Thursday, April 7, 2016

Shimano. The giant, angry, blue smurf that's dismantling the cycling industry....part 1



     In case you have been living with your head in the clouds, Shimano is making headline after headline these days, and it has nothing at all to do with the fact they still make a front derailleur. I will first begin by saying I feel that Shimano does make some, if not the very best, in cycling components. I used to be a full SRAM guy. As I progressed in my career, I made the move to Shimano. You can blame Juicy's, and every front derailleur, and every Hydro recall.

     Not that it is anything new, but many throngs of retailers are bemoaning Shimano's pricing structure as it pertains to IBD's vs. internet sales. It has become common knowledge that Shimano components are priced at or below dealer cost online. Consumers know it, and retailers are demanding change. Shimano has no plans to change, and is pretty honest about it when facing dealer complaints.


 

      Shimano dropped its pricing structure earlier this year. Not, as you would think, to help support IBD's in their competition against online shoppers. It came without a notice or heads up to many IBD's. Again, the IBD was left a little angry and pained, blue balls if you will. It just takes a quick glance at Bicycle Retailer's comment section to see this ager is widespread, with many dealer's throwing the rep out under the bus in the process.

low cost smurf's     head down to the comments to get a Tapas of dealer frustration. Pay attention to article publishing date.

     Now, I work for an IBD. I have friends, many of them actually, who own, run, and buy for IBD's. Many of my colleagues have called for a ban on buying Shimano product. That will get them to listen they say. Sadly, I feel these friends have no worldly idea of what they are talking about. In fact, many of them are running an antiquated business model that has been around for decades. Decades without change. Decades without forward thinking. Decades without a single ounce of prediction, only head in the sand reactionary bellowing from the same internets people are using to shop online. Meet your competition, it is the world, and you are staring at it right now. Perhaps you didn't notice the grimy handshake. Meet the internet, here since 1990ish. Crazily enough the whole selling online thing started decades earlier, and the first item sold was something anyone could grow themselves, weed. So this is Shimano's fault right?

     Shimano is not around to subsidize the local IBD. They are a business. A fairly healthy and well run business that is multifaceted. You know they don't only sell cycling right? I mean they are healthy in that they have a diverse business profile that branches out to gain other sources of income. But most IBD's only sell cycling. As if every IBD is immune to winter. I mean, it's spring now, and sales are healthy. You do remember January and February right? That was about the time you were wise enough to save a few dollars and lay off your second technician. ( Oh don't fret dear reader, there is another piece coming on that bullshit.) How's that working out for you now?

     Shimano. Well, Shimano not only cut it's price structure. It also announced it was up 14% . Is your business up? Notice the date stamped on that article. Yup same day as the price cut. How many times do you as a dealer, cut prices without losing margin, while you are up? Not many. Instead you wait for the big brothers to allow you to cut margin, mostly your margin by the way. SPRING SALES ON 2016 product??????????? Uh, that seems super healthy. What are you looking forward to when your terms are due and you still have floored 2016 product that was already on sale before spring?

     Maybe this is your fault. Yup. Read that again. It is your fault IBD. I have been working in very healthy retail stores that have shelves of black and blue boxes on hand. The same boxes that are cheaper online. A lot cheaper. I have sold XT brakes all day long as replacements for Elixirs and Juicy's. Why? Not because they are cheaper, but because I have them on hand and have technicians who can install externally routed brakes properly in under an hour, on top of their regular work load. I work in healthy IBD's who can make that sale happen. What about your shop?

      " I can order it for you"

     " It'll be four days before we can get those installed"

     " I have so many excuses for not making this sale happen its stupid. BUY LOCAL"

     " There was a delay in shipping, not sure when they will arrive "

     I'm pretty sure the customer has heard all that, and THAT is why they buy online. It's not them, its YOU. It's not Shimano. It's YOU. YOU the IBD. Your outdated, antiquated, surly business model is turning away clients. How may of you are welcoming of clients who bring their online purchases for you to install and don't complain about the cost of labor ? Very, very, very, few. That is pure profit. You didn't waste time ordering. You didn't shelf the product and have no carrying costs. Shops tend to charge $20-$40 per line to install disc brakes. If you maybe didn't lay off one of your technicians and get caught out when the season snuck up on you, you'd be glad to bank that $40-$80. If you are not happy to bank that, then you WILL go out of business. If you give that client the stink eye, you WILL go out of business.

    Quite frankly, you should.



   




22 comments:

  1. I'm unbelievably happy for my customers to buy parts online. Why?
    - Overall my margin is higher which makes my business look healthier.
    - MY stock never gets discounted, because I haven't got any.
    - When the part goes wrong (and of it's Sram: It WILL) the customer or the mail order shop pays me to remove/re-fit the item.
    - I also don't have to cover the cost of postage on warranties.

    So there's certainly a few things I'll keep in stock: Consumables, parts for hybrids and commuters, the kinds of things that go wrong mid-ride and can be fixed on the spot.

    But otherwise I'll get it from the supplier (bearing in mind Shimano & Sram is all free postage) to order or the customer can do that for me.

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  2. It is a even worse situation here in Australia at the moment as bike shops are being forced to purchase product off the online retailers. Shimano Australia has been out of stock of a large selection of everyday items like 8 speed derailleurs for months. I have heard rumors of Chainreaction offering a further discount to retail stores that are purchasing large quantities.

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  3. Very well said! Wish all the bike shops could understand that!

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  4. Preach! That's how we do it in the ski shop. Same shit different season. Instead of bitching about people buying skis online or getting a deal from a friend we're stoked for them to get out skiing and happily charge them to install the bindings and do a prep so they are ready for the slopes.

