangers of that if it continues, and we’ll leave it to them to execute the strategy they think is best for their business over there,” Ford said. “Obviously we want to have a voice when it affects other people, but we also don’t have the legal right to go into a distributor and say here’s how you need to do your business, because we gave them the right to sell online.”

Ford said online sales can present a double-edged sword. “There were benefits obviously that come from embracing that [online] strategy, but there’s also a downside now that we’re discovering,” Ford said.

Ford pointed out that Chain Reaction has been a good online retailer for them over the last couple of years. “The fact that they sell bikes online provides a way for a kid that doesn’t live near a Mirraco dealer to get a Mirraco,” Ford said. “Now when they cross the line in terms of discounting, for example, and that destroys a dealer base that we’ve established, then yeah, it’s a different story.”

SR Suntour also has product being sold through Chain Reaction.

“I suppose they can be getting it from at least a couple different sources, one is our UK distributor,” said Doug Stuart, who oversees aftermarket sales and marketing for SR Suntour North America. “They can sell them products, and then I don’t know what relations they have in Asia, but they can be getting it through sources over there as well.”

Stuart said one of his main interests when it comes to Chain Reaction is product being sold through them that lands in North America.

“Based on the price it’s being sold for it affects the overall value of our brand for one,” Stuart said. “Two is, and it’s a little bit of a side issue, there’s warranty to be considered. Is a product being sold through a distribution chain in Europe covered under warranty?”

Stuart said most of the consumer comments he’s read in reaction to this letter are saying, “What’s the matter?”

“As an industry, as marketers, as sellers, of course, we have to be very conscientious of, and listen very carefully to the end customer, because they’re the ones that make this whole thing go round,” Stuart said.

Stuart said he deals with consumers on a day-to-day basis frustrated that they can’t get a hold of certain SR Suntour products, whether it be from a local dealer or in an online capacity.

“From a consumer perspective in our day and age, they want to be able to go down to the local shop or go online and get the credit card out and have what they want, and when they have a challenge with that in the consumer’s mind they think there’s something wrong, and there is,” Stuart said.

At the end of the day, Stuart said, it’s up to suppliers to have the willingness and fortitude to establish their own policies on how and where their product is sold.

“I’m not an expert on European law and that type of thing, but I certainly think that in the U.S. as a brand, while we might not be able to dictate retail prices to dealers, we certainly can have guidelines that dictate how they can market and advertise the product,” Stuart said. “Companies should have rules on where you can sell the product—that’s a pretty normal part of business.”

For more supplier feedback on this subject, be sure to read the March 1 issue of Bicycle Retailer and Industry News.

—Jason Norman
jnorman@bicyleretailer.com

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