A brief comparison between '97 and today... and the white elephant in the room

I remember my version of the cycling world of fifteen or so years ago as being vastly different than that of today. One could argue that it was better then or better today, with equally compelling arguments. Not sure where my vote is yet, although I will say that the oversized headset, electronic shifting systems, lightweight bikes, and the seemingly more level playing field of the CG contenders puts today in an advantage. However, Record equipped bikes at $5K or less (early Ergo Power was still the most amazing advance ever in the road tech world), small budget teams getting invited and winning major races, and Cippo himself might give those older days the win. This discussion is going to really focus on the shopping differences between the two eras. Not sure yet where I put my vote, so let me wax on to figure this out.

I remember my bike shop experiences from the 1990's being significantly different than those of the past few years.

Part bad and part good. There were only a few shops in each region that actually had the high end road. For me, a couple in NJ and a few in NYC. I recall going to shops that I knew had the cool products but often the vibe was cold and harsh. I would wander in but usually did not get a warm greeting. Although I was greeted with that typical gross bike shop odor and an atmosphere summarized as clutter. One or two guys (who looked nothing like cyclists) sneering and giving me the sense that I didn’t belong in their clubhouse. The bikes themselves were usually frame sets hanging from the ceiling or up high on the walls on hooks. The groupsets were usually displayed in their boxes in the display cases. Exotic wheels weren’t quite the fixture they’ve become today, but perhaps a set of Cosmic Carbones would be hanging somewhere. Clothing, helmets, shoes were less voluminous than in the modern era, but usually maintained some position in the shop. It wouldn’t be uncommon to find those soft goods as being a season or two out of date. Their own shop kits might be available in the always popular sizes of XXS or XXXXL.

The prices were typically clearly displayed.

Things get a bit crazy on this next point. When I was interested in purchasing something, the price was that which was listed on the tag. Negotiation might occur if I was purchasing a complete bike, although the discount was rather modest at 5 or possibly even 10 percent. Of course, club members and close friends might receive something, but it was a scheduled / already agreed to percentage. These surly shop guys were so prickly, that most feared even trying to negotiate further, let alone obtain success in the event they tried. Candidly, most of us really didn’t want to. I think we were happy that the shops existed to give us a place to escape to and see the stuff that got us excited. For the most part, we respected the fact that these were businesses that needed to be run as real businesses. At the time I was working in the Corporate World where the bottom line drove all of our decisions so why shouldn’t these small businesses be allowed to use the same standard. Did anyone receive “cost plus 10″? Of course – but not the people outside a very tight circle and there was respect for that. I didn’t then or now see a problem with that. In return, these same people accepted a certain responsibility to be loyal and help that shop drive business and pitch in when possible.

The Service Dept back then typically had at least one mechanic that was nothing short of awesome.

This guy had been around since wheels were square and could essentially adjust and service anything relating to the bike. Of course, hydraulic brakes and complex suspension (early Judy doesn’t count, come on) hadn’t really found its way to mtn bikes yet, but these guys actually knew why those spanner tools hung on the wall – they knew loose ball bearings. They were amazing wheel builders since the Ksyerium and the factory built craze were still infants. They could rattle on about the differences between 531 and Max or SL. The Service Depts themselves were filthy and the Small Parts area was stocked modestly, but your trusted mechanic was held in the same regard as your lawyer or accountant.

Fittings weren’t incredibly complex.

You seem about 5’9″ (Faye – I’m 5’9″ like I promised before our first date, not my actual size of 5’7″) so throw your leg over that 54cm over there. Clearance? Cool, that’s your size. Sure, the $5K sale did bring out the big gun owner, who spent 30 or 45 minutes with you with a couple of protractors and a plumb bob while you were spinning on a trainer. Realistically, there were some good fitters back then. But for the most part, it just wasn’t that good or sophisticated. One shop in each region actually had a Banning or someone even close to his skill set and we were on the constant search to find him (no online forums to help navigate the maze). For the record I am a natural 52cm, no thanks to the first two road bikes that were incorrectly sized at 54 and sold to me at full list price.

