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

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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. 

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

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JT Thompson

Tue, 8/18 10:46AM • 47:12

SUMMARY KEYWORDS

bikes, retailers, giant, bicycles, brand, retail, people, products, cycling, buy, USA, service, dealers, continue, companies, business, big, days, suppliers, lead

SPEAKERS

JT, Rod Judd, Chad Pickard, Kent Cranford

Rod Judd  00:10

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

Chad Pickard  00:16

I’ve been looking forward to this podcast for a few weeks. I’m a little bit of a fan of Giant and live bicycles. I have a couple hanging in my garage. In fact, everyone in my family has at least one bike that came from giant bicycles. In some cases, it’s actually two or three. Today we’re going to be talking about giant bicycles. And my guest is JT of giant bicycles. Welcome to the podcast. JT. How are you? 

JT  00:38

I’m great. Chad, thanks for having me.

Chad Pickard  00:40

Good. It’s I am really excited about this podcast. It’s not often that we get to talk to someone like yourself, you’re the GM of Giant Bicycles. That’s an important position and also an important leadership position in our industry. So I’m going to thank you for all that you’ve done so far, and hopefully for a lot of things that are coming up.

JT  00:58

Thanks, Chad. You give me more credit than I deserve.

Chad Pickard  01:01

Well, I’m sure you have some great people working with you which giant USA A lot of people don’t really know. But tell me about your staff you have about 100 people and

JT  01:11

we have 93 people. So we kind of internal joke is where the 93 Spartans, and we’re competing with 10 times that personnel from the brand in Wisconsin and the brand in Northern California. So all of us wear a lot of hats and we’re not afraid to do things that are outside our job descriptions.

Chad Pickard  01:31

Okay, Giant USA out in California, you’re not just a warehouse. What are some of the things that you guys do for giant global I guess is what we’d say.

JT  01:41

So we’re one of 14 giant global sales companies. So there’s giant Germany giant France, giant UK giant USA, giant Canada, and so on. So it’s the local sales companies objective is to connect to the culture Using the products that are created with our engineering and manufacturing in Taichung, city, and dacha Taiwan, and to connect to our market with products experiences, but more importantly, connecting to our retail network, we have a global strategy that is based in retail first. So it’s called retail support. And it’s not just something that we do in Giant USA, it’s the same game plan in giant Taiwan or giant Singapore giant Italy. So it’s something that is a global strategy, that retail first, that’s our connection to the consumer.

Chad Pickard  02:44

And you guys do any product development out in California

JT  02:48

or have a part in that we have a major part in that. So there’s, there’s about a half a dozen of us that are involved in that with all the different cycling gear experiences as well as bike Express lenses and there’s three of us that go back to Taiwan. Usually once every six weeks, obviously, we haven’t been doing that recently, we try to shape design and create products that are right for our culture. So we have a big play. So where we have a global leader, so say gravel bikes, or performance mountain bikes, giant USA is by far the global leader, or also live bikes as well. So, we are the leading product development team for a big number of segments that we provide in this market. Now there are some other global sales companies that lead in other categories. So as per se giant Australia would lead tri bikes because that’s really their forte. So what we use is these global sales companies to lead product development, where that segment and experience is is critical in that marketplace.

Chad Pickard  04:02

Sure, sure. Okay. And for those of you that don’t know the brands under the giant umbrella are live bicycles momentum and as well as Kate x live being their ground-up from kids bikes to adult bikes designed for women by women, which is phenomenal. There have been some changes at giant over the last couple months, a little bit of branding, a few name changes. Is that something that we as retailers will see, will we see different opportunities for us or different programs developing because of that?

