Talked about at length here
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I think LBS can still make this work pretty well. Our local shop already have adopted what seems to be a smart option. They keep a small demo bike fleet around, that they charge 100-150$ to rent for a day. That demo fleet is then sold at a good discount when the new model is launched.
Then they let you take that 100-150$ dollars off the price of a new bike if you order through them. Iâm sure they lose some business, but they also donât have to order a bunch of bikes, that is costing them money every day until they get them sold.
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A key pointâŚalthough Direct-to-Consumer bike sales are arguably the most direct âattackâ on dealers ever, it is also just the latest iteration of the challenges dealers have faced for decades.
First it was catalog companies (Nashbar, Performance, Excel, etc), then it was the internet and now it is DTC. The good shops find ways to adjust and adapt. The ones who only complain usually go away.
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No doubt. I expect many of the good ones will, hence not all LBSâ are created the same. The poorly ran LBS with lousy customer service, etc., are probably going to feel it the most and what happens from that will cause them to either adjust or close shop.
Iâm confident Specialized researched the best way possible to incorporate a DTC model that doesnât put LBSâ in an awkward spot. But anytime a manufacturer enacts a sale model that impacts their vendors, theyâll be some shakeout for said vendor(s). I was looking at it more from a consumerâs POV.
I agree with that. I wonder though how much is the margin on a high end bike (4000$ and up)?
My guess is that the profit for the store for selling a 5000$ bike is not that high. Especially if you take into account the time value of money from when they first bought it, until they sold it?
I bet the margins are much better on beach cruisers, and cheap bikes in general.
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When you start getting to higher end bikes, the conversation switches to a degree. (Disclaimer: it has been a few years since I have seen updated price lists for dealers, so I am relying on my past career experience, but I am 99% certain it still applies)
Higher-priced bikes do tend to generate lower marginsâŚhowever, they produce much higher profit dollars. So dealers tend to switch their focus from margin to dollars. I would hesitate to guess at what point that conversion happens at this pointâŚand it is likely varies from dealer to dealer.
At lower price points, margin is the focus. So yes, the margins are better, but the dollars are substantially lessâŚwhich is compensated for by volume.
Example (and these are made up margins just to illustrate the point):
- $300 MSRP @ 50% margin - $150 in profit (gross)
- $3000 MSRP @ 25% margin - $750 in profit (gross)
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Good LBSs have a chance to pivot to a potentially more lucrative option - high quality service. Eliminate the risks and headache of inventory and focus on customer retention through great service. I know I would pay a hefty premium for someone to look after my bike the way I want them to
The guy who runs bikesdirect claims he sells over 5000 bikes per year direct to consumer. There are plenty of people who know what they want and will buy online without seeing the bike in person.
Canyon has proven that people will buy expensive bikes sight unseen.
Easy online sales, coupled with warranty service at a local specialized shop, sounds like a winner to me.
Yes and noâŚit is certainly a more profitable business model. If you arenât making the most margin from your service department, you are doing it wrong.
However, bikes provide much needed revenue. As many shops are beginning to find out now, it is very difficult to make up for the loss of big $$ provided by bike sales with service alone. Now, you donât have to replace those on a dollar for dollar basis due to the higher margin contribution of labor (and accessories), but most shops have an overhead structure which bike sales help cover.
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I finally was able to snag a Specialized Epic Evo expert yesterday online. I had to be Johnny on the spot to get it as only 1 showed up and I was able to purchase. I did text my Specialized lbs owner as I am friends with him asking if he was going to get any and he said no so I ordered and had it sent to his shop. While he makes less $$ than me buying in store he still gets some credit. It cost me the same as sending to my house.
He did say that the only thing that makes him mad is that Specialized will be holding 25% of the inventory for online only sales which is where he really loses out. He cannot order those bikes as they are âonlineâ order and wonât be able to compete that way as Specialized is doing that.
I get the direct to consumer stuff but that part is really crappy.
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The market will certainly gobble up many LBSs who try to maintain their previous overhead. There is no doubt it will be a major shift with a lot of shops struggling, but it doesnât necessarily mean doom and gloom.
Picked up my Epic Evo from the LBS this week too!
What I donât understand so far from my point of view, is why would I not buy a Spesh from the local dealer?
I would have paid the same ordering it online as I did picking it up in the shop. Itâs like D2C without the reduced price tag⌠Just donât see the incentive to buy it online at the moment
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Because they donât have any at the shop and my owner friend told me before I ordered he does not see any in his queue. Unless I misunderstood you of course.
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I agree with @ericallenboyd - itâs because they have them online but not in stores. One caveat thoughâŚit actually costs more to buy it online because there is a $50 shipping fee.
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Yes and that is what it is. I see the $50 as the âcostâ for them to set it up for me and if I want a bike and it is only online I am going to pay the $50 vs waiting months and months.
I was lucky to even get the 1 that actually showed up. I can setup my bike myself but my lbs is good to me and know everything will be done right and adjusted for me.
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Is Direct to Consumer only for MTB bikes? I didnât see any road or gravel bikes available. All are sold out.
They are not showing yet but I am sure over the next month there will be more showing up which can only be purchased online as dealers are not getting that 25% of the stock.
I think the direct to consumer is more of marketing and process online because regardless you could always buy a bike and have the option to either ship to lbs or your house. It is the stock piece mainly
Edit: to add for example lets say Diverge bikes had stock of 100. Online would have 25 and the other 75 could go to 75 dealers so they get 1 each to sell in shop vs Specialized could sell all 25 online. And dealers cannot buy them like normal consumer and resell in store. They would get in big trouble for that.
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Same
That was a great pod. Thanks for sharing.
Was not a dig on your choice! I would have done the same! I was just lucky it was the other way around; none available online, one available at the LBS!
It was just a reflection, that I donât understand Speshâs incentive to the consumer: Charge the same for the bike D2C as getting it off the floor at the LBS. Unless substantially cheaper online, why would future customers go that route?