Leftovers

Some Numbers Comparing Running Retail to Bike Retail

As the bike industry is just beginning to move their catalog of goods online, practically the entire floor of a running store is filled with items that can be purchased from the manufacturer websites- and in many cases it can be found cheaper. In many ways, how a running store is operated today could be a blueprint for how bike retailers may have to operate in the future. So how do running stores stay afloat when everything they sell can be purchased from a phone?

When I ask IBR owners and managers this question, a popular response is that running stores can survive because there are more people running than cycling. They believe the customer base of runners is so much larger that they can work on massive volume. This thinking may be incorrect. Running participation in the US is nearly identical to cycling. In a 2013 study done by the National Sporting Goods Association the number of people participating in cycling or running activities was very similar, with 39.3 million people cycling and 40 million people running. The NSGA classifies participants as those who ride or run at least six times during a calendar year. The NSGA then takes the total number of participants and breaks it up into three categories: frequent, occasional, and infrequent.

Total participants (in millions):
39.3 cycling, 40.03 running

Frequent, more than 110 days per year:
5.35 cycling, 9.22 running

Occasional, 25-109 days per year:
18.55 cycling, 18.56 running

Infrequent, 6-24 days per year:
15.41 cycling, 12.23 running

While the number of runners and number of cyclists may be similar, there is one reason many bike retailers will call out when they are compared to a thriving running stores. There just are not as many running retailers as bike retailers and therefore the running stores command a larger portion of the market. In this instance, they are correct.

According to Leisure Trends Group there are more than 1038 specialty running stores in the US, compared to just over 4000 independent bike retailers. Though it should be noted that Leisure Trend’s numbers only reflect specialty stores, they do not include everyone who is selling running shoes. Those 1038 stores represent approximately 22% percent of all running shoes sold, the remaining 78% is split amongst online retailers, general sporting goods stores, and discount stores. In a similar fashion 74% of bicycles sold in the US are sold by department stores and discount stores.

Do you think bike retail and running retail are similar? Are they the same customer base? Do they have the same challenges ad opportunities?

Please remember to comment and share. Thanks- Donny

Check out my book. Leading Out Retail is a creative look at bicycle retail and teaches retailers simple strategies on how to increase profit through service, what the most important question to ask every customer is, and how to manage the dreaded Timmy Factor.

It's Crazy The Hours That Some Bike Retailers Keep

Should a retailer open their doors earlier or later? Open or closed on Sunday? Retailers are always testing their hours of operations but this may help end the trial and error.

Choosing hours of operations is based on a number of factors including the shopping preferences of customers, potential sales, and fixed costs of staying open. Managers also have to consider the willingness of their staff to work certain hours. Since cost of labor can range up to 20% of an IBR’s total revenue it is crucial that every hour a store is open, it is open for a reason. Either to manage customer purchases or provide a customer service which creates profit later.

To help bike retailers make a more informed decision, in May of 2012 I conducted a study that took a closer look at hours of operations for IBRs in the United States. I sampled hours from a hundred bike retailers from 17 cities in the continental United States and compared them to a hundred other sporting goods retailers in the same cities.

Cities sampled in hours of operation study: Los Angeles, San Francisco, Seattle, Salt Lake City, Tucson, Denver, Minneapolis, Des Moines, Kansas City, Oklahoma City, Austin, Chicago, Philadelphia, New York, Asheville, Atlanta, and Miami

Sporting goods retailers open earlier and close later than bike retailers in nearly all cases studied. The most common hours for a bike shop are 10-7 on weekdays, 10-6 on Saturday, and closed on Sunday. For sporting goods retailers the hours were longer in every instance: 10-9 on weekdays, 9-9 on Saturday, and 10-7 on Sunday. This begs the question, are sporting goods retailers providing a better service or taking potential customers from bike retailers?

With these results we learn that bike retailers are open 53 hours per week on average while sporting goods retailers are open 76 hours each week.

Opening earlier or closing later can prove fruitful though. Being the only bike retailer open in a city at 9pm might mean, over time, they will acquire new customers who would usually go to other stores but can’t. If an IBR has a ride that leaves from their store every Saturday at 7am, earlier hours on Saturday would allow them to provide pre-ride services and sell products needed for the ride. These small gestures of good will go a long way. Mellow Johnny’s in Austin, Texas opens their doors at 7am every day except Sunday when it opens at 8am. In a discussion with their manager I learned that business is generally slow in the morning. The customers that do stop by are generally dropping off their bike for repair before their workday begins and they are always grateful.