JT  04:32

Absolutely. In the past, there was a brand elasticity that was so large for giant and live that we had products that were sidewalk bikes that would start near $100. And we would go up to super professional-caliber bikes that were $12,000 and that there’s just too much brandy less density. You can’t be Volkswagen, Audi and Porsche under one brand you need to create segments for the brand In a clear point of view, recently we launched Giant group is the overall umbrella. And under the umbrella sits the giant brand, the live band, and the momentum brand of bicycles and Codex is a component brand. What this will enable us to do and we’re in that process now and it’s something that will be a journey over the next number of years is you will see recreation, sidewalk bikes that were in the giant family, when they are re-engineered a new platform those particular experiences will move to momentum. So the reason I say that is so giant and life will become exclusive to the sport and performance segment. So creating a very clear point of view. momentum, then becomes our urban recreation, transportation sidewalk. And it doesn’t mean it’s a cheap brand, you’ll see some interesting designs, you’ll see certainly innovative e-bikes within the momentum line. So that enables us to create three separate product lines that have a very clear point of view. And I think will help us do a better job with our messaging and our marketing, which is not one of our best performance areas. It sounds

Chad Pickard  06:27

like a lot of change. But it also sounds like you’ll be able to focus a lot more on those categories and deliver a better product. So does that give Giant USA a little bit more of an advantage or well, things look kind of the same from a retailer to vendor point of view.

JT  06:43

I think it’ll give us an advantage because we’ll have a brand that has clarity. My example before of the whole Volkswagen Audi Porsche, I think you’ll see giant will become the performance and sports brand and that’ll be the real vision. powerplay live will be in the same area. And then momentum, as I explained is more fun transportation. So that clear point of view I think will help us define the brand. And also help the dealer be able to communicate what the brands are about. So there’s less duplication today we have an escape. And we also have in a momentum line, an ice Street and some people would say, Hey, there, there is a similar experience. So what we want to do is create experiences that are more powerful in one family and eliminate them from another to stop duplication, we want to be very focused on our product line. So by having a focus, we can actually be a better supplier because we’re one of the only ones I know of that actually makes the food that we serve the writer and the retailer from raw materials with our aluminum Foundry and our own Carbon Fiber through to the retailer’s door, we control the process and we make where our competitors go to another manufacturing facility and by so that makes us very unique. So we’re that restaurant that makes the food rather than the restaurant that serves fast food per se.

Chad Pickard  08:19

Sure. We’re going to come back to that a little bit later. A few years ago, you guys kind of broke the industry mold and brought us the live brand full line of women’s bikes. This year. You signed Rebecca’s Rusch as a LIV ambassador. So some awesome things happening on that front. What opportunity has this provided for women and why does life continue to push for more women’s bikes and other brands kind of seem to be cutting back a little bit?

JT  08:41

The first one I’d like to make is Bonnie two is our chairperson. She’s an avid cyclist. She’s got a great style. She has really been a major part of driving us to make products that are absolutely pure for women over Yours, Chad, you’ve been doing this for a long time like I have, there’s been a lot of shrink and pink bikes out there. Sure. And that’s not live is about making products that are specific for women, our data is very heavy. And the data that we have is women’s lower leg mass fires much differently than a man. There’s much more power from a women’s side than from the way a man writes different anatomy, obviously, and we are LIV is women engineering. As you pointed out, women design women’s colors and graphics for women. It’s not about making bikes that are just a different color. The bikes are pure to create a better performance experience. And often the live bikes will end up being considerably lighter than the men’s bikes because they’re sized a bit differently. They’re smaller triangles. They have a different layup, stroke. For the carbon bikes, they have a different budding procedure for the aluminum bikes. And I think some of the reasons why many of the competition has backed away from making these bikes that are specific to women’s performances. It’s an ROI issue, making carbon mold. It’s $100,000. When you do it the way we do it, that’s one size. All right, and every size for a giant carbon mold is a different layup, outer diameter, inner diameter. They’re all unique for a specific size rider. So when you see other companies trying to do that, there is a lack of ROI to recover that tooling cost. Fortunately for us, we have that integration of carbon makeup as well as an aluminum foundry. So we can be more specific in quality as well as also saving some costs because we do the work ourselves rather than buying from a third party. I do not see any lifting of the gas pedal when it comes to lifting. If anything, I think you will see more and more. As we talked about how this giant group impact works in the future, that you’ll continue to see more and more performance bikes. So Rebecca rush that girl’s my hero.  I don’t know how else to say other than she’s the real deal. She kicks ass and she’s awesome. And having her with us and helping us design some of our products in the LIV family is going to be huge. I think you’ll see more and more of her involvement with our company, especially here in the USA, but it’s also a global play as well.