Of course former VP Al Gore had already coined the term Information Superhighway (folks, he didn’t claim he invented the thing, just that he thought of that expression). I had access, but the flow of information wasn’t even close to that of today. In order to read (not watch HD video) the winner of Liege Baston Liege, I read VeloNews or one of the other handful of print magazines. I remember reading about teams like NetZero and realizing that domestic racing was real and that pro racers didn’t only speak French and Italian. Now I get results in real time of the CAT 4 practice crit in Prospect Park every Sunday (super compelling stuff, go Kissena!). We might get our hands on one of the coveted Euro based magazines, but then of course we’d be reading the winner of last year’s edition of the Giro d Lombardia. These US and Euro magazines weren’t just for racing results – they provided product reviews, sneak peaks at upcoming products, and a little bit of technical information. The last ten or so pages of these magazines provided a commerce alternative to the shops – ads for mail order “shops”. The OG discounters. Holy crap, Dura Ace for 25 or 30% off!! Wait, shipping from the UK and not a strong sense of confidence that I wasn’t about to get ripped off. Wait, although my home mechanic skills were ok, who would help when I couldn’t figure out my limit screws. Wait, what will happen when my manuals are in the wrong language (Campag and Shimano didn’t have even close to the same level of tech info available in their online libraries and back then SRAM were still the mtn grip shift guys). Its seemed that shops still dominated commerce for us.

Like every other nearly 40 year old curmudgeon (I still tell myself I can pass for 28, but this blog’s aim is honesty), I often brush off todays’ world in favor of the days of the past. But let's take a similar look at today’s environment.

Today, bike shops have more sub-categories than ever before.

Concept stores have popped up for the “Big Three” and have changed things forever. Perhaps boring to see every product from bikes, wheels, clothing, shoes, helmets, pumps, tools, etc from only one brand in the whole shop. But they have your size and color in stock today. They have the marketing backing of the Big Three. They have decent service depts and varrying degrees of fitting capabilities. They offer pretty good pricing for their brand compared to the handful of independent shops still trying to make a run with one or more of the Big Three along with other brands. Some argue that these places are a bit bland and vanilla. They do offer high end as there will usually be several or more bikes on the floor with Dura Ace or Red (that other component brand is typically absent), fancy shmancy carbon wheels, and of course the carbon frame set from the Big Three brand that is marketed in the same budgeted means that reminds me of a Fortune 500 company.

Most of the remainder of the high end stuff is sold at one of the few remaining independents (although occupying a very small part of that shop) or is found at the newest category – bike boutiques. Like any other type of consumer segment, boutiques offer a very different shopping experience. Typically the principals of said shops are well dressed, 40ish, friendly and offer a very warm greeting. Often the only places to find the Euro and domestic brands that are smaller but “better” (frame sets, wheels, group sets, cockpits, etc.). Often the places that really specialize in fitting. Often the places that have service depts that can still build a wheel or perform other real mechanical tasks beyond simple out of the box complete bike assembly. Typically, the boutique is a clean environment, sometimes almost museum like. Comfortable couches are set in front of huge flat screen TVs showing that day’s Giro stage. Often a fancy Euro style coffee bar is present serving drinks I still don’t understand. Of course the high end clothing brand is well stocked and even lifestyle pieces (like pink button down shirts and $250 jeans) will be available. East West Bikes falls into this category and in some respects highlights this uniqueness and is also part of the parody of it. Some of these boutiques are amazing and offer product, service, information, and a general environment that we never had 15 years ago. Guaranteed rides, trusted consultants to assist with everything from personal reviews to home visits to assemble your new $2K virtual computerized trainer system, and a fun place to stop by and enjoy a beer or club soda. And some are facades for rich kids that need something to do, so daddy provides them with an unlimited bank account to keep them out of other trouble. Good grief you might say, but it gets worse. These guys have and continue to be destructive to the general marketplace (more to follow in the subsequent paragraphs).

