How Bike brands are Competing With D2C Competitors

Every year, independent bike shops go out of business, and one of the most commonly cited reasons is the loss of sales to online retailers. To compete with this growing competition, many traditional bike brands are offering “Click and Collect” programs. This means customers can shop and purchase bikes from the brand's website and pick them up at the nearest dealer’s store. In return for facilitating the delivery of the bike, the retailer gets a cut of the sale, typically comparable to the margin they would earn if they sold a bike from their own inventory. On the surface, this seems like a win-win for both the bike brand and the retailer: the brand keeps a sale that might have gone to an online-only retailer, and the retailer gets compensated for promoting the brand, building the bike, and finalizing the transaction. However, upon reflecting on the possible long-term ramifications, this hybrid online/in-person model may have some risks that could endanger both the bike brand and the retailer.

The rise in popularity of online shopping poses a number of challenges for traditional retailers. Most of these challenges revolve around product pricing—there are few reasons why a bike listed online is often cheaper than an equivalent bike at a local brick-and-mortar store. The primary reason for these savings is that online retailers tend to have lower costs associated with each sale. This can be achieved by selling directly to the customer or by having fewer overhead costs. As a result, they can sell bikes for less than traditional brands that must share the profits with retailers or pay for things like expensive store locations.

Bike brands and retailers both know that, over time, an increasing number of bike purchases are happening online rather than in physical stores. This is why many brands are offering “Click and Collect” programs. While bike manufacturers would ideally like to sell bikes directly online, they still rely heavily on independent retailers. Selling directly to customers would put them in direct competition with their retail partners. For this reason, the hybrid model of “Click and Collect” makes sense: the bike brands get to have an online presence to sell bikes, and the retailer still gets a share of the profits and the opportunity to build a relationship with the customer.

Given the above, I believe the “Click and Collect” model is a tempting path for brands and retailers to pursue. However, I also think it would be a strategically risky mistake. The reality is that when a bike is listed for sale online, it will inevitably be cross-shopped and compared with competitors' bikes. This is not favorable for traditional bike brands that sell through physical stores. Due to the way the supply chain is structured for traditional brands, they will not be able to sustainably match the prices of online competitors. The only way traditional brands and retailers can offer a competitive value proposition is by exploring areas beyond price and convenience. When a customer wants to buy a bike and walks into a bike shop, they should be faced with an entirely different experience and selection of products than what they can find online—an experience that makes them feel they are purchasing a more premium product that comes with exclusive service. Bikes sold in bike shops should be viewed as part of a different segment than what’s offered online. This way, the products cannot be directly compared to what's available online, because there is added value in pricing a bike from an independent retailer.

The best way to compete with D2C (direct-to-consumer) competitors is not by trying to beat them at what they do best—price and convenience—but rather by leaning into the aspects they can’t compete with. Traditional bike brands need to remind customers why they should pay more for the premium service that comes with working with a retailer. Unfortunately, “Click and Collect” programs don’t offer the same premium service throughout the purchasing process, which makes them less distinguishable from offerings by D2C companies. This is problematic for retailers, who need as much distinction as possible in order to charge a premium for their products and protect the margins for both the bike brand and the retailer.

Independent retailers have several advantages that D2C companies simply can't provide when selling bikes. Instead of competing on price and convenience, traditional bike brands should leverage their relationship with retailers to add value in other ways. For example, an interesting strategy might involve a bike brand providing customers with a credit for a bike fit and some tune-ups offered by the retailer. While this would only be possible if the bike had a higher price point to compensate the shop for the added service, the purpose would be to signal to customers that by spending more on this brand of bike, they are guaranteed a better fit and proper functioning. My thesis is that customers would recognize the value that comes with this level of service and would be willing to pay a premium for it.

The intentions behind these online programs are well-meaning, and both the bike brand and the retailer can benefit from the short-term increase in sales. However, I believe this strategy is not a winning one in the long term. The entire point of this strategy is to compete with online retailers, but the traditional bike supply chain simply won’t be able to outcompete online retailers on factors like price and convenience. For this reason, traditional bike brands should position their products in a different segment than what online competitors can offer. This would mean setting higher prices and using that price difference to provide value in ways that only in-person retailers can offer. This is the only way I see traditionally structured bike brands and retailers protecting their margins and remaining profitable.