Bicycle retail industry is about to open the Bike 4.0 era?

Bicycle retail industry is about to open the Bike 4.0 era

In the bicycle industry, with the development of information and interconnection technology and changes in consumer behavior habits, the relationship between companies and dealers will once again usher in changes.

Brands are beginning to integrate vertical markets through D2C or direct acquisition models, and control of retail channels is gradually being taken over by bicycle brands, allowing a new era in the way bicycle business operates.

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    What is the Bike 4.0 era?

    In Rick Vosper’s description, retailing in the bicycle industry has been broadly divided into three models since its development.

    Bike 1.0, from about 1950 to 1975, when the specialty retail market was dominated by a single brand, Schwinn, creating an era of relative stability at the electric bike suppliers and retailer level.

    Bike 2.0, from the end of the bicycle boom and the introduction of mountain biking in the early 21st century.

    This period was influenced by the phenomenon of perfect competition, where no one or more specific brands could accumulate enough market share or competitive advantage to control the market.

    What is the Bike 4.0 era

    With Bike 3.0, headline brands began to emerge, with bike brands such as Trek, Specialized, Giant and Pon beginning to dominate the market. Who are the top 10 electric bike brands in USA?

    Brands expanded through strategic alliances with selected dealers, but ultimately failed as most large dealers chose to work with more than one brand, and by 2020 nearly 30% of all Quadrumvirate dealers have multiple brands.

    Quadrumvirate dealers own two or more of the top brands.

    However, in recent years bike brands have gradually begun to opt for direct-to-consumer sales, or have chosen to bypass dealers altogether, using them as a fulfillment mechanism and offering D2C bikes from dealers, as is typical of the Bike 4.0 era.

    Trek pioneered this concept in 2015, and Specialized and Giant openly refer to this new, customer-centric, open marketplace as an ecosystem, with traditional sales channels being replaced by omni-channel sales “ecosystems.”

    In order to strengthen their control over the sales channel, brands have begun to directly acquire bike stores in key markets, vertically integrating the retail channel, which is most directly reflected in the growth in the number of headline brands’ directly managed stores.

    Heading brands’ direct store scale continues to expand

    In August 2021, Pon Bike Holdings of the Netherlands acquired the 11-store Mike’s Bikes chain in Northern California.

    Two months later Pon announced plans to acquire Dorel Sports Group and merge it with its own line of brands, eventually creating a conglomerate with nearly $3 billion in global sales.

    Trek has been acquiring bike stores for years and now owns an estimated hundreds of retail stores, and Specialized continues to follow suit.

    By acquiring retail stores in key markets, brands are consolidating key aspects of the specialty retail channel as a way to increase sales, economies of scale and market efficiencies.

    Heading brands’ direct store scale continues to expand

    Giant has repeatedly announced its intention to exit the retail business for C&C sales, with Giant President John Thompson saying in a March 22 user communication, “We are not in the retail ownership game, and we have determined that the best way to reach the consumer is through capable, dynamic (LBS) retailers.”

    Directly managed stores account for more than 10% of sales

    Why do brands place so much emphasis on self-owned store locations? The most direct effect is to be able to squeeze the offline scale of other brands.

    Trek acquired 21 stores in Orlando, Florida in 2021, many of which were previously Specialized dealers, and Trek’s consolidation of the retail business was able to directly weaken Specialized’s distribution channels.

    Integrating Trek’s retail operations was able to directly weaken Specialized’s distribution channel, create a unique offline marketing style, improve service levels, and, more importantly, increase sales, economies of scale, and market efficiencies as the distributor’s role was replaced and brand margins increased.

    According to statistics, company-owned stores for Trek and Specialized brands now account for more than one-tenth of all bike store sales, with Trek being the brand with the largest number of bike stores directly owned and the largest branded bike chain in U.S. history. What’s the difference between Trek bike vs. Specialized bike?

    The consolidation of vertical channels represents a dramatic change in the way business is done, yet brands in the DTC model have strong control over their supply chains.

    Directly managed stores account for more than 10% of sales

    Due to the need to respond quickly to changes in market demand, most DTC brand suppliers need to be flexible and quick to produce.

    As a result, most of the more successful DTC brands are medium-sized or larger companies in the industry, and distributor buyouts are a high-risk gamble that is only suitable for the most financially powerful brands.

    However, this is not an opportunity for small brands.

    Once a large manufacturer’s own direct line has a place in the retail layout, large bike or electric bike manufacturer may not need as many dealers and will reduce the number of dealers in some markets.

    It may be a blow to the small dealers of the big brands, but a reduction in the number of dealers by the big tier 1 brands could be a huge opportunity for the market expansion of the tier 2 and tier 3 brands.

    Chocolatezhu
    Chocolatezhu
    Hi, I'm an experienced writer about mechanic and an expert on bike and e-bike tech who appreciates practical, beautifully-engineered things. And of course, I love cycling.
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