Chad Pickard  11:44

When personal requests can we see some of the live colors and marketing come over to the giant side. I mean, the live stuff just jumps off the page in a catalog on the showroom floor. It just screams it wants to be written. I love the color of the designer. it and I know I know some other giant retailers that talk about that as well. But the LIV stuff is amazing looking they do an incredible job with it every year.

JT  12:08

So I created the live bikes are certainly leaders in their outlook. I think that’s pretty important to see that LIV has that unique team. And live is radically different from what you see on the outlook of Giant and the momentum lines. I think you’ll see the giant team raise the bar I think they have over the last couple of years. I think our outlook has really improved and we’re implementing some new paint processes and some proprietary graphic presentations. I think that will help our amazing engineering pop off the page. So people just want to buy it because graphically it’s over the top and inviting. Awesome. I

Chad Pickard  12:55

look forward to seeing that in person and print on the web wherever possible. We’re gonna shift gears A little bit a couple of podcasts ago, we talked about the bike boom and 1973 there were 15 million bikes sold in the US. And the next year that number dropped almost in half numbers went from 8 million to 15 million and then back to 8 million. What do we need to do to continue this bike boom that we’re currently in? What do retailers and vendors need to do to ensure that these new cyclists coming into bike stores are gonna you know, when the weather gets nice again next year or and in some parts of the country stays nice. What do we do to keep them on their bikes?

JT  13:31

But I think we have a little different issue. So I was riding a bike back in those days when there was the gas crunch in the mid-70s. Gas came back at reasonable prices. our human nature is to forget things pretty quickly. Where I think that changes now is I think, now we’re into a quality of life issue, a health issue. I think the fact that you know, we’re having this boom right now, which is what I remember, it’s much bigger right now than it was just the acceleration of where we’ve come. Because I think those of us who have been in the business I’ve seen the last 10 years where the independent specialty stores have been kind of stuck with about 2 million bike sales per year. I think it’s going to be a lot, potentially bigger this year, but the supply channel just can’t accelerate from 20 miles an hour to 100 miles an hour. So that’ll be our challenge. But I think it’s human nature, to want to have some fun. And I think right now, there’s a lot of people having fun on their bikes, they’re able to have separation, they’re able to get exercise. And I think we all know that cycling, the cost of cycling is an amazing value. When I go to the giant factories and I see what we do, and then I see what we price our products for. It’s just mind-blowing that we can make it work with all that goes on pulling together all the parts that makeup one complete bike. So where I think this wins is, America is a very car culture. I think we’re changing that a little bit right now, especially in urban environments, I think mass transit will be less likely to be used. Because there are some health concerns. I think the gym following someone sweat on a machine and then jumping right back on it, I think might be a challenge, where you can just ride your bike and it’s your own sweat, or your family sweat, the fact that people are riding now, I don’t know if we’re going to hold all of the acceleration that we have right now. But I think it would be a really great opportunity if we can hold 20 to 25% of that of those cyclists that are new now that they stay in it. They become our dream, which we all know that’s the cyclists for life, where they buy their second bike, their third bike, they get involved Cycling becomes part of their life, they become that cycling person, which I think many of us in this industry, and I think outsiders think we’re a little touched. But I think there’s going to be more of that. We’re going big. We believe, here at Giant USA that the next 18 months in America are going to be a great opportunity to get more people on bikes and its real challenges supply with the right products at the right time, I think is going to be a big deal. It puts a lot of pressure on us as a manufacturing company to get the proper throughput, get our sub-suppliers who at times control our lead times to perform at the level that we do. So we’re bullish, we’re excited. We think America is going to be more like Europe and a certain degree in which I’ve lived in Europe for a number of years racing my bike, and it was always amazing. The culture, the intelligence, and the health, that really seemed to be a direct connection to the cycling life. And I think it’d be a great thing if America got closer to that.

