BTCEB Blog No 37: Death of the IBD

It’s a good bet that independent bicycle dealerships, IBDs, have taken a real pasting since the economy has gone down the toilet. Sure, money is tight so for many of us cycling is both a hobby and as a form of self-expression but it isn’t a necessity.

You can’t eat a bicycle.

Nor can you live in one.

Or drink one.

And while there’s been some pretty cool stuff that’s bubbled up lately (oh, so sexy 2×10 drive train….) given the choice between putting food on the table or a new XX drivetrain I’ll choose eating.

But it’s tough running a business when people are synching up their belts. Every penny that’s being is spent on a hobby may be another penny that’s not going into a retirement fund so as a result IBDs tighten their collective belts too and as a result they aren’t ordering high end components or big ticket bikes and are instead they are concentrating on bread and butter orders like tubes and tires.

As a result manufacturers and distributors are left scrambling for customers. Hello online distributors, goodbye IBDs. In the interest of full disclosure I’ve bought parts on line because there had been times that I could get things online for less money than I could wholesale.

The problem is the entire situation is untenable and shortsighted on every one’s behalf. When parts and frame manufacturers sell to online distributors it undercuts an IBD’s ability to stay open. I find that practice particularly odious from bike frame manufactures. Now by that I don’t mean some smaller operations or independent individual frame makers (necessarily) I mean companies that are essentially design firms that contract offshore manufactures that do little more than put a new sticker on a prebuilt frame. I’m sure every one has seen a frame decal that has said something along the lines of “Designed in California made in China” or other such marketing B.S.

Some of these design firms sidestep IBDs entirely and sell either customer direct or to a large wholesale distributor, others are simply design elements of large wholesale distributors who sell to online web dealers. I’m not going to fault people for doing so, and actually it’s pretty smart, but I as an IBD would think twice about bringing in a brand that doesn’t protect my dealership agreement with them.

Also, some small parts distributors are also now going customer direct and I as an IBD would have reaction because it’s a disincentive for me to want to stock a product that my customers would sidestep me and buy from an online source.

Again, I don’t think that online merchants are evil, and historically they were largely set up as clearinghouses for overstock or unsold previous year’s model inventory but now they are fierce competitors and due to their purchasing power can sometimes sell current year items at or below wholesale.

Where IBDs or even some chain stores can win out is level of customer service and onsite repair. But therein lays another problem and that is the demands from tech savvy customers, increasingly sophisticated shifting, braking and suspensions systems but the unwillingness of inability for either the customers or shop owners to pay for a highly skilled and dedicated work force.  On a personal note had I had any idea that this was where the industry would had been going I would have stayed the course and had become an auto mechanic specializing in high end imports. As far as making a career out of wrenching on bikes is concerned forget it. There’s easier ways to make a buck and still ride a bike.

Five thousand and ten thousand dollar bikes aren’t unheard of, an astonishing increase of the high end market, but if bike shop customers walked into an auto dealer and demanded to pay the same dollar amount per hour that they demand of a bike shop they would be thrown out on their ear. So in order to hourly labor rates low, have to keep their pay scales low. That’s problematic in the long run because due to the inability to retain a highly skilled workforce and low employee moral with its associated consequences.

Which leads to another problematic area. Are bikes necessities or are they luxury goods? Bikes fail by certain criteria because they neither offer food nor shelter but for large number of people they offer basic low cost transportation so they can secure these things. So are they then luxury goods? Not for people who can barely afford a yard sale bike for basic transportation they aren’t. So if labor rates are raised to a level where they can retain a highly skilled workforce that may also mean it puts such services outside the reach of people who have marginal incomes. The net result of that is people who can barely afford nominal bicycles often defer any maintenance in favor of basic necessities and therefore ride on increasingly more dangerous machines.

Several years ago I wrote a letter to the editor of Bicycle Retailer and Industry News where I specifically asked to have my name removed from the letter because I was still looking for a job in the industry. I wrote at length about health insurance and some of the other issues mentioned here but I didn’t have a real solution. Even now I’m sure I still don’t. There are other industries such as independent bookstores that have taken to cooperative buying in order to lower per unit costs and even buy group rate insurance policies together. Some independent music stores have started doing the same thing so at least there is precedence.

But here’s my fear and my prediction. Independent stores will not completely vanish but at a certain point will only cater to the higher end of the spectrum. Lower level consumer bikes will be mostly available through either big box merchants or whom the same assembles guys who do shipping and receiving and who polish the floors at night. Also, bikes on line will become increasingly more popular and will require a minimum amount of mechanical skills to assemble prior to hitting the trail. Maintenance will still take place in shops but there will be a rise of independent specialty shops that will be closer to an auto shop that will focus largely on repairs and, to a lesser degree, sales but largely accessories for repair work.

And concept stores, they are just another nail in the coffin for IBDs.  For those of you who are unclear on the concept of concept stores or conceptually can’t grasp what a concept store means put simply they are retail outlet stores that essentially only carry one brand of item and are essentially retail outlets for a single brand. Yes, Apple stores may carry a couple of items that don’t have an Apple logo on it such as some sound equipment if you can grok that then your on the right page.

A well known nationally distributed brand will have way more name recognition than most IBDs and as result they have a built in client base in a way an IBD may not. Added to that high profile web presence the purchasing power a large wholesale distributor has it’s a one two punch to competing IBDs.

Personally I’m fresh out of ideas and I’m just waiting for the fall.

Adam H

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