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Trek to begin online bike sales — Dealers will assemble bikes and get a service commission

Published August 5, 2015

Editor's note: Due to a technical glitch in our Facebook-based commenting system, the comments left under this story for the first several days after its publication are no longer available. However, we did save a screen shot of the comments as they appeared in our comment moderation system. That screenshot is viewable as a pdf file: trek comments.pdf

MADISON, Wis. (BRAIN) — In a first for a major U.S. bike brand, Trek Bicycle will begin sales of complete bikes to consumers via its website in late September. Bikes will be shipped to the brand's retailers — not direct to consumers — for assembly, and retailers will receive a service commission on each sale. 

Trek also will begin online sales of parts & accessories from its own brands, including Bontrager and Electra, as well as other bike brands including Park Tool, Garmin, Finish Line and Burley. Trek will deliver these products direct to consumers, but local retailers will also receive a service fee.

Trek president John Burke revealed the plan Monday evening to several thousand Trek retailers at the company’s annual Trek World dealer meeting here. He said the plan had been in development for about two years and called it the “largest investment Trek has ever made.”

“It’s been a massive investment,” Burke said, then referred to his father, Dick Burke, the co-founder of Trek. “One of my father’s business maxims was, ‘we play offense.’ So, we sat around and watched the online thing and that’s been OK — it’s been a great learning experience. Now  it’s time for us to play.”

Burke cast the online sales program, called Trek Connect, as part of a larger investment in increasing the profitability of the brand's U.S. dealer base on several fronts. Trek will offer tools to help dealers increase sales to women, which Burke said will amount to half of all bike shop sales within five years. Trek is expanding its business management education programs, and will offer new marketing tools including comprehensive seasonal promotions with store displays tied to quarterly print catalog mailings.

And — in an announcement that drew applause from the dealers — Trek is launching a service department education and certification program. Burke said service currently accounts for only 7 percent of revenue for most shops, but produces nearly a quarter of gross profits for those shops.  So increasing the volume of service business is a clear path to increased profitability — and survivability, Burke said.  

"I've seen stores that sold a lot of products go out of business. I've never seen a store that did a lot of service go out of business," he said.

Trek is building a 5,000 square foot service education center at its Wisconsin factory and will begin classes in January. It expects to train about 1,000 service personnel next year.

In addition to mechanic and service manager training, Trek will offer dealers help with service department displays, fixtures, tools and systems that will lead to some stores being designated as Trek Certified Service locations.

Online bike sales ’Not huge at first’

Burke and other Trek executives said they are not planning for a huge volume of online bike sales immediately. But they said it’s clear that consumers want to shop 24/7 for bicycles, just as they do for other products. Burke began his presentation by showing slides of e-commerce sites including Chain Reaction, Wiggle, Performance and Canyon Bicycle.

As part of the check-out process, consumers will be asked to choose the local Trek retailer who they want to service their order. Consumers will not be able to choose “none of the above.”

The chosen retailer will receive a service commission equal to their normal margin (which varies depending on the size of the store’s business with Trek) minus an estimation of the costs that Trek shoulders (and the retailer avoids) in making the online sale. That includes the cost of carrying the inventory, shipping, and sales. The bottom line? Retailers will receive roughly 80 percent of their normal margin on these new sales.

Burke said the bikes would all be shipped from Trek's warehouse to fulfill each order, and would not be taken from a dealer's existing inventory. Trek will ship them at the same level of assembly as other bikes shipped to dealers. 

The redeveloped website will combine Trek’s and Bontrager’s sites, which are currently separate. It will offer live chat consultations on bike fit and selection. In addition to the online purchase program, the site will add a new feature that allows consumers to see if nearby shops have specific products available for in-store purchase.

All Trek dealers will participate in the online sales program, but they can opt out of the delivery service if they choose, or they can specify to what distance they are able to deliver.

Dealers react

David Sanborn of David's World Cycle in Orlando, Florida, said he loved the idea of delivering bikes that were bought online.

“Some people are just too busy to come pick up a bike. But we can go out there in our van and bring along some accessories … That’s where the relationship will begin," he said.

Sanborn, who operates 12 stores, was one of a handful of dealers that consulted with Trek starting last year on developing the program. He said if the program takes off, the look of his stores might change.

“In a few years they might be smaller stores (with fewer bikes on display),” he said. “It might be something to think about when it comes time to negotiate new leases. Maybe in five years I’ll have 12 people driving around delivering bikes,” he said.

Chris Kegel, CEO of Milwaukee’s Wheel & Sprocket retail chain, said Trek's service commission plan appeared “fair and realistic.”

“Customers want to be able to buy online so I think overall it’s a positive move,” Kegel said. Wheel & Sprocket already has a thriving online business of its own.

Kegel was more excited about Trek’s service certification plans, a concept he has worked on developing through CABDA and the NBDA. “It’s long overdue,” he said.

Doug Coulter, owner of Scott’s Bikes in Cleveland, Tennessee, applauded Trek’s decision to take action in the face of a rapidly changing marketplace.

“I think our industry is changing and we need to take the bull by the horns,” said Coulter, whose father started the family business in 1964 in Connecticut. “If we are going to carry on, we have to look outside the box,” he said.

Trek's other news

Trek is also launching a bookkeeping service, called Ascend Bookkeeping, which it has been test-marketing for about a year. Burke said the aim was to give retailers that same kind of book keeping services and analytics that Trek has, tailored specifically for bike retailing.

Burke also told retailers that selling e-bikes was a clear path to remaining viable and growing in the coming years. He said Trek is currently selling only 2 percent of the e-bikes in the U.S., while the company has a marketshare of over 30 percent in bicycle sales overall, and about 40 percent marketshare for pavement bikes. Trek is launching three new e-bikes at Trek World this week.

 

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