The study showed that Sunday was the most popular day for bike retailers to be closed with 32% locking the doors, compared to 11% of sporting goods retailers. If an IBR is choosing to close for moral or religious reasons, then by all means, I encourage them to do so. For other, smaller retailers closing down for one day a week may be helpful when attempting to save money. However, closing one day a week means being closed for 52 days a year, almost two months. Any retailer choosing to close one day each week will want to be absolutely sure they are making a smart financial decision.

According to the study the most effective, and possibly lucrative, hours of operation for bike retailers would be 11-8 on weekdays and 8-6 on the weekends. Of course this can vary from one location to another and whatever the hours of operation are retailers would be wise to prove the effectiveness by measuring traffic flow and sales.

Thank you for reading this far. If you found this content valuable, please share. Thanks - Donny

You can find more studies like this in my book! Leading Out Retail is a creative look at bicycle retail and teaches retailers simple strategies on how to increase profit through service, what the most important question to ask every customer is, and how to manage the dreaded Timmy Factor.

Why Does Your Bike Shop Exist? And Why Should Anyone Care?

As of December, 2013 Simon Sinek’s Ted Talk, How Great Leaders Inspire Action, was ranked number three of most watched Ted Talks with over fourteen million views. And deservingly so, many businesses have used Sinek’s talk to guide their strategies. The talk is referenced in dozens of books and Specialized, Trek, and Cannondale have all used the talk in presentations to their retailers. One of the reasons the video is so popular is because Sinek explains how inspired leaders and organizations think differently than everyone else. They do this by first defining why they do what they do. Then they say how they do it and finally, what they do. I will break that down a bit further.

The Golden Circle. Smart leaders and organizations work from the inside out. Starting with why.

What. Every bike retailer in the world knows what they do. These are the clearest definitions of their business and for many reading this book, the most common list of what bike retailers do:

Sell bicycles, equipment, and apparel
Repair bicycles
Fit bicycles
Coaching and/or consulting

How. Many bike retailers can even define how they do it. This is what many people in business refer to as their unique selling proposition, or USP. This is what makes doing business with one IBR better than shopping from their competition. Here are the most common answers I hear to how people do what they do.

Perfect location
Great selection
Experienced and highly trained staff
Family owned
Detail oriented
Fastest turn around
Competitive prices
Awesome shopping experience
No intimidation or pushy salespeople

Looking at this list, many retailers will agree that those are all things their business offers to their customers. That’s the catch, every IBR believes they offer these things and no owner or manager will say otherwise. No bike retailer in the country will tell their customers, “We have a crappy selection of bikes, moron employees, and we do really shitty work.” If everyone is offering the same thing, what makes anyone truly special, different, or unique?

Why. Where companies struggle is defining why they do what they do, and to quote Sinek “It is not to make a profit, that is a result and it is always a result. By why I mean, what is your purpose, your cause, or your belief? Why does your organization exist? Why do you get out of bed every morning? And why should anyone care?” When retailers effectively define why they do what they do, they are speaking to the emotional center of their customers. Here are some of the best I have heard.

We live and breathe triathlon.
We believe you deserve the best cycling experience.
We believe the bike should never be an excuse.
We believe cycling will change your life.
We want to grow the Portland commuting scene.
We provide a service with a performance benefit.
We want more cyclists riding more often.
We are mountain bikers to the bone.

When retailers define why they do what you do, many of the day-to-day business choices become a lot easier. For example, let’s pretend a retailer has defined their why as, “We live and breathe triathlon.” What brands do they carry? They carry brands that have a dedicated focus to triathlon. What type of people do they hire? Triathletes, preferably people who live and breathe triathlon. What publications do they advertise in? They advertise in publications that triathletes read. What events do they sponsor? That’s easy, they sponsor triathlons. What would be the best way to grow their business? Possibly with swim and run gear. People do not buy from businesses that have what they need; people buy from businesses that believe what they believe.

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What Happens Before We Buy?

Have you ever visited a store and saw something awesome, then went home and checked it out online, then asked your friends about it, and then went back to the store to buy it?

I like to call these points in time, micro conversions. Nearly every purchase we make is preempted by a micro conversion or a series of micro conversions. When someone is overwhelmed by micro conversions it can become too much to handle. The desire to purchase is like an enormous weight on their shoulders. These are the people that walk into the store, throw down a credit card, point to a bike and say, “That one. Now!”

In bike retail it’s easy to focus on the macro conversion (when someone makes a purchase). That’s where we find the glory of the sale, that’s where the commission is, and that’s when we feel the satisfaction of a job well done.

However, I like to remind retailers- without a healthy strategy around acquiring micro conversions, we will never see macro conversions.

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Sales Per Sq. Foot in Bike Shops? Take A Guess.

