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August 9, 2010
Northside Wheelers – one of my favorite small LBS’s in Melbourne that I’d hate to lose to the online giants.
The Local Bike Shop (LBS) has been fighting a losing battle with the online giants over the past few years. This isn’t the fault of the LBS. I’ve seen what it costs them to buy a set of tyres or a chain. It’s the same as what PBK or Wiggle sells it to us for. In fact, I’ve even heard first hand accounts of the LBS ordering parts off the internet because they can get it quicker and cheaper than they can from the Australian importer.
I have very little inside knowledge of the bicycle industry, but I do know that the online retailers acquire their product in ways which allow them to drastically reduce their costs. For example, they purchase excess quantities of OEM components from large bike manufacturers. They also have low overheads, no GST charges, and access to a worldwide market which helps drastically reduce their prices. It’s obvious that their business model gives them a huge advantage over the Australian distributors. Large chains with buying power like BikeForce are beginning to make some ground however. If you’ve noticed, they have the same price on many products as you’ll see sold online at PBK or Wiggle.
The LBS owners blame the distributors. The distributors blame the manufacturers and are trying to cut off supply to the online retailers. As a consumer, I don’t care where it comes from as long as I get my gear. By the same token though, I don’t want to live in a place where bikeshops only sell kids bikes. There’s nothing I love more than killing an hour having a look around a well stocked LBS drooling at all the nice cycling products I aspire to own.
Bicycles Network Australia (BNA) has done an excellent study on how online retailers are affecting our spending at the LBS. Although this study comes from a small sample group (261 respondents) their findings confirm what we already assume: Australian cyclists spend a lot of money online and it’s only expected to increase.
Download their study in the Ultimate Guide To Online Shopping here.
It seems that we would tolerate paying up to 20% more on the same product in the LBS. Since we automatically have 10% GST in Australia, this doesn’t leave much room for margin.
We can see that most of the products purchased online are parts, accessories and clothing. Personally, I wouldn’t change my spending habits on these items even if the price were equal in the LBS. They’ll never be able provide the large selection that can be offered online. Even if the one online store cannot offer what I want, I can simply order from another site without leaving the comfort of my chair. It arrives 5 days later with minimal shipping costs and couldn’t be more convenient.
I’m hoping that we’re going to start to see things change. After speaking with a couple Australian distributors they tell me they’re fighting a loosing battle with the online retailers and have begun reducing their margins to remain competitive. Hopefully we start to see these price reductions passed on to the consumer.
There’s no doubt that there’s a place in the market for both the LBS and online retailers. For me, the convenience of shopping online is a huge attraction if I know what I want and don’t need it immediately. In this age we are all very well informed and often know exactly what we want before buying it. However, you cannot replace the LBS for larger purchase items where warranty is a must (bikes, wheels, powemeters, etc).
What are your thoughts? What do you buy from the LBS? What are your gripes towards the LBS? What are your complaints towards the online retailers? What would make you switch over to shopping at the LBS?
I want the LBS to be as successful as possible. I have a vested interest in this and so should you. The Australian distributors and bike shops are the ones who give back to our local cycling scene, contribute to our phenomenal cycling culture and of course support CyclingTips. There would be none of this without them.
(in case you’re wondering, no…this isn’t some covert attempt to extract valuable marketing info. I’m simply curious on your opinion with this issue!)