The internet is now as much a part of the typical customer's cycling experience as the shop.

Print magazines are still around, but their role has been dramatically marginalized and will eventually be extinct no doubt. To summarize, I see the internet as relates to the cycling world as:

An amazing resource for watching live and recorded races (type Erik Zabel in the search spot on YouTube and call me in a month when you’ve seen the first 10% of the highlights);
Hundreds of sites devoted to product information and sneak peaks at tomorrow’s product which will be released mid season one season after the last major introduction (remember when 9 speed lasted for years?) in an effort to gain a few points on their competitors;
Forums and other cyclist to cyclist means of communication to bring together people from all over the world as well as the people on both sides of the industry / consumer wall; and
Every brand publishes Manufacturer Suggested Retail Pricing (“MSRP”). But no one buys at that level or respects it anymore. No one on the retailing side or consumer side. Quite candidly, some on the manufacturer side still do and will enforce it, but so many of them disrespect it too. Our society was built on free market trade but there has always been some suggestion about fairness (google FTC or AntiTrust or Fair Trade). Even concept stores backed or owned by the Big Three will sell below pricing from independents carrying the same brands. As mentioned earlier, I do not have a problem with club guys and other selected individuals receiving some benefits via discounts. I do not have a problem giving cost plus 10 to a handful of people who in turn will work the register on a busy Sat or will lead the group ride or take responsibility for bringing retail customers to the shop and basically serving as roaming shop advocates.

My problem is two-fold.

Firstly, shops that basically offer huge discounts to any stranger who walks in. On the same point, consumers who drive up in $50K plus vehicles wearing $10K wristwatches and $1K outfits and essentially demanding ridiculous pricing. Ironically, those other categories found on these people were probably not discounted, but the Pinarello or Colnago should be according to them. I’m sick of it. Really fucking sick of it. But I’m also sick and tired of our competitors giving it away. It devalues the brands and it devalues what we do. Our education, experience, knowledge, etc. is becoming a crutch not an asset. Its not right. Second, I hate it when industry people turn a blind eye. If you have a policy about MSRP or Suggested Advertising Price, enforce it. I know there will never really be a way to police what happens in the shop itself, but if someone is advertising 10 to 20% in violation of the advertising policy of a vendor, that vendor should shut down that shop immediately upon receiving notice of the violation. I send email after email to some of our vendors, but yet weeks or months go by with no change on the competitor shop’s website. Do we continue to carry said brand and try to sell at MSRP or do we stop carrying it? Even if we think a discounted brand is the best, should we focus on competing brands that support us, and hold the line with the other shops? There are brands that I think are great but I will not carry as I believe they’ve been devalued so badly that we just can’t do it from a business perspective. Its a shame and I dread the day it happens to one of those left on the bike side that we do in fact sell. Ultimately, we want the our own brand of EWB to be what people chase after, not specific brands. I want people to see us as better than all the other shops. I want people to come to us regardless of what we sell because of us. But the brands themselves will always be a huge part of the equation.

Online discounting has been cleaned up a lot lately and I credit the industry for doing so.

The offshore sites have been challenged from a customs / import standpoint. And most US customers will get turned away by the vendors for warranty claims for product from offshore gray merchandise. Domestic online sites rarely show discounts, and are typically dealt with when reported, although the speed and efficiency from some vendors could still use some work. I’ve also seen folks who purchased discounted stuff online over the past few years starting to find their way back to legitimate sites and shops due to terrible customer service experiences. But, the shops that are discounting to strangers and others outside their key circles continue to do damage. Why is the question that most will ask at this point. Why would shops sell at huge discounts to people outside their tight inner circle? My suspicions are: 1) they don’t need to have a profitable business because the trust fund is so plentiful, 2) they want to be liked and instead of achieving it the real way, they buy it from people, 3) they want to have “juice” with the industry and get their ass kissed by vendors for doing volume, and 4) they have personal vendettas against legitimate shops.

