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Distributors, deconstructed - BikeBiz

Distributors, deconstructed

Laura Laker speaks to independent bike dealers across the country to find out about what doing business with distributors is like, and what can be improved to keep bricks and mortar retailers secure in the future.
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(Written by Laura Laker)



Laura Laker speaks to independent bike dealers across the country to find out about what doing business with distributors is like, and what can be improved to keep bricks and mortar retailers secure in the future.

As part of our focus on distributors this month, in this issue we spoke to retailers of different sizes across the country to find out the main issues retailers face around stock control and sales, and what distributors can do to help them – as well as what they are doing well already, and what retailers would like to
see improve.

DELIVERIES

What’s the issue?

Distributors not being able to offer delivery timescales to retailers. This can make closing a sale there and then hard, as shops aren’t able to tell customers with confidence when stock will arrive.

Eleanor Bolt, who works in sales and admin at Drover Cycles, in Hay-on-Wye, Herefordshire, says: “We have got one or two suppliers that are very good with offering next-day deliveries, and others where delivery is a bit vague, so we are wary of making promises to customers. If people are to spend money in the shop, rather than going and spending online, it’s vital to have things in as quickly and reliably, and as soon as possible. Then we can say with certainty when an item is coming in. Some distributors are good at actually, but some are not so good.”

What can distributors do better?

“In-store deliveries to home addresses, and next day deliveries, are helpful,” says Bolt, “because you can promise customers items and know they will be delivered. It’s easier, in terms of making a sale, to be able to promise something the next day, rather than having to say ‘it will come at some point’.”

Toby Dalton, director and co-owner of Wheelbase, with stores in the Lake District and Darlington, would like to see reliable stock information from more distributors seven days a week. “We’re a seven-days-a-week business so the B2B on a weekend or holiday period is key; giving our sales team confidence that customers get accurate stock information there and then, and not having to wait for a call back on a Monday. It also helps massively in closing the sale on the day while the customer is there in your store.”

“The bulk of our day-to-day business with most distributors is done online via B2Bs. So a reliable and up-to-date B2B with live stock is essential.”

ONLINE DISCOUNTING AND PRICE CONTROL

What’s the issue?

It’s something that comes up time and again – the issue of heavily discounted goods online competing with bricks and mortar retailers.

Noah Fisher, owner of Mamachari London, says: “The hot topic these days is price control; I have a lot of discussions with distributors and brand reps about that; it’s not possible from a legal point of view to decide how much their stuff sells for.

“That’s probably one of the biggest problems now, and that it’s easy to scan a barcode and find the cheapest thing online. With servicing, customers can find out how much parts cost online. We appreciate people do that but if it becomes standard practice then we aren’t going to take much money on any repair or product.”

What can distributors do better?

Noah says: “The law specifically prohibits external price control but in practice what the clever companies are doing is saying: ‘if you’re going to knock out this product online and undersell the retailer, then we aren’t going to make it easy for you; products won’t be available to you’. It might be out of stock – to punish them for being naughty.

“I was talking to one rep of a distributor who said one area they can exert influence by arguing cut prices are reputational damage and they can make a case to cease supply, if it damages the reputation of the brand.

“Companies like Raleigh and Madison they don’t do much on that, or maybe they do in the background but I’m not aware. A lot of their
stock is highly discounted. When a brand is exclusive it’s very easy to know who’s behind it; that’s one of the biggest problems.”

MARGINS AND BREXIT

What’s the issue?

Shrinking margins in the industry, compounded by the Brexit effect, making it harder for retailers
to make money.

Richard Watts, director of Cycle Highlands, which offers bike rental and sales in Ballater, Aberdeenshire, says: “I think margin is an issue throughout the bike trade, and distributors are getting better at dealing with internet-only sellers. Because of Brexit, with the pound dropping, what you’re getting now for £500 on a bike is nothing like you were getting a few years ago; that’s quite difficult for the customers to take on board.

“I understand distributors are running on tighter and tighter margins; I think in the bike trade, compared to other trades, we have to work seriously hard to make money out of each sale.

“It seems to be getting harder for the largest high street bike retailers, like Evans and others, to make money, even with online discounting. However, the more they have to sell stuff closer to retail price the more it gives bricks and mortar retail a chance.”

What can distributors do better?

“I think with bikes, we need to make the buy-in enough to get the maximum margin,” says Watts.

“The direct-to-consumer model with the likes of Canyon in many ways makes sense because the material costs are so high now for distributors. While I don’t think there’s much more margin in trade I think it is the one thing that, from a distributor’s point of view, could help us – if we could get more margin.”

“The big issue,” he adds, “is exchange rates and VAT. We are spending a year’s wage per quarter on VAT; corporation tax isn’t so hard-hitting but the VAT really hits us.”

