I have a general inquiry to the major bike manufacturers that are regularly represented here. There has been much discussion on this board regarding the growth of online commerce (ie ebaying) and the slow death of local bikes shops.
My inquiry is this: How do you feel about your authorized dealers selling your product over the internet for below msrp?
It is common to see local bike shops selling NOS frames, components and even complete bikes on ebay for discounted price as these as closeout items. I don’t have a problem with this, as anyone in the business will agree with - sometimes things don’t sell for whatever reason. The issue that I bring up is when lbs’s begin labeling their online sales as ‘overstock’ and then sell '05 product. These items appear less and less like overstock and more and more like they bought more bikes than they figured their local market could absorb in order to meet the bike manufacturers price selling points. For you all that aren’t aware, shops get larger discounts from the manufacturers for placing larger orders.
My question is this - how is this fair to the collective group of your local dealers? I have heard through the grapevine that many manufacturers are addressing this issue, yet one of the largest manufacturers (that is usually represented here) is one of the manufacturers that is being taken advantage of. Wait…scratch that last thought. One of those manufacturers is hurting the collective group of their dealers by allowing this to take place. This is not hard to monitor and anyone with internet access can see it. Bike shops do not hide their names on e-bay. In fact they advertise it so as to generate a sense reliability to buyers.
In conclusion, I hope that everyone here will understand my point and those in power will hear it. I for one, like discounted prices - just like everyone else. But when my lbs can’t compete with other lbs’s simply because this action - there is something wrong. Tri-shops pride themselves on customer service - fit, advice and knowledge. To me, that is worthless retoric when they say that, then sell online at discount. Lets be honest. It is about time that manufacturers begin holding their lbs accountable for the products they sell. Herbert, Gerard - would you like your '05 bikes being sold on line for 2-400 off msrp? Check it out, it happens and it is happening now.
How do the local dealers on this board feel about it?
We very much believe in the support of our local bike shops and will stand behind them. We actually have very strict guidelines regarding selling at MSRP etc, and all of our dealers sign contracts which deal with this topic aswell. Basically all of our bikes which are current year models are to be advertised at MSRP or higher.
if a shop wants to sell items below list, or even at a loss that is their call. They wont be in business long of they cant pull a profit. When it comes to a contract, MOST dont have a real firm way of saying you will sell this for that…we all know that there are all kinds of freebies at some shops (from helmets to water bottle cages). Those of us that are in the market for high end bikes will usually go to a reputable shop and even pay more (happily) the rest of society can keep getting their bikes at WalMart.
One highly related problem I VERY commonly see (even at so-called “pro” tri-shops) is this: when a shop sells at or above MSRP and provides little or practically zero service or expertise with the product/bike. How can they, when the ‘expert’ often is extraordinarily young, inexperienced, and paid minimum wage, or is a businessman who has little passion or real experience within the sport except as a sales rep?
I think a solution could be that bike framesets should be sold inexpensively via mail order, online, or ebay to expert consumers who know what the heck they are doing about building a bike up from scratch and need no guidance, service, or advice except warranty support.
Complete bikes, requiring assembly, set up, adustment, and tuning could and probably should be sold at MSRP to less experienced consumers at shops with staff who actually know at least a few things about the product and (in return for reasonable profit) take at least some time to educate the new rider.
Please look into this matter. I am not usually the policeman type, but when I see how this could affect my local shop and my friends there, it angers me. The problem is not large now - but it ought to be stopped before others use this method. ABG are affected by this - please do an ebay search of your brands to check it out.
So, uh, why is it that this particular practice has got you in such a lather? It sems to me that it is up to manufacturers to police this particular practice, since as you say, they can access the Internet as easily as anyone else.
I personally, as a consumer, can not get too much up in arms about the industry failing to police retailers that sell goods to the public at a discount. In fact, if such practices can enable me as a consumer to get better deals, I would prefer that they continue.
I can think of a few thousand things to get more worried about than this particular topic.
It also may be that the industry doesn’t go out of their way to police these things because in some cases it may be to their best interest to turn a blind eye.
So in the end, you really might have only a very few interested parties that are going to be bothered by this.
I would love to rock this ABG boat…their contract is shit and protects no one. They sell their super high end bikes but wont let people get exactly what they want from any LBS as you can only get a “built bike” wiht their house brand crap on them…UNLESS you go to Colorado Cyclist who is more than happy to sell you just a frame (I bet they keep the parts). ABG has gone from being a great company (And I do own Litespeed’s) to being a un moving giant. They are doing it WRONG I think…ABG should let people buy just frames and or let us alter our build kits.
