Monday, December 12, 2005

LBS or Online Retailers? I say both.

Where does the Local Bike Shop stand in today's brave new world?

You've got the online retailers cutting prices lower then any brick and mortar can reach. And if people can get products for half the cost on the internet, then it's obvious that they're gonna do it.

It's inevitable. Online retailers that can buy in bulk at lower prices and resell to a worldwide marketplace are going to consistently beat out the pricing on the LBS. And the number of people buying online is only going to grow.

The way I see it, the local shops have two choices. They can moan, fight and advocate against this and slowly go into extinction or they can play on the strengths that they already have.

I've talked to way too many people that have had bad experiences with the local shops to think it's isolated incidents. They get attitude when they do come in to spend money because at some point in the past they went for the online deal. Or they are pushed to higher price items and end up leaving with nothing. Or they feel out of place when they walk in a shop full of 'pros'.

I think the LBS has two major strengths that many of them are overlooking.

Maintenance and Customer Service... two areas that no online retailer should ever be able to match.

First of all, shop maintenance is the highest level of income per sale. You sell a derailleur, you make a low margin of profit. You sell maintenance... 100% of that cash is going into the shop. Instead of advertising deals and cutting prices on products that are still going to be cheaper online, why not advertise and push all forms of maintenance? Your product with the highest level of profit and applicable to all products whether you sold them or not.

And the Customer Service is where shops can really shine. Don't push a $1000 bike if a customer only has $300 to spend. Just explain the pros and cons and remind them about your maintenance package. You want that customer to feel nothing but welcomed and encouraged to come back.

Sure, in a perfect world there would be no online retailers, and the Local Bike Shops (that carry a lot of the heart and soul of the sport) would have very little competition, but that's not how it works any more. And you can either fight against it and lose or compete with your strengths.

I've discussed the topic with employees and owners of both the online retailers and the brick and mortar shops, yet I consistently come to the same conclusion.

So am I wrong? What're your thoughts?

Posted by Tim Grahl at 12:47 PM

7 Comments

  1. Blogger Karl Wiedemann posted at 2:15 PM  
    This is a very tough topic for retailers and suppliers.

    I actually had a similar conversation with a shop owner over the weekend. To keep biz moving during the winter months he sells on Ebay. He says that very few people walk into his store between Christmas and April 1st so he sells discontinued or slow merchandise on Ebay to keep his lights on. I can't blame him for that.

    The hard part for a supplier is trying to not let our brand get diluted in the marketplace by Ebayers trying to make a quick buck to keep the cash flowing.
  2. Blogger Bernie posted at 5:41 PM  
    I know that a few of my best customers do lots of shopping online, but I try not to let it bother me. I just keep gently reminding them that while they can save big on certain big items, in the long run I make their lives easier.

    Cases in point:

    1. One of our regular shop-ride attendees and beer bringers is shopping for a closeout rim to practice his wheelbuilding skills. He comes to me to find out what spoke length to order with his rim. I ask him, out of curiosity, how much the online retailer's spokes cost. They cost the same as mine, so I actually end up getting the spoke sale, just by being friendly and helping him figure out what lenght he needed.

    2. A local commuter buys some inexpensive road tires online. He orders 700x28, but receives 27x1 1/4. I have the tires he wants in 700x26, and he asks if I'll give him credit for the online tires. I tell him I can only give him the wholesale price. He does the math and realizes he'd be out the same amount paying to ship the tires back, and I gain a sale. Plus, the seed is planted in his head that online shopping is a hassle, but Panther City Bicycles hassle-free.

    Ebay is a whole different story; I've thought about trying to clear slow-moving merchandise there, but shyed away from it because it does seem to dilute the brands. Also, I know of a couple of my customers who peruse ebay just looking for local cycling items (so they can save the shipping and get killer deals). Why should I give those folks an item for less than I'd charge them if they came in the store?

    Anyway, its obviously a complicated issue. I think the sometimes hassle of shopping online will be enough to allow the harder-working brick-and-mortar shops to always stay in business.
  3. Blogger Pete posted at 7:58 PM  
    I buy a lot of stuff on-line simply because my bike money is hard fought and needs to go the extra mile. If I can save 30% I do it. The money I save usually ends up getting spent on a smaller item at the LBS in the end.

    But if it's only a couple of bucks I always try to give the LBS the business. I check the LBS to see what their price is before ordering online. But I still feel guilty.
  4. Blogger George posted at 3:09 AM  
    Good one.

    I've spent over 10 grand at my LBS in the past 8 years.

    Sure, I buy a couple things (mostly apparel) online but I like to spend my money locally even if it cost me a little more.

    I have 2 *awesome* shops in my area and I like to try and support both of them with my business.

    Mail order ain't gonna fix my busted wheel on a Friday afternoon while I wait.

    Either one of the two shops I go to will.

    Money ain't everything.
  5. Blogger George posted at 3:10 AM  
    This comment has been removed by a blog administrator.
  6. Anonymous RogueMechanic posted at 6:29 AM  
    I think that you're onto something Tim. It is a tough subject for the IBD to stomach, but a valid and real one. Your post has motovated me to finally describe what I think the IBD will look like in the near future. I'll try to post the first part today.
  7. Anonymous Anonymous posted at 6:13 PM  
    Tim, You do have a point but speaking from experience this is how it usually works at the shop I work for. We bend over backwards to make our customers happy with both prices and service which some loyal customers appreciate. The problem is the whole online shopping consumer is obsessed with how "CHEAP" they can get something online and how "expensive" it is to get the part(s) PROFESSIONALLY installed and PROFESSIONALLY adjusted by someone who takes pride in making your bike WORK better than you ever could yourself. We repair and build bikes all day every day and we are darned good at what we do. When you have a repair done at a shop it will work the way the manufacturer intended and when it does you will be happy. I have folks on a daily basis try to haggle about a $5 brake adjustment they can't do themselves. "My bike don't shift well and I've tried but nothing I 've done helps...What?! $8 to adjust the derailer!!!
    An even more frusrtating thing is that alot of cyclists think the only reason "shop guys" ride some of the best equipment and suggest the same to customers is that we get such good deals we can afford more than the doctor, engineer, dentist, comp. programmer, truck driver, factory worker...et al, when the truth suggests that the average wage of a shop mechanic hovers somewhere around the $8/hr mark. We ride the stuff that works better and lasts longer than the cheap stuff so we don't have to replace it as often(we can't afford to). We appreciate nice bikes and parts because we ride more than the average cyclist, when something works better for us we reccomed it to our customers because we know its good(not just to up sale you). I'm not bitter or resentful I just want folks to realize we care about customers and care about their bikes and no, we can't compete with online prices usually, but one day online shoppers will need our expertise or a quick repair so you can get back on the trail/road again and our doors will be closed.. Hundreds of LBD's close each year, whether due to huge discounts consumers get online, bad management, lack of quality employees who can make just as much working at Subway...whatever. Every time it happens the entire cycling community suffers.

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