RELATIONSHIP – PERSONAL TOUCH

What’s the issue?

Variations between distributors on the relationships they build with retailers, and the sense larger stores are favoured over smaller shops. Given the choice, bike shops will favour distributors who build relationships with and support them.

Noah Fisher says: “Some distributors have no sales reps, and use contractors that only represent key brands and don’t visit small retailers – only people who spend six digits with them every year. Others spend their energies driving sales into the small and independent shops; that is why we buy from those distributors – we get a lot of support from them.”

What can distributors do better?

Toby Dalton, from Wheelbase says: “We do like to speak to internal sales on the phone. We like it when we have one or two people dedicated to our account so we can form a good relationship and do some good business. Also, free shipping, a helpful rep that doesn’t want to simply over load you with stock, and efficient and purposeful visits to store are a winning combination that will lead to a successful, long term partnership.”

Noah Fisher echoes this sentiment: “The thing that keeps us going back to the distributors, they are the ones who are really focused on supporting their dealer network and putting things into shops that are going to sell. They offer us incentives, with marketing material, which they supply, and that helps them but it also means we can access the brand with low pricing.

“Zyro and Extra also take the time to come see us every few weeks, or once every month - that makes a big difference, because then we have a good personal relationship with them.

“Other distributors could take a leaf out of their book. Others are notoriously difficult to get support from if you are a small retailer so I guess if more companies were making a commitment to support bricks and mortar – in particular independents – that would help.

“That’s key to the survival of a lot of bike shops that the brands and distributors support the local network, rather than favouring those who have a lot more buying power such as big chains or online.”

POINT OF SALE ASSISTANCE

What’s the issue?

While larger retailers might have the staff and expertise to do their own marketing, from professional-looking websites, to in-store deals and marketing materials, for smaller shops this is not always possible.

What can distributors do better?

Drover Cycles’ Eleanor Bolt says: “When distributors send images for advertising deals and ones that actually sort out the deals for us, it’s very helpful because then we don’t have to spend time coming up with in-house posters and thinking about what deals to run, which is helpful, and frees up staff time.”

BUY-IN

What’s the issue?

For Robert Pollen, director of Withington Cycles, Manchester, the main issue is the pricing structure distributors offer retailers for in-house brands.

“They claim it’s to reduce internet companies selling it cheap, but the buy in deals are getting more expensive and it isn’t scalable,” he says.

“Chain Reaction or Wiggle get the same buy-in deal that we do. We can only buy three or four different items out of a range, Chain Reaction will go out and buy hundreds, if not thousands, of these things and end up selling them at cheaper than we can even afford them.”

“It’s the premium brands that people go online for; we can no longer stock it Altura clothing - the buy in’s too expensive when we sell at the recommended retail price. Meanwhile, Chain Reaction will have 10 per cent off and weekend deals with another 10 per cent off and when you spend £100 you get 10 per cent off.”

“They need the quantity to keep the factories running. You can see why it happens, but... this leads to the issue of not making money out of things; if you are devaluing the product to that level you can only sustain that for a short time.”

“Taking these crazy buy-ins we haven’t got anywhere to store the stock, even if we did have the money. We can do it with low-risk products, such as D-locks, and helmets, we can commit to those, but there’s still a buy in for them with premium brands.

“We have to commit to those each year. Some of the bikes have probably been the worst. If we want to keep a premium brand of bikes in, we have to commit to approximately £20,000 of bikes a year. That leaves us very little diversity and room for other brands. From a customer’s point of view they see our main brand, Cube, and they don’t necessarily want that brand, they might want to look at a few brands, but we can’t offer that, so we lose a lot of customers to the bigger stores like Evans and Cycle Surgery. We struggle with them.”

What can distributors do better?

Some smaller retailers would like to see buy-in deals that help smaller shops, that can’t necessarily shift large volumes of one brand, but would benefit from a wider range of products for their customers to choose from.

CORE RANGE AND STOCK HOLDING

What’s the issue?

“Key, especially for small companies like ours is holding enough stock into for us to consistently offer a product and have it available,” says Mamachari London’s Noah Fisher. “We can either buy in a whole lot of it, and sit on the inventory, or the distributor can do it for us, and because the difficulty of retail, especially for small independent cycle shops, is the volume of product, we have to have in stock to be credible.”

What can distributors do better?

Noah says: “It’s really helpful for distributors to have that stock in, rather than some distributors who have ordered conservatively and then it’s out of stock for two or three months, while it gets shipped in from the Far East. Then we have to say ‘we’re out of stock and we will let you know’ or we have to find an alternative and change our product line. Zyro get that; they say ‘we are going to support you by keeping stock’ and we can order it when we need it. That way, if it’s a core product we know we don’t have to keep it in the back.”

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