It’s always tricky when a conversation that keeps happening, but really doesn’t make any sort of solid ground happens over and over again. It’s tricky because you quickly realize that that subject is one of those that has a fence in the middle that puts most on one side or the other with a small group waiting to see where things go hanging out on the fence. If you pick a side, you piss of the other side and vice versa. When the Let’s Talk BMX Shops and the Direct To Consumer War post dropped a month or so back, it immediately stirred up a lot of debate, and some people felt it was left pretty open ended and could be explored deeper. We actually tried to get a number of brands to comment on their perspective on the topic of why brands have chosen or not chosen to sell products direct from their website. We quickly realized we hit a soft spot that everyone would be into talking about, but not publicly. Why? Well, some didn’t want to give more attention to brands utilizing Amazon, others felt they might burn some sort of bridges with shops or distributors or generate some negative feedback from the general BMX community and others simply were just waiting it out to see how things panned out to see where the future of the business of BMX goes. Quite honestly, the subject has been crossing my mind pretty much every single day, weighing pros and cons, looking into what opportunities that can be created or how it could destroy certain aspects of the traditional business model the BMX industry uses. Instead of trying to get conversations going through interviews, I decided I’ll just put my personal perspective out there and see if we can spark some discussion… So, here we go… Let’s see who I can piss off the most.
Alright, so, let’s just start out from the beginning and see where this goes. As I’ve said more than once, the traditional BMX chain of business follows this line… A brand designs a product and then has it produced, whether it be produced in Taiwan, China, some other country or in-house like Profile Racing, S&M Bikes, Standard or FBM to name a few do. Once that product is created, it is then sold to distributors around the world, the distributor then sells to shops and mail-orders in their territory and the shop then sells to most of you, the consumer. In some cases mail-orders that do large volume orders are working direct with brands, eliminating the distributor in the chain. So we have something like this…
Example for Taiwan production:
Design > Production > Brand > Distributor > Shop / Mail-Order > Consumer
Example for In-House Production
Design / Production / Brand > Distributor > Shop / Mail-Order > Consumer
Pretty simple, right? Alright, now let’s look at it like this..
Brand gets product produced for X amount of money > Brand sells product to distributor for % mark up in price > Distributor sells to shop for % of mark up in price > Shop sells to consumer for % mark up in pice.
Each step bumps the price of the product up higher than the previous step that ultimately leads to the price you pay when you buy a product. That percentage is that “margin” that we hear about that each business involved needs to keep operations running and turn a profit so they can continue to grow.
Alright, still following? It’s pretty straight forward and easy to understand for the most part when broken down into the most simplistic terms. There’s obviously a lot of factors involved in each step that alters each step. For example, the cost of shipping, discounts, etc. come into play for each step.
Now, here is where we’re starting to see problems and why people are getting so upset over things. With the increase of technology and the ability to sell products online, it’s becoming increasingly easier to reach potential customers. It’s no longer only places like Dan’s Comp, Empire and Albe’s that are selling online. A good number of shops have tapped into the online sales to help increase their sales as well. Now, this alone is good and bad dependent on what side of the fence. Existing online retailers (which all do have actual store fronts as well) are seeing more competition which is bad for them. On the other side, it gives more small shops the opportunity to generate more revenue to help keep their doors open and grow their businesses which is a good thing, not just for them but for BMX in general because it increases the amount of people able to work in BMX and help grow the sport. All fair and good there, it’s business. There are shops that we’re sure aren’t very tech savvy or don’t like the way the internet is changing business that don’t utilize technology to leverage their sales out there as well, which is unfortunate since the internet isn’t going anywhere any time soon.
What’s upsetting these shops and mail-orders is that we’re starting to see a number of brands selling direct from their websites as well. From the perspective of a shop, this increases competition even further and can make it difficult for distributors as well because if the shop has fewer sales, they will make fewer orders from the distributor. Most of these brands sell their products through their website are at a comparable, or in some cases higher, price than shops, which is more or less to encourage people to shop at their favorite shop or mail-order over them to help make things a little more “fair”. Either way, at the end of the day there is more competition and the potential that a customer will buy somewhere else.
