ACT attacks Halfords

In a remarkable attack, the ACT has released a powerfully-worded statement including points-of-view that many industry insiders, especially suppliers to Halfords, have been thinking, but few have been prepared to voice in public.

Halfords recently sent a letter to suppliers demanding new, 90-day payment terms and, in many cases, margin reductions. Many key suppliers have now decided to cease supplying Halfords/Bikehut. Others view the "Homebase-method" of "bullying suppliers" as excessively short-termist.

The ACT believes the wheels have come off the Bikehut experiment. This is also the fear of Bikehut managers from around the UK, some of whom have spoken to BikeBiz.co.uk.

"Recent developments have seriously affected not only Bikehut staff morale but also Ripspeed and sales assistants," said one manager.

"No one knows what direction we are moving in. A lot of the original problems and subsequent restrictions were caused by the initial intake of ‘specialists’, many of whom had only worked in bike shops and had never run them. A lot of the current clearance activity is to get rid of the stock these guys got in four years ago.

"A lot of specialists have already gone. Many more are looking. If it all carries on the way it is going many more will go."

The ACT has done retail spot-checks on number of Bikehuts and has found SKU gaps. This is confirmed by a Bikehut manager:

"We have been seriously short of stock of bread and butter lines, cables, locks, brake pads, lubes, tyres, tubes, the list goes on. A lot of the specialist equipment has gone. No Hope in the cabinets, Middleburn disappeared, high end Shimano on the way out. It is starting to feel like we are back in 1998 again. Just today we had new plans arrive for our wheel display. We were due to have Hope hubs into Mavic rims, Tiagra into Mavic. The new plan shows bog-standard wheels."

One Bikehut staffer revealed to BikeBiz.co.uk that there’s a new, from-on-high emphasis away from catering to IBD-type customers.

"We have been told to fight for volume, not enthusiast sales."

The ‘new concept’ Bikehut store at Burton on Trent has been a "great disappointment" to suppliers previously excited by the move even further up-market.

"It’s nothing like the plans they talked about before launch," said one supplier.

"I don’t suppose there will be any further ‘new concept’ Bikehuts."

The ACT statement takes many of the above concerns and amplifies them. The statement is entitled ACT challenge Halfords to communicate as part of the specialist retail sector and not to drain funds from the industry.

Here are some extracts from the ACT statement:

Dominant corporate

"ACT has always been relatively passive as to Halfords role in the retail sector. Irrespective of industry concerns as to Bikehut – IBD aping or otherwise – at least one major corporate was always going to be influential in the UK retail market. ACT recognised that a single dominant corporate, generally focused on developing cycling – BAGB member, not price driven etc – was better than a highly competitive corporate sector, that could inevitably pull the whole retail sector apart."

Two stools

"ACT believes that Halfords is a retail anomaly, dominating two sectors, cycles and auto, that have little synergy between them. Halfords is strategically unable to withdraw from either or fully revamp their format to do justice to both in a complementary manner."

Niche no longer?

“We viewed their strategic move into the more upmarket sector with a high degree of scepticism. It was certainly mistimed, being very MTB biased just as the slump in this sector was impacting – terminally in some cases – in the IBD sector. It was like letting kids free in a sweet shop for too many of the bikeys in the business and what they failed to grasp were the real commercial challenges that go with being a specialist retailer, the ones that IBDs struggle with every day and generally overcome with a lot of hard work from on-site proprietor managers.”

Reverse brain drain

"We saw their staff investment as a more valid and a threatening strategy to IBDs, but the change in ownership appears to have undermined this investment and the apparent breakdown of their specialist strategy is already driving staff out of the businesses."

Too few SKUs

"ACT have recently carried out on site reviews of Halfords Bikehut outlets throughout the country and have found most to be very under stocked, poorly merchandised and greatly lacking in the ‘specialist’ equipment they were supposed to be majoring on. The display arms were empty including core products like security. There were only three locks on fifteen arms in one Home Counties outlet. In another outlet, the bicycle representation was far from specialist, one token Kona and one GT were surrounded by discounted Raleigh’s."

Supermarkets

"De-ranging, less specialisation, bicycle price point reduction, relocating bicycles back downstairs and at the front of the store may all indicate that Halfords want/need to fight for some of the bicycle volumes lost to supermarkets over the last few years. If this is the case it should be seen as generally positive by IBDs. [However, if Halfords are getting back into only the] the level entry sector of the market and that was controlled by a committed retailer with some measured strategy as to cycling and a greater commitment to quality [that ‘s good]. This could help develop new cyclists, improve their first experiences of cycling and provide a better recognition of value than the supermarkets etc are likely to offer."

Servicing

"Halfords movement away from questionably commercial investment in spares and service parts increasingly leaves room for continued growth for IBDs in the workshop market, an area that ACT is heavily committed to investment in via the CyTech brand linked to mechanic centres of excellence."

Is Halfords up-for-sale?

"The market could again focus on clearer boundaries between specialist retailers, providing specialist service and products, whilst Halfords battle for the entry market where they first built their market share. However, the concern is that this is an insincere strategy aimed at bolstering the P&L bottom line and the balance sheet. This is a concern backed up by Halfords increased focus on forcing their margins up – via the likes of their ‘auction buying’ and now their dictat to suppliers over payment terms. Halfords demand for greater supplier funding – if suppliers should cave in – will simply mean less support for the IBD sector, who will be left with few options to turn to.”

Go on, is it?

"The industry cannot afford to fund a financial makeover for Halfords so that it can be made to look more attractive, perhaps for onward disposal or management share options."

Invest in IBDs, or else

"A major element of ACT’s strategy is the development of good retail practices through training and investment, working with suppliers to realise profits, together through the supply chain. However, if suppliers back down and invest in Halfords now, they can expect a general deterioration in their return and debtor days with the IBD sector.

Talk is good

"Halfords is an important influence on our market place; ACT want them to discuss their strategies so that together, we can develop the cycling sector." Time to come clean, Halfords, and open up lines of responsible communication within the retail sector."