LBS/ Wiggle type on line retailers

May 9, 2010
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Tokyo
#1
I think the topic of the effect of on line buying on local bike shops/ specialist retailers etc has been frequently discussed here. Here`s an article on The Economist website which looks at the phenomenon in the context of the car market, and which actually suggests a reasonable solution where manufacturers, consumers and retailers can all get what they want:

http://www.economist.com/blogs/schumpeter/2012/01/selling-cars?fsrc=scn/tw/te/bl/thecostofafreeride

I wonder how if it will become applicable to bikes, and if so, how long before it becomes the norm in Japan? I`d certainly welcome the chance to actually test ride a new bike rather than just ogle it in the shop; and I also want a decent price and after sales service. Some kind of sales structure where manufacturers run sample operations and then allow LBS to run lower cost operations without expensive stock would seem to create a win-win situation, and might be an improvement on the current structure where we often can`t sample the bikes, and then have to take a choice between buying online, with the price advantage, and buying locally, with the service advantage. We would sample the product in the manufacturer led emporium; buy from the lowest price source (no reason why this can`t be Rakuten if they get their act together) and have it assembled/ serviced locally. It means the LBS no longer even attempts to sell kit, but they make their money on service and after sales support without the financial drag of having to hold extensive stock. I think the market is already moving in this direction, but I am not sure that Y`s and others quite realise that they are in the wrong game.

Graham (There`s a phrase I loathe, but "Full Disclosure": I do work for The Economist)
 

FarEast

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May 25, 2009
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#3
The biggest issue is that most online retailers buy direct from the manufacturer while the LBS has to buy from a local distributor. So the only way to this model would work is to remove the distributors..... which wouldn't be a bad thing!
 
May 9, 2010
23
2
13
Tokyo
#4
Exactly. Puts the onus on the manufacturer to take care of marketing/ product awareness,which I think they are trying to do anyway; removes a middle man; ensures that consumers can always get a competitive price; and leaves LBS with hopefully a profitable business in service/ support. Losers are therefore distributors and stores trying to be all things to all buyers....it simply isn`t possible
 

theBlob

Bokeh master
Sep 28, 2011
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#5
Might work well for large manufacturing companies that have the ability to handle micro distribution, and local marketing in multiple markets.

Doesn't work for any smaller operations that allow a middle man to handle distribution and marketing within individual country markets.
 

GSAstuto

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Oct 11, 2009
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www.roadfixie.com
#6
Alot of potential plusses and minuss:

1) Distributors DO aggregate many brands at volume levels that are simply not feasible or practical for the LBS.

2) MFG have a hard time to 'meet the customer' because their business model is based on running a factory - not B2C. Therefore, they don't have substantial investment in CRM other than to supprt their B2B sales channels.

3) Global e-tailers cannabailise and corrupt local economies becuase they can thrive without the same fiscal responsibilities as their domestic counterparts. Mainly through avoidance of taxation and HR responsibilities.

4) Consumers of e-tailers who use LBS as their 'demo shop' cannabilise their local economy and infrastructure because they re-inforce (3). Since the LBS has no way to determine if the customer is there 'to shop' or simply to check out items they have ZERO intention of purcasing via online - they are stuck with basically the position of a fluffer.

5) E-tailing cannot provide 'hands on' support. And price is reduced because of this. Bear in mind, the cost of support is generally between 7-12% of any product. Now then, if a customer is willing to pay less, then use paid support of LBS, great! However - e-tailing again screws the LBS when the MFG 'allows' warranty / supoprt for their items regardless of the point of purchase.

I proposed several years ago some viable solutions to these issues within the context of 'boutique' e-tailing that mainly revolved around the concept of treating products as value added components of a lifestyle platform rather than simple merchandise. So - the LBS (or local entity) could evolve more as a platform support provider than a typical shelf merchant. Since most Japanese LBS are quite small and service primarily their neighborhood - they are doing this already - with the exception of just 'knowing it'.

The other way to take advantage of the e-tailing phenom is to co-opt the e-tailers customers through a stratgey of local disruptive marketing. I'm working on a couple of projects that use that model, and we'll see how it pans out.

D2C models are out there - and you can see this in action through sites like Ali Baba, etc. There is a massive 'sample' business that the mfg's (mainly Chiense and Taiwanese) are quick to jump on. But the end result of this is really incredibly poor support and generally no product responsibility back to the customer. Because the product is really an OE sample, it has zero accountability other than what the factory represents. And likely, as not, the end consumer will never really know what factory actually built the sample, list of ingrediants, testing, etc - so it becomes the ultimate case of caveat emptor!
 
Sep 2, 2009
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#7
Without wanting to go into too much detail, Wiggle did spend a great deal of time and effort researching and attempting to connect with the Japanese bike shop world around the middle of 2010, only to be met with a pretty muched closed shop (pun intended). Various approaches for a co-existant integration were proposed, with all but the advertising agencies basically just saying no.
 

GSAstuto

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#8
Of course!

1) What did Wiggle offer the LBS other than using them for customer acquisition? The LBS' have a hard earned customer base. Unless Wiggle offer's them a substantial return on the investment, they should decline any so called offer.

