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QBP’s Steve Flagg urges dealers to support exclusive brands that maintain MAP pricing

Published January 28, 2015

PHOENIX (BRAIN) — Steve Flagg got the audience’s attention at the IBD Summit Wednesday, pointing out the challenges that rampant discount pricing for parts and accessories from online vendors in the U.K. pose for distributors and dealers.

Flagg, founder and president of Quality Bicycle Products, the largest distributor in the industry, said QBP often finds it difficult to compete with some online pricing from these websites.

“We get calls from dealers wanting to know why these prices are just 10 percent above what you charge us. I can’t explain it, but it’s not a good feeling and the same is true for dealers who hear the same thing from consumers,” Flagg said, as some 250 attendees filled a conference room at the Marriott Hotel at The Buttes.

Flagg could offer no explanation for how websites like Wiggle and Chain Reaction can deliver products direct to consumers so close to wholesale prices. “I, too, am concerned,” he said.

While Flagg diplomatically avoided naming names, among retailers these UK websites are widely reviled for their low-ball pricing of Shimano components.

Flagg pointed out that national retail sales have been averaging around 3 percent in growth. But for bicycle dealers sales are trending slightly down. And, more importantly he noted, was the double-digit trend in the overall growth of Internet sales — averaging around 10 percent a year. “I believe we can capture some of that growth,” Flagg said.

But first, Flagg listed what he called factors comprising the “Bad Internet.” They include the web’s power to turn brands into commodities, ultra-low pricing, minimal contact with consumers, a lack of community and showrooming.

On the other hand, there is the “Good Internet.” The web allows consumers to research products before purchase; “pajama” shopping or, in other words, the ability of consumers to sit at home and shop online; the web’s ability to save time and vehicle trips; and its ability to maintain MAP pricing.

What QBP needs to succeed are the same attributes that dealers need: Exclusive brands that protect their products with MAP pricing. “Dealers must select brands that have channel integrity,” he said. But just as importantly, dealers need to build their own store’s brand as well as differentiate their store in the marketplace.

Flagg pointed out dealers also need to embrace all the digital tools now available. “Use the Internet to communicate the dealer’s brand,” Flagg said. 

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