So now, we also have this additional business chain that goes…
Design > Production > Brand > Consumer
That chain eliminates distributors and shops / mail-orders and two links seeing a percentage of profit off the products. This benefits the brands that make the direct sale because now they have created a product for X price, and then sold it for the retail price. Taking in a higher margin of profit because instead of selling the product for a lower price to the distributor, they sold it for full price to the customer. The bad? That sale just cut two businesses out the picture. The good? That brand just made more money to help them continue operation that could be put toward new product development, marketing, team trips, videos or a number of other things. Not to say shops or distributors wouldn’t be doing a number of the same things with the money they would have seen, had it followed the traditional model.
So, what’s the difference between a brand that sells direct from their website and a brand that sells exclusively on Amazon… That’s where we need to look back at those three different business models we’ve already mentioned.
Example for Taiwan production:
Design > Production > Brand > Distributor > Shop / Mail-Order > Consumer
Example for In-House Production
Design / Production / Brand > Distributor > Shop / Mail-Order > Consumer
Example Brand Selling Direct From Website
Design > Production > Brand > Consumer
And now…
Example Brand Selling Direct From Amazon
Design > Production > Brand > Amazon > Consumer
Alright, now we’re confused… There’s another step in the direct sales on Amazon than a brand selling direct from their website. Why is this a problem?
Well, there’s a number of problems that are arriving from this method. Below are three common issues we’ve heard about.
1. Brands selling on Amazon are not supporting the BMX / bicycle industry and are just trying to make money.
– This can be very true, and sadly it is. When a bike is sold on Amazon it benefits the brand and Amazon, it doesn’t benefit core distributors or shops, which hurts both of those links in the traditional chain. Unless somebody shows up at a shop with a box from Amazon willing to pay to have a professional build the bike. This can be applied to mail-orders or brands shipping direct from their websites as well.
2. Brands selling on Amazon are not giving back to BMX.
– Also, another true statement in certain situations (we will go into that further down). When you look at a core BMX brand, one with history in BMX, one with a full team of riders they support, one that supplies product for jams and contests, one that spends money supporting media outlets with advertising money, brands that have a full staff from product designers to team managers, graphic designers, web design, social media managers, accountants, etc.. you see the differences between core brands versus the cheap knock offs that are just trying to make sales and money, doing minimal in the form of supporting riders, events, etc.
3. Brands selling on Amazon are able to undercut everyone because of the lower overhead costs.
– Yeah, in certain cases this is very true as well. Once again, using Mafia Bikes as the example, they produce bikes that could be comparable to some core BMX brands bikes in materials. However, they sell the bikes for much cheaper that no shop or distributor can compete with. That right there is the root of the issue we’re really seeing when it comes to this whole fight we’ve been seeing. A core brand that work with distributors, shops and mail-orders could hypothetically “compete” with them on price but then shops and distributors get screwed, and that’s not going to work either.
Alright, now let’s try and look at this from another perspective….
If you have worked at shop or distributor, you undoubtably have seen the big dilemma that puts the buyers in a serious pinch. There’s no way that a shop or distributor could stock all of the possible options as far as products go. Brands have complete bikes come in multiple colors and styles, frames with multiple colors and top tube lengths, bars with multiple colors and sizes, stems in multiple colors and sizes and this could be applied to pretty much every single product that a brand makes. So, when buyers do their job, they need to have a good understanding of what sells, what they could use to fill a gap and what they simply just can’t afford to stock. So, that leaves the brand either sitting on product they had produced but have limited outlets to sell the product, or they pass up creating a product entirely limiting their sales and ability to compete with another brand.
In many cases, you can look at shops and find products that are 2-3 years or more older because it simply hasn’t sold and they have no choice but to hold on to it hoping it will eventually get sold so they can recoup that money and use it to buy something new that will sell. BMX is risky because of how fast trends can change and what was cool one week could be useless the next.
