This eBook written by David DeKeyser will help you analyze your business and determine how you are currently doing and how to run a profitable bike shop.

David DeKeyser and his wife Rebecca Cleveland owned and operated The Bike Hub in De Pere, Wisconsin, for nearly 18 years. In 2018, they sold the business and real estate to another retailer based in a nearby community. David now writes the Positive Spin series on Bicycle Retailer and Industry News and he writes articles for the NBDA’s blog, Outspokin’. David also provides business consulting through the NBDA’s P2 Consult Program.

The NBDA has been here since 1946, representing and empowering specialty bicycle dealers in the United States through education, communications, research, advocacy, member discount programs, and promotional opportunities. As shops are facing never-before-seen circumstances, these resources offer a lifeline. Together, we will weather this. We at the NBDA will not waver in our commitment to serving our members even during this challenging time—but we need your support.

Now is the time to become a member as we join together to make one another stronger. Whether you’re a retailer or an industry partner, your membership in the NBDA is one of the best investments you’ll make this year. 

Learn more about the benefits of being a member and join now.

The post How To Run A Profitable Bike Shop – Free eBook appeared first on National Bicycle Dealers Association.

With the current inventory situation, the bicycle industry (and many others) are experiencing; used bikes could be a great source of the product to offer. With the brisk sales of bikes beginning to slow somewhat, many suppliers’ inventory levels are still virtually non-existent. The best option may be to search for quality used bikes in your business’s price points most needs.

How To Find Good Used Bikes

Your customers may be the best source of used bikes and the easiest to reach. Emailing your customer base and letting them know what bikes and what price points you are looking for may drive those with seldom-used bikes back to you to unload their bikes. You may also want to try posting ads on social media sites and Craigslist. The goal is to drive the sellers to you who may not have been looking to sell, but a simple way to clean out the garage may give them the nudge they needed. Just be very clear about what you are looking for regarding brands, age, condition, and price points.

Alternative Cash Flow Generator Tool With Used Bikes

Some companies specialize in used bike “drives” if you will. These used bike drives are an exciting concept and are relatively painless. Primarily, you advertise people to bring their bikes down on a specific day or weekend, and the company will buy anything they bring. Then the company writes you a check, and the sellers get the amount as a gift certificate to your store. The bike drive is a great way to generate cash flow and sales without the hassle of having to deal with the used bikes themselves. Chad Pickard, the owner of Spoke-N-Sport with two locations around Sioux Falls South Dakota, expects to generate about $40,000-$50,000 dollars in upfront cash with his sale in late July. Customers have gift cards that can only be used in his stores, “securing future purchases” in Chad’s words. Gift cards are always an excellent way to ensure those future sales and gift cards have an added, but unintended benefit in that many take quite a while to be redeemed, and a percentage will never be seen again. Here’s an interesting article that looks at gift card statistics – “what happens to unused gift cards.”

How To Value Your Used Bike Purchases

The most straightforward tool and the one most retailers will use is Bicycle Bluebook. Ensure that you are carefully evaluating the bicycle for any repair work it may need and adjusting pricing accordingly. The margins can be pretty good if you do an excellent job with the initial evaluation and pricing.

Protecting Yourself

Protecting yourself is a consideration when buying used bikes. First, if you are using your customer database to pull trade-ins, you will probably have very little reason to worry. The biggest thing to do is log the customers’ driver’s license and the serial number of the bike and have the seller sign a document that states the bike is theirs to sell—requiring a receipt while ideal may be pretty hard to produce for many people.

For help becoming more profitable, check out the P2 Project, a peer to peer, networking group, that members overwhelmingly feel has improved their business, or for more information on the P2 Consult, program contact David@NBDA.com or P2 Consult.

Words by David DeKeyser

David DeKeyser and his wife Rebecca Cleveland owned and operated The Bike Hub in De Pere, Wisconsin, for nearly 18 years. In 2018, they sold the business and real estate to another retailer based in a nearby community. David now writes the Positive Spin series on Bicycle Retailer and Industry News and he writes articles for the NBDA’s blog, Outspokin’. David also provides business consulting through the NBDA’s P2 Consult Program.

The NBDA has been here since 1946, representing and empowering specialty bicycle dealers in the United States through education, communications, research, advocacy, member discount programs, and promotional opportunities. As shops are facing never-before-seen circumstances, these resources offer a lifeline. Together, we will weather this. We at the NBDA will not waver in our commitment to serving our members even during this challenging time—but we need your support.

Now is the time to become a member as we join together to make one another stronger. Whether you’re a retailer or an industry partner, your membership in the NBDA is one of the best investments you’ll make this year. 

Learn more about the benefits of being a member and join now.

The post Are Used Bikes A Quick Fix For Inventory Woes? appeared first on National Bicycle Dealers Association.

1. Bicycle unit sales have fallen nearly 30% in the last five years. Of course, we are in the midst currently of a boom in sales, but the overall trend has been downward. Capitalizing on the current sales increases while attempting to forecast the future is challenging.

2. Tariffs. Currently, there are many exemptions in place set to expire over the next few months on Chinese made goods. About 94% of bicycles are currently made in China. The Tariffs are set to go back up to 25% in August.

3. Retailers are reporting some slowing in sales due to inventory shortages, but there are also some cancellations of pre-ordered bikes and returns happening as well.

4. E-bike sales are robust, but margins are not as high as retailers would like/need. This situation is tough because they are high dollar sales, which require top dollar inventory commitments that may siphon dollars from higher unit numbers and margins on lower priced bikes.

5. Very hard to forecast when it is hard to know what supply will be. Retailers are placing orders for bikes already for spring when a much more just in time model has been the preferred, and more profitable way of doing business in recent years, which has become impossible in light of current issues.

6. Even if sales stay high, it will be tough for the industries manufacturing partners to scale up quickly to meet this demand.

7. Finding a way to retain the new customers coming into stores. This situation is challenging, as there are so many things going on currently, and holding on to these new riders is a crucial way to build our future customer bases.

8. Margins are down for some, as it is much harder to sell P&A if you are running a curbside pickup operation.

9. Repair parts dwindling to nothing in key repair areas.

10. Lack of connection to new customers when sales spike to this level.

There are many things to consider moving forward, and no one seems to have a crystal ball. If inventory continues to be as challenging as it currently is, it may be tough to maintain sales, and develop relationships with customers by providing excellent service and selection if unable to meet their needs. The possibility of further lack of distractions for consumers such as sporting events, kids going back to school or not, an extra $600 in unemployment checks, personal fatigue, and anxieties for everyone and the potential for a very contentious political season all weigh heavy on everyone’s minds. It is an understatement that we are in uncharted waters. Some retailers will look for ways to exploit opportunities, and others will act with more caution.

The NBDA has been here since 1946, representing and empowering specialty bicycle dealers in the United States through education, communications, research, advocacy, member discount programs, and promotional opportunities. As shops are facing never-before-seen circumstances, these resources offer a lifeline. Together, we will weather this. We at the NBDA will not waver in our commitment to serving our members even during this challenging time—but we need your support.

Now is the time to become a member as we join together to make one another stronger. Whether you’re a retailer or an industry partner, your membership in the NBDA is one of the best investments you’ll make this year. 

Learn more about the benefits of being a member and join now.

The post Predicting the Top 10 Immediate Challenges for Bicycle Retailers appeared first on National Bicycle Dealers Association.

Your beliefs of what your store’s position is regarding who you are serving 

This gap is quite common in my experience with stores that are struggling. Simply put, the owner is trying to be or become the store they aspire to own in the face of directly contradictory evidence. This misconception is most common when the owner believes they can sell either higher-end products than their market/customers are interested in or a category that they appeal to them. Still, again, their customers are telling them differently.

Your personal bias in choosing inventory that reflects your personal preferences

This concept is pretty straightforward. You like things that you use, yet they are not selling for various reasons. You may want certain brands, models, or categories of products, yet your customers are not in agreement, which should be evident because it isn’t selling. Yet, you persist in a cycle of ordering and needing to discount to these items believing they should sell.

A belief that customers will not accept higher prices or charges for service.

I have heard “we can’t,” so often when it comes to product and service pricing. It usually has to do with the perception of what the market the can bear. The shop owner who feels this way may be right, but I will go out on a limb and say they have not experimented with different pricing strategies to see if there is any pushback. If there is pushback, determining how much is also crucial. Humans seem to be very averse to criticism. Even one negative experience may produce enough ammo to revert, even in the face of the vast majority of sales transactions garnering no reaction to the rise in pricing.

The belief that a specific percentage increase in sales will solve any financial strain. 

This challenge is an arduous thought process to overcome. I have heard many times from retailers over the years the description of the perfect sales increase percentage that will free them from stress. The problem is that unless there is a concerted effort to reduce expenses and increase margins, the extra costs associated with the increased sales will probably not be the panacea it was hoped to be. Often an immediate expense reduction is what is needed to the right the ship. One of the first reactions to a stagnant or slowing of sales companies often makes to reduce payroll through layoffs. It is an immediate change to the financials. In less extreme measures, you may consider pricing strategy solutions and more deep analysis of your critical metrics if not already doing so. The point is that there are many more good and quickly attainable solutions to tight cash flow issues than merely raising your sales volume.

Most of the above issues can be resolved by diligent best practices in the areas of reporting for both inventory and sales, along with margin maintenance and stocking items that sell along with digging even deeper into items that sell faster, etc. Utilizing your financial reports also to verify you are making data-driven decisions versus emotional or ego-based decisions. Please review the NBDA’s programs such as P2 Consult with myself, or the peer to peer, P2 groups, where you can learn from other excellent retailers how to elevate your business with increased profits following best practices. Some retailers will push back that some of the things discussed here will suck the soul out of their business by being too business-like. I have heard arguments to that effect. But I say that nothing could be better than being more profitable as you get to chose what to do with those profits. If you honestly feel you would not like more money for you or your employees, you can donate to a million worthy causes. The point is that being profitable should drive your decisions. You can still operate a profitable business that gives you the living you desire and can benefit the greater community right as well.

Words by David DeKeyser

The NBDA has been here since 1946, representing and empowering specialty bicycle dealers in the United States through education, communications, research, advocacy, member discount programs, and promotional opportunities. As shops are facing never-before-seen circumstances, these resources offer a lifeline. Together, we will weather this. We at the NBDA will not waver in our commitment to serving our members even during this challenging time—but we need your support.

Now is the time to become a member as we join together to make one another stronger. Whether you’re a retailer or an industry partner, your membership in the NBDA is one of the best investments you’ll make this year. 

Learn more about the benefits of being a member and join now.

The post Hidden Hurdles to Avoid: How To Run a Profitable Bike Shop appeared first on National Bicycle Dealers Association.

Learning how to run a profitable bike shop takes effort, but is well worth it and it starts with evaluating and choosing a location. Most bicycle retail stores’ second most significant expense behind payroll is occupancy expenses. As a percentage of gross sales, the target for all combined occupancy expenses is generally around 10%, preferably less. But even just a few percentage points can add up to substantial dollars. I always think that using an example to paint a picture is compelling. If you have an “average” size store of 1M in annual sales, a 2% occupancy expense reduction, invested in a mutual fund monthly over ten years, would put over $300,000 into that account with a relatively modest 8% return. It could also help you buy inventory, pay down debt, and a host of other things.