How many QR dealers do you think there would be in the US if a shop, with a reputable name, bought (an arbitrary number) of Luceros, say 50. And they sold 5 of these models in their shop with expert fit and guidance (QR, as a true Tri manufacturer I am assuming acres about these commodities). Next, they sell the other 45 at 200 over retail ( I know this may be extreme) on the web. That is 45 buyers that they took out of the market for lbs’s. Why would you go to a lbs if you could get the bike for 30-40% off retail online?
I don’t think, and I hope, many shops would want to carry a brand that oks this action. Perhaps that why major companies such as Cannondale and Specialized don’t let their dealers do internet commerce. That maybe drastic, but if dealers violate these contracts perhaps their license ought to be revocted.
There are some fairly technical antitrust laws that govern the extent to which a manufacturer can control its dealers’ pricing. Max resale pricing limits are usually okay, but a manufacturer who tries to set a minimum resale price can run into antitrust problems very quickly. Tread lightly, as the penalties for violating these laws are severe.
We very much believe in the support of our local bike shops and will stand behind them. We actually have very strict guidelines regarding selling at MSRP etc, and all of our dealers sign contracts which deal with this topic aswell
Are you an attorney? Because Oakley controls its dealer retail price better (or do I mean worse?) than any other company I have seen. I think they may be due for some enforcement of anti-trust laws.
There is a big difference in terms of what you can sell a product for and how it needs to be advertised. Advertising MSRP means protect the brand image, how the bike is actually sold in a store is free market and can be handled by each store as they see fit.
Cheers,
Herbert
One highly related problem I VERY commonly see (even at so-called “pro” tri-shops) is this: when a shop sells at or above MSRP and provides little or practically zero service or expertise with the product/bike. How can they, when the ‘expert’ often is extraordinarily young, inexperienced, and paid minimum wage, or is a businessman who has little passion or real experience within the sport except as a sales rep?
I think a solution could be that bike framesets should be sold inexpensively via mail order, online, or ebay to expert consumers who know what the heck they are doing about building a bike up from scratch and need no guidance, service, or advice except warranty support.
Complete bikes, requiring assembly, set up, adustment, and tuning could and probably should be sold at MSRP to less experienced consumers at shops with staff who actually know at least a few things about the product and (in return for reasonable profit) take at least some time to educate the new rider.
But this is all a dream… Your ideas are excellent. I myself come from an engineering background and have worked in the bike industry and on my own bike for over 25 years. This is how I have always bought a new bike, as just a frameset. I upgrade my components as I see the need to. This is a lot more expensive but I enjoy working on my own bike and WOULD NOT trust a 16 YO kid to work on my race machine that I reach speeds of up to 80km/h down hill!!
You’re right, of course. And, there are some manufacturers that do a good job of controlling dealer pricing in ways that are perfectly lawful. My post was intended only to alert people to the fact that this is an area in which manufacturers must and generally do tread lightly. There really isn’t as much freedom as one might suspect for manufacturers to willy nilly impose pricing terms on retailers.
“No. Price fixing is when several manufacturers get together and settle on a price.”
That is what is referred to as horizontal pricing fixing and it is per se unlawful and can land you in the federal penitentiary.
An agreement between a manufacturer and dealer as to a minimum resale price is also unlawful price fixing. An agreement regarding a max. resale price, so long as it is reasonable and legitimate, is not illegal. A manufacturer can adopt what is called a Colgate policy, in which it unilaterally imposes a resale price and terminates dealers who do not sell at that price. This is not viewed as an agreement because it is a manufacturer’s unilateral policy. I’m risk averse, though, and Colgate policies give me hives.
There are lots and lots of things manufacturers can lawfully do to encourage retailers to sell at MSRP.
From a legal perspective, I don’t know if you can force your dealers from selling below a certain point. I would check into this. I believe this is called price fixing.
Please explain to me how my requiring my dealers to not advertise or sell PowerCranks over the internet at less than our MRSP is potentially running into “anti-trust” problems.
I can sell over the internet. Why do I want to sell at wholesale to someone else so they can undersell me over the internet? Nothing says i have to sell to any reseller - I can go direct to the end user and that would allow me to reduce my prices some. Why do I want to sell to someone who will undersell the LBS, who I would like to support. and who needs a reasonable mark-up to pay the rent and salaries but who cannot get the potential volume of the internet?