August 11, 2017

By Jay Townley for Brooklyn Bicycle Co. 

We asked bicycle industry leader Jay Townley for his advice on how to make it in today's retail environment. Jay is a regular on the Bike Industry speaking circuit and has helped countless shops get on track.  Check out his words of wisdom below:

If you are in the specialty bicycle retail, or bike shop business in the United States. you already know that you are in the middle of disruptions – with a capital “D!” 

Unless you are Performance or one of the other large corporate bike shop retailers, you are probably below the Small Business Administrations definition of a “Small Business.”  

Consumers, including you and me, are leveraging the advantages that the Internet has given us.  Now we demand 24-7 access to retailers and delivery of products to our homes or places of work along with the ability to send back what we don’t like or doesn’t fit! 

So…how can a bike shop survive, and actually thrive in this churning retail storm?  

The answer is by following the 7 consumer-focused initiatives explained below - all easily within the reach of every bike shop in America. 

As you already know, bike shops are not all the same, so each bike shop owner will have to decide the right mix/approach for their particular business. You can tweak the advice below according to your own financial and merchandising situations.  

1. Define What You Want

The first step is to sit down in a quiet place, and decide What you Want.   I am taking this directly from Marie Forleo and I highly recommend you visit Marie’s website and take her advice. Once you’ve defined your goals, write it down because, as Marie says, ‘Clarity Equals Power’!  The clearer you are about what you want your bike shop to be, the easier it is going to be to communicate your Mission and Vision to your managers and employees. 

As a suggestion – don’t try to be all things to all people. Ask your customers what they want from your bike shop and focus on delivering the experiences and lifestyle solutions your customers want from you. 

Bicycle Space, Ivy City, Washington DC

BicycleSPACE, Ivy City, Washington DC

2. Get to The Brutal Truth

Next sort out the Brutal Truths on which brands are benefiting you and which brands are holding your business back and restricting your ability to generate a real and fair profit – and jettison them! 

Start with pulling out all of your Authorized Dealer Agreements that you have signed with the bicycle brands.  If you don’t have a copy - ask your sales rep for the brand to provide you with a copy.

Read the Agreements and if you need any clarifications ask the brand, and most importantly, question any clause that, in your judgment isn’t beneficial to your business. Getting the opinion of an attorney or financial advisor will be up to you and your budget, but make sure any Authorized Agreements you have signed are fair to your business and will help you make a profit – or, plan for a future without them and prepare a calendar for sending a proper notice of termination.

3. Do An Internal Audit on New Bike Sales

Do an internal audit to make sure your bike shop is making a fair gross profit margin on the sale of new bicycles.  

According to NBDA's 2017 Retail Study, new bicycles account for 47 to 50 percent of the total annual revenue of the typical American bike shop.  When this data was analyzed by Fred Clements it clearly showed that over the last 15-years, the typical American bike shop has not made a net pre-tax profit on the sale of new bicycles! 
 
If your bike shop is the exception, congratulations!  If your bike shop is among the vast majority that have not, or are not making a fair profit on the sale of new bicycles – stop it! 
 

Remember, your bike shop is the brand in your neighborhood and community, and you have the local branding power to sell only those new bicycle products that provide your business with a fair retail profit.

4. Focus on GMROI!

Gross Margin Return on Inventory is a key financial metric that you have to learn all about as quickly as you can.  Why?  According to the NBDA, the typical American bike shops is realizing slightly over 2 inventory turns on new bicycles and around 3 on total inventory. 
 
Other retail channels are realizing 4, 5 and 6 or more inventory turns on total store inventory, and every additional turn results in additional profit and increases GMROI!
 

Increasing your bike shops inventory turn and GMROI starts with selecting and working with brands and suppliers that are as interested in your shop making a fair profit as they are in making a profit for their businesses.

Ordering and receiving merchandise more frequently and no less than 5 or 6 times per year at landed costs that allow your bike shop to make a fair profit is the place to start. You can streamline this purchasing and merchandising process by leveraging your Point of Sale (POS). 

5. Limit the Number of Choices for Customers 

Dismantle the Tyranny of Choice in your bike shop!  Over several decades the bike trade has promoted and accepted as conventional wisdom that consumers want a lot of choices. Too many choices result in confused shoppers, who too frequently leave a bike shop without purchasing!

     It is not up to the brands or their reps to do your bike shop merchandising for you – unless they will help you install a Good-Better-Best system! 

    For a given new product look at the models in a category and select a good opening price point model, and a better model with a logical step up in features and retail pricing, and finally select a best model with logical and additional step up features and a top of the category retail price.

    Make it easy for shoppers to buy from you – and make it easy for your sales associates to sell to shoppers.  Install a uniform step up retail sales methodology and continually train, educate, and reward your staff with an incentive system.

    Don’t forget add-ons and including add-ons in your bike shops retail sales methodology and your training and education program – and your staff incentives. 

    Bicycle Space DC

    BicycleSPACE, Ivy City, Washington DC

    6. Become Omni-Channel

    Examine what it really means to be Omni-Channel. Again, as a result of technology the American consumer is empowered- they determine the retail economy.  Consumers want, and have come to expect, experiences that give them 24/7 access to retailers.  Omni-Channel is a term that is often misused and misunderstood.  What it means is a seamless electronic extension of your brick-n-mortar bike shop!

    This means creating a commerce enabled website for your bike shop!  If your bike shop already has a website, but you are not selling merchandise online, investigate providers and resources to take your website to the next level. 

    If you don’t now have a website, please seriously consider including one in your next budget and business plan. Your physical store and your website should carry and feature the same merchandise and promotions, and your customers should be able to shop your bike shop, by accessing your website anytime, day or night.

    7. Take a Service Focused Approach

    Focus on Totally Outrageous Service and delivering extraordinary experiences and lifestyle solutions – and you’ll have customers for life!

    We borrowed Totally Outrageous Service from T. Scott Gross who wrote a very successful business book around his actual retail experience of providing POS, or Positively Outrageous Service: New & Easy Ways to Win Customers for Life!  Some of you may have read the book or experienced a live presentation by Scott over the years when he appeared at Interbike and NBDA gatherings.   
     
    Retailing has gotten tougher as shoppers and customers have become more demanding and much less forgiving of slow or poor service. There is no excuse and in today’s retail environment, no forgiveness of bad service. 
    What do you have to do to create Totally Outrageous shopping experiences? 
     
    Start with your bike shop management. In turn, you and your managers can start with hiring-smart. Use online assessments as a part of your hiring process, and act on what they tell you – particularly about customer service naturals, always conduct at least two or more interviews before making a job offer, and never hire on “gut-feel” – ever!  
     
    The objective is hire people who want to serve and provide outstanding customer service. Once you’ve hired someone with the right qualities to be in a customer facing position you can then train them to learn the ropes.
     
    It is hard, if not down-right impossible to provide a Totally Outrageous shopping experience if every manager and employee doesn’t know what you, the owner want, and what the rules of your retail store, both physical and online are.  When your whole store is on the same page…Totally Outrageous shopping experiences can begin!

     

    By following these tips, we believe you will thrive in this competitive environment. Remember, be your own advocate when choosing bike brands, hire the right people and make the buying experience easy and fun for your customers!

    Bicycle Space, Ivy City, Washington DC

    Bike Fitting Becky Puritz of BicycleSPACE, Adams Morgan, Washington DC 

    Jay Townley just entered his 60th consecutive year in the bicycle industry in 2017 having began his career as an employee in a bike shop in 1957. Townley is currently partner and co-founder of The Gluskin Townley Group and also co-founder of Future Velo.

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