Speaking at the annual Trek World dealer meeting on Monday evening, Trek president John Burke told several thousand Trek dealers about a plan that has been two years in the making and called it the “largest investment Trek has ever made.” As of late September, customers will be able to select and purchase any Trek bicycles as well as parts and accessories from Bontrager directly on the company's website. Bikes will be delivered to a Trek shop of the customer's choosing for assembly and final delivery, with the shop receiving a "service commission" for its troubles.
The move is being made in response to the global increase in online business and changing shopping habits in the biking world, although the company is emphasizing improving the shopping experience rather than lowering the final cost of the product to the end-consumer at this point, citing "24/7 availability and convenience" as the main reason riders like to go online to shop these days. This is of course still very different to the pure online brands (Canyon, YT, Commencal, etc), because the bike shops are still an obligatory part of the sales process (you will not be able to choose to have your new Trek delivered directly to your doorstep), but it is still a very significant step and one that Trek would not be taking unless it truly believed that people will increasingly want to be able to buy bikes online. As for the end prices - they remain the same at this point, but it is not too far-fetched to imagine that Trek is merely laying the groundwork now to be able to compete to a degree with the consumer-direct brands on price in the future.
The service commission will be equal to about 80% of the margin shops receive on bike sales today. With orders being fulfilled from Trek's central stock as opposed to the shop's own, Trek says shops will also face less cost of sales, implying a financial status quo for dealers as the end game for now. Of course, if Trek is taking 20% of the shop margin for itself, it is also because it believes it can now do a better or at least more profitable job of marketing, selling, and distributing its product itself, with only point-of-sale and post-sale service left entirely in the hands of the dealers.
On the topic of service, Trek is also launching a dealer service certification program, quoting the high profitability of service vs product sales as the path to survival in an increasingly competitive and connected world. To support this new program, Trek is building a 5,000 square foot service education center at its Wisconsin factory.
E-Bikes were also mentioned as a path to growth, and the company is introducing 3 new e-bike models this week.
GLBorchert
8/4/2015 6:05 PM
Oz_Taylor
8/4/2015 9:28 PM
fast_bastard
8/4/2015 10:40 PM
pechanga
8/4/2015 12:29 PM
Oz_Taylor
8/4/2015 3:40 PM
Do people go online and purchase new cars? No, you go to a car dealer.
And where have you been for the last 15 years? ;-)
pechanga
8/4/2015 3:48 PM
Oz, working in the bike industry, amazed at the resistance to the internet
stiingya
8/4/2015 9:48 PM
Nicholast
8/5/2015 3:30 PM
Actually, they do. In Colorado, there is a dealership chain that offers the ability to choose and purchase a new car online and will drive it to your door. They're doing it to appease the market segment of new car buyers who are research heavy but dread the traditional dealership experience. I am in that market segment.*
* Unfortunately, I cannot afford to buy cars new.
fast_bastard
8/4/2015 11:30 AM
I really think bike shops are about to get squeezed out really hard by online retailers, particularly at the high end. I see two reasons for this:
1) Pricing: companies that offer consumer direct sales can offer more aggressive pricing, as they can cut out several layers of middlemen (distribution and shop).
2) Stocking: with the huge number of standards nowadays, it is very hard for shops to keep stock. With all the different hub standards, bb standards, headset standards, etc. shops are put in a bind. If they stock an item, there is a fair chance that they won't sell it and if so they pay for that cost. If they don't stock an item, their lead time should a Customer request it is quite long. Larger online retailers that move much higher volumes can adapt more easily to these standards as they are better able to predict year to year how much product they will move.
I purchased two items recently, one from a shop, one online.
-I purchased an air can for my shock at my LBS. It takes me 20 minutes to drive there. I had to visit the shop to order, and to pick it up. It took 30 days for it to arrive, and I called them twice to remind them and check on status.
-I ordered a dropper post online. It arrived at my house two days later.
