Switching Schwinn to mass was the right move, says Hornung

The business section of the Chicago Tribune carries a piece on the success Pacific Cycle - now owned by Dorel - has had by making Schwinn bikes available to category-killers and other big box retailers. Sales doubled. The loss of two-thirds of Schwinn's independent dealer base, caused by the move to mass two years ago, was "about what we expected," said Chris Hornung, CEO of Pacific Cycle as was.
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"When a venerable bicycle firm started letting major discount stores sell its products, some of its longtime dealers saw sales plummet," says the piece in the Chicago Tribune.

IBD Mikes Bikes of Palatine sells a 20-inch Schwinn boys bike for $130 while discounters sell it for $70, said journalist Judith Crow.

John Fearncombe of Mikes Bikes said:

"And the one in the chains has features that we don't have. It's a losing battle."

Annette Lemke, owner of soon-to-close Glenview Schwinn, said the opening of a Galyan's sporting goods store hurt.

"You can't compete with that," she said.


With bikes selling so cheaply at chain stores, many customers will simply discard an old bike and buy a new one, wrote Crow. "We're a throwaway society," agreed Lemke.

In its heyday Schwinn sold 1.5 million bikes a year, but it was down to 500,000 annually when the company was acquired in 2001 during its second trip through bankruptcy court.

Hornung told the Chicago Tribune that the introduction of Schwinn to "broader distribution" was successful, having "doubled Schwinn sales to more than $1 million." [Note: this should say 1m units].

By entering the mass market, Schwinn lost two-thirds of its IBDs, leaving it with about 800 IBDs, which account for about 40 percent of the brand's sales.

"About what we expected," said Hornung.

He told the newspaper that Schwinn dealers can do well by providing service and a better selection and also capitalising on their expertise to sell more bikes, especially to adults.

But some dealers remain skeptical, reports Crow.

"George Garner Cyclery in Northbrook, one of the earliest Schwinn dealers, dropped the brand shortly after it was rolled out to the mass market. The store currently carries Trek and Specialized.

"We were told the bikes would be different," said George Garner Jr., son of the store's founder. "When it came down to it, they were not that different."

The economics do not make sense, he says. Although Schwinn reduced prices to dealers, helping them improve their margins, the implication is, "you've been overcharging us all this time," Garner said. And even with improved margins, the bike stores cannot beat the chains on price.

"We don't need the line," Garner said. "It causes a lot of confusion. It's important to differentiate."

In the UK, Schwinn is an IBD-only brand.

http://www.ctnow.com/.../chi-0403080214mar08,1,7551315.story?coll=hc-headlines-business

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