If we were to center a microscope over brick and mortar retail what many people tend to find is that it’s a real estate game just as much as a retail game. If an IBR can earn significant dollars per square feet then they’ll have opportunities to set up business in a location with great traffic, parking, and amenities that facilitate a positive shopping experience. If they cannot earn the dollars per square foot then they’re blocked out of the prime locations and will work harder to convince customers to seek them out. This is how the phrase, “We’re a destination location” was born.

Sales per square foot is a popular metric used in the retailing industry and is simply the average revenue a bike shop creates for every square foot of sales space. Investopedia, a website dedicated to educating people on finances, investing, and more defines sales per square foot like this, “Sales per square foot is used by businesses and analysts alike to measure the efficiency of a store’s management in creating revenues with the amount of sales space available to them. The higher the sales per square foot, the better job management is doing of marketing and displaying the store’s products.”

Signature Cycles. It would be a safe guess to say they are outside of average for bike retailers.

According to the National Bicycle Dealers Association the average square footage of a bike shop in the United States is 4472 square feet. In a survey done by RetailSails, a retail and consumer goods consulting firm, they measured the average square footage of the nine most successful retailers in the US. They found that the average retail space of Apple, Tiffany, and Coach was similar to bike shops at just under 5000 square feet, the difference was how much those stores earned per square foot- and it was a drastic difference.

Apple was the runaway leader by far, earning $6050 per square foot nearly double over second place Tiffany & Co. The yoga-inspired apparel store Lululemon came in third at $1936 per square foot. And what about bike shops? Depending on their size a bike shop will earn between $100 and $250 per square feet. While most bicycles are more expensive than most Apple products, and require a highly knowledgeable and educated staff, they have the same earning power as a low-end department or a RadioShack.

It’s this kind of earning disparity that tells us bike retailers are clearly playing the retail game, not the real estate game. This means there will rarely be a bike retailer next to an Apple store, Tiffany & Co. or even a Lululemon. Most IBRs simply can’t afford to run a profitable business in those locations.

Since IBRs are playing the retail game they have to convince people to find them and when they do, the people working at a bike retailer have to win them over with an engaging experience, incredible product knowledgeable, and a rooted sense of trust with all cyclists walking in.

Thanks for reading this far. I know you're busy, but if you found this valuable it would mean a lot if you shared it. Thanks - Donny

When Bikes Ruled The World. A Trip Back In Time.

Imagine a moment in time when bicycles were the biggest topic for everyone to be talking about. It happened and greatly influenced bike culture today.

The greatest year to be a bike retailer in the United States was 1972-1974. These are the years many industry veterans refer to as the Bicycle Boom. Time Magazine said it was “the bicycle’s biggest wave of popularity in its 154-year history.” In the early 1970s there were approximately 15 million bicycles sold each year which, for the first time in decades, surpassed car sales. To create a sense of how big this boom was, seven million bicycles were sold in the US in 1970- and only 200,000 of those bikes were lightweight 3-speed or derailleur equipped bikes geared toward adults. The majority of bikes sold in 1970 were children’s bikes, approximately 5.5 million. By 1972 the bikes for adults grew 40x with sales breaking 8 million making it the first time since 1890 that nearly one-half of all bicycle production was geared for adults. The Bicycle Boom was so enormous that the US has yet to match those annual sales numbers.

We can give credit to the Baby Boomers for sparking such growth in the cycling during the early 70s. As many of the Boomers were in their early twenties they were seeking inexpensive transportation and a new form of recreation and exercise. Boomers also had an eye on reducing pollution and they saw the bicycle as their answer.

But the Baby Boomer’s weren’t the sole cause, it was a perfect storm of events as manufacturers in Asia were producing lightweight and affordable bikes for adults. Brands like Fuji, Miyata, and Nishiki are credited as the brands of the Bicycle Boom. They were so dominant that they caught US manufacturer Schwinn on their heels, unable to produce a bike that could compete on quality and price. This arguably started Schwinn’s 20-year demise from their throne as the brand of choice in the US.

National Geographic, May, 1973. Grove, N. “Bicycles are Back, and Booming.” — National Geographic, May, 1973. Grove, N. “Bicycles are Back, and Booming.”

The three largest US-based bicycle manufacturers still operating today were all born from the 70s Bicycle Boom; Cannondale in 1971, Specialized in 1974, and Trek in 1976. Many of the bike retailers in the country also began in the 1970s and the ones that were already in existence saw massive growth. Bicycles were in such high demand that bike retailers weren’t the only ones cashing in- department stores, gas stations, and small garage shops popped up like flies, selling whatever bikes they could get their hands on. Prior to the boom many bike shops were known as one-stop fix all service centers and you were just as likely to find a grease covered mechanic working on a lawnmower as a bicycle.