Chad Pickard  17:12

Yeah, I agree that physical and mental health would be completely different. I mean, I see it in, in my own employees when days that they ride consecutively into work versus, you know, weeks, usually the winter where they drive a little bit more, you just see that personality, it’s completely different. So let’s just hypothetically let’s, let’s just say that I own a bike store, maybe in Sioux Falls, South Dakota, and I’ve got to do some planning for next year. Do I look at

JT  17:37

this year’s number and do the same do I? How can I work with my vendor to make sure that I’m going to get bikes next year? That store that you just described is a unique circumstance and if you have multiple stores, you know, even the store that’s store two is always very different than store one or store three, they’re always unique. So I think it’s up to you to connect to the marketplace. Giant USA is like a big retail store, right? We’re retail support, as I explained earlier, and our decision to buy big, that’s how we’re going to run our business because we think there’s an opportunity out there in the marketplace as America changes and goes more cycling centric. So we’re going to do our best to fill our three company’s own distribution centers that are 150,000 square feet plus, in California, in Illinois, as well as New Jersey. And the reason we do that is so we can feed our customers within two days to 90% of the country. We want our retailers to turn their inventory because inventory term means profit. But Chad, I think we’re in the new world order. I think we’re going to need to be aggressive without risk there is little reward. And right now, I think all these signals, and maybe you say it’s a stock market play or a futures play We as Giant big retail company, we’re going to go fast. Now we’re going to try to supply those sub $1,000 bikes in an aggressive manner. continue to innovate with sport and performance bikes, really push hard on E-bikes that people can afford, really round out our brands. And the most important thing we can do is to help our retailers thrive and make money, again goes back to retail support, and that is, if our retailers are healthy, we are healthy. If our retailers are not healthy, we suffer along with them.

Chad Pickard  19:38

So you guys do some planning some inventory planning, obviously, I mean, I hope where do you see the value from the retailer’s from their planning? Is it I’m assuming you don’t need down to specific skews, like in six, seven months? I’m going to need eight of this specific skew. Is that forecasting more per category is it Do you like To see size runs, like what would your average size runs are? Or is it color? Where do you guys benefit the most from getting information from retailers for long term projections? 

JT  20:11

Okay, this is going to sound hard. But we have made aggressive buys forecasts as the improper term. We have placed firm orders with the factory for size for color for the model. That’s what we’re doing because it’s the only way that we can ensure supply from our sub-suppliers and obviously, the biggest one is Shimano, and number two is SRAM, and there are other opportunities out there as well. So as a manufacturer, being first in line with the sub-suppliers, unfortunately, we are because we’re the biggest global manufacturer and we also do a web business as you’re well aware of. We got to be firm for us. So I would ask really Taylor’s to be as firm as they possibly can buy the bikes they know they’re going to sell. And we’re forecasting an increased opportunity of more than 40%. So when I said we’re going big, we’re going big, but I want to put that in relevance to Giant USA. Were an underperforming brand in America. I don’t think there’s a reason why we should be in the position we’re in. Now I’m not saying that’s bad. I’m just saying around the globe. In most marketplaces giant is the by far our leader by far sports performance brand leader in Australia, in the UK, in France in the Benelux countries in those real cycling centric markets. And what makes me stay awake at night is even our brothers and sisters to the north of the US and Canada. Giant is the number one brand competing with the Same brands we have here in America. So let’s just say holding myself accountable and holding the rest of the 93 Spartans here accountable is we have a great opportunity for growth and the growth will be done the right way. We’re not going to roll the tank over the bodies. And I think we can do some great things with our retailers as partners to win together. But we need those firm orders. Okay, which I’m a huge fan of, I think that you know, with any brand you as a retailer, you sell what’s on your floor, and you order what you’re going to sell. And sometimes I think our customers are not, they’re also not coming in for that specific skew. They’re coming in because they want to bike with their kids. They may prefer red, they may prefer black, but ultimately their real desire is to have fun on a bike and not have fun on that specific UPC number. So yeah, no, I don’t think that was a hard answer at all. What can I Retailers do with Giant to help continue to move this ball forward? I mean, what? Where can we work together? Is it working together by creating programs? You know, Giant has their web link, and they have their Ambassador programs, which have been sounding like they’ve been great for retailers. Are there other programs coming out? I mean, is there or is it just a matter of retailers asking for help in certain areas, we’re always going to adapt. So we have this term here at giant globally called PDCA. Plan, do check act. So we’re constantly evaluating our planning. And we assess those projects or actions, sometimes on a weekly basis, monthly, quarterly, yearly, and then we repeat, to improve. So that’s the plan, do check, act repeat. So we’re constantly evaluating our products or services and some of the key services that we provide Right now, our weblink our click and collect, actually a pretty small business for us chat. Now it’s gotten a lot bigger since March with the issues we’ve all faced. And what I understand from the research I’ve done and with some experts is prior to COVID-19 total eCommerce sales in the US were about 8%.

