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Longtime Michigan Retailer Closes

Published December 14, 2009

DEARBORN, MI (BRAIN)—Michigan retailer Bikesport, Inc. has closed its doors citing a long list of reasons including a reserve account imposed by its credit card processor that took $60,000 out of the store’s operating cash flow.

The road and triathlon shop owned since 1992 by Tom Demerly, a well-known figure in the triathlon community, closed its doors at the end of November.

Demerly, now an employee at Trisports.com in Tuscon, Arizona, did not return requests for comment, but he elaborated on the shop’s former Web site saying a convergence of a number of factors led to the closure.

The primary contributing factor was a reserve account established by Bikesport’s credit card processing company last January during the height of the U.S. financial crisis.

The processor required the $60,000 reserve account security against the weakening economy and the potential liability of Bikesport, Inc. to maintain operations as the economy worsened.

“There were no commensurate outstanding liabilities to our processor for any amount,” Demerly said on the Web site.

That hit was compounded six months later when a bike brand that accounted for half the store’s annual sales dropped Bikesport’s account citing distribution practices that violated new amendments to the dealer agreement.

In September, Bikesport hired a specialist in corporate restructuring to advise on securing capital to assist with normal operations until funds in the reserve account were released. The next month, the capital secured by the factor agent was lost when the source closed after a chain of businesses it was funding declared bankruptcy. In November, Bikesport, Inc. consulted with three attorneys to consider suing the credit card processor to get back the reserve, but the processor ultimately extended the reserve account for another six months.

“All these factors combined in under 12 months set against the backdrop of the global recession and the impact on the local economy in one of the areas of the U.S. hardest hit by the recession proved to be unsurvivable,” the Web site said.

Bikesport advised customers with bikes on order that had already made a deposit to contact their credit card companies for a refund as the store cannot give money back because the processor has the funds.

Demerly has since joined the management team at TriSports.com where he assumed the new position of bike manager at the retail store in Tucson. There, he will head up the expansion of bike services offered at the destination shop including enhancing the bike fit and service areas.

—Nicole Formosa

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