Mistakes Retailers Make when evaluating and choosing a location…

A mistake many retailers may make is to have either too big or too expensive of a retail location. As commercial property prices tend to rise over time, if you can find a spot to purchase, you are permanently locking in the expense, and building equity. Without going to much further into it, if you can afford to buy, it usually makes sense. If you cannot purchase a building, then be very careful spending too much on your lease.

How much space do you need? 

The amount of square footage is a figure you can extrapolate as a number based on sales per square foot of selling space. This number can vary greatly, but if you begin to tickle close to $400 per selling square foot, you start to exploit each square foot to a reasonable degree. What is selling square feet exactly? It is simply the retail floor space. You will have restrooms, storage, the repair shop, and perhaps some office space. Somewhere around 30-35% of your area will be dedicated to supporting space. Let’s take an average size store of $1M in sales, with an average sales per square foot of $325.How much space do you need? About 3100 square feet of selling space or about a roughly 5000 square foot total size store. There are so many variables based on regional rents that some areas will allow for more space and others far less, which can add significant variance to the sales per square foot equation. Still, one major caveat to going with too much space, even if it’s relatively affordable, is the tendency to want to fill the space, which can wreak havoc on your inventory dollars you are carrying, and subsequent turns. You may need to go quite small in areas with high rents and be creative with your selling space while looking for less expensive and innovative ways of storing inventory. Personally, it seems prudent to burst at the seems and outgrow a location versus having to grow into it, which is a significant risk. Remember, the number of arriving at 5,000 square feet is a middle of the road number. Bigger and you risk needing too much inventory and smaller means you will work harder, which is not a bad thing. Smaller equals more turns and more affordable, and that is where the profits are found.

In real estate, the saying has always been Location, Location, Location.

Everyone, of course, wants to be in the A+ Location. The problem is that you have to pay for those locations. Perhaps being a solid B gets you close enough to the action. Bicycle retail stores are generally destination businesses and do not require you to be in the absolute best areas. It may be a hindrance at times to be in too big of a shopping area and get lost in the crowd. Test riding bikes is also a real consideration, along with the ability to rent bikes if you want to tap into that market. Having managed or owned retail bicycle businesses in at least 7 locations over my career, I can say without hesitation that being where people are riding can be a huge benefit. It s tough to quantify, but I can say that when we moved our bicycle shop from a strip mall to a freestanding store on a bike path, sales increased pretty quickly.

So what do you do?

Big store for the wow factor, along with an A+ location? Maybe that will work for you, but I would urge caution in going too big or too pricey. It would be better to build up to that commitment, particularly if you start a new business. On the other hand, you can go small and conservative, but too small and conservative may cost you some potential. The answer, like many things, lies somewhere in finding the right balance. I offered a formula above to use as an example. Figure in your local variables in expenses, metered with your risk assessment, and then analyze the demographics to try and get the best possible Location. Add in the potential to ride nearby, if for nothing more than to take a quick spin to clear your head during hectic days racking up big sales.

Other Articles in this series

• How To Run A Profitable Bike Shop – A Series Introduction
• How To Run A Profitable Bike Shop: Inventory – Part 1
• How To Run A Profitable Bike Shop: Inventory – Part 2
• How To Run A Profitable Bike Shop Vendor And Product Selection

The post Evaluating and Choosing a Location: How to Run a Profitable Bike Shop appeared first on National Bicycle Dealers Association.

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Dan Thornton

Tue, 8/18 10:46AM • 41:30

SUMMARY KEYWORDS

bikes, stores, p2, people, day, business, bicycle, run, orders, retail, bmx, employees, retailers, showroom, week, industry, road bikes, trails, numbers, years

SPEAKERS

Dan Thornton, Rod Judd, David DeKeyser, Kent Cranford

Rod Judd  00:10

You are listening to bicycle retail radio brought to you by the National Bicycle Dealers Association.

David DeKeyser  00:16

Hello and welcome to another episode of bicycle retail radio. My name is David DeKeyser and I do retail consulting for the NBDA is P2 Consult program. You can find more information on that program and all the other great benefits the NBDA provides on the NBDA website NBDA calm. Today’s guest is Dan Thornton on our Free Flight Bikes with locations in Marietta, Sandy Springs, East Cobb, Georgia starting 42 years ago as a skateboard shop. preflight has evolved tremendously over the years. And with that, thank you, Dan, for taking the time to join us today.

Dan Thornton  00:54

Oh, You’re quite welcome. Happy to be here.

David DeKeyser  00:57

First off, 42 years starting to skateboard shop. Can you kind of walk us through your business’s bio a little bit through the years and at the end of that finish up with where you stand day-to-day in the business?

Dan Thornton  01:12

Yeah, 42 years condensed down in a few minutes isn’t easy, but I’ll give it a shot here. We, being my father myself, opened up a skateboard shop in 1977. And did quite well actually for about a year year and a half we thought things were just going to keep going. And in 1978 things took a turn for the worse in that industry. It seemed that liability insurances skate parks and hindsight now you look back and skateboards are very, very cyclical through generations of kids. They come they go, they’re big. They’re small parts of our sporting activities. So we made the decision and 78 kinds of looked around and said, what’s next? And what do we do now that we have a retail storefront? We know enough about retail to be dangerous. What do we do and At that time, BMX was booming? The BMX scene was happening. tracks were popping up everywhere. teams were traveling and nationals were happening through both ABA and NBA. So we kind of jumped in with both feet, we bought a little tiny bike shop in our hometown that had closed that had you know, I think it was about $8,000 in inventory. We moved to a little better area that was the better-suited showroom for bicycles and BMX continued with skateboards for a while, but that didn’t last very long as BMX took over quickly. When the BMX scene hit, we were doing national mail order, we set up a mail-order catalog that we actually hand printed in the store with a little pictograph machine, mimeograph machine, whatever you call it, ran catalogs, mailed them out and put ads in the back of BMX action magazine or BMX plus back then and just really, it just took off on us and we didn’t really know what It hit us and it ran hard for quite some time we had a national team that traveled we had mailorder going in a retail showroom that was kind of the hotspot for BMX, in our marketplace. And just like anything, you know, it’s cyclical to that it had its run road bikes, we had a gentleman that ran the Eastpointe velodrome that came to me and said, Hey, you guys need to be sunken, some road bikes, it’s the next thing coming. And we got into road bikes. And we sold rode bikes pretty hard for quite some time and was doing quite well with road bikes. And then the next thing the mountain bike wave and the mountain bike scene hit and we were there. So we really just transition from product to product, always keeping what we started with, and that’s BMX and family bikes. So it’s a big part of our business today. We have three stores now my dad through my mom, she worked for IBM and she was transferred in 1982. And at that time, he came to me and said, What do you want to do? You know, we can try to sell it. There’s probably not much here to sell. We could liquidate, you could do whatever it is you want to do or You could continue to run it and pay me back my investment over time and we’ll see how it works. At that time, my wife 42 years as well, we looked at each other and said, let’s do this, let’s make it work. And she went to school and learn to do books and I went to the school of hard knocks and dug into the stores. So I never had a formal education, everything has been from high school on and just school of hard knocks. And the rest is somewhat history. We now have three stores and 30 plus employees that are top of season 26 at the low point of the season, so it’s been very, very good for our family. We’ve been rewarded greatly and trying times today for sure. It’s a different type of stress from other times we’ve seen in this industry that we’re dealing with today with the COVID issues and shut down and the bicycle rebirth or boom if you want to call it whatever so

David DeKeyser  04:50

Yeah, a personal story there is that in the 80s I was really into BMX and I remember the free flight and Name and the catalog showing up in my mailbox as a teenager probably in 1984 1985. So whenever I would see your name pop up, the name of the stores pop up over the years that always kind of had a fond memory for me because that was a nice time I think in my life. So it’s kind of neat how you’ve transitioned so much over the years. Nowadays, in your stores, what brands are you selling what’s kind of paint a picture of what your retail business looks like today.

Dan Thornton  05:31

We’re one of the top 50 TREK dealers and we do a primary TREK business. We also do very, very well. We’re one of the largest Santa Cruz dealers in the southeast. So those are our two primaries. We obviously like everybody to do a couple of specials of this and that custom frames in the roadside, but that’s our primary too. So we’re primarily a TREK retailer. 

David DeKeyser  05:53

With a Santa Cruz component there. Obviously, you must have some mountain bike trails or very good mountain bike trails. I’m assuming with In striking distance of some of the stores, 

Dan Thornton  06:03

Blankets Creek is about five miles from our largest location, our oldest and largest location. And the blink Creek trailhead is managed and run by Sorba which is the southern offroad bicycle Association. And it was one of their very early trails when they went into developing clubs in the region. So they have both blankets Creek, rope mill and Altoona Creek are all run by SORBA And then so Creek it’s closest to our other two stores. We’re in a hotbed of some of the top trails in the eastern region. It’s without question blankets Creek is one of the most visited trails pops up on a bunch of top trails and in mountain biking for us.

David DeKeyser  06:42

Do you have some recreational paths or rail trails or anything like that near any of your stores?

Dan Thornton  06:48

We did? Well, I say we’re kind of surrounded by what’s growing. It’s slow. As everyone knows, money’s the issue. In almost every case, there’s quite a bit of political will to do it. There’s not enough resources from a financial standpoint to do what they want to do, but yes, there are recreational paths trails, the silver comet trail runs from Summerlin, which is really where a skateboard shop started. It goes all the way to Birmingham, Alabama, it’s 60 miles of old railroad tracks that were pulled up, turned into a really nice dual-direction bikeway that’s just hugely popular, especially as you get closer towards Atlanta in the city in Smyrna. So yeah, we have Roseville there’s a Greenway and then there’s paths and trails and it’s been quite a movement over the last say 20 years quite a change. But a long way to go here in Georgia, that’s for sure.

David DeKeyser  07:36

How big are your stores,

Dan Thornton  07:38

our largest stores 7500 square feet. We like to call it our mothership. If we have large bulk orders come in, that’s where they come in. And then we have weekly distribution to our other stores via transfer. The other two stores one is a two-story building, which we purchased about 15 years ago, and that’s right at just under 5000 square foot freestanding building and then last Or most recent opening a six years old. And that’s in the city of Sandy Springs in the shopping center, and it’s 4300. So all 43 or greater

David DeKeyser  08:11

is three of the most stores that you’ve ever had. Have you had more than that? Kind of how did you arrive at that number of stores in your current locations?

Dan Thornton  08:20

That’s a good one for very, very short periods of time. We had four but it was typically when we tried to a location that didn’t work. We may have been there five years, tried to make it happen, couldn’t make it happen. And while we were closing it, we would turn around and begin opening a store in another area to give it a shot. See if we can make that we’ve done and this is definitely our three. It’s very interesting when you look at stores one’s easy. I mean, you know, hindsight is always 2020 and I some days I dream of a 20,000 square foot one single store that does it all has it all. Because you know when you take your staff and you have an amazing staff At one and you start taking your best of staff to go run another one, you just basically end up with three stores with great staff, but not always the best of staff and you kind of lose a little control and it takes several years to really get that. It’s not near as easy as it looks on the outside to open multiple.

