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are the bikeshops or online shoppers the greedy ones?


By StanTheMan - Posted on 27 April 2013

NB: Originally posted elsewhere on the Global Riders Network and appears via syndication.

I've just spent 5 weeks in UK, Germany, Spain, France & Italy.

I found the only expensive part was was Petrol & road tolls in France & Italy. Food, alcohol,clothing, accomodation was dirt cheap. http://www.smh.com.au/data-point/rising-price-of...

for someone who is a non finacial background and involved in the retail industry.....this article is easy to undrstand. I admit, after looking at shops in Europe, Austrlaia has a lot to catch up on. Even in Spain shops are imaculate. fresh & beautiful displays & excelent product. And most of all, absolutely totally spotless.

I'm a big online shopper when it comes to my bike & car. Retail is pushing shit uphill in Oz.

But really we just want our dollar to have more purchasing power. we accuse bikeshops & retailers to be greedy. But were pullig the big wages & want to screw local business.

We might be pulling the big wages, but the amount left for discretionary expenditure is a lot less here in Oz compared to say the UK.

Back when I was growing up, most families could afford to purchase on a single income and being prudent. These days it's almost impossible on a single income - both parents need to be working.

Working in retail leasing for a Landlord/& Retailer traditional bricks n mortar retail simply can't compete against the low cost online model, the cost of doing business (CODB) for online doesn't need to allow for staff wages which along with rent is the big difference between the two. Along with intergrating an online channel (online store) bricks n mortar operators are now being forced by the consumer to lift their game, with Apple stores clearly the benchmark with the experience/theatre they create in their stores.

The big natonal retailers have had it good for such a long time with big margins now being whittled away thanks to the combination of online and savy & informed consumers. Unfortunately this has come at a price and hasn't helped the smaller players in the market who appear to be getting squeezed out, just take a drive through oxford street paddington (or your local high street) and count the For Lease signs!

Where one door closes another opens - as is evident with the number of 'pop-up' shops occupying these vacancies and enabling new start ups to promote their new business ideas.

Like most of us I would rather support my bricks n mortar LBS particularly those that don't charge extra for providing a high level of service and knowledge. All retailers/service providers should be made accountable for providing substandard product & service and only those that address this area and deliver will succeed.

IMHO Paddington died as soon as Westfield Bondi Junction opened in 2004. But the current climate certainly isn't helping Paddington either.

I call BS on this:

Working in retail leasing for a Landlord/& Retailer traditional bricks n mortar retail simply can't compete against the low cost online model, the cost of doing business (CODB) for online doesn't need to allow for staff wages which along with rent is the big difference between the two.

CRC is the biggest bike shop in the world. It employs something like 348 people on a huge site. What makes you think they don't pay wages or rent?

Sorry to deprive you of your misconceptions: maybe this might open your eyes.

http://www.bikeradar.com/gear/article/chain-reac...

What it comes down to is efficiency and service. They invest heavily in systems to provide both.

And unlike most local retail in Australia, they succeed. How is it I can get a part from the other side of the world faster than it takes to come from Melbourne (I'm looking at you Mavic)?




I would love to always support the LBS as much as I can, but does help if they stock something that is usually twice the price you get from CR or Wiggle.
When I have paid a premium at the LBS and get a good service, feel they deserve it. But it does give me the sh*ts when they do not give you the time of day or attitude.

No need to apologise pal!

To be clear I was speaking 'comparatively' as of course staff are required for the online format as is warehousing too. Yet comparatively the traditional bricks n mortar model runs a significantly higher cost model..i.e. much higher rate/sqm on retail rents, higher wages with retail staff paid more per hr than warehouse staff in addition with weekends and public holiday rates also a big factor.

Case in point..the retail component of the company I work for employs 7,000 staff and operates from 700 bricks n mortar stores in Australia, NZ, Russia, China, South Africa Singapore, Malaysia Indonesia, and all of Eastern Europe.

