What I’m about to suggest comes from a place of love and best interest for all concerned.
Bicycle retailers would be better off if they allowed their suppliers to clear old stock directly to the public.
Walk around the warehouses of most wholesalers in the bike industry and roughly a half to two-thirds of the stock you see will be old, discontinued or deadlines; literally millions and millions of dollars worth of dead stock. They offer it to you of course, through endless clearance emails and top of the sample-bag rep pitches. In the end, you cherry pick the most saleable stock and leave the bulk of it to the wholesaler to dust and move around on forklifts.
You don’t really care what they do with it after that; as long as they don’t try and do something dastardly like, SELL IT TO THE PUBLIC!!! Bastards! How could they do that to you? Undermine your business, selling old stock to your customers, which they had already offered to you at or below their landed cost, but you didn’t want. Cancel your account with them. Ban their rep from your store. Put all their stock in the discount bins. Run around howling at the moon and cut off your baby to spite your bath water… or something like that.
But take a deep breath and actually think about it for a moment. Bicycle retailers would actually be much better off if they allowed and indeed, supported their suppliers selling off old stock directly to the public. And here’s why;
- It would actually reduce discounting across the industry
Remember, your reference point as a retailer is wholesale pricing. The consumer’s reference point is retail pricing. 30-50% off RRP is a bloody good deal to most consumers. As a result, discount levels would actually be reduced or stabilised by allowing distributors to clear old stock directly and in a controlled manner.
- It would stop their problems and bad decisions becoming yours
Stock doesn’t sell for lots of reasons. Whilst many of those reasons aren’t the fault of the wholesaler, the majority of them are. Why make their poor decisions or problems yours to deal with? Why not focus your resources, time and energy on the ranging, purchasing and marketing decisions they got right?
- The brands and products you stock will actually hold greater value
Nothing pollutes your inventory’s profitability like being surrounded by discounted random stock all the time. You always want to have some specials, but they should be just that; ‘special’. Leaving the distributor to clear all the old ‘crap’ will actually help you to build and maintain brand and product value with your customers.
- Wholesale prices would become more competitive
Thanks to your suppliers not having to burn vast swathes of their stock holding every year at or below what they bought it for, they won’t need to build the end of season discounting into their costings; which they do. Hence they’ll be able to wholesale products from the get-go at lower prices. Which could help partially bridge the online pricing parity gap.
- Margins would improve
If wholesalers and retailers were having to discount less and products were holding greater value with consumers, both wholesale and retail (net) margins would by right improve across the board.
- Better cash flow for everybody
Clearing the millions of dollars of old and dead warehouse stock more efficiently would significantly improve the cash flow issues for distributors; And with a higher proportion of retailers’ spending being allocated to products with higher dollars in the till return and sales frequency. Their cash flow would also be improved.
- Domestic ranges would better reflect the international ranges
With cash in the bank and shelves less blocked up with old inventory, importers would have less reason to hold new ranges and products back, as they often do. Hence domestic ranges in local IBDs would more likely reflect the full range and options of international markets.
- New ranges would be available sooner
For the same reason, new ranges would also be available sooner, as there would be much less reason to hold them back.
- The suppliers and brands IBDs rely on would be in a better position to support retailers and invest in their business
That greater cash flow and improved net margins, would also allow suppliers to invest more in their retail partners, through increased staff resources, merchandising support, marketing co-investment, store fit-outs etc. etc. Just imagine an industry that worked with and for each other more. Just imagine.
- Suppliers would be less inclined to become your competitor
There are plenty of examples of wholesalers (and brands), who through the prolonged frustration of lack of support from retailers, to either range their products, or help them clear their old stock, decided to become retailers themselves; either directly or indirectly. So let them clear that old stock and they will be a lot less inclined to go down that path.
Think I’m on to something; or do you think I’ve spent too much time over the years glueing tubs to track wheels? Looking forward to hearing your thoughts on my proposition.
Australia’s Bicycle Industry Consultant & Commentator