Kent Cranford  09:20

This podcast is brought to you by the NBDA, membership, and industry donors to continue providing education and content like the podcast you’re listening to now. We need your support. Go to NBDA.com and join or donate today.

David DeKeyser  09:40

Are you guys pretty comfortable now with where you’re at? Or do you have plans if you saw the right location, the right spot? Would you move into that? Or have you settled into what the business is at this point?

Dan Thornton  09:53

I’ve looked at that we looked at it. There are times we feel like we’re a little bit too small to be big and we’re too big to be small and we feel like We’re kind of caught in the middle, there’s no doubt there are economies of scale that can be gained by multiple locations. The problem is having very tight controls on those. And it’s not easy. It’s very, very hard regardless of what database, what systems, what point of sale you use, the amount of management and control of that is the hardest part. And that’s the downside to multiple locations. So I respect those guys. You know, when you see people with 1520 3040 locations, it’s just amazing that they’re able to do that and maintain a high-quality level of service to the customer. Do you think that just comes down to they have such a solid operational handbook in a way of, you know, they can just pop open the door and they’re ready to roll? Yeah, you know, I that in the discipline. I think the real thing there is discipline and oversight management. It’s extremely hard to create a perfect customer experience. And as you move Apply, that just gets harder, there’s no doubt in my mind that that becomes harder and harder. The dream of perfect service for every customer and everything else. It’s near impossible to create the perfect customer experience time and time again, without those controls and management are extremely hard to do to have people in different locations. Always being consistent with the way you treat your customer is the hardest thing and you know, the big retailers know it without question when you start looking at big retailers to this level of service. So that’s one reason that when you look at our competitors online and the Amazons when they have their management and control under one place, they completely control the script and let people know exactly what they can and can’t do. It makes it hard on retail, and we are dealing as everyone in this podcast knows that we’re dealing with pay levels that do not that have a big business. And it makes it tough. We love what we do every one of us, but it’s also a hard job.

David DeKeyser  12:06

Do you have any ideas there on ways to bolster those pay levels?

Dan Thornton  12:13

Well, it’s a margin game. Everybody knows, you know, I have friends that are consultants. And here you have people that are consultants in different industries, they have absolutely zero inventory, their assets or laptops. And that’s it. When they sell their businesses, they’re selling it at eight and 10 times revenue of gross profit. And typically, I find that most are looking at three times at best. And that’s if they’re really, really good with really, really good books and fantastic profits. And that’s tough to deal with. So, to raise the pay scale of an employee, the only way it’s going to happen is to increase your income and volume to make sure that you’re highly profitable and as we all know in this industry, That’s typically not the case. It’s just typically not the case, we’re dealing with many, many retailers that if they break, even in a year, they consider it a very good year. And in many cases, they have spouses and other people that help cover their paycheck. You know, it’s just not the normal business. You know, we’re very lucky, though, that we’ve survived when most of the retail has failed, which gives me a glimmer of hope that there are places for retailers to continue to move along the path to profitability, slowly find their way into where their profits match their efforts because it’s hard. It’s not easy.

David DeKeyser  13:41

And there seem to be almost two different types of stores. There are the stores that are being run from a very businesslike standpoint and the stores that are trying but are missing the mark and there’s just not enough kind of meat on the bone. If you’re not firing on all cylinders, and some of those things areas with the amount of time that you guys have been doing this with your stores. Are you always working on TREK has that turret you know, they always use the term continuous improvement you kind of run into that? Or do you find yourself doing that? Where you’re continuously trying to get down to the bone with a scalpel and really find areas that you can make more money? Whether that’s with data, or however? Or do you feel like you’ve hit your stride as a business from what you can improve?

Dan Thornton  14:31

No, I believe fully that there’s always room for improvement. We’re continually It doesn’t matter what decision we make anything whether it be new canopies for our events or new fixtures for the walls. We look at everything from a financial standpoint, is there going to be ROI? Is there going to be a return on investment for what we’re getting ready to do here or is it just because we think it’s really cool to have and those decisions are made every single day based on what’s going to be better for us the processes we use for service check-in. And you know, I look at track as an amazing partner. I don’t really know where we would be today without that because I see comments on some of our industry forums where I can tell that retailers are operating the way we did 25 years ago, just seat of the pants, cash registers. And you know, many cases, I believe a lot of retailers have pointed sales, but really, they’re just very, very expensive cash registers. inventory is inaccurate. No maximums being used, service orders, and service tickets aren’t being controlled. It just goes on and on and on. And you don’t have to have a business degree. Obviously I don’t. And you don’t have to have a business degree to get it to do it to make it work. But you got to have a commitment. And it’s always a commitment to doing better. And I think so many retailers and I understand it, I get it. I’ve been there to wear every day you turn the key in your day is in your face and it doesn’t end when it does. End You have no time for anything, you go home, you’re exhausted. You start over the next day, there’s never time for continuous improvement. But that’s how it’s going to get better. And if you can’t find the time to do that, it’s a long road. Without profits, it’s very hard to be profitable. Right? Not enough margin.

David DeKeyser  16:20

That’s always going to be the hard thing, I think is to, as you said, there’s just not enough hours in the day if you’re being slammed. That brings us to today where most retailers seem to say that they’re exhausted with what has been happening in the last few months. And there’s been a few that sound almost invigorated by the challenge and everything. How are you doing? How are you personally handling this and how are you feeling kind of on a day to day basis right now?

Dan Thornton  16:51

For me, it’s been invigorating, there’s been nothing but invigoration coming from me, I have been for the last 10 or so years. Very, very backseat to our business, allowing my son who’s our general manager. And before him, even prior general managers to run 80%, probably more like 90% of this business. And when this happened, unfortunately, my son was out riding and took a hard crash and had to be taken out by ambulance because he broke his femur. And the day it happened, I’m like, oh, I look like I’m gonna be back on the retail floor. And I came into one of the stores that probably needed the most help. And just said, Okay, it’s time for me to get involved. I got very involved in everything that he would do. He was almost two weeks completely out of touch because of it just it was a pretty severe break and surgery by followed by, now, you know, rehabilitation therapy and things and he’s doing better. He’s activated again, but it’s activating to a point that I’m kind of excited to be back at it. I’m 62 years old and thought I was pretty much done with retail. I’m having actually more fun than I’ve had in many, many years doing what I do, and just a newfound passion for the showroom of retail. And it showed me an awful lot of where we are what we need. And, you know, we’ve taken the store that all of our stores are up substantially as a company, we’re up 52% on the year, we went into COVID, up about 17% thinking we were having the best year we’re going to have when it happened, we closed for three days thinking this is going to be devastating and the worst thing could ever happen to us. We modified our business, change the world we were doing change the way we did business, and had meetings with our managers and immediately opened up and the rest is history is just insanity every day, you know, we leave, you’re exhausted. we’ve modified our hours, not only our hours of a day, but we also modified our opening days to give every single employee the opportunity to have two days off. Could we be up 60 or 70%? Absolutely, but I think I threw that would have lost some really, really Good employees and lost their confidence in me as a decision-maker to keep the business going. It’s extremely hard as it is, I’m happy to say we’ve really lost no employees through this stressful time so

David DeKeyser  19:15

and that’s mainly due to having an extra day off or two days off, you think and producing those hours.

Dan Thornton  19:22

Will no employee ever worked more than five days a week. That’s our mantra. I want employees to ride their bikes, have fun, enjoy family, and do what they do. So we don’t drive anybody past we really don’t expect even managers to put in more than 45 hours a week. And nobody’s this most of our managers have been putting in less than typical. So by closing two days a week, it’s allowed us to have 100% full staff attendance every day of the week. So we don’t have those split schedules to where one day you have five people in the showroom, and one day you have three. One day you have to mechanics one day you have four based on seven days a week and the number of hours where Open typically. So what we’ve done is just gone 10 to five every day, and Tuesday through Saturday, every week. This week we’re stepping up because things we can see the tempo is starting to change. A lot of it’s based on product availability, bicycles aren’t available as they were early on. So with that happening, we’re modifying and we’re going to go 10 to seven. We’re here till seven every day anyway. We’re just here normally from five to seven, organizing for the next day building bugs cleaning up taking care of service, everybody has a role in a task, mopping cleaning touch surfaces, just doing everything we need to do to be prepared to turn the key the next day. So now what we’re going to do is go ahead and open up till seven. We think we’re still gonna have time for that sort of thing after because the volume has flowed our numbers are still quite good. Every day I keep saying we’re going to have the worst June we’ve ever had yet. We’re off the charts in June even though it feels like we don’t have inventory. We’re getting bikes. They’re just not enough. But we’re selling a lot of things that we probably wouldn’t have sold. So, you know, at this point, month to date, we’re up 116% over last June was huge. It’s crazy. Yeah, it’s crazy. So it’s a good time for the industry. But I think everybody has to take a deep breath and realize that no matter how you treat your people and what you do for your employees, we’ve been bonusing extra pay on an hourly basis. We’ve increased everybody’s pay through this for now. And we’ve also allowed all the employees that have goals and marks to hit on a monthly basis. We’ve just taken that off the table and said, instead, we’re just going to continue to pay the full bonus whether you hit those marks or not because some of them the way we’re handling services, not measurable. You know, we had service ticket sizes that we would bonus on, we had, you know, email capture rate that we would bonus on and things like that. So we just took all those bonuses and said we’re going to give them to you as long as you’re here every day working hard. We’re going to give you your full bonus regardless Have you hit your measurables? At some point that’ll change back and will go back to normal and, you know, employees will still be compensated well, but right now we feel like we owe it to our employees. So it’s been great.

David DeKeyser  22:13

So kind of looking forward over the next month or two, you noted that you’ve started to see a little bit of a slowing. And is that a slowing in the numbers due to product availability? Or is it a slowing in that people, the general public is starting to go back to work and there’s kind of normalization started to happen in society it? Yes, it’s both

Dan Thornton  22:39

Georgia was one of the early states to start opening back up. And we noticed almost immediately the traffic patterns started picking back up and were notorious for horrendous traffic. It’s still nothing like it was many, many office spaces are still closed and other things like that, but without question a difference in the number of door swings, we track traffic and we know our traffic counts are way, way off. The difference now is we’re a little more able to handle the customer without the ferociousness, you know, the people lined up outside and we’re just not as stressed on a day to day basis. So we’re able to take probably even better care of our customers yet still control traffic. We don’t have open showrooms. We’re allowing one customer to instill her, but they’re not lined up 10 deep, but we’re still seeing that those customers that are in are here to buy. And if we have what they need, they’re buying it. Services not quite as far back as it was. We’ve never been more than two and a half weeks. doing most of our while you wait for quick repairs. At the front door. We’ve set tents upfront kind of triage centers, and if it’s deeper than that, we let them come on back, talk to the mechanics and determine whether or not it’s something they want to leave for two weeks, but that’s about where we’ve stayed in two weeks for the most part on one service turnaround.

