Why are manufacturers increasingly going direct?

The cycling industry operates in a constant state of evolution, products evolve, trends and fashions come and go, but some things are a little more set in stone, such as the route a product takes to market, right? Rider and sports journalist James Cornford, talks to a few exceptions to the rule…

The route to market has traditionally been manufacturer to wholesaler, wholesaler to retailer and retailer to consumer. But over recent years there has been a growing trend for manufacturers to gain more control on the distribution process, from the introduction of concept stores, through to removing links in the distribution chain. It all comes down to weighing up the benefits of local market knowledge, against direct influence and control.

Mavic, known for its wheels, but emerging with an ever-growing portfolio of products, was were an early adopter of ‘the direct approach’ and has been expanding the model for the past 15 years. The French manufacturer started going direct in its home nation approximately 15 years ago, before rolling it out to other areas of Europe (Germany, Austria and Switzerland). Five years later and then on to the USA and the UK, with Spain and Italy coming onboard in September this year. The question is, why?

Alex Coventry, Mavic UK and Ireland sales manager, had this to say: “The main driving force for changing our distribution model was to improve our overall level of service offered to the consumer and the retailer, in terms of availability, training and margin and to get a better retailer presence for Mavic.

“By going direct we were able to offer the retailers a more tailored and dedicated level of service and improve their product knowledge, allowing the retailers to sell more product and provide an improved service to the consumer.

“The new distribution model also allowed us greater control over how Mavic’s products are sold, represented and serviced, making it easier to enforce our trading terms, such as retailer selection and internet representation.”

A new addition to the direct club are Kona, who in July 2011 moved its UK distribution to Kona Europe, who handle the rest of Europe, the Middle East and Africa, so it will be interesting to see if their Vancouver neighbours, Rocky Mountain, go the same way after recently parting company with Silverfish.

Charles Russell, Rocky Mountain sales and marketing director, wasn’t giving anything away about which direction they were going in during our recent chat, but as a company, Rocky Mountain employs both models. It handles direct distribution for Canada and North America, but currently use the distributor route for the rest of the world.

“Distributors bring local knowledge. They know how to sell and market our brand in their respective countries. They in turn provide feedback about their particular market demands, and if possible, we work to accommodate their needs in our bike line-up. This model for the international market has proven to work very well for Rocky Mountain.”

When borders are no longer boundaries, then the direct distribution method can flourish, which is why it is proving so strong within Europe. But to start any major restructure requires a heavy investment, so why do Rocky Mountain think it is worth doing?

“The primary reason for this is companies want to take more control of their brand and how their products are being marketed and sold in any given country. Another reason is focus. If you go direct it cuts down on the noise to the retailer. When you’re working with the retailer, all you are speaking to him or her about is your brand, not trying to wedge in another!”

“This is particularly important for a brand like Rocky Mountain because we have highly technical products with a long history in mountain biking and that message can get lost when working through a distributor.”

The dynamics of the distribution chain are changing as a result of manufacturers wanting a larger say on how their products are represented. Where ownership of the distribution chain is not a viable option, the use of dedicated brand manager roles are taking more prominence, with wholesalers dedicating staff to major brands, blurring the line of who these staff work for.
So what route will Rocky Mountain take? Will they head down the same path forged by the likes of Mavic and championed by their BC compatriots? Only time will tell.

“We are currently looking at a variety of ways to sell and market our brand in Britain. The UK is a very important market for us and we want to make the right decision and make sure we set up the right structure so we don’t need to make a change for a long time. We appreciate the patience on behalf of our strong dealers that have sold Rocky Mountain Bicycles in the past,” concludes Russell.