Chad Pickard  24:26

Is that just bikes or is that bikes and bike gear?

JT  24:28

No, we’re talking all e-commerce. Okay. All goods. So Macy’s, Target, what have you. Okay, so I’m sure that number is a lot different now. Three months later? Sure. So you haven’t seen the numbers come up yet. And some of the very best companies are in their total revenue zone is 20% is done through e-commerce. So we’re in the single digits at giant Group here in America. And I’m sure that it’s going to continue to rise, as more and more young people are involved with capitalization that they have the money. But one thing is going to be crystal clear about whatever we do with our click and collect what we call weblink. In America, we’re going to share the profit with our retailers. So we call that O plus O and O plus O. o is online. So that’s our web link. And then offline is our retail network. So whenever we do online, we always think retail first, how can we support our retail network? You know, the retail network? I think you know this very well. You guys are. Those guys are on the front lines. They’re dealing with the customers have each one has unique needs, different ways of communicating. We want to empower our retailers to remain individualistic To cover every unique human circumstance, holy crap that’s challenging. So we understand how hard the retail job is. Anybody that’s an executive in this company has come from the retail world. And we’re going to do everything we possibly can holding up our part of the partnership. And I hate to use that word partnership, because it’s, it’s used by many who don’t know what it means it’s a marriage. And yeah, we’re not perfect, and we’re going to make some mistakes. And you’re going to make some mistakes at the retail side, too. But the thing is, I think if we know we have each other’s back, and we’re always pushing to help each other. There’s always good intent behind every action that we’re going to be powerful together.

Kent Cranford  26:49

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.

Chad Pickard  27:08

So, because of my position on the NBA board, I get to know a lot of retailers and retailers as small as I donate in Sioux Center, Iowa is backyard community is 7000 people from woody at Richardson bike Mart, who has 7 million people in the Dallas metro area, you know, to obviously different retailers in different parts of the world. How do you connect with them? And how do you relate to them when you don’t have Interbike? Or a trade show or the giant link event? How do you connect with them to see you know what their struggles are on a daily basis, other than a zoom meeting with everyone which it probably isn’t possible?

JT  27:46

That’s correct. And I’m not a fan of zoom now because I’m on zoom for like five hours a day in a hurry. I believe humans love human contact. Unfortunately, the last three months we’ve had to stay six feet apart from each other We’re going to do our best in this hopefully temporary time to do virtual launches. We’re going to empower our we have 25 account executives on the road. We’ve got three regional sales managers. We’ve got eight inside reps, we’ve got five after-sale warranty people, you know, really trying to connect with each individual retailer in this challenge. Do we know how well it’s going to go? No. Do we have every intention to provide as much information and intimacy as possible? Yes. And we’ll see how it goes. I hope the days return where we can have link launches. Again, be more intimate, but we’re going to try our best with electric launch capability, zoom meetings, podcasts, video presentations. We’re learning ourselves right now. We’re in these new waters and we’re trying to swim as well as we can

Chad Pickard  28:59

get It’s gotta be challenging. I mean, as, as a retailer myself, you know, it’s hard to have those in-depth conversations when you do not face to face. And it’s just a digital connection or maybe just a phone call. But I certainly look forward to things changing, I think, I think everybody has sat there at the retail level, retailers are being told to add more and more value for their customers when a product is bought. And that’s, that’s how we’re going to beat online sales. And I don’t, as you mentioned before, that’s only 8%. But so as retailers add more and more value that comes at the expense of time and resources, which can slowly erode some of the dollars and cents that make a bike store sustainable. How can a retailer add more value without eroding that? How can giant as a vendor or other vendors add value to their product so that the retailer doesn’t carry that full load?