24:01

Have you heard of P2 groups and wondered what they are? P2 stands for the profitability project. And while profitability is that the focus of everything we do, we do so much more p to group members share their expertise and their insights. They ask questions and they exchange resources to make sure every member is profitable and successful in every aspect of bike shop ownership. Reach out today so we can tell you more.

David DeKeyser  24:36

As far as the locked showroom, and how you’re operating currently. Do you have any sense as to how long that will last? Is that something that you feel could continue as long as the virus seems to be circulating or is that something you feel you might wind back? Have you given that any thought at this point?

Dan Thornton  24:58

Yes or no? Definitely given a thought, a day, we have no clue. The difference now is on a typical Saturday in the season, there are times that you’re overrun with customers, and you don’t think about it twice. You just have people wandering the showroom waiting for somebody and it’s just as out of control the differences. There’s no order to the order. You have to have a pretty good showroom general that knows what’s going on and is always continually pointing and saying, okay, somebody would be right with you. What are you okay, Bill? Sue, will you help them? Can you help hurt you? And now what’s happening is they’re outside instead of inside, and when they come in, we have time to talk to them. It’s very unique and different to have to speed up a conversation when you can tell. Maybe they’re just COVID stir crazy and want to chat and get to that point where we’re like, Okay, well, you know, if you wanted to go ahead, we’ve shown you what we have. We’ve got other people waiting outside. If you’re not ready to make a decision. We understand we’re here. Come back or call us another time. You kind of has to escort them out because you can’t let somebody The phone is the worst part about our business right now is taking care of the phone. But you can’t let them come in and be the phone call that goes on and on and on to where they just want to talk about their last two months of lockdown. And that’s what’s happening is you just could sense that people want to chat sharing the point where

David DeKeyser  26:20

you’ve had a big increase in phone traffic as well.

Dan Thornton  26:23

It’s probably our biggest stress or concern right now. And there’s a point where you cannot get to all the calls. It goes to voicemail right now we’d love to you can’t obviously but you know the TREK Marlin is the hot bike. There’s the Marlin the bird and the FX are the three bikes that if I had an unlimited supply, I don’t even know what we do. We would have people lined up 50 deep and if we had an unlimited supply, but we don’t so you know, my part of me and I told the guys the other day in the manager’s meeting, Colin, I said I really love to put on this on the phone recording message that says thank you for calling free-float bicycles. We at this time don’t have Marlins. We Don’t have verbs and we don’t have the x’s. If that’s what you’re looking for, please call us back in two weeks click. And just because that’s what it is, all we do is explain and then they don’t understand why they think it’s because China makes the bikes and it’s all about the duty and import problems that have been going on. And it’s not it’s just nine months of bikes have been sold in 10 weeks, 12 weeks period. It’s hard for them to grasp that. Why can’t they just make more? You know,

David DeKeyser  27:26

how far out Have you placed orders now and it’s kind of a two-part question is How are you planning the next few months inventory wise? And is there some light at the end of the tunnel from an availability standpoint?

Dan Thornton  27:38

I don’t know how other companies are managing backorders I think truck I got to take my hat off to them. They have done an amazing job of fairly handing out bicycles and when I say fairly, if you have some business sense and you have the time to sit down and place your backorders, your bikes will come to you in the order you placed them. There’s no Cutting in line. There’s no favoritism to trick stores. And I thought at first that that was one of my big fears is like, oh boy, now we’re going to be competing to get bikes from people that own the stores, they’re going to get them first. And that hasn’t been true. If you place your orders now, it doesn’t mean they weren’t way ahead of us and getting some back orders and but it does mean that you get your bikes in the order you place them. So we’ve been placing orders weekly to kind of keep a flow of bikes coming. I mean anybody that went in and said on one 100, Marlin mediums, hundred smalls, they don’t have the ability to take on 400 mostly 400 bikes at any given time. So even if they could, they wouldn’t get them. But what we’ve been doing from the very start was placing orders all the way back to April. For bikes that we thought were going to be a problem so we keep getting them weekly. We’re getting shipments but it’s not enough. It’s just not when it’s going to get better. I’m seeing there are bikes that if you go to Trek’s website, it tells you right now, if you place an order today, that order would be placed and delivered on x. And right now there are bikes all the way out to November in December. If you don’t have bikes in the queue and you haven’t been aggressive on keeping orders in, it could be a very long year for you.

David DeKeyser  29:14

And I heard that the 2020 ones in not with the track but with another manufacturer that is already showing sold out. And I think that that’s kind of that same timeframe of November, December, January.

Dan Thornton  29:25

Yeah. So it seems like we’ve already been getting some 2021 bikes, both road and mountain bikes, but those are all bikes that like I said, we went in and placed what trek did was very wise was, let’s say the color was blue, and you placed orders and back orders for blue. And the new bikes coming in green. What they did was they just converted your order over rather than saying, Oh, you didn’t know about the new color yet you’re out to align. So the person that placed an order a month and a half later when the new model shows up. They don’t step in front of you. It’s obvious that they put a huge amount of time and energy thinking through the process to make sure that their dealers are treated fairly. I’m quite impressed. of all three companies, their shipments have been on time. I know most of our other vendors are struggling with three and four-day delays. Shimano East Coast so they have very few employees. And we’re, we’re seeing like six and seven-day delays from the time the orders picked at the time it leaves the door trick we’re still getting if we get it in by two or three, we’re getting the shipment out the same day. So I have to say I’m pleasantly surprised at what’s been going on with our partner.

David DeKeyser  30:30

That’s great to hear. You know, now everybody’s trying to look at the crystal ball a little bit. And I think that there’s some hope that you know, the one question that everybody keeps popping up, is this going to last? And I think that there are two parts to that where we’re already seen, like you said, with things loosening up, there are fewer people that only have bikes to go to. So that might soften up demand a little bit, but do you feel that have you gotten the For many of these people, that this is something that is going to become a regular part of their life. And we may have a rising tide of participants over the next few years.

Dan Thornton  31:10

I’m an optimist and believe Yes, I am seeing still more people on bikes, whether it be neighborhoods, bike paths, trails. I’ve started this week doing some group rides, we’re still you know, social distancing in the parking lot. We’re not getting on the wheel as we would normally do for road rides. But the numbers are greater. And I’m starting to see now in our sales, some high-end road bikes are going that weren’t going in the heat of all this. We’re seeing high in mountain bikes. Our Santa Cruz inventory has been depleted. We can’t wait until the announcements of the new product and about a week and a half, and orders placed. So my gut says that we’re going to continue to roll I really do not see. I know there’s a lot of pessimism out there. And I keep seeing people saying Yeah, you’re going to see all these bikes on the Facebook marketplace and eBay and another year. that’s gonna happen. I mean, there are definitely people that got caught up in this and said, I gotta have a bike, gotta have a bike. Now I have a bike, why buy a bike? I think there’s going to be a continuation of this. I think people are learning to vacation without going to Europe or going to the beach. The staycations have been a big part of our sales, families coming in buying for bikes on a bike rack. And I’m seeing more and more bikes on backs of cars as I go to the bank and go go grab lunch or whatever. There’s, without question, more activity. So I think long term, we’re all going to see a positive kick from this not just now but in the future. But there’s no crystal ball. I wish I had one. You know, like, we sold the whole bikes in April May. And our rec sales were just okay. People were coming and going, Oh, no, and you know, and they’re buying $600 $800 $900 bikes. And I think the money shock of buying a couple of bikes at $800 when most people were probably wishing they could have bought a $500 kept them away from buying a bike rack. Well, it was almost a boomerang effect. those same people are coming in now wanting racks and racks are out two months now. So what was a bike shortage is still a bike shortage but now there’s a rack shortage. There are no racks hardly to be had immediate shipping who could have predicted that you needed or Yakima sales doubled already this year more than doubled. And we can’t get more for a while. So it’s pretty shocking to see what’s going on. And those are those things that if you had a crystal ball, you could have said you know what’s gonna happen? All these people are gonna need a way to transport these bikes are buying but I doubt many people thought that way and didn’t bank orders and all of a sudden now, inventories dried up. So people are like, what, why can’t I get a rack? You know, it’s just not that easy.

David DeKeyser  33:46

let’s shift gears a little bit. I kind of want to touch base on your involvement with the NBA over the years if you want to give us a little history there.

Dan Thornton  33:56

Yeah, happy to gosh now it’s probably been 20 plus years because I’ve been off the board at least three years. And I’m not good with saying Oh, it was 19 X that I did x. But I was invited to be on the board of directors as a, just a board of directors. I was on the board for 17 years. So I went through the board was on the board for many years, and then slowly started taking officer positions from secretary-treasurer to VP. And then finally president, and then I was the chairman the year after passed after that. And then when that was over, I just said that that’s enough. I’ve done enough. It’s obviously anybody that knows anything about the NBA knows that it’s a nonprofit association, and there’s no compensation for the board, no stipends. And it wasn’t really about the money. It was just the fact that I had felt like I had done my time doing what I could do. My whole goal going into the NBA was to try to help dealers be better and see dealers that really wanted to reach out and figure out a way to make money be profitable. in this industry, we love to do that. And that was the whole design in the desire programs from everything, including those that know the PT program. That was my whole intent of being on the board was to just see this industry continue to prosper and raise all boats. I felt like we did some really good things while I was there. It was a good run I met some amazing people from J grades of the formal owner of the bike gallery, Chris Cagle, one of my best friends ever. Whelan, sprocket and on down the number of people that I served on that board with and got close to was just incredible and helped my business tremendously as well.

David DeKeyser  35:43

Why don’t you talk about that a little bit more? From a mentorship standpoint, you have three stores in Georgia. They’re good-sized stores, but some of the names that you just mentioned, you were rubbing elbows with, kind of the Titan so the bike industry in a way and What did that mentorship mean to you? And how much did that involvement? I know you were involved in the P2 groups talk about that a little bit. 