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  5. Wow, where to start.

    First of your very wrong a many of your topics. Right idea but just poorly executed reasoning. Much like your grammar.

    Your correct in that the IBD business model is dying as we know it. Scratch that, its dead and some owners just haven't realized it yet. Internet sales are the way of the world in 2016. Housing large amounts of stuff in a box so someone can walk into the box and select what they want doesn't make sense when consumers can pull out their internet box from their pocket and purchase goods while standing in line for their next double mocha frapachino. But thats not what has shops up in arms.

    Did you know 'dear blogger' that when I sign up for an account with Shimano I sign a contract stating that I won't sell goods below what price they dictate the goods are worth? Did you know if I get caught selling goods below MRP, MAP or MSRP that I can legally be prosecuted for breach of contract and loose not just my Shimano account but also my Quality Bike Parts account too?

    Shops aren't upset that Shimano is selling direct to consumers. We are upset that the playing field isn't level. If I have to sign a contract that states I legally can't sell goods below X dollar amount why would the largest manufacturer in the industry willingly undercut me?

    Secondly the IBD is largely moving online as well. Few shops don't have some sort of online catalog or shopping cart anymore. Whats the point? Wiggle and ChainReaction will just undercut that price too!

    Shimano took away my ability to source parts from anyone but them. They willingly removed their distributors in their supply line in an attempt to create more profit. THAT is where they got that extra 14% increase in sales from. Sales aren't up. Profit is up. This was accomplished by removing middle men in the supply line. However what they didn't do was adjust inventory levels properly. Now I can't get some goods to save my life. But guess who can? Wiggle. Strike two for the IBD trying to compete. Its not because of antiquated business models or a changing retail landscape. Its because Shimano did everything in their power to make it impossible for me to compete.

    Lastly I think your incredibly misled on profit margins and overhead for the IBD. Your argument that the IBD should be happy getting 100% margin on labor on goods being installed that were purchased online is a 1-way ticket to going out of business. Labor may be high margin but the average shop only attributes about 20-25% of their income to it. Retail is still the large driver of cash flow to a store. Telling me I should be happy making labor on someone else's sales is like telling the restaurant they should be happy making tips on the food I bring in from Aldi. Good luck with that.

    In the end I agree that Shimano is a good business. The retail landscape has changed and online sales are here to stay. Shops need to diversify to survive by offering things customers can't buy online. However thats not why shops are pissed. Shimano backed the shop into a corner and now is pulling the rug from under them. Its harder than ever to compete because the playing field isn't fair. Not even close. Be happy you still have a job selling stuff 'dear blogger' because that day may soon pass.

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    Replies
    1. Shimano (i.e. worldwide, not just the corner of the world that is the US) remains a good business as long as its products do what they are expected to do. That is to some extent driven my the puerile marketing that Shimano USA seems to take the lead in and generate (you could argue that any sort of off-road riding is simply and excuse to buy, wear out and replace increasingly expensive 'consumables', with gnarly dude wank factor as its sauce) , but in the end, how useable their products are. 20 years? 10 years? 5 years? Theoretically spare parts should be around for 20 years, as a rule of thumb, but when SHimano haven't got spare parts FOR CURRENT MODEL COMPONENTS (I'm not talking about one or two widgets for exotic thingo A, I'm talking about pretty much all cones (which are now integrated into axles, needing 3 x the cost and throwaway), rims for their wheels, derailleur pulleys for nearly every derailleur except a few common ones, etc. etc. In my country the lead times on these is often stated as months, which is ridiculous.

      If they want to piss off and annoy mechanics, and hence customers, have what are effectively non-serviceable components and systems is a sure way to do it, i.e. often expensive throwaways. This is why Shimano will fail. "Too big to fail"? as Neil Young said? Don't bet on it.

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    2. BTW Brett, the analogy you make to bringing in food to a restaurant from Aldi is a bit off. I'd say the food would be brought in, but the IBD (we call them LBSs where I come from) owns a functioning kitchen, has skilled cooking and waiting staff, and can make a meal out of any ingredient proffered: cheap or gourmet organic, with trimmings and presentation as part of the package. Charging appropriately. Why should this not be 100% of income? Cost of holding stock is a large part of non-wage-reated and equipment overheads. Remove that, and you focus on what you are good at.

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    3. "First of your very wrong a many of your topics. Right idea but just poorly executed reasoning. Much like your grammar."

      Off not of.
      You're not your.
      Check your own grammar first. I could not read past your first paragraph.

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    4. I am so glad someone other than me noticed the grammar nazi using poor grammar, in his second sentence. Also, went to his shop website. Poorly created and still advertising buy local from November. Just saying.

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  6. Shimano never have any unusual spare parts for things anyway nowadays, so there's hardly any reason to keep an account with them. As Mr. BikeHates says, either a big inventory of cassettes, chains, pads, etc., or nothing, and let the customer order whilst you fit.

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  7. I see you've been and employee, never an owner. I guess that should be obvious by your comments.

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  8. The main issue we have is that Shimano has quite literally made getting parts to have on hand difficult if not impossible. And to top it off we can buy the parts from chainreaction for less than we can from Shimano/QBP the problems that arise from customers buying online is that they bring us parts that don't fit or the wrong part altogether. Which makes us look bad because no one wants to hear they are wrong. Then you have the lack of standards just fucking pick one and stick with it for at least a few years

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  9. Brett Schaefer, you sir are bang on the money!

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  10. Couldn't agree on a few points, especially the IBD needing to evolve, but on others...

    http://thisbikeisfucked.blogspot.com/2016/04/shitmano-go-fuck-yourself.html

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    ReplyDelete