JT  29:54

Yeah, that’s a real challenge. We’re in a business where a profit struggles Sure, and the margins are lean for everybody in the full channel. So it’s like we’re trying to get blood from a stone, our fixed cost, variable cost percentage versus what our profit side brings in, is so tight, it’s alarming. And it’s just like a retail store. A couple of points here, there can make you very, very sad or make you very happy. But that’s so we’re kind of in a very interesting business where it’s so damn lean. So I think on the sales company side, the distribution side, what we do here in America, we got to figure out ways to help. So do we offset home deliveries? Do we provide cash payouts on a web link, which we do now? We provide a 100% margin to stocking dealers do we create different incentives that recover more margin for those areas that we might have a little more margin, and we can share it back with the dealer. But some cases, just like the dealer, when we’re selling $150 bike, when it’s all said and done, we’re doing it out of service. We’re not doing it for profit. It’s really challenging. So how do we offset freight, which is one of our biggest challenges from the giant side as well as the giant retailer side? Right? How do we do that? Because we’re in a freight war. What I mean by the freight war is the freight wars with Amazon with all the e-commerce companies going into the transportation companies that we use and basically bumping us to the back. We’re a relatively small business and I’m talking the whole industry, we don’t command much power. So the transportation companies kind of have their way with us and put us to the back of the line. The rates are not the best for us. So we have to figure out a way To navigate that challenge and to help our retailers as well. And I would say one thing that’s pretty, please don’t think I’m crazy for being so Frank, is we can be pretty stupid in this industry. The fact that we don’t charge the consumer for freight in my mind is insane. I mean, at the retail level, right? When you buy a car, you buy a motorcycle, you buy a boat, you buy any premium consumer good, which a bicycle is. There’s always a destination charger, whatever you want to call it. So, yes, in the 70s, that great brand out of Chicago came up with all their innovative stuff. And I think this industry is falling along with that because we don’t know a better way but I would say if retailers start charging consumers a delivery charge for freight, I think it offsets that it makes a big deal over the course of an annualized business, and I’m just using that as an example. There are other areas that I think we just give away. And we’re giving away when we don’t have to. But on the giant side, right on our web link, we have to set the tone we have to set the standard. So we have to charge the consumer All right, a delivery fee as well. So it’s not all on the retailer chat it’s part our deal as well. So and I think we need to lead that revolution of more profit.

Chad Pickard  33:32

I can get on board with that Yeah, Yeah, I agree with a lot of that, you know, you buy a new car, you might get an oil change, but you buy a new bike and you get one-year free service free, you know, probably a static fit of some sort. discounts and accessories. Yeah, yeah, it’s dollars being given away and just walking out of the door. So yeah, though, that’s for it’s a frank answer, but yes, it’s I agree I would love to see a day where you know whether the weed becomes more sustainable through greater margins or giving away less. I think that’s important for our industry.

JT  34:10

Even more on that, and you got me all charged up on my soapbox right now, sorry about that. Go for it industry. We’re in the service support we provide. So those free tuneups lifetime warranty on frames or wheels or whatever you have you. They are in no other business. I’m not saying it’s wrong, but we have those services, we have those programs. And I don’t think they have much value because we don’t put value to them. So I traveled the country often, except these last three months, and been doing it for 30 years or more. And it kills me when I see service rates of x dollar and you can go to one market. You can see all The dealers in the metro area or small city, you can see all the service rates, the change, I’m sorry, are the same. There’s a vast difference in what some dealers do versus what another does in the quality of service and the way they build their bikes in the way they service bikes in the people that they hire, the expertise, the technicians, and we’re not talking about low tech goods anymore in the bike business. I mean, we have some of the highest tech goods that rival Formula One cars or motorcycles. We don’t treat the business as such. So So going back to my original point is we give service away and we don’t charge enough for it. I have owned an old European sports car for many years, which I rebuilt and fortunately, I can do that on my own. I tried to go to that German car dealer to get my car serviced. I wouldn’t be able to feed my family. So I think we’re just leaving too much undone, especially for those that do it to a very high level. If you do it to a high level, you can charge more and have the confidence to charge more and justify it. I think a lot of this comes from dealers being challenged in the quality of people that they can hire. There’s a lot of young people involved in retail, they’re kind of transience in their job. So I have a lot of empathy for retailers with humans that are working on the floor. It’s so hard to find good people to keep good people pay them enough when the business ROI is so challenging, as we earlier spoke about.