Dan Thornton  36:08

Sure, I’d be happy to well, it all started I think in about 1999. I was invited to go over to the Tour de France. And I believe that was the first year that Lance won the Tour. And I was there with some pretty heavy hitters that the industry that I had only read about at that time, my wife and I were there. Were there with Chris Kegel, Jay Graves the former owner of the bike gallery in Portland, Oregon, gossips Hill Able from Austin, Texas. And the list just goes on. And I hate that I left anybody out. But even Jimmy Hoyt from Texas is there and I realized quickly that these guys were no different than me. They just got an earlier start on growth and realize quickly that Yeah, there’s room for us to be bigger and better. And I started listening and talking and asking questions. About how they did this, how they did that. How did they come to this? How do they come to that? It wasn’t long before we got home, and we started really looking at our ability to grow. It was a huge turning point for us. When you can be in a room with the brains that I was able to spend a week with. You cannot get that back. There’s just no way that you can pay for that type of education. Not long after the NBDA, I was invited to be on the board of the NBA. And at that point, Chris Kegel said, Hey, I think Dan would be a good board member. Let’s ask them and bring them on. That’s when we started talking about the idea of the P2 group early on. And Jay Graves and I were the first two said absolutely. We actually cut a check before there was a P2 group and left it with Jay Townley and said Jay, get this thing started. Here’s a check. And he said on those checks for over a year before, I believe at that time, Fred Clements started working with Dan Mann as a consultant. And the decision was made to go ahead and let’s get this P2 things started. And it was the best money I’ve ever spent getting in the room with some really smart retailers. So we were involved in group one. group one was extremely successful in the P2 group. And we were meeting twice a year, we were talking on the phone on a regular basis, sharing of our numbers, I could see quickly that there was so much potential for us to be better and do better. All I had to do was listen and change the way I did business. And that’s the hardest part is making those changes. The listening parts easy. You know, anybody can go to a meeting, make a bunch of notes, and come back and do nothing. But changing them is what really helped us and visually seeing where we were compared to these guys. I was seeing numbers of margin different so I’m like what the heck you know, we’re not getting 42 points after everything. We’re not getting 46 points. We’re getting 38 points. So when we’re not making money, we’re not seeing growth here. Our labor as a percentage of sales is this, our rent as a percentage of sales is that and when you start seeing numbers that come out of P two, it’s eye-opening, that you’re doing something wrong. Or you’re doing something very right. Not everybody’s doing anything wrong. They’re just a confirmation that Yeah, we’re doing everything we can possibly do. Which means the P2 group isn’t for everybody. But the collaboration and sharing ideas was unreal. I’m no longer on it. I realized when I wasn’t that active in the day to day business that I had kind of run my time through and it seemed like I wasn’t getting back near as much as I was giving in the meetings, and the sharing of numbers and I just finally said, okay, I’ve done my time on the board. I’ve shared my numbers, I’ve shared my secrets of what’s helped us grow. Now it’s just time for me to kind of kick back and not really do this anymore, and have that extra expense. I looked at it as an expense at some point. But that Doesn’t mean everyone should it’s if you’re early in your career and you’re struggling to figure it all out, there’s not much better you can do than be a member of P2. It’s phenomenal.

David DeKeyser  40:10

Well, thank you, Dan. That was a pretty glowing endorsement of the P2 program number one, and fun history of both your involvement in the NBDA and the P2 group along with your business. And I think that anybody that listens to this is going to have an enjoyable few minutes learning more about your business and getting some ideas on how to be a better retailer. So thank you very much for joining us today. You’re quite welcome. enjoyed it. If you found this episode or others of bicycle retail radio insightful and informative, please consider joining the NBDA if you haven’t already by visiting nbda.com as the NBDA has benefits that can save you money and improve your business. Ultimately, your membership adds to the collective voice of this specialty bicycle retailer. In the NBDA his efforts to represent and advocate for your interests.

Rod Judd  41:04

Thank you everyone for listening. This has been bicycle retail radio by the National Bicycle Dealers Association. For more information on membership and member benefits, join us @nbda.com

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David DeKeyser and his wife Rebecca Cleveland owned and operated The Bike Hub in De Pere, Wisconsin, for nearly 18 years. In 2018, they sold the business and real estate to another retailer based in a nearby community. David now writes the Positive Spin series on Bicycle Retailer and Industry News and he writes articles for the NBDA’s blog, Outspokin’. David also provides business consulting through the NBDA’s P2 Consult Program.

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The NBDA has been here since 1946, representing and empowering specialty bicycle dealers in the United States through education, communications, research, advocacy, member discount programs, and promotional opportunities. As shops are facing never-before-seen circumstances, these resources offer a lifeline. Together, we will weather this. We at the NBDA will not waver in our commitment to serving our members even during this challenging time—but we need your support.

Now is the time to become a member as we join together to make one another stronger. Whether you’re a retailer or an industry partner, your membership in the NBDA is one of the best investments you’ll make this year. 

Learn more about the benefits of being a member and join now.

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The post Continuously Improving w/Dan Thornton appeared first on National Bicycle Dealers Association.

Todd Cravens

Tue, 8/18 10:46AM • 32:53

SUMMARY KEYWORDS

retailers, business, bike, people, bike shops, pre-tax profit, buying, profitability, number, bit, factories, store, bicycle, inventory, items, sales, expense, margin, run, businesses

SPEAKERS

Todd Cravens, Rod Judd, Tara Kuipers, David DeKeyser, Kent Cranford

Rod Judd  00:10

You are listening to Bicycle Retail Radio brought to you by the National Bicycle Dealers Association.

David DeKeyser  00:16

Hello and welcome to another episode of bicycle retail radio. My name is David DeKeyser and I do retail consulting for the NBDA is P2 Consult program. You can find more information on that program and all the other great benefits the NVDA provides and the NBDA is website nbda.com. Today’s guest is Todd Cravens. Todd is the Vice President of Business Development at quality bicycle products. Todd has well over Forty years of industry experience. And with that, thank you, Todd, for taking the time to join us today.

Todd Cravens  00:45

Oh, thank you, David. I’m really pleased to be here.

David DeKeyser  00:48

First off, why don’t you give us a little bio on your experience over the years, and as you finish up, maybe you could go into what you’re doing day to day at QBP.

Todd Cravens  00:56

Okay, thank you. I was bitten by like bug about age 10 and not being able to sit shaken. So bicycles have been a personal passion of mine. And that morphed into working in stores through my youth in school and starting a store on campus in college and doing economic research on the common behavior of bike shops and businesses and college on to import work being a partner in a store in the Washington DC area in the 80s, working in manufacturer serrana. And then eventually coming to QBP. Working in customer service, product development, Product Management, purchasing sales, and in many cases, both things wrapped around retailer support at this point in my career. As the Vice President of Business Development, I’m the one tasked with looking to the future and developing things that will help our retailers and suppliers thrive. And so, on a daily basis, that does mean quite a bit of retailer contact both big and small.  That’s part of how we’re trying to keep our finger on the pulse of what it is that retailers are experiencing needing and wanting. And there are times when Someone says they want something. And I might actually disagree and think rather, that somebody actually may want something but maybe need something else. And that if we talk about what’s happening in the way our world has changed post-COVID, and how shopping habits have changed and what many retailers have had to do to attack. So you can kind of adjust to whether it’s a new normal or not the new conditions, I’m not sure many people would say that those are things they wanted. But if we talk about retailers being available to consumers a variety of ways, whether it’s online or social, I would argue those would be things that retailers need. And so, you know, a daily basis can also be things I said on our credit committee. So I see a lot of bicycle shop financial information, I mean, the sign off-chain there, and it’s something that kind of developed a bit of a knack for in terms of helping me to understand the financial health of our retailers. And that can go to margin conversations with vendors when a vendor develops an item and gives them an app and said what they think the margin should be for a retailer. I’ve consulted with a number of vendors and been able to share with them that that actually that margins down Enough based on what bike shops average expenses are. And what I find is that oftentimes vendors don’t know what that number is. But we have real data. So you know what they are. And it’s something that happens behind the scenes, but something that I’ve done as well. So those are maybe a few bits and pieces. It’s a bit of a mixed bag on a daily basis.

David DeKeyser  03:17

Excellent. Yeah, we’ll dig into that profitability thing here in just a little bit. I think that that’ll be very interesting. The first major topic right now, as of today in the industry, I think a lot of retailers are wondering about inventory levels, what that’s going to look like over the next few months. What you take us on that. And do you have any suggestions for what retailers could do either to prepare if we think we’re going to have shortages? So basically, how did we get to where we are at this point in time and what can we do going forward?

Todd Cravens  03:50

Right, thank you. I think that you know, part of how we got here was that 12 manufacturers and distributors had forecast badass growth for spring of 20 Nobody was expecting what would come the devastating effects of COVID not only in the tragic loss of life but all the economic disruption, particularly as things really lit up in the United States and march for a period of time, we saw sales drop off at a rate of 30%, which is really not sustainable for virtually any business. And we had to take some very drastic actions in our organization, as in other companies out there if we look at this general industry, it was pretty scary. The switch flip, though, and cycling seemed to be something that people could do. I think, in many cases, Mike’s offer a more affordable solution that a new bass boat or a new jet ski or a new car, whatever that is.  And so we saw, this has come roaring back through our retailers, many of the retailers we’ve worked with and spoken to, it talked about working hours and having the kind of business that those who have been around a long time experienced during the bike boom in the early 70s that they’ve been told about and to the point that has been so much growth for many people that is beyond stressful. It’s rather hard to continue to meet day after day. But as we go to some of the things that happened through this is starting to fall off a number of companies very quickly, canceled purchase orders or put them on the factories got this information and they made adjustments in many cases they were struggling with staffing their factories due to the closures and quarantines that staff had been in due to COVID issues in Southeast Asia. So as things kind of peeled back like that, a number of, again, factors you’re able to adjust. But when things very quickly flipped, and all of a sudden demand came roaring back. At that point, many of the light companies, ourselves included, came back to our factories and said, Oh no, we know you’re only at 80% capacity. But here’s 120 or 150% of what we originally thought we wanted, which kind of created a big gap for the factory to try to meet demand. If you throw in the fact that three of Shimano factories in Malaysia, Philippines and Singapore which make a lower-end middle-end product, very, very popular on the OEM side, high demand if you will, those factories were shuttered for anywhere from 30 to 45 days, and the That was a problem as well.  So we’ve seen these kinds of supply-side shocks and some demand-side shocks as well, both the fall off and then there’s roaring back. And that so there have been some gaps for the manufacturers, if you will, to try to catch up. So we’ve seen quite a bit of pressure on them. And that’s both on the bike side and on the PMA side. So that’s a bit of kind of where we got there, if that makes sense, and really about advice and dealing with it. It is so challenging for everyone, My heart goes out to everybody here. I really think this is the place where you do lead to the relationships you created. So hopefully the suppliers you’re working with you have a good credit relationship, you know, the credit managers are going to need to know that you’re likely going to need more credit because you’re buying more and buying more frequently. Hopefully, there’s enough cash flow is being generated that you can not only seek that but also continue to meet your credit obligations. We’re a big believer as a company and just in time inventory that gives retailers more flexibility, and we fund our inventory such that retailers can order more frequently from us get higher returns. And actually spin if you will more cash through the business but with a lower capital requirement, so we’re big believers and just in time inventory, we think you’ve got less at risk. I think that what we’re seeing right now with demand, this is a place where, especially on bread and butter items, retailers should probably take a longer view of days on-hand inventory, because they’re things you just don’t want to be out of, you don’t want to be added to you want to be out of tires, you want to be out of cables on the service side as an example.  But there are also accessory items that should go on every bike or that people should be buying from you that you also don’t want to be out of. So I think a retailer at this time should probably put more days on hand in stock. And that’s because the product is available. It’s certainly run out in some category, some items. And that’s been challenging again, for everybody because everybody wants it. I think those are a couple of ways to get at it traditionally. I think you have to be more comfortable with substituting out something maybe even a product line that you add a product line because it’s available and it’s filling a need that you have and it’s maybe not your first choice but you know, I was talking to a large retailer and NVDA member of course who made the comment to me that as well. suppliers run out of a poor group of bikes. And when he said, What should I do? I’m thinking about adding another brand. The vendor said, Oh, don’t do that. That’s a horrible idea. The retailer asked, Well, how long will he be? And he’s like at least five weeks. Well, that’s not acceptable. This retailer can’t be without bikes for five weeks. So he did bring on another line. And I’m not suggesting that retailers just kind of willy nilly jump lines. But I think you have to be open to meeting those opportunities as they become available to you. Does that make sense? Does that kind of get out at David?