If bike retailers that started up in the 70s played their cards right, they rode on four more distinct waves in the cycling trends. They likely continued to sell lightweight, Asian-made road bikes in late 70s and early 80s. They expanded into BMX in early 80s but by the end of the decade were focused on the massive growth of mountain biking fueled by American manufacturers like Specialized, Cannondale, and GT. Mountain bikes would carry them through a good chunk of the 90s until 1999 when road cycling made a monstrous comeback on the coattails of Lance Armstrong’s Tour de France performances. As the 2000s came into focus many bike retailers could have also jumped on board with the growing army of triathletes.

From 1970 to 2000 IBRs grew from sales and service to true community hubs. People would walk into their neighborhood store, grab a magazine, and talk about the sport. Discussion bounced from newest bikes, to comparing technologies, dissecting suspension systems, and which riders were lighting up major tours. Club rides started at the IBR and when they finished everyone would grab a beer from the communal fridge. Everyone knew each other’s name and every store had a distinct club-like feel. If you were in the club, you were in for life. If you weren’t in the club, you were only a purchase and a bike ride away from earning the secret pass to belonging. It was a true subculture. Bike retailers were their own niche and the center of all cycling knowledge for their community.

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Book Summary: Reinventing the Wheel by Chris Zane

It’s not too often you see a book about the business of bike retail. Zane’s Cycles is located in Branford, CT. Here is a short video where Founder/President Chris Zane describes his business, and here is where you can buy the book.

SUMMARY

Chris claims a 23% annual increase in revenue over the year before is his company’s average growth.

Nothing was focused on how to execute a sale, instead everything was focused on a higher level on how to get the customer in the store and keep them coming back for life.

The book worked like bike-shop specific bookends on any day-to-day work. Before you can execute a sale or service effectively, company visions like this need to be in place.

While the sales strategies Chris presents aren’t new (in fact he tells us where many of his ideas came from) they are new to the cycling industry. While marketing to gay/lesbian communities is obvious for millions of other companies, I wonder how many bike shops look into expanding their market there?

He mentions several times his plan to grow his one store location to 100 stores nationally. Too bad he never details how he plans to do it. Will be exciting to watch as he does.

THREE KEY IDEAS DISCUSSED

1. Zane’s average lifetime value of a customer is $12,500

This give Zane’s roughly $5000 profit if they earn maximum customer loyalty

The lifetime value allows them to understand the cost of acquiring and earning a customer

Arguing over a $100 return is not worth losing the customer and their lifetime value of $12,500

If a business does not understand their customer’s lifetime value, they do not know where to begin pricing strategies in service or marketing.

2. Zane’s has a 3-leg stool to their business. Products, service, and price.

Products:

Strong relationships with strong vendors and suppliers

Vendors need to be willing to go the extra mile in warranty and delivery

Vendors are not partners. Zane’s is their customer and they expect their vendors to treat them as well as they would treat their own customers.

Service:

Satisfaction guarantee. If a customer is not happy with any product they bought, at any time, they can return it for a full cash refund. The author tells a story of a full cash refund he gave a customer who brought in a bike that was 6 years old. The customer then bought a bike 3x the value and has been a loyal customer since. Proving the value of the lifetime customer.

Lifetime free repairs. All repairs that come from general use of the bike are free for life. This focuses his staff to assemble bikes in a manner that demands very little return and strong product education to his customers. The cost of free service is a no-brainer to Chris when compared to the lifetime value of the customer.

Kid’s trade-up program. If a parent buys their kid a bike they can return it for full value towards the purchase of the next size up. While it sounds crazy, this has been a profit center for the shop. The idea that a trade-up program is in place makes the sale easy. Only a portion are traded in and those are donated which earns the shop free marketing and new customers.

Lifetime flat repair program. For $20 you can buy free flat repair for the life of your bike. They sell 4000 of these programs a year and perform free flat fixes about 50 times a year. 4000 x $20 / 50 = $1600 earned for every free flat fix they do. People who ride a lot and are more likely to get flats don’t buy in to the program- they need to know how to fix a flat themselves.

Price:

90-day price guarantee. They match any price and then some.

Because the services Zane’s offers seems too good to be true, they match any price their customers can find on a bike up to 90 days after the purchase

When a customer does ask for a price match they give them an additional percentage on top to be sure Zane’s had the cheapest price.

This discount is acceptable in light of the customer’s lifetime value.