By comparison, 420 CRC staff operating out of 215,000sq ft (paying much lower industrial rates/sqm) is bugger all for a business that services a world market! All from one main DC in Ireland where third party distribution centres are then utilised throughout the globe once product is despatched from CRC.

Of course CRCs' service and efficiency is likely to be far superior it's all under one roof as compared to 700 bricks n mortar stores spread servicing 3 continents with 7,000 staff of differing backgrounds & cultures...

CRC themselves began as a bricks n mortar store yet obviously they realised the huge opportunity the lower cost 'online' model provided and they've mastered it into a hugely successful operation with the obvious cost savings passed onto the consumer thankfully!

For many years people made huge profits from real estate speculation and I always used to think where does the money come from? Those who owned real estate got a bigger slice of the GDP pie which meant the value of the work of productive and innovative people was diminished. The other side effect was commercial property values escalated meaning rents followed. This still worked ok for retail because the effect was similar everywhere, and even comparing other cities in Australia wasn't very relevant since you couldn't drop into a store in another capital anyway.

It has all become unhinged because retail in Australia now competes directly with other countries who don't pay the rents that they do in Australia. There is a lot of money to be lost as the value of commercial property levels out to the point where the bricks and mortar retail can compete with overseas online stores.

The local bike shop has to be pretty smart these days to compete, but its not a lost cause.

Greed doesn't come into it.

The whole supply chain and business model worked when our dollar was worth 60-70% of what it is now. Back then while cheaper items from overseas weren't as bigger cost saving.

They now either have to try and stick to their prices or sell twice as much at a discount to cover their costs or reduce overheads and supply chain costs.

On top of this you need to look at why our dollar is so high. The rest of the world has been in a bad way since the start of the GFC in 2008. This means retailers in other countries are in survival mode with trimmed costs and supply chains and selling to well funded Australians who escaped the recession. We are an eager lifeline at the expense of the LBS.

I'm sure many retailers in other countries have gone under too. Survival of the fittest. Unfortunately for our LBS they got drawn into this even though our local economy has been ok.

Greed doesn't come into it. The rules just changed massively.

Ford and Holden are struggling for similar reasons. The high dollar combined with other manufacturers sales at an international low means low finance rates and great deals on VW, Audi, Volvo, Mercedes, Subaru etc. this also filters down to the second hand market. Why buy a new commodore? A low mileage as new Audi with twin turbo 2.7L anyone?

Off topic...

Running costs on the imported cars are twice the price of Commodores.

BTT

Depends on where you buy the parts.

Online sales or someone other than the dealer.

I think shoppers always just look for value.

Market value is always defined by what people are prepared to pay. This often has little or only loosely relates to cost.

The set price also creates a perception of the items value.

From engineering design I know we always tried to create high perceived value and often could charge more for these products even if they actually cost us less to manufacture than items of perceived lower value.

Same in new cars. Some of the upgrades people pay for cost less than the standard items.

However we never gave this profit to the retailers.

The LBS shop at the moment has been hit with a sudden change in perceived value by overseas price comparisons.

Perceived value has also been dropping for a long time locally. How much do people now pay for 26" rigid
frames? More bling and shocks were standard for the same price even in 2007 compared to 2000 excluding inflation.

Have you been into a motorcycle shop? You get more for similar money. Even an engine thrown in for free. We are however prepared to pay the same or more for less (metal, plastic etc).

Be thankful we are not roadies. Less material to manufacture, no suspension and they retail for even more.

Given almost all cycling product is sourced from Taiwan or China, local supplier replacement cost will also track downwards with the FX rate.

The challenge is for them to manage their fixed component of their costs, and productivity. Oh, and the "S-word" too.

Most local buyers would be prepared (but perhaps not happy) to pay a 20% premium to offshore online prices so long as the service levels matched. The usual 100% plus premium is a little difficult to swallow.