David DeKeyser  08:29

Absolutely. Yep. I think that’s great advice. And it’s interesting to hear. I’ve heard a few people discuss where bikes were made and how that might affect where they’re coming from. But when you paint the picture of these parts are coming from there’s also parts included when you’re buying bikes, so it’s just that whole supply chain has been interrupted across the board.  So even if you could get parts of a bike, you may not get the whole bike. 

Todd Cravens  08:55

Well, that’s true. And the other piece to throw in there is it comes out of a tariff We as a bike industry has had to deal with is that a number of manufacturers, ourselves included, are in the process of moving our supply chains. And in a naive world, the feedback I’ve gotten from some retailers, it’s a little bit jaded. It’s like, I don’t know why to do that. I mean, it’s really easy. Just go to a different country, you know, kind of like a Burger Kings out, you go to McDonald’s kind of a thing, and it doesn’t quite work that way. And what we found is in the best possible instance, and that’s with everything working perfectly and working with existing people that you know, you’re 18 months, and you could easily be 22 to 24 months. Because you go to different countries, you’ve got to qualify, all of the manufacturing, you’ve got to qualify all the samples, and then your batch testing when you’re doing production. And so I wish it were easy but not and on the one hand, actually, it’s rather making it having all these hurdles, it slows you down to be sure, but particularly with the batch testing, it allows you to catch things upstream so they never hit the retailer and they never hit the consumer so you catch things before they’re a problem. It is a fairly involved thing. So yeah, that’s been a challenge for everyone.

David DeKeyser  10:03

So let’s kind of turn a corner here. You and I had had a conversation. And you would allude to this in your introduction about profitability. And what QBP has found the average stores pre-tax profits are overall what they are for good stores. Why don’t we kind of dive into that a little bit? I think that this is something that retailers would probably find interesting if they don’t know how they stack up to other retailers, A and B, what the potential is, or them profitability wise.

Todd Cravens  10:35

I’ve been in the industry, as you mentioned, for a very long time, ever since I can remember. So I started working in bike shops in eighth grade, I’ve always been told you can’t make a lot of money in the bike business, or, you know, kind of the old thing that we kidded about how do you make a small fortune start with a large fortune and you know, it’s like as I spent time as I did research and that as I owned a store and then as I continue to support retailers throughout my career, I have come across a number of retailers that have made a very comfortable living, and in some cases creating wealth. And they run really disciplined businesses. And they certainly work hard. We all work hard, but they pull it off. And so when I think about that, I know what’s out there. And in most cases, those retailers are running their business like a business and some retailers that I’ve spoken to take offense when I say that, and my intention is never to be offensive, but it’s rather to reflect on what it is you’re doing, and are you getting the result you want. And if you’re not, then you need to change and you change by looking at what’s causing your results. Right. So you know, we’ve seen pre-tax profit between 2.2 and 3.9%. On average, frankly, with sgma is from 35 to 45%, which is quite high. If you think of a vendor crowing about an item that is digit percent gross profit margin or that so keep what we have called Keystone over the years. You know, there’s not a lot left over frankly, yet. We have seen also retailers that are pushing 10 to 12% pre-tax those retailers and it’s not that you know, running on a shoestring or doesn’t have any overhead Don’t pay their staff or things of that nature. They’re significantly more efficient. They do run leaner, as it relates to SAS or their staff gets worked pretty hard. But they are also really operating on the three kinds of a leverage point to the income statement around how they maximize sales, how they maximize margin, and that comes out of how they buy. And then lastly, their expense Hawks. And now the expense part is the least alluring part of the job. If you like bikes, you don’t really want to be negotiating with your insurance broker and the people that provide your internet and your landlord and utility company on and on and on. But that’s what we found, as we’ve done the research and income statement says we’ve visited retailers as we’ve done work with v2, we did work with v2 over a period of time there were definitely those retailers that did that. And I think it goes back to, frankly, the basics of are you buying and selling items on which you can be profitable and again, that’s for some people. That sounds ridiculous to say it that way. I continue to be floored that retailers sell products on which they aren’t profitable. And then Kind of insult to injury is on which they do not know that they’re not profitable. And that’s a really, really scary combination.

David DeKeyser  13:07

One question I had that I kind of came back to after our last conversation was the pre-tax profits. The NBA, in their cost of doing business surveys, has a term owners’ compensation and profits to gross sales and those numbers that you’re talking about anywhere from 2.2% to 1012, or 15%. Those do not include the owner’s salary, is that correct?

Todd Cravens  13:30

Those numbers actually do include the owner. So do I do that there are what I would call a fully loaded income statement? And so no, they do, in fact, for that 2.2 to four-point or 3.9. These aren’t people that are writing a massive distribution at the end of the year, you know, and so, exact comp shoots off the page. You know, these are folks that are operating just above or just below average costs, and it’s kind of a precarious place to be the people that are running tidy your businesses with higher pre-tax profits, the difference we see that really drives at home The expense piece we’ll see a five-point Delta on the expense, sometimes seven points. And sometimes it’s because the retailer really did bread and water for the first several years and that retailer was able to get a mortgage to buy a building and eventually pay him or herself rent.  And at the end of a 35-year run, they didn’t just have a business with a pre-tax profit to sell. So there could be multiple, they had good inventory, even though it’s going to be written down on a sale, but they had a building they could either sell or rent. And so you know, they’ve got they’re building a tangible asset for which there’s a public market. You know, there are a lot of stores that are not making a lot of money that at the end of 30 years, if they’re operating maybe two to 4%, pre-tax, they’ve got okay inventory, they rent a building, even if they’re pulling down, let’s be generous and say 5% because the math is easier, and they’re doing a million dollars. And you say that somehow you talk somebody into paying, you have five times multiple, we’re retiring on what it would be a very small amount of money, so to speak, and so think it’s a bit of the battle. What you find on a daily basis, and that’s how you win the war at the end, if you will, maybe that language is through martial, but nonetheless, you’ve really got to be engaged, measuring regularly. So I still know retailers, they look at annual balance sheet income statement, they don’t look at monthly or weekly. And I’m a big believer in charting your progress because the sooner you find what your results are, if they’re what you want, we’ll do more of it. If they’re not what you want, figure out what’s causing it and change it so then you can get what you want.

Kent Cranford  15:29

This podcast is brought to you by NBDA, membership, and industry donors to continue providing education and content like the podcast you’re listening to now. We need your support, go to NBDA.com and join or donate today.

David DeKeyser  15:49

So one of the big discussions is always around the margin. And we talked about this a little bit and how to increase it and one of the topics you brought up was the idea of value pricing and you use the analogy sample from when you were a store owner. And I was wondering if you could kind of go through that real quick.

Todd Cravens  16:05

Sure, thank you be sure to qualify this for everybody I store in the 80s. It was before the internet, it wasn’t a Washington, DC suburbs, there was a strong personal income component. And it was during the 80s, which was kind of a gogo time in the economy, especially in Washington. But we were clear that there were certain items that customers didn’t shop you on, they just want to know that you had it and could fix it. For us. It was sealed 27 by one and a quarter chromed bolt-on roadwheels. We paid I think I want to say 865 if I remember right, and we sold them for 3499 all day.  And again, the question was always not how much is it? It was rather can you do this and get me back on the road right now that taught us a valuable lesson one we tried to position ourselves as a shop that offered exceptional value, not prices, but exceptional value. So we were customer-centric, checked into our community involved in our community as well of course, but we did look at a number of things where we believe we could make more money and so we mark things As such now where there are some things that were just kind of insanely competitive, absolutely, we could get those things for people, but we didn’t stock them because we wouldn’t make enough money on them. And so, while I was an enthusiast and liked all the neat bike parts, we were a business first and had to be profitable. So I think that approaching it that way, knowing what those items are, and often those are service items. But even if we take that step further, I have seen retailers let the items being sold say at service be determined by the service advisor or the service manager, not by what the retailer’s chosen for assortment, that is where the retail will be most profitable.  And I’ve often seen people sell things where they’re either trading dollars or losing money on a repair item when they should be making significantly a significant margin because again, they’re providing a service they can obviously pricing the labor to but it is a piece that can be a disconnect. So I think that value pricing matters as a way to approach your business. So do you have to know your market Absolutely? And yet No, but it will bear Yes, you do. So do you do some testing, of course, you’re going to probably lose a few people along the way customers that think that you’re not worth it? And we were very happy to tell you that we struggle with that at first because we didn’t really lose anybody. It was really, really hard when somebody accused us of charging too much. But interestingly, that didn’t ultimately have an impact that we could measure, as in proper sales down or things of that nature.

David DeKeyser  18:22

Fantastic. So in the big three items here for profitability, we’ve gone over expenses, which are the hard and somewhat boring part we’ve talked about. We’ve talked about margins when I’ve talked to retailers when I was a retailer, and now one of the things that always comes up, it’s just a very knee jerk way of improving their businesses to increase sales. And it seems like the easy way out, well, if I could just get my sales up and fill in the blank with the percentages, or the number of bikes, but you had stated that you need to be very mindful of the cost to increase those sales, and had discussed a multiplier of your pre-tax profits to determine if something actually works. And the example that we had discussed to me was so clear, and I think could be very helpful for retailers about an ad buy, and how you would determine if that was actually successful. And I think to give an idea to that increasing sales, you really need to increase sales if you’re going to spend money to increase the sales

Todd Cravens  19:29

agreed. And thank you, you know, it’s one of those things that I kind of struggle with getting to but I’ve seen it when people are considering an ad buy what for whatever medium you wish that’s agnostic, you spend $1,000, let’s say, which is not insignificant for any store. And I’ve seen retailers say, Well, I spent 1000, and I made about 1000 or 1100. dollars in sales. So you know, I just about broke, even so, I did okay because I got my name out there, you know, and first of all, I think that’s the wrong approach. When you’re evaluating any kind of expense and where you anticipate a return. You need to look at your pre-tax profit. If you can divide that into 100, to get an integer that tells you what the multiplier is how many sales dollars, you have to break even. And so again, because the math is easy in my head, you’ve got a 5% pre-tax profit. If you divide that into 100, you got a multiplier of 20 times that thousand dollars add by breaking, you even get to $20,000. If it doesn’t get you $20,000, you’ve lost money, because margins involved.  I think it’s a handy little tool to evaluate whether or not something is worth it because you can put a hard measure on did it return your sales that it actually makes you money? And I think we often have gotten this from people in the advertising and marketing world when they come to us to say, Oh, no, this is going to be great for you, you’re gonna have a great ROI. Well, you now have a tool to determine whether or not it’s a great ROI or whether or not it’s an ROI at all. Maybe it’s a loss, right. Again, not a particularly alluring thing, but I think it’s a powerful tool to help you be a steward of your business because really for the retailer, if not you who sets the old Harry Truman, the buck stops here. And so that kind of really takes me to. It’s not that you shouldn’t be looking for opportunities. But I’m a big believer in making a plan and then executing your plan. And as you’re executing, you’re measuring and if it’s not going the way you want, you find out what’s the pinch, what’s the area that’s causing the problem, you fix it, and you move forward and keep measuring. I’ve kind of had the belief that because of the feedback, I’ve gotten more people to know what their functional threshold power is, then what their top five expenses are, and most importantly, what they’re doing about those sub-five expenses, because every year those are going on, and even if it’s only 1%, two or 2%. There. And I’ve heard people say it’s not really very much WellQBP if your top 10 expenses all go up 2%. That’s a lot. 