Now we have brands sitting on product they produced because the distributors didn’t order much or anything of a certain product and if those distributors don’t have it, you can bet that the shops the distributors sell to don’t have it either. So, in some cases you have products that are only available in a few countries and probably in a pretty limited supply, but you have a people who are looking for the product. If you’re a shop, you will likely try and find that customer a similar product that you have in stock, or something you can get from your distributor quick to ensure that you make the sale, right? So, now the brand has just missed out on sale, not because they didn’t produce a product the rider wanted, but because they simply could not get that product to the customer.
What can a brand do? Reduce prices and hope that distributors bite at a deal and it gets sold? Sure, but let’s be real, no business wants to have a problem where they are putting product on sale just to get it out the door. The best thing a brand can do in that situation is to pop an online store on their website and then when a kid reaches out to them saying “Hey, I’m looking for this product in the United States, but nobody has it”, — because the distributor couldn’t stock it and the shops obviously don’t have it — the brand can now say the product is available on their website. If the brand is doing things right, the price won’t undercut a shop or anyone, but it will give a customer the opportunity to get the exact product they wanted but couldn’t find anywhere for the same price they would pay if the distributor and shop did carry the product.
So now, a brand that had a product that they couldn’t get to a customer due to the traditional chain of business failing, has now found a way to still make the sale. Which is great. The brand is happy, the rider is happy and the distributor and shop didn’t have that risk of a product sitting on their shelf not being sold.
The downside? The downside would be if the kid who just ordered that product could have easily picked up the product direct from their local shop just down the street. In which case, the whole point of selling a product online has failed and that particular customer most likely spent more time and money to have it shipped to their front door than doing a little research. If a shop is doing a good job at their online presence or marketing in general, if you search for a product on Google, they generally will tip you off to the nearest store that carries it. If you go to your local shops website, it will potentially say they have the product in stock, or if you shoot them a message on social media, an email or dare I say actually call them, you can easily find out if they have a product in stock or if they can get it for you. In which case, you should definitely support your local shop or favorite mail-order before going directly to the brands website to buy the product.
So, there’s good and bad scenarios that can pan out for everyone dependent on the different options they have available to make the sales. Unfortunately, with the way the world is going… Not having an online presence whether you’re a brand, distributor or shop, you’re missing out on sales opportunities. So, blaming a shop or brand for utilizing technology to benefit their business over others really isn’t a valid.
How can Amazon actually benefit BMX?
Going back to the title of this nearly 2,500 words long already post… Why it might be time for BMX to start looking at Amazon. Now, this is where things might get a little bumpy and I’ll probably get an email or two telling me that I’m a complete idiot, but it is what it is. I don’t have any actual advertisers to keep happy (seriously, look around… Google ads), so I’m going to give you my honest opinion on this subject…
BMX is stubborn, change has been pretty tough when it comes to the business aspect of things. We’re pretty far behind when you look at other industries that have streamlined their sales models to really maximize sales. But, that’s what happens when you have an industry ran by passionate people who don’t want to see their sport get destroyed by corporations and money hungry suits that at the end of the day don’t care about anything more than money. Hey, I’m right there with you. If I was looking to make a ton of money I would have probably quit this shit a long time ago, haha.
But, after spending plenty of time weighing pros and cons, I’ve been seeing a number of things happening as of late that you might not have noticed. BMX brands are slowly starting to warm up to Amazon. Don’t believe me? Go take a look at what pops up when you search for BMX on Amazon. I’m not trying to throw brands under the bus here because the way they are doing it makes sense. Right now, you can find Odyssey, Cult, Stranger, KHE bikes, Mongoose, DK and a few other brands on Amazon. Most of which are only selling discontinued and past year models of product they were sitting on when their new 2016 product landed. It might not even be the brand itself actually selling the product and just somebody that swooped the store name to sound more credible. The prices? Comparable to what you would find if it were for sale at a shop. In a positive light, it’s not under cutting anyone at least.
