BikeBiz Bicycle and cycling retail news
One bike trade supplier to Halfords told BikeBiz.co.uk IBDs could grab market share from the retailer that accounts for perhaps 30 percent of UK bike sales.
In an outburst of emotion, he said:
"This is the single biggest opportunity IBDs have had for years. It’s a unique market situation."
He also said divide-and-rule doesn’t work in the bike trade any more. Suppliers talk to each other. They know many of their competitors – those who also supply Halfords – have yet to sign up to the new Halfords trading terms, unilaterally imposed by the Homebase-inspired corporate.
And this is a corporate retailer that is now acting more like Philip Green’s Arcadia, than the relatively benign Boots, former owner of Halfords.
Green, the billionaire owner of Bhs and who successfully bid for the Aracadia group in 2002, was one of the first retail bosses to impose tough new terms on his suppliers via ‘magic formula’ letters. The Arcadia group comprises Burton, Miss Selfridge, Top Shop and other leading High Street names.
His lead was followed by execs controlled by Sir David and Sir Frederick Barclays, owners of Littlewoods, the shop-and-catalogue retailer, since October 2002.
Soon after the erection of ‘under new management’ signs at Littlewoods, a missive went round to suppliers asking for a two percent cut in prices, with immediate effect. Bike suppliers got those letters. Some capitulated quickly, others toughed it out. The bike suppliers who toughed it out were dropped from the catalogue.
The top brass at Homebase, the DIY giant, tried the same give-us-more-margin-or-else trick and, by and large, it worked.
A few weeks ago, the Homebase top brass were parachuted into Halfords. Lo and behold, automotive and bike suppliers soon got the magic-formula letters.
Ah, but the bike market is brand-led. Name a brand of garden furniture. What worked at Homebase looks like it could back-fire big-time at Halfords, say suppliers to Halfords, keen to stress that the ‘breach of trust’ issue could happen again, and again, and again.
BikeBiz.co.uk has spoken to key bike trade suppliers to Halfords, and has been doing so since this story first broke, see link below. A few have bitten the bullet and signed new contracts. Some have waved goodbye, others are currently stalling. Few, if any, view Halfords as a ‘partner’ any more. Any ‘special relationships’ are special no more.
Yet right now is perhaps not the best time for Halfords to act tough, say suppliers. The retailer is in a 2-3 week period of deciding on specs and prices for 2004 brand and house-brand bikes, due September. Those suppliers not willing to subsidise Halfords are passing the margin claw-back and increased interest payments on to consumers, either by downgrading specs or increasing RRPs.
If Halfords messes suppliers around, the CVC-owned retailer may just find it has some big gaps in its bike department in September and October. It’s already got gaps – and downgrades – on the P&A front, as an ACT mystery shopping survey found last week.
And if Halfords isn’t sitting on big stocks of bikes right now, or with plenty of containers on the water, it can expect few ‘dig-us-out-of-a-hole’ favours from suppliers if the fantastically warm and dry start to the year continues through the summer.
Most members of the two wheel team at Halfords (and it’s now a depleted team) understand the trade’s maddening, idiosyncratic little ways. Ex-Homebase execs do not, say suppliers.
So, will Steve Lowe, head of two wheel and the former marketing manager at Raleigh (bike trade, man and boy), make Halfords top brass see the error of their ways? Not very likely, on Monday he was seconded to the Halfords computer systems department.