David DeKeyser  21:44

Right.

Tara Kuipers  21:46

Have you heard of P2 groups and wondered what they are. P2 stands for the profitability project. And while profitability is that the focus of everything we do, we do so much more P2 groups Members share their expertise and their insights. They ask questions and they exchange resources to make sure every member is profitable and successful in every aspect of bike shop ownership. Reach out today so we can tell you more.

David DeKeyser  22:21

So I want to talk about competition a little bit between retailers. In a way, if you have two retailers in the same town, and they’re buying products, both from QBP, and they bought at the same product, and they hung up on the wall in their store, they have it priced the same. How can retailers either brand themselves or how do they compete at that point in time when basically the items are identical, the prices are identical, and even the place where they’re buying from is the same?

Todd Cravens  22:51

Yeah, that’s a great question. That’s a tough one too. I think it’s kind of easy to get mired in kind of call negativity around competition and the big believer that stores Have to differentiate themselves. And it’s really foundational to branding and I kind of hang it on as a retailer, how do you make yourself special, distinctive and memorable, and in doing in such a way that people will pay you? That’s kind of the essence of strategy. And you do have to figure that part out, a lot of retailers will say, Well, you know, we’re known for customer service, I can’t tell you how many have told me that some are really exceptional, most are not. Because if you say that you’re being held against how Lexus does service, for instance, regardless of whether or not your Lexus dealer and kind of the other service experiences retailers across the board have provided to this consumer. So I really think that you try to move away from competing on the thing, and more about how are you more alluring to the consumer? How are you working in the community in a way that is creating riders that are perhaps supporting the community? You know, one way to think about it? This is an old example. But when I owned a store, my wife taught at a private school, they had an auction every year we were a retailer. So people came for us to sponsor Little League and other things. We didn’t do that because it wasn’t like it didn’t make sense to us. But the bike made sense to us.  So we were involved in things that promoted cycling. And we donated, I was not clear that I wanted to do it. But I liked the school in one sport, my wife in school, so we donated an expensive road bike at the time. And those were popular. And a very interesting thing happened. And this is again, we learned a lesson here, we backed into it, we weren’t aware of it. Because we supported school. All of a sudden, teachers were buying bikes from us. And all of a sudden, parents were buying bikes for themselves and their children because we supported the school. And so when we cost out what we had put into it, we actually did get a very strong return in a long term way. And really, I think what this highlight is, again, what are you doing this making yourself distinctive? How are you reaching out to communities in a way that is important to them that is meaningful and that they would want to come back because a lot of retailers will give you a narrative on how well they do in every category across the board, whether it’s women or people of color or minorities and I would challenge Specifically, what are you doing that’s meaningful? And it should probably learn that from somebody else rather than just what you think if that makes sense, but I think the differentiation is a really big piece. And that’s a tough one. Because at that point, we’re selling commodities. We absolutely are.

David DeKeyser  25:12

So every day, you and QBP, obviously, are plugged in to what’s happening with retailers, and you’re speaking with retailers you’ve seen over your years, obviously a ton of great retailers and you’ve seen those who have struggled. Is there something that you have found that is just a foundational difference between these different stores and how they’re doing instead of mindset? Is that a certain skill? Is there anything that you’ve ever been able to distill down as to the difference between those who are really succeeding not just in their community, but also financially?

Todd Cravens  25:56

Gosh, I think the biggest piece and it may sound tedious but If that concept around business acumen really matters, and you know, it’s treating the business like a business on an everyday basis, and it is knowing your numbers, and it’s Frankly, I take it back to me in a step back further setting a goal, okay, I’ve set the goal, how do I get there? And so those retailers that have prospered, they lead into their business every day. And it’s not that they don’t take time off, but they are extraordinarily conversant. They do stay on top of business and trends in the industry. They have learned things like real estate, whether they’re renting or whether they’re buying, I can think of one who’s quite successful and he says location, location, location is not a cliche, and he’s right. He’s pretty savvy about where he puts a store. As an example, I think others lookout a little bit further into the future wondering how else they can be efficient. I can think of one who made a massive closeout cash buy which got him even a better origin.  This would have been in the middle 90s and he then computerized his business when computerization is more expensive. But in doing so that gave this retailer and his business partner extraordinary information to run the business even more efficiently and more effectively, again, being in the numbers. So I think that being in the numbers is probably it. And for some people, I know that’s gonna sound like, Oh, that’s not why I got in the bike business. And I would actually put it out there. It’s not either-or it should be and, and if you own the business, it kind of has to be an regardless of whether or not it’s your favorite thing. You just can’t pay attention to it. And as you get in the numbers, and as you understand your performance, and what drives it, and you increase that performance, you can ultimately become more profitable. And if you’re more profitable, I would argue that profit just represents a choice, the more your profit, the more choices you have. And that’s kind of a cool place to be able to have choice versus at the end of the year, having and if there’s any money left, that’s probably an inventory, which is typical, but you know, not really kind of having a paltry existence. So I think there’s an opportunity there, but I think it’s really learning your business. If you don’t know it. You’ll If you got a mentor, you work with another person in a business who understands it. There are things like community college classes just even on basic things like cost accounting, but otherwise, you know, you’re cooking a turkey in an oven, but you don’t have a thermometer. So you don’t know if it’s done or not. And that’s a problem.

David DeKeyser  28:13

Right? Right now it feels a little bit like retailers and everybody is kind of hitting the reset button. In a way, I think that inventories in the stores are they’re obviously able to sell through a lot of things. So they’re kind of able to clean house, but retailers are also and this has been discussed quite a bit is how tired everybody is right now. And even you guys there was an Instagram post and CBeebies Instagram page that I saw last week, it was all hands on deck, absolutely. packing boxes and everybody’s working longer and harder as far as the next several months or a year and nobody has a crystal ball obviously, but the things that retailers have learned in operating their businesses and how many times and how fast they’ve had to pivot in the last 60 or 90 days. Do you feel it? That’s going to be, ultimately, possibly a positive for how retailers and the whole industry has learned to completely change day to day in the beginning week to week and now kind of month to month. In the end, do you think it may be a net positive for operations? I believe so. Because to be sure, it’s hard. And I know retailers are beyond tired, and often 70-80 hours don’t get it. And so my heart goes out to them. I know, it’s a challenging time, I kind of think of stress on top of stress. And there are a lot of times in our personal life or in work, that we’re doing all these things that are the first time ever, but then successively, right. So that’s really stressful. And so I do believe that some of the things we’ve learned

Todd Cravens  29:45

will serve us one is just the ability to change and to pivot. Sometimes it’s forced upon us and I would argue that would be right now, other times there’s an opportunity and we take a risk, but if we think about it, you know, we worked hard to support people for bikes to get bike shops, nationally listed as essential businesses, because we deeply believe in our hearts bike shops are essential businesses, that was important for us because we believe that designation, a lot of a number of retailers to continue to do business if they chose some chose not to because they were worried about health, I totally understand and respect that. But a number did and add to, to your point change how they were doing business by appointment more online, through Facebook, any number of things that allowed them to serve their communities and be accessible to their customers. And, you know, even when I think about the numbers of customers that have chosen to sign up for a retail fulfillment, or they’ve created a stronger online presence, for a number of people, they had no interest in doing that, with these significant changes in public health policy and the challenges that we were all dealing with a number of people leaned in and based on the numbers we’re seeing, it seems to be making a difference. So I guess in the end, I think most people don’t like change. I know I’m in that boat. However, I know that being able to be open to change and then understanding how to Work through change might be one of the most important skills I’ve ever learned at QBP. Because it allows us to continue to develop and grow either again, because it’s forced upon us or because there’s an opportunity if that makes sense. Absolutely.

David DeKeyser  31:13

Todd, this has been very informative. We really appreciate that you took the time today. Do you have any final thoughts or last words for us here as we start to wrap this up?

Todd Cravens  31:23

Oh, gosh, Thanks, David. It’s just a pleasure to be on the podcast. And thank you so much. You know, I really just have such profound respect for our retailers out there and the services they provide the community, we really believe bikes solve a lot of problems. And we think that mic shops are positioned to be able to be part of the solution, which is really magical. Not all businesses can say or do that or even feel that good. So it’s just our great privilege to serve retailers out there as well as suppliers, getting the product to retailers. In both cases. These are really critical stakeholders that we want to support and continue to advocate on behalf of so I’d say thank you very much. Best of luck. I still think we have bright bright skies ahead of us. Excellent.

David DeKeyser  32:02

Well, everybody that was Todd Cravens, we thank him for being on the episode today. If you found this episode or other bicycle retail radio insightful and informative, please consider joining the NBA if you haven’t already by visiting nba.com as the NBA has benefits that can save you money and improve your business. Ultimately your membership adds to the collective voice so the specialty bicycle retailer in the NBA is efforts to represent and advocate for your interests. Thank you, everybody, for listening.

Rod Judd  32:29

This has been Bicycle Retail Radio by the National Bicycle Dealers Association. For more information on membership and member benefits, join us @NBDA.com

David DeKeyser and his wife Rebecca Cleveland owned and operated The Bike Hub in De Pere, Wisconsin, for nearly 18 years. In 2018, they sold the business and real estate to another retailer based in a nearby community. David now writes the Positive Spin series on Bicycle Retailer and Industry News and he writes articles for the NBDA’s blog, Outspokin’. David also provides business consulting through the NBDA’s P2 Consult Program.

The NBDA has been here since 1946, representing and empowering specialty bicycle dealers in the United States through education, communications, research, advocacy, member discount programs, and promotional opportunities. As shops are facing never-before-seen circumstances, these resources offer a lifeline. Together, we will weather this. We at the NBDA will not waver in our commitment to serving our members even during this challenging time—but we need your support.

Now is the time to become a member as we join together to make one another stronger. Whether you’re a retailer or an industry partner, your membership in the NBDA is one of the best investments you’ll make this year. 

Learn more about the benefits of being a member and join now.

The post How to Run a Profitable Bike Shop: Part 2 appeared first on National Bicycle Dealers Association.

Constantly Evaluate And Experiment

Constant evaluation and experimentation with the product mix is a good thing. What I mean by this is always to be tinkering with your product mix to validate your choices and not become stale. What was hot a few years ago may have cooled, and you didn’t realize how much a particular product sales have slowed. An example would be cycle computers. What was an item I recall always being a no brainer, slowly lost traction to cell phone holders, and GPS. Retailers may add another item(s) to the product mix without realizing that those new products are replacing the need for the prior products or, at the least, lessening your inventory needs for the obsoleted product. You also want to be experimenting with pricing on items to verify you are getting what the product is worth. Often retailers will settle for the MSRP or MAP pricing on things that are not price-sensitive and can be sold at much higher margins. Again, experiment continuously. We slowly replaced our best selling bottle cages with a very competitive and incredibly similar model that delivered twice the profit, which on such a high volume item can add up quickly. You may also want to pare down color selections on certain things until you find the happy medium. Now you can go a little deeper on fewer SKUs while maintaining sales. Apply this to product selection as well. You may not need an array of choices when a good, better, best approach may work best. Or even “this is the only model we carry” can, at times, for the right item be the best approach. The “right” amount of selection can vary from store to store, so always be fiddling to find the right balance.