Chad Pickard  36:43

I think you said it I mean, there is an opportunity there to charge the right price, whether it’s service or not. There was my accountant told me he said his competition in his town, which is a small town in Iowa. His competition doubled all of their rates, and their first thought was they’re going to do half as much business and then their second thought was, they’re going to make the same amount of money with half as much work. I’ll never forget that story. And I hope that people look at service that way that you know, right now we’re most bike shops are just booked a month out. If they transition some of their pricing to a little bit higher to what it actually should be, you know, then they may lose a little bit of service, but they’re also going to be able to pay more competitive wages, probably staff that’s less stressed, probably the staff that is truly skilled will probably stick around longer and enjoy their jobs more. But yeah, I agree with you. That’s thank you for that. Appreciate that.

JT  37:35

And Chad, what you just said I think delivers on the end goal of quality, rather than volume and being the best and being quality is should always be your first drive. Right. Going back to your question about plenty of work with a small local 7000 population town dealer or that Richardson bike Mart, you know, in a major metropolis of more than 5 million people my answer Human on human, it’s identifying the unique needs and doing your best. No one plan works for everybody. And we try to put everybody into a general plan. But then I think it’s very important that we have the courage and we have the flexibility and the partnership to flex where it makes sense to build both of that business relationship to return the most reward

Chad Pickard  38:28

I want to go back to so giants you mentioned, you know, you cook your own food and deliver it and serve it in your own restaurants, in a way distributed through your warehouses. So with giant owning that kind of that whole process what’s, you know, from the time that you say we need this product, to the time that can be on a sales floor? Do you have any sort of edge with owning that whole process? Can you get a product to market any quicker? And what is that timeframe? Like? Is it three weeks is it 60 days, 90 days,

JT  38:58

so our lowest lead times Our I’m going to put transportation to our market in there too because we’re talking about 30 days under. Right great for order placement to where we have it in our distribution to get in the hands of our retail family is 90 days is the shortest lead time. That’s not today, because today we’re in it upside down demand cycle and supply cycle as well because still a lot of sub-suppliers are not at full capacity. And then some of the longer lead time bikes, you know, some of the Exotica stuff might be as much as 150 days. So sometimes we’ll make a plan for that Exotica type product, and let’s just say it’s 300 bikes we go to we present the bike and our dealers just get overwhelmed and excited, and they buy 600 bucks, the second half that 300 is not going to be delivered until 150 50 days later, at best, maybe we can put it on an air container and get it in 120 days. So, at certain times of the year, sometimes you miss the whole opportunity because you know that a sub-supplier has a new widget coming that will obsolete, that particular rear derailleur or fork. So it can be a challenging business. I’m less worried about the sub $1,000 bikes because I think we have more flexibility there. Okay.

Chad Pickard  40:33

So as a retailer we have challenges with as a vendor, I imagine is that transportation that shipping time is that one of your biggest challenges is working around that. Is it the value of the dollar? I mean, what are the struggles at your level?

JT  40:49

So the transportation thing is a challenge in the sheer cost. That’s that challenge. The biggest challenge we face is efficient production time, meaning getting all the hundreds hundred little parts to make that complete bicycle, getting it all scheduled to go down the production line. And then getting all the boxing all the employees and people power is a huge challenge because we have this thing called Chinese New Year in Asia. And it’s not just China. All right, it’s whether it’s Taiwan, Cambodia, Vietnam, the Philippines, Singapore, Malaysia, people go away. And there seems to be more of a transit workforce there. And it’s very common for 20% of that workforce not to show back up. So, yeah, imagine your retail store where you know, you had a vacation time when things were lean, and then all of a sudden, you know, those who you least expect don’t show up again. It’s usually RAGBRI week. And they’re laying in a cornfield.

