As the Bike 4.0 dynamic continues to evolve, one side effect is that dealer trust is eroding. In fact, from where I sit, retailer trust is at an all-time low with some large suppliers, based on my 40-odd years in and out of the bike business.
When I talk to dealers, more and more I hear suppliers referred to as "competitors" or even as "the enemy." And to be sure, part of the Bike 4.0 dynamic is what I call the "channel-agnostic marketplace," in which cycling products are available through a variety of channels, not just brick-and-mortar retail. And virtually all suppliers now sell consumer-direct. Also, three out of four of the Quadrumviate brands — Trek, Specialized, and Pon/Cannondale — now operate chains of retail businesses, many hundreds of locations, which compete directly with local retailers in each market area.
At the same time, suppliers have cut back on lines of communication with dealers. Whether the result of layoffs, "consolidated" sales rep territories, or just reduced contact with individual dealers, many suppliers are "going dark" with increasing numbers of independent bicycle retailers.
The net result of this trend is not zero, despite what some corporate bean-counters may pontificate. At the end of the day, less dealer trust means fewer dealer sales, which still compromise 90% or more of revenue for some brands.
To be sure, the effects are subtle and hard to notice. Bike inventory may be replaced with a competing brand. Overall order volume shrinks as dealers choose to inventory less product. Re-order trigger levels may become lower. Retailers may go in search of alternative suppliers for generic items. But it all impacts the bottom line.
Digging deeper
"According to the NBDA Cost Of Doing Business reports, inventory turns are way down, which means [retailers] have too much inventory." — Chad Pickard, Ratchetco
To learn more about this phenomenon, I reached out to Chad Pickard, whose background is in bicycle retail and whose consulting business, Ratchetco, "works with retailers to help them free up time by implementing systems and finding areas within their businesses where they can be more profitable."
Here's what Pickard had to say about the loss of dealer trust and what suppliers can do to begin restoring it.
In your consulting business, you work with a lot of retailers. What are they saying about their trust of suppliers?
Simply put, there's a younger retailer that they don't know any different, and it is what it is. The retailers that have been around longer, let's say pre-pandemic, are really concerned.
They hear from their vendors "trust us, trust us," but then they (suppliers) mark down their inventory and leave the retailers holding the bag. There's another level there, where there are things that would help retailers do business better that don't get a lot of attention from suppliers. I'm talking about things like warranty processes, where there's a lack of communication and things are really drawn out, while the retailer is just trying to keep the customer happy. It's like there's an apathy there.
Another example is where a vendor is going to have a program. Now, that's not a bad thing, necessarily. But in the push to fill out programs, something is getting lost. The conversation needs to be about planning inventory out in advance, "so we have the inventory when you need it." But when it comes across as "we need orders, we need orders," it just seems like a money grab. It's in the way it's communicated and how it's received. The bulk of retailers I work with do not even have a buying plan, so programs can come across as really threatening. But the vendors are ultimately responsible for that communication. And when the communication is not there, the dealer is not going to participate in the program, and that puts both of them in a really tough spot.
Is the lack of trust directed mostly at larger suppliers, or is it across the board?
I would say the larger suppliers, but the larger retailers have been around for a while, too, so they just do things the way they're accustomed to doing them. But smaller distributors have the opportunity to pivot and change how they have the conversation with retailers.
Are dealers ordering less from suppliers they don't trust?
Well, our industry has always been over-inventoried. According to the NBDA Cost Of Doing Business reports, inventory turns are way down, which means [retailers] have too much inventory. At the same time, suppliers have too much inventory, too, and that leads us to today, to a system that doesn't work anymore. I can't imagine (brands) having three or four times the number of warehouses (they've had traditionally) and trying to decide what they're going to be able to do about it. Now retailers are decreasing the amount of inventory they carry, and that's making for a very difficult situation. But consumers just want a bike to ride, and often model years aren't a part of that.
Can you name some suppliers who are getting it right and restoring dealer trust?
Look through the industry forums or look through BRAIN and see which vendors are not in the headlines. Those are the ones who are getting it right.
Rebuilding bridges
"Other brands in other industries have done things to alienate their retailers, but they've also instituted programs to win that trust back. And the bike industry can do the same too." — Chad Pickard, Ratchetco
What can suppliers do to begin restoring confidence with their customers?
The answer is in the question: Treat them like customers. When you go into a specialty retailer, how do you want to be treated? Retailers are out there every day, doing the hard work, and brands need to be doing everything they can to make sure that process is as easy for them as possible.
A dialed-in warranty process is one thing. Make sure that UPSs, SKUs, colors, sizes, model names, all need to be consistent so that dealers can easily import it into their POS.
I would also love for vendors' onboarding process for retailers to push for a solid business plan. Push for a marketing calendar, push for a buying plan. And when the retailer doesn't have answers to those questions, send them to resources that can help them. Vendors should look for a retailer who has systems in place to deal with those situations. This is not a new problem. The one element that's made it different now is just the challenges in inventory has increased all the stressors. Other brands in other industries have done things to alienate their retailers, but they've also instituted programs to win that trust back. And the bike industry can do the same, too. Absolutely.
This all needs to happen at places like CABDA, Retailer Summit and Sea Otter; places where vendors and retailers can connect with each other on neutral ground to openly discuss challenges. Retailers need to be encouraged to use their voice. Vendors need to be encouraged to listen.
Finally, I want to leave space for vendors and retailers who are doing really, really well. They're out there and businesses that are struggling can see them as a beacon of hope. There are ways to fix this, and it starts with hard conversations between suppliers and retailers and finding time to be honest with each other.
