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Financial literacy lets retailers respond to opportunities

Published March 3, 2020

Editor's note: This article ran in the February issue of BRAIN.

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This issue of BRAIN features a lot of good news — suppliers and retailers who finding areas of growth and optimism even while others talk about retail collapse and declining ridership.

I see a few clear opportunities for growth for IBDs, that I’ll mention below. But I want to emphasize that instead of chasing the Next Big Thing, many retailers would benefit by getting a handle on their business and building or preserving your store’s ability to react to trends quickly and painlessly. 

Increasing your inventory turns is key. You should be striving for somewhere around 3.5 turns instead of the more common 2-ish. That leaves you more limber when product breakthroughs and the inevitable duds occur. You also are easing potential cash flow issues with a lean inventory mentality.

When a hot category pops up, some care is required. E-bikes are happening in most shops. Are e-bikes going to save retailers? I am a little cautious about that. The realized margins that I found in my business were fairly low at the end of the day, often below 30%. 

While e-bikes generally have high dollar sales, margins still matter and these high dollar bikes can chew up your open-to-buy, require a concentrated sales approach and have some extra mechanical needs. 

All that, coupled with developing distribution channels, such as powersports dealers, leads one to wonder how that will shake out. You need to put energy into this category, but be careful to maintain your margins and not get too deeply into models or sub-categories that are unproven in your own business. 

There is good news in the bike industry. Retailers need to get a handle on their businesses so they can take advantage of the opportunities.

The second trend that is surely going to continue to evolve is “off road” riding whether it’s bike paths, gravel or mountain biking. Fewer people are riding traditional road bikes on pavement.

Mountain bikes continue to advance and with trails being a proven economic driver, more and more places around the country are embracing this — it's a great time to be a mountain biker! Getting off the pavement is a major theme and also points to the surge of smart trainers and the Zwift phenomenon. Smart trainers and a burgeoning supply of smart trainer accessories should be something to look into if you are not already playing in this space.

But the real next big thing is for all retailers to begin to gain a much higher degree of financial and data literacy about their businesses. The opportunities and outlook are incredible when you begin to truly understand your business. Business basics such as well trained employees who make your customers feel welcome and can close sales, along with excellent customer data capture and retention schemes are critical. The tools and resources are available to you to improve your business, and while success is never guaranteed, the facts are clear that many retailers are experiencing success even in this rapidly changing, yet very rewarding industry we all love!

David DeKeyser and his wife Rebecca Cleveland owned and operated The Bike Hub in De Pere, Wisconsin, for nearly 18 years. Recently they sold the business and real estate to a nearby retailer and relocated to Colorado. He can be reached at Bikezest@gmail.com.

Stock art from unsplash.com/@austindistel.

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