The industry needs to enforce the retail pricing issue better. I know what I’m asking for is incredibly challenging. Firstly, in some respects, that would be convicting based on heresay. But, if you receive 100 reports of wrong doing, send in a spy or give them a call and catch them red handed. Second, cutting off revenue from a dealer is tough for any business, especially our vendors that operate on very thin margins. Cutting off a shop could mean a few seasons with significant lost income until a better dealer(s) can be identified and set up with replacement sales. But, their brand will be protected and the value of the brand will be maintained. A Scattante will never be viewed as a premium brand even if they develop the best thing since carbon five years from now. Forever and ever, it will be known as a piece of shit. That same devaluation can happen to any brand unless it is properly protected and maintained.

The consumers in their fancy cars described earlier will continue to come into our shops no doubt. But we can band together and cut them off. It works for those watches. Just like our vendors, that will mean some losses before we recover the sales from legit retail consumers. But we’ll protect ourselves and have more fun. I didn’t join this world to work in an Arabian bazar. I suspect that most of legit retailers us didn’t. Ironically, from my observances, these people don’t want a discount on the service we provide, but demand a discount on price. Try that at the Ferrari dealer.

This discounting issue affects all of us.

Family shops, concept stores, boutiques, distributors, manufacturers, inside sales reps, outside sales reps, etc. All of us. In effort to provide some transparency and education, bike shops (regardless of the category defined in this long winded rant) typically earn anywhere from 20-45% margins (for every dollar that goes in the register, 20-45% is left after deducting the cost of the good sold). The balance of that dollar goes to paying the employees, rent, insurance, utilities, and other overhead items (everything from capital improvements to fancy fitting tools). Thus the true net “profit” may only be 1-5% This is not an exaggeration. The actual margin on most products is around 35%. So if someone receives 20% off something, the shop is left with 15% to cover all that overhead (no profit typically). If someone demands 30% off, the shop may actually be losing money in the long run when factoring time spent. No business can bleed out like that. Plain and simple. People want the employees of shops like EWB to provide consultation that is far superior to that found in a family shop, but do they realize that the cost of our human capital will inherently cost the shop more, thus further adding to the overhead cutting deeper into the margin formula.

Luckily, the network of good shops that are just saying no is getting stronger. We’re working together better than ever before. I don’t mind loosing sales to some of our legit competitors as I know they’re working just as hard as us. Like a racer, I want to win it all, but when I’m honest with myself, I know that sometimes, we will loose. I just hate loosing over dollars as opposed to something else. I hate loosing to the discounters. But what I hate the most, is spending a ton of time with a consumer, giving them the full EWB experience, and then loosing the sale to a discounter. I don’t want to do the work for the discounters.

Let's go back to the original question

I know what you’re thinking that I long for the days of the mid 90s. But, I’m choosing today. I see a lot of problems no doubt, but the positive to me outweighs the negative. The products are simply better. If you really hate carbon just because, then buy a Torelli steel bike. If you can find a way to afford it, get a Pegoretti. EPS is better than 11 Speed Mechanical which is better than 10 speed which was better than 9. Today’s carbon wheels are amazing, but the Shamal is better than any hand built aluminum rim box section wheelset from 15 years ago. The racing is more bland but seemingly getting more level on the pro level (maybe someday on the local amateur level too). And while discounting has really messed things up, select shops today are better than the average of the past. Sure, there are tons of shops not worth even walking into, but each region has a few that offer something really amazing.

I hope this honesty will be understood as an effort to help. But I also hope that people on all sides recognize my motives and interests. My goals are simple. I do want to achieve at least modest financial success, as I’m working hard for it. I also really want to see the cycling world perpetuate, not come to a crashing halt in the foreseeable future. We will not turn into a discounter or a concept store if our model fails, we will move on to something else, leaving a hole for those that have gotten hooked on the new service principals we deliver.

Your friend,

Eric Popiel