I'm buying more and more online these days as it is way more convenient. If I order something through a shop, it is considerably more effort at this point.
***Edited to add this experience as well:
-I purchased a rear hub online from Bdop Cyling online this year, a Novatec. Price was great, it arrived ontime, etc. All was good, unfortunately about 2 weeks later the hub died. It absolutely exploded. I was really bummed. That was Tuesday. That night I sent Bdop Cyling an email, asking about warranty process.
Before I went to bed, I checked my email, they asked a few questions, requested some basic pictures. I sent those. The next morning I checked email again, they asked a few more questions to clarify a few things, and a couple of more pictures as some of the earlier ones weren't very clear. All in all super friendly to deal with.
Thursday morning I received my brand new replacement hub from Bdop Cycling. They priority overnighted it from Taiwan.
T-Dawg
8/4/2015 5:20 PM
stiingya
8/4/2015 10:05 PM
This is exactly it. I feel bad for shops, but 98% of the time they don't have what I want and say they can order it. Then they only put in orders once a week, and then it takes another week "at least" for it to come in. AND it costs more... Then there is the hours, you pretty much have to leave early from work or go on your lunch to visit the shop. OR waste time Saturday that you could be out riding. Heck, I end up having to go to REI when I need a tube, or brake pads after work to go ride because they shops are all closed already.
It sucks because I'd rather buy local and keep somebody who loves bikes in business. But when I can shop whenever I have the time, compare prices and products from different sellers, and have my parts in a day or two for less money it's pretty hard not to choose that.
David_Quenzer
8/4/2015 5:37 AM
onenerdykid*
8/4/2015 6:33 AM
Oz_Taylor
8/4/2015 4:08 AM
So local bike shops have their already low margins squeezed and there is no price reduction or benefit to the consumer. Good for Trek.
People are willing to buy bikes direct online because they are great value for money. If you are going to pay dealer prices anyway, part of the cost/experience is being able to demo the bikes and speak to real people about your purchase, and develop a relationship with your local shop (that will probably save you money on servicing and parts in the long term).
Imagine if you are running a bike shop. Who is going to get your attention? The guy who buys his bike after coming to you for advice, ordering, and giving you a decent margin on the sale. Or the anonymous customer who buys the exact same bike online, collects it from your store, but you make very little money out of the sale, and you never see that customer again because he buys all his gear online anyway.
And what is to stop customers going into bike shops, getting the advice, trying the bikes, then going online on a Friday evening and ordering the bike they want for collection from the same store. Dealer does the work, Trek gets the margin.
The whole thing just doesn't seem fair to me.
I do like the idea of proper dealer training. Why not do that anyway and allow the dealers to improve their expertise and service to incentivise people to actually visit a bike shop.
Roll X
8/4/2015 9:27 AM
DrewB
8/4/2015 10:21 AM
Oz_Taylor
8/4/2015 11:55 AM
I think the margins are low for such a niche, high end product. Standard margins (ignoring any tier based pricing structure) are around 25%, and you will find that most online retailers will advertise bikes at 10% discount right away, even on the latest models. So most customers go into a local shop asking them to price match, meaning true margins are usually around 15%. It's not a fair comparison with the car industry because of the way that industry is propped up by finance. Car dealers sell finance agreements and optional extras and they don't like cash buyers. I stand by my comment that for the number of high value bikes that a typical bike shop sells, the margins are low.
There should be no need for a small shop to have to stock every size of every model of bike. A select few sizes and models should be all that's required to demonstrate size and spec differences to a customer. If the distributors keep good stock levels then bike shops should be able to order the stock they need when they need it, instead of the distributor holding onto stock for their own web store.
When distributors or manufacturers turn to direct sales, it's always the middle man who loses out. The work load will be the same, but with a lower margin.
charlieh5816
8/5/2015 9:23 AM
bmoc97209
8/5/2015 9:44 PM