What not to buy: Stocking your shop for the new season

What’s your brand plan for 2014?
Pre-season is upon us again and it’s therefore a great time to take a long hard look at the overall performance of the brands you sell and really assess the profit you make from each of them. The ‘value’ of a brand (can be bikes, clothes, suspension forks, etc) to your business isn’t just about your gross profit margin but also includes issues like availability, SRP stability, warranty support, technical and sales information, build quality, settlement discount, online availability and customer demand. What might appear to be a great up-front dealer discount might not look so good when the sale goes through the till.

Before you enter the pre-season affray its worth researching the brands you stock so that you have a clear picture of where your 2014 purchasing should be focused. Research comes in two forms…

Quantitative Research:
In simple terms, the brand values you can quantify using numbers, which include:

•  Gross profit margin (bikes and equipment will probably have different margins)
•  Settlement discount
•  Credit limit
•  Payment terms
•  How much volume/value do you have to buy at preseason to achieve your dealer discount
•  Any other financial support (team equipment, co-op ad support, merchandising)
•  Is this year’s turnover with the supplier up or down on last year

Qualitative Research:
Slightly harder to pin down, these issues include personal experience, emotional attachment, customer feedback and personal likes and hates. 

The best way to rank these is on a scale of one to ten, with ten being superb and one a real shocker. Areas to look at are:

•  Is the product discounted locally or online and will you have to price match goods to make a sale?
•  Do you have a lot of local competitors selling the brand?
•  Are customers coming into you shop aware of, or asking for, the brand?
•  Does the brand invest in technical/sales training to help you sell to your consumer?
•  Is clear, concise consumer product information available in print or online?
•  Is in-store merchandising available to support the brand?
•  Is the product well packaged and does it look appealing when on display?
•  Is the product build quality good making it easy and fast to put through the workshop should it return?
•  Is the quality of the product good or does it come back for regular tweaks and adjustments?
•  Does the company have an efficient and fast warranty replacement process?
•  Does the supplier’s sales team have accurate availability information of what’s in-stock and on the way?
•  Do you have to hold the stock or does your supplier have availability off their shelves?
•  Is the brand investing in technology that will make its product more saleable in years to come?

Action Plan:

•  Do the quantitative research or ask your accounts person or accountant to do it

• Do the qualitative research by getting your team involved. Draw up an agenda or request an XL spreadsheet from nick@wavingcat.co.uk and hold a team meeting to discuss these issues. Getting feedback form your team will get them engaged in the process and might flush out issues that you are not aware of. Score this research from one to ten as you go along, as it’s hard to remember all the issues at the end of the process.

• Analyse your research by going to Costa and ordering a double espresso! Only you can ‘value’ the brands you have in terms of the research results: is SRP stability more important than area exclusivity, is a higher dealer margin more important than a product that takes longer to build, and is the brand ticking enough boxes to grow with you over the next 3-5 years?

• Make a brand plan for 2014 by ranking the brands you have and working out which you are going to invest more of your buying power with during the 2014 season?

When you meet your suppliers at preseason you can use your brand plan to show how and why you will increase your buying commitment and why they should invest in you in terms of additional discounts, improved terms, in-store merchandising etc.

One final thought: If and when you come to sell your business in the future, the profile of the brands you stock can add real value to potential purchasers (assuming the brands will transfer their allegiance to the new owners).

For more information, or for a chat, contact nick@wavingcat.co.uk

And there’s more tips for bicycle shops from Waving Cat here.