2) I don't know any advertising agency that would turn down business from anyone.

3) Why hasn't Wiggle established a Japanese KK, YK or even branch? And why haven't they opened a 'Wiggle Shop' in Japan to support their business here? It's a free market, and with the billions invested, there is no reason why they couldn't, right? Except for the FACT that mfg's have established grey marketing 'rules' in deference to their local resellers (and local brand shops) , which , companies like Wiggle regularly circumvent.

The crux of the 'problem' in Japan is that it has existed for so long as a niche rich market. And the difficulties of foreign companies operating in Japan has created the need for nefarious distributors. But - it works because the Japanese consumer HAS the cash to pay. In fact, most Japanese consumers pride themselves on how much they can spend on a brand as an indicator of social worth. They aren' looking for deals - they are looking for 'value'. And value is based on the packaging, not the function.

Now that the economy in Japan is somewhat normalizing - customers are seeking 'deals' - and this is what is disrupting the heretofor exaggerated distributor condundrum.

But remember, Japanese consumers do not like risk. And anything that steps them away from accountability, increases the risk. And this goes, as well, for the LBS who wants a distributor they can hold accountable for every small detail, in a language they understand, regardless how inefficient and expensive it is.

If Wiggle offered a reasonable affiliate program you'd find me first on the list to sign up! In fact, I've even suggested that to them several times. And I mean something substantial and not the silly 1990's genre Affiliate Window. I look at Wiggle as a supplemental supplier - nothing more or less, and they have done NOTHING to earn the right to churn MY customers, however, I'm happy to purchase FROM them based on the KSP they offer which is nothing more than access to certain out-of-network items and logistics.

Bear in mind, I'm focusing the discussion on Wiggle - but the same goes for pretty much any big box etailer. I also purchase from many smaller etailers that concentrate on specialty niche items - and , as such, they DO offer great value other than simply price, because they ARE enthusiasts within their specialty offering and can provide much more than simply a link to buy something.

Without wanting to go into too much detail, Wiggle did spend a great deal of time and effort researching and attempting to connect with the Japanese bike shop world around the middle of 2010, only to be met with a pretty muched closed shop (pun intended). Various approaches for a co-existant integration were proposed, with all but the advertising agencies basically just saying no.
 

FarEast

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May 25, 2009
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#9
The crux of the 'problem' in Japan is that it has existed for so long as a niche rich market. And the difficulties of foreign companies operating in Japan has created the need for nefarious distributors. But - it works because the Japanese consumer HAS the cash to pay. In fact, most Japanese consumers pride themselves on how much they can spend on a brand as an indicator of social worth. They aren' looking for deals - they are looking for 'value'. And value is based on the packaging, not the function..
BOSH that's spot on. My sponsors have a boutique clothing shop that stocks some of the top names in cycling technical clothing, it's bloody expensive and can be bought cheaper direct or from online.

Yet their customer base don't - why? Because they have the market sussed! The shop wouldn't look out of place on Omotesando Dori and the staff know their stuff and you feel you are getting the service that matches the brand.

Japanese retailing is all about the "Experience" from the product, to the staff to the gift wrapping in tissue paper at the counter and that's what the Japanese want!

Yes there are Japanese that use online retailers to cash in on the deals but these are the same kind of people that buy thier Louis Vuitton bags from ドン・キホーテ because they want to feel part of the group yet can't afford it - once they can however you'll see them in the luxury brand shops spending thier cash.

I can honestly say that once the Japanese yen recovers and younger Japanese have more money to play with then online retailers will see a HUGE dip in sales revenue from the Japanese market.

But remember, Japanese consumers do not like risk. And anything that steps them away from accountability, increases the risk. And this goes, as well, for the LBS who wants a distributor they can hold accountable for every small detail, in a language they understand, regardless how inefficient and expensive it is.
..
Again spot on. Japanese consumers love to be told what to buy, they put 100% of the choice in the hands of the master and if you watch a good Japanese sales guy he'll avoid giving options or variety but will word his choice in a way that allows the consumer to change thier mind. It's pretty impressive.

The important thing about this however is that the salesperson takes ownership of the transaction so if there is an issue with the product then they also feel 100% responsible for any defect or warranty issue. Stage 1 who supplied me with myy 1st Pinarello were like this and when I came back to report that I had cracked the rim of my wheels they went out of thier way to solve the problem and make sure I was happy.
 

jdd

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Jul 26, 2008
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#10
I don't know near as much about all this as you folks, but my two cents:

After browsing the same items on wiggle I went to one LBS and had them list up a quote for the same group of deore XT (and/or dyna-sys) stuff.

LBS is cheaper(!), and even if they were a little more I'd still be their customer.
 
Sep 2, 2009
5
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#11
Yes there are Japanese that use online retailers to cash in on the deals but these are the same kind of people that buy thier Louis Vuitton bags from ドン・キホーテ because they want to feel part of the group yet can't afford it - once they can however you'll see them in the luxury brand shops spending thier cash.
LOL.