Negotiate In Your Best Interest

Sadly many retailers can become defined solely on the product/brands they carry and may overlook or avoid opportunities that could be advantageous to the bottom line. While I am well aware of the ‘quotas” many retailers have to contend with when it comes to product selection, due to supplier’s programs and demands, always be negotiating in your business’s best interest. You still want to use your data to back up your negotiations. If nothing else, do not become complacent in your vendor and product selections. The wrong vendor or product mix can wreak havoc on your product supply, turn over, and bottom line. When you have picked the right product and mix for your business, not only is it suitable for the company, but it makes the whole experience for you and your customers much smoother. Many retailers, even the successful ones, may become complacent in this area. There are many ways to work on your store’s profitability, operational efficiencies, staff training, and many other aspects, but inferior product and vendor selection can make for an uphill battle for your business. Things change over time; make sure you are too.

Remove Emotion From Your Product Buying

Finally, when discussing product selection, be careful not to make knee jerk decisions based on your feelings. I can think of several product examples where we were making excellent margins and experiencing very fast sell-through. These brands were also being sold through various online channels at or below our wholesale pricing. The obvious, at the time, the decision was to kick these bad actors to the curb. Over the next season, we struggled with the replacement items, not having the brand name, quality, and sometimes availability of the previous bestsellers. Somewhat begrudgingly, we went back to the products experimentally, and fearful we would be called out as overpriced to see what happened. In the dark recesses of the internet forum and Facebook pages, the word was we would be suffering the wrath of showrooming customers within minutes of these products hitting our floor, and worse yet, supporting those who do not help us. While this may be the case with certain products, I can think of two very poignant examples of selling these products at full margin, with no blowback and even better, selling far more of the products than the replacements. The moral of the story with vendor and product selection is to validate your feelings on the sales floor. Would you rather be right, or profitable? Developing strong vendor relationships can be an incredible help to your success, but verify things occasionally. Of course, it may be necessary to move some product to stay in a vendor’s good graces, but only if they are delivering tremendous value to you across a wide swath of your business.

Words by David DeKeyser

David DeKeyser and his wife Rebecca Cleveland owned and operated The Bike Hub in De Pere, Wisconsin, for nearly 18 years. In 2018, they sold the business and real estate to another retailer based in a nearby community. David now writes the Positive Spin series on Bicycle Retailer and Industry News and he writes articles for the NBDA’s blog, Outspokin’. David also provides business consulting through the NBDA’s P2 Consult Program.

The NBDA has been here since 1946, representing and empowering specialty bicycle dealers in the United States through education, communications, research, advocacy, member discount programs, and promotional opportunities. As shops are facing never-before-seen circumstances, these resources offer a lifeline. Together, we will weather this. We at the NBDA will not waver in our commitment to serving our members even during this challenging time—but we need your support.

Now is the time to become a member as we join together to make one another stronger. Whether you’re a retailer or an industry partner, your membership in the NBDA is one of the best investments you’ll make this year. 

Learn more about the benefits of being a member and join now.

The post Vendor and Product Selection: How To Run A Profitable Bike Shop appeared first on National Bicycle Dealers Association.

Inventory optimization

The trick with inventory optimization is that each category is treated uniquely. Some items may allow you an incredible number of turns. Parts and accessories lend themselves to this in particular. Most shops are placing one or two parts orders weekly, and this is where diligence pays off. Why carry a few month’s inventories of items you can turn weekly or bi-weekly? The answer is simple. The more turns allow you to hit freight allowance numbers more readily and keep more dollars in categories that naturally may not turn as many times. When we talk about turns, some items you want to have may turn less than goals, while others may turn 10-15 times. From a cash flow standpoint, “just in time” is always the goal. I know some may disagree with making that many turns because you will be receiving inventory constantly. Still, in the early goings of becoming inventoried correctly, it is safer this way, in my opinion. As you develop better controls on your inventory, you can more confidently increase ordered quantities, always staying within your “budget” of inventory dollars, of course.

Consideration should always be given when you begin to become more detailed with your inventory is that some vendors and salespeople may object at first to the use of data to make better decisions. Use data to disarm them instead of emotions. When you negotiate from the position that improving your metrics is the goal – it can enhance the relationship. If your vendor, when showing legitimate reasons based on data that you are trying to grow your business metrics, cannot fulfill your needs, you may need to look elsewhere. Salespeople have a job that, at times, can be at odds with your business’ health. Becoming more data-dependent is a fine line to walk, as you want to have partners that can trust you are doing what is best for the business, and the benefit to that for them should be obvious.

Inventory Buying

Inventory buying is a very personal process for many retailers. Certain brands, product categories, and even colors, etc., can play a big roll in what ends up on a shop’s sales floor. The constant use of the data to drive those decisions will also disarm the buyer from making costly mistakes. One critical thought to have when making decisions using data, combined with some experience in one’s own business, is that data is just another way of listening to what your customers want. It cannot be any more evident than the natural example of a product that sits until discounted while other products turn circles around the slow movers. A serious problem is when that information is not acted upon. The reality is that many shops continue to make the same mistakes year after year, while the data is telling them another story.

Inventory Purchasing

Inventory purchasing need not be a mystical process. Using the formula outlined in part one, applied across your categories to ensure that you have the correct amount carried in each category, then applying a little artful foresight when you feel a specific category needs attention. Perhaps a category needs to be bulked up if you aim for an increase in sales, or maybe a product shortage is looming. Conversely, maybe a category needs to be lightened up because it can be turned much more frequently. Data and knowledge of any personal bias in your buying habits can go a long way to becoming more profitable and loosening up cash flow. I am sure many reading this have stood on the sales floor and wished you could convert some slow-moving items to cash. While discounting is generally frowned upon, when an item is for whatever reason exhibiting signs that it may not sell quickly or at all without extra incentive, make that decision quickly and convert the item(s) to cash. You do not want to be operating a museum!

Running a Profitable Bike Shop

Running a profitable bike shop is not rocket science. However, it is challenging to do if you do not budget your inventory buys at the category level, by extracting the data, and trusting it. Interpreting your data accurately when having to apply hindsight to future buys, and also continually analyzing if the products you are putting on the floor, even if they are selling through are the best option from a profitability standpoint.

Next up, we will dive deeper into vendor selection and its effects on profitability.

Words By David DeKeyser

David DeKeyser and his wife Rebecca Cleveland owned and operated The Bike Hub in De Pere, Wisconsin, for nearly 18 years. In 2018, they sold the business and real estate to another retailer based in a nearby community. David now writes the Positive Spin series on Bicycle Retailer and Industry News and he writes articles for the NBDA’s blog, Outspokin’. David also provides business consulting through the NBDA’s P2 Consult Program.

The NBDA has been here since 1946, representing and empowering specialty bicycle dealers in the United States through education, communications, research, advocacy, member discount programs, and promotional opportunities. As shops are facing never-before-seen circumstances, these resources offer a lifeline. Together, we will weather this. We at the NBDA will not waver in our commitment to serving our members even during this challenging time—but we need your support.

Now is the time to become a member as we join together to make one another stronger. Whether you’re a retailer or an industry partner, your membership in the NBDA is one of the best investments you’ll make this year. 

Learn more about the benefits of being a member and join now.

The post Inventory – Part 2: How To Run A Profitable Bike Shop appeared first on National Bicycle Dealers Association.

The Right Amount

So how do you unravel the seemingly deep dark mysteries of how much inventory is correct? It is effortless. You want to have an amount that allows you to turn that inventory multiple times. Based on my own experience and that of retailers I admire and having seen the financials of shops performing both well and abysmally, there are some dead giveaways. Our industry loves the idea of two turns, yet many shops do not even get to that point. I believe that somewhere around 3-3.5 should be most stores’ target goal. Some stores are a bit higher and some a touch lower. But at the end of the day, that’s a realistic number to make your aim.

The Math

So how do you arrive at that number? Here is where being very careful is essential. I have spoken to some retailers who have been at it for a while, pay their bills on time, and seem to know their stuff end up stumbling here. First, we need to arrive at your gross sales. Most retailers do not enter a cost amount to labor items, which I believe is the correct way. Your costs for labor are an expense and are already accounted for as such. That means labor should be removed from your gross sales. I like to use 1 million dollars as a round number for gross sales in examples like this, and it is pretty much agreed that this is what the “average” store does annually. Let us also assume that labor dollars account for 10% of gross sales. This amount needs to be removed from the equation. You and I are on the same page, which means that we now are at $900,000 in gross sales that need inventory to produce that amount. The last assumption is that the sales of that inventoried product return a 38% margin, which is sadly often high. If you know your gross margin (you should!) use that, otherwise use 38% with your numbers as it is a unique generalized number when labor is removed. If you are higher, it will net you an amount that would give you more turns – which is a good thing. I like an app called iMargin, which is free. Those numbers will look like this:

Now all you have to do is divide “cost” by three, which equals $186,000 at three turns, $159,428 at 3.5, and so on. Retailers are achieving 4-5 turns and some less than one.

Plugin your numbers and see where you are. Chances are you are probably carrying a little too much inventory. If you are taking a lot more than advised, you are perhaps struggling with cash flow issues. This topic is one of the first key performance indicators I dig into with a consulting client.

In part two of the inventory section of this series, we will dig deeper into the fine-tuning of that 3-3.5 turns dollar amount and discuss how to get much more granular with that one significant number. If this all seems pretty basic, that is a good thing! If this is a little confusing (or a lot), pay attention closely, as this is critical to your success, which is another word for profitability!

Please reach out to me if you would like to discuss this further at david@nbda.com or check out the P2 Consult NBDA program!

Words by David DeKeyser

David DeKeyser and his wife Rebecca Cleveland owned and operated The Bike Hub in De Pere, Wisconsin, for nearly 18 years. In 2018, they sold the business and real estate to another retailer based in a nearby community. David now writes the Positive Spin series on Bicycle Retailer and Industry News and he writes articles for the NBDA’s blog, Outspokin’. David also provides business consulting through the NBDA’s P2 Consult Program.

The NBDA has been here since 1946, representing and empowering specialty bicycle dealers in the United States through education, communications, research, advocacy, member discount programs, and promotional opportunities. As shops are facing never-before-seen circumstances, these resources offer a lifeline. Together, we will weather this. We at the NBDA will not waver in our commitment to serving our members even during this challenging time—but we need your support.

Now is the time to become a member as we join together to make one another stronger. Whether you’re a retailer or an industry partner, your membership in the NBDA is one of the best investments you’ll make this year. 

Learn more about the benefits of being a member and join now.

The post Inventory – Part 1: How To Run A Profitable Bike Shop appeared first on National Bicycle Dealers Association.