Chad Pickard  42:03

If they’re lucky, yeah,

JT  42:05

 I’d say manpower is probably the biggest challenge. And what we’re trying to do to circumvent that is there is more and more automation coming into play in manufacturing. So in aluminum frames, robotic welding, and on some of the carbon stuff, there are some robotic actions taking place in the cutting of carbon prepreg. And then the pool of carbon prepreg, as it’s laid into the mold as well. So, I mean, there’s a lot of technology and there’s a lot of opportunities to improve. So what it does is the cost is high for automation, but the production throughput all right is more consistent, provided the robot doesn’t break down. Sure, or the operator that is using the robot shows up for work

Chad Pickard  42:58

right different challenges. Have to make sure that our pizza gets delivered on time for our employees and the beer fridge is full-on Friday nights. Well, john was cooking, we’ve covered a lot of things. And I want to thank you for being on the show. We’ve, I’m sure we’ll talk again, maybe on a webinar or on another show. But thank you for taking the time out of your busy schedule and spending it with us today. Any final words you want to add?

JT  43:22

Yeah, I just can’t use words to describe the change that has happened to our business in the last 90 days. The expectation of when you know, these headwinds first started to hit us in February. And then as it just spiked, we thought the business was going to be soft, as many businesses thought, but it actually went the opposite way. Fortunately for us, we took care of our sub-suppliers and continue to keep our orders in place and continue to pay them like the business was going to be as planned. And I think that’s put us in a very good position right now, as some others did cancel and put things on delay. We are really, really focused on retail first, we’re not perfect, we’re going to make mistakes. But our, our integrity in that end is very high. We know how hard the retail network is. And the retail network has experienced, probably threefold of what we have from our side because we’re somewhat isolated. We take a knee per se, and really appreciate what our retailers have done for us because, without them, we would not be here, being able to enjoy the cycling life, because I love to ride my bike every day and I’m just like your employees. When I ride my bike. I’m a happy camper and whatever comes my way I seem to be able to brush the dirt off and when I don’t ride the bike things Things seem to get through my pores and bother me. Closing note again would be, we’re focused on supply. Everything is about supply right now, especially for the next 90 days, July is has been pretty tough because what took place with sub-suppliers in February and March when Shimano was essentially shut down in Singapore and a number of other places were shut down because of governmental restrictions that we’re feeling right now, because of the lead times in June. So we’re doing our very best to spread the bikes around because we want to feed everybody and it’ll get better in July. It’ll get even better in August. And I think it’ll get better again in September. It’ll continually improve from our side on the supply. And we’re confident that there’s going to continue to be more consumers that see the value in cycling and visit innovation. pendant specialty retailers that want service want to love and want to be part of the cycling life, not just buy a bike that’s going to hang from a hook in their garage because they spent $150 on it from a mass merchant.

Chad Pickard  46:13

Well awesome. Yes, I know a lot of retailers are looking forward to you know, opening up the floodgates of bikes and and and hopefully continuing into the next year and years beyond that too with new customers and more customers. So yeah, looking forward to that. So thank you JT. Appreciate your time. I hope Giant continues to thrive and the health of your staff and family continues to be healthy, I guess. Thanks, Chad. back at you already. You take care.

JT  46:39

Okay, my best all our retailers. I want to thank them for their support. They’ve really been everything to us.

Chad Pickard  46:46

Cool. Thank you. Hey, take care.

Rod Judd  46:48

 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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Chad Pickard
Owner, Spoke-n-Sport – South Dakota (2 locations)

In 6th grade, Chad took apart and rebuilt his first coaster brake hub.  It was that curiosity that kept him working in bike service shops from the age of 14 till buying Spoke-N-Sport in 2001.  Mountain bikes and Hans Rey ignited his passion for technical trail riding a few years later.  Chad’s work experience is almost 100% bike stores but he is always looking to other industries to improve the customer experience in his two stores.  Chad serves on the bike committee in Sioux Falls and has played an active role in defending the rights of cyclists at the state level including the most recent 3-foot / 6-foot passing law.

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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.

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