– and is the future of the traditional wholesaler under threat?
Dirty Little Secret No.1 – more and more bicycle retailers are moving on from being online malcontents, to online customers.
Faced with the new breed of dynamic online cycling retailers, with their huge product ranges, fast turnarounds and prices typically 30-50% cheaper than their local retailer; consumers quite quickly transitioned from “I’d prefer to support my LBS where possible” to “bugger it, look at the money I’m saving”.
Now the same thing is happening with Australian bicycle retailers. And when I say ‘now’, it’s really been happening for a number of years; especially in the outer territories such as WA, FNQ and Tasmania. But now also in the major metro markets of Melbourne, Sydney and Brisbane. More and more local retailers are now openly admitting to buying more and more of their stock from the very companies they despised and railed against (and still outwardly do).
Dirty Little Secret No.2 – the major online retailers have long offered ‘trade’ accounts, with a further 10-20% off the listed prices.
Whilst not enough margin to purely sustain an Australian retail business, the chance to still win the sale, keep the customer and make a few dollars in the process has become too tempting to resist for many retailers. And not just on the high end components and premium accessories; but on bread and butter items as well. Categories wholesalers thought would never be affected by the onliners.
The willingness to deal with the ‘dark side’ is made all the more palatable, by the real or perceived lack of help from brands, their distributors or the government to do anything about the huge pricing disparities*. The sympathetic shrug from their local supplier and the spiele about how they’re working hard with their suppliers to stop Wiggle, Ribble or Bike Bug selling their product to consumers at essentially wholesale prices, has worn thin.
The Not So Secret Little Secret – Wiggle have now set up an office in Australia
The much maligned UK online behemoth, ‘Wiggle’ (sorry if I sound like I’m picking on you guys), have opened up an office in Sydney. Now whilst they are saying it is to better support Australian customers; which I’m sure they are hoping to do. I have to wonder, which customers they are taking about exactly. End consumers, or bicycle retailers?
They did the rounds of Australian suppliers a couple of years ago, seeking direct supply from local wholesalers; mainly for AS standards helmets (as they can’t legally sell most major helmets brands into Australia) and big box items they didn’t want to have to import from the UK; without much joy.
But what’s to stop Wiggle or the other major onliners, becoming primary suppliers to Australian retailers and usurping established wholesalers? Well, in both theory and principle, there are plenty of obstacles; e.g. territorial agency contracts, upside down seasons, GST, customs and freight charges, local baseline costs of doing business. i.e. all the same costs and issues that Australian distributors are dealing with.
What makes the prospect of onliners usurping distributors more feasible though, is the fact that territorial contracts are being openly flouted or ignored by flaccid suppliers. Which leads me to my third dirty little secret;
Dirty Little Secret No.3 – more and more of the major brands are now directly supplying and liaising with the major online retailers
The thinking (or the excuse) was that the best way to control the situation, was to be inside the tent. The hope was that this would assist pricing stabilisation and distribution controls. All it has meant though, is that the online retailers now have the same or better buying power, as the major distributors and probably more power and influence. The tail is now basically wagging the dog.
Could we soon see a time where Wiggle, Chain Reaction, PBK, R&A, BikesDirect and co. are the major competitors for the likes of the Monzas, Bikesportz, Madisons, QBPs and Grofas of this world? Could they even ultimately replace them and control the whole distribution chain? Could the next logical step be to start purchasing the brands and the factories themselves? Tin-foil hat wearing conspiracy tripe for some I know; but is it really that far-fetched? Or that far away?
And if it came to be; would it ultimately be a bad thing or a good thing for the industry or the consumer?
Are you a wholesaler? Are you at all concerned? What are you doing to keep your business relevant and viable in the mid to long term?
*I thought it important to note here that in fact, many brands, distributors and industry bodies have been working very hard on this issue for many years now. Peter Bourke and the BIA for example, have been relentless on this front. And there are definitely some major brands who can claim to have largely stabilised their global distribution and pricing through tightened up online and distribution management policies.
As someone who formerly represented a leading Australian distributor, I can assure you that this issue was front and centre at nearly every show, supplier meeting and Skype chat; if not the primary issue. Whilst many IBDs might feel their concerns are not being addressed; I can assure them they are. The problem is very few have been able to find real, workable or legally enforceable solutions.