Just on the LBS costs here on the north shore (as that's what we are referring to competing against the likes of CRC etc)

Take rent for an example, have a look at a shop front on any sort of arterial or main rd here on the beaches or north shore, and the rent is phenominal! The amount of bikes and products that have to be sold, just to cover the rent, let alone the running costs of the business like power, wages etc. Compare that to an online bunsiness that doesn't have a shop front, they don't need to have higher paid bike mechanics, but rather employ warehouse staff and parts pickers, lower rent for much larger premises (warehouse distribution doesn't need to be local, it can be located specifically in an area that is cheap and it won't impact sales or passing by trade etc.

Yes, that's a major factor. Those property costs have been driven up by a long period of cheap money (low interest rates) and a scarcity of supply bidding up property prices, for which commercial landlords expect an economic return. But they've got it arse about. It's not the bricks and mortar that are the asset, it's the tenant - he/she who pays the rent. An asset is something that puts money in your pocket, and owning an empty shop takes it out.

Personally, I reckon the online "revolution" is going to foment a major correction in the retail property market - shopping centres in particular. If the tenant isn't making money, neither will they. Rents must come down to more realistic levels, and asset valuations will follow.

If had any of my super in Australian retail property trusts, I'd be moving it elsewhere until the trend becomes more apparent.

Where to next for your LBS?

With most retailers now having to reinvent themselves in the face of high aussie dollar/online competition, high cost of living and our propensity to save more and pay down debt etc..this all leads to the all important scenario of sink or swim for the LBS..and the evolution of same etc...

Without wanting to digress, the message coming from national retailers I meet with on a daily basis and at retail conferences it's all about creating 'an experience' for the consumer at Showroom level aka the Apple Store model... Most other examples delivering on this challenge seem to be found overseas in Europe and the US where the larger populations allow justification to spend big dollars on cutting edge/jaw dropping showroom fitouts designed to ensure the consumer stays in store longer and returns sooner...I'm sure all of us enthusiasts on here could spend hours in our local LBS regardless of a whizz bang shop fitout, if not for the want of hitting the trails and testing all the latest and greatest gear ASAP.

That said, for the LBS to also integrate an online channel (store) capable of passing on cost savings to the consumer, are they really able to compete against the likes of CRS or Wiggle, is it sustainable and what be their point of difference?

My limited bike shop knowledge of a dual channel operator only leads me to CELL Bikes who strategically don't offer the same full range offered by their online store as they do at their bricks n mortar store that I visited recently.

I imagine there will always be a need for the LBS particularly for those time poor consumers who rather pay $$$ for servicing than learn the ins and outs of bike repair and maintenance.

It does pose and interesting question as to the evolution of the LBS and where to next for the LBS?

One major retailer (not bike related) back in NZ doesn't pay for any items until the customer buys it.

This gives them a big range in products, instant warranty replacement service and zero of their money tied up in their floor stock. It also eliminates FX currency risk.

Better service, what you want is in store and reduced supply chain costs. The distributor saves too as they need less warehouse space.

There is a high end bike store which sells Titanium Merlins or Litespeed's & has a steak joint n bar built around it to create some kind of "experience" & get the punter to spend $$.

Reminds me a successful kitesurfing shop back in NZ also sold secondhand washing machines and fridges.

Much of the time they did a double sale. My GF at the time was stoked, I came home with the whiteware she wanted. I was stoked and slipped a kite into the shed...

Basically it's about building community around the bike shop. I see Atelier de Velo heading in the right direction incorporating a cafe into the shop. It make it a place for riders to hang and diversifies your income stream. I'm not sure the CBD is the right long term location. KOM in Neutral Bay probably had a cool location but they seemed to get their business model wrong. I reckon something like AdV but in Manly Vale with more mtb emphasis would work quite well.

If you visit Noosa check out the shops up there. They are doing a great job especially Noosa Bike Shop.

There is a high end bike store which sells Titanium Merlins or Litespeed's & has a steak joint n bar built around it to create some kind of "experience" & get the punter to spend $$.

Well, I suppose that's a new twist on selling the sizzle! You can buy the steak as well Sticking out tongue

The place is called "The Pedaler's Fork" & it is Titanium Moots bikes they sell.They have FB page if you want to check them out.

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