Why is it good to see actual core BMX brands popping up on Amazon? It’s creating competition for those shit “brands” that are going direct to consumer, undercutting real BMX brands, shops and distributors for profit. Right now, there’s not a ton of competition and it’s letting these knock off brands get sales that aren’t benefitting core brands. It’s also exposing real BMX brands making quality products to the consumers who are using Amazon to find a BMX bike or part that might not have a local shop or familiar with what Dan’s Comp or another mail-order might be. It’s opening up a whole new channel for sales…
In my opinion, there is a right way and a wrong way for BMX to utilize Amazon as a sales tool. One thing that I don’t think too many people realize is that like eBay, anyone could start their own online store. So, any shop, any distributor, any brand… Anybody with a way to get the product could open an online store on Amazon and show up in their listings. I personally feel like brands should leave it up to shops and mail-orders and potentially distributors to create those stores. Ultimately just giving retailers another outlet to reach potential customers. Obviously, these stores would need to follow a strict MSRP price to ensure nobody would be undercutting another seller through Amazon, an online retailer or an actual shop. That price? Make it a little more expensive as part of the deal to sell on Amazon. Another thing to consider is it would be another route for advertising since those search results would lead to people seeing the brands name, which could be recognized if somebody were to walk into a shop after looking online.
Could it benefit shops? Yeah, especially if the price it’s being offered for on Amazon is higher than the shop actually sells it for. If it sells on Amazon the sale had a higher margin, that shop just benefitted from it. Another thing to consider is that most people looking on Amazon will look elsewhere to make sure they won’t find a better price somewhere else. I know I’ve looked up stuff on Amazon and ended up just going to a store to buy the same product for the same price or cheaper on multiple occasions.
The negatives? Mail-orders would take a hit with the higher competition if they didn’t also adopt a store on Amazon. Shops would take a hit if they didn’t create a store or have the ability or resources to make it happen. There’s the potential for somebody to undercut other sellers, which would probably end up pretty messy but could be contained if their suppliers cut them off for not following the price guidelines for it. Could it kill off some shops? Possibly because there could be a shift from actual retail sales to online, eliminating a need for sales staff, which I think is a big concern for people who want to support local and small businesses.
Just to be clear… I think this should be a tool utilized by shops, not by brands. Giving shops the opportunity to make more sales. Not put them out of business.
Does it suck it’s coming down to this? Yeah, it does… But the way people buy things are changing. Even the skateboard industry has taken advantage of Amazon.
At the end of the day, the reason I’m saying this is because I feel like we’re slowly seeing brands testing it out and it’s likely that we are just going to see more brands starting to pop up on there for brands and retailers to stay competitive, especially after already seeing a few brands dipping their toes to test the waters so to speak. It is another route for selling products online that currently is frowned upon because it could have negative effects on the traditional chain of sales BMX currently follows. Do I think it should be used as a tool and not a primary source of sales? Yeah, I do. Do I think it should be left up to shops to use it, not the brands? Yeah, I do. There are a lot of benefits that a local bike shop can offer that you won’t ever find online and they’re more than important. I’m just looking at this from the perspective that Amazon exists, BMX products are being sold there and there’s no way either are going anywhere, so maybe it’s time we find a way to use it as a tool to benefit sales for shops versus being the angry mob that is pissed it exists and just complain about it. Any sale of a core BMX brands product will benefit BMX more than a bunch of non-core BMX brands taking advantage of the little competition there is.
I’m sure I’ve pissed people off. I’m sure I probably am unaware of details that probably are why people are pissed off… But that’s my 3,500+ words on the subject from my perspective and the way I see things panning out. I’m just trying to get some sort of discussion started because I’d rather just get everyone talking about it versus just ignoring the subject that has crossed everyones mind by now. Luckily, I won’t have to worry about losing any advertisers.
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