Editor's note: On the occasion of Ernesto Colnago's 80th birthday, we are re-publishing an article on Colnago's resurgence in the U.S. market. The article originally ran in the September 2011 edition of Bicycle Retailer & Industry News.
By Doug McClellan
CAMBIAGO, Italy—Colnago today is arguably the most famous global icon of Italy’s premium bike making heritage. Yet in the crucial U.S. market, distribution problems caused the brand to come dangerously close to disappearing.
Matters came to a head in January 2009, when Colnago’s third distributor in 2 1/2 years decided not to continue with the brand. Officials had to decide whether to try yet another distributor or switch to a direct distribution model.
“The dealers got very upset. They wanted to kill us,” said Alex Colnago, who oversees sales in the United States, Japan and Taiwan. “We had some requests from other distributors, but we said, if we are wrong again, what’s going to happen to the brand? Three in a row? It’s finished. You’re over.”
Within a span of only two weeks, the company opted to open its own office in Chicago and begin distributing directly to U.S. retailers. The United States became the only market outside of Colnago’s home of Italy where the company distributes directly.
Alex Colnago, the nephew of founder Ernesto Colnago, said the decision to open the U.S. subsidiary has paid off and has put the brand on firmer footing.
“We started with maybe 50 to 55 shops,” he said. “Now we’re at 120. We are covering more territory. So, it’s working.”
Alex said Texas is a good example of the progress the brand has made in two years. In 2009, the company had no retailers in Texas. When Ernesto asked to meet with some Texas retailers, they were polite but weren’t interested in carrying the brand.
“Now,” Alex said, “we have nine dealers.”
One of those Texas retailers is Nelo’s in Austin. When the store relocated two years ago, it re-evaluated the brands it wanted to carry and chose Colnago.
“It appeared that the demand was there again for a really high-end brand that we could almost exclusively custom build with,” said Brendan Sharpe, Nelo’s service manager. “The new versions of the CX-1 and the EPS and the M10 and the C59 are being pretty well received.”
But one East Coast retailer, whose shop has carried Colnago “since day one,” said the company still has issues with product availability.
“It takes forever and you cannot get an answer,” said the retailer, who spoke on condition of anonymity.
Sales in his store have fallen off from 50 to 60 frames a year to about 15, the retailer said. “There’s no dealer protection. It’s becoming open to just about everybody around,” he said.
Alex Colnago said the United States is now tied with Japan as the company’s No. 2 market, after Italy. The new U.S. office has boosted the company’s results, he said.
For the fiscal year ending in May, Colnago sales rose by about 15 percent in the United State, compared with about 10 percent worldwide, Alex said.
Colnago is aggressively pricing its bikes in the U.S. market. One benefit of distributing directly is that Colnago can reduce its prices by 10 to 15 percent because there is no longer a middleman taking a cut, Alex said.
But the company is taking other actions to spur sales.
For example, Alex said, the M10 road bike, which is made in Taiwan and assembled in Italy, typically retails in the U.S. for about $4,500, while the entirely made-in-Taiwan CX-1 goes for about $3,500.
In Italy, the two models sell for about the same price.
“For the U.S, we decided to keep the price of the CX-1 very low to push it more on the market,” Alex said.
That helps, but Nelo’s Sharpe said customers buying a high-end frame are more concerned with features than price.
“When they’re going for a Colnago, money is not typically the biggest issue for a customer,” Sharpe said.
About 40 to 45 percent of the dollar value of Colnago bikes sold in the United States is from models made in Italy, with the rest coming from Taiwan-made bikes, Alex Colnago said. In units, Colnago sells about 2,300 bikes a year in the United States, with as many as 700 coming from Italy.
“Even if we don’t sell a lot, the U.S. market is very important for the image. You have to be in the U.S.,” Alex said. “It’s where the trends are made. You have to do something there to understand what’s happening in the market and what competitors are doing.”
Yet Colnago is skipping one big U.S. market event this year. For the first time in years, the company will not be exhibiting at Interbike.
Alex said the show has become too late, after Colnago has already had its sales meetings.
He said the biggest impact of missing Interbike will be the opportunity to meet smaller retailers.
“I’m not sure 100 percent we made the right choice,” Alex admitted. “The only problem was timing. We have to decide if we invest a lot of money in Interbike or a lot of money on the sales meeting.”