3. Where to put your efforts in marketing

Zane believes that 30% of customers are price conscience buyers, 30% of customers are experience conscience buyers and the remaining 40% can be persuaded to go either way. If you attempt to market to 100% of your customers you will gain approximately 50%. If you market just price or experience you will gain approximately 70%.

Experienced focused buyers spend more, so market your services and the shopping experience. Not the super deals on price.

Thanks for taking the time to read this far. If you found value in this piece would you please consider sharing it on social? Thanks again. Donny

How Many Bike Shops Serve Beer? You Might Be Surprised.

Many bike shops are expanding beyond the sale and repair of a bicycles. Doing this brings customers in the door when they may not need anything cycling specific.

For a bike retailer, selling a bike is a macro-conversion. But in the US 12% of bike shops have coffee bars, 11% offer spinning classes and almost 5% serve beer. About 1% offer massages, yoga or full-service restaurants. When these shops sell these things they are micro-conversions.

A business can no longer live on macro-conversions alone. Selling items that have a lower price point and are purchased more often are the micro-conversions that bike retailers need to thrive.

Thanks for taking the time to read this. If you found value in this piece would you please consider sharing it on social? Thanks again. Donny

200 Bike Shops Will Close & Other Predictions for 2014

I thought I'd take a crack at making some predictions for the year. 5 predictions for bike retail, and 5 predictions for the world of retail. In no particular order, here you go.

IN BIKE RETAIL

More bike retailers will move to click-&-collect.
Truly competing with online sales means competing online. Retailers will thoroughly build out their click-&-collect sites.

More bike retailers will become manufacturers.
Apparel and small hardgoods will be the first to be made by the local retailer. Once the retailer becomes the manufacturer, they will no longer be limited by MSRPs or territories.

Bike retailers will experiment with pop-ups.
Instead of waiting inside the brick and mortar, more retailers will open 1-2 day stores where cyclists congregate. Coffee shops, gyms, and trailheads will be the starting points.

200 bike retailers will close.
As some retailers grow, they are not growing the number of cyclists at the same rate. Only way they grow then is through market share.

A major cycling brand will go direct.
One of the top 10 cycling brands in the country will cut out the retailer network entirely. Instead selling direct to the rider.

IN ALL RETAIL

Stores will be open on Thanksgiving Day.
This is a no-brainer. For good or bad, the holiday of Black Friday is becoming more relevant than Thanksgiving. Bike retailers will still be closed though, still struggling to capitalize on the holiday.

Apple will update their in-store CX.
The customer experience at Apple is becoming antiquated. They will, again, revolutionize the way people shop. We will all say, “Why didn’t I think of that?” when they do.

FedEx and UPS will announce Sunday delivery.
With Amazon and USPS to launch delivering on Sunday, they will redefine the rules of making a delivery. UPS and FedEx will have to play catch up.

Showrooming will be encouraged.
Retailers are understanding that showrooming is not the death of a sale. They will promote it in store knowing that what the customer finds will match what they have.

Ship-to-store will grow.
Too many UPS packages were late or stolen this year. Customers will opt to ship to the store (or a UPS/FedEx location) giving retailers another chance to convert.

Thanks for taking the time to read this far. If you found value in this piece would you please consider sharing it on social? Thanks again. Donny

Should Bike Shops Be Selling Men's Underwear?

The world of bike retail is changing, and changing drastically. Is there anything off limits for a bike retailer?

Twenty years from now we will look back upon this decade and we'll have a name for it. Much like we named the Industrial Revolution. We will point to this time and say, "That's when it all changed." In the world of retail the way it is changing is from the merger of manufacturers and retailers. The traditional model of manufacturer to distributor to retailer to customer is dying and in many places is already dead. From now on it will be simply, manufacturer to customer.

Many would look at Target, Wal-Mart, or their neighborhood grocery store as the traditional definition of a retailer. They bring in products made by other people and sell them to consumers. Though when looking closer we realize that more than 50% of what Target and Wal-Mart sell, they manufacture. Every grocery store has their own brand of items. Even Amazon, the world's largest retailer, is a manufacturer of electronic goods, kitchen supplies, books, and much more.

What does this mean for the independent bicycle retailer? It means, more than ever, they should start looking to create products of their own. Controlling the entire value chain. Right now nearly every bike retailer is the owner (or manufacturer) of the services they sell. Going forward they will begin to own their apparel, the shoes, the nutrition, and possibly even the bikes.

Some retailers will even expand beyond tradition and start selling items we never expected, but with a brilliant cycling twist. Look Mum No Hands in London sells their own band of men's underwear for example.

What is the next product you really want to own?

Thanks for taking the time to read this far. If you found value in this piece would you please consider sharing it on social? Thanks again. Donny