This month, with globalization and product trends as background, we are going to review Distribution Trends - including E-Commerce, the future of traditional distribution models, new and emerging models and B2B, or Business-to-Business E-Commerce.

The Internet and E-Commerce are without a doubt the most important changes affecting the global bicycle industry todayˇK and in the future. Foremost is the fact that the Internet has given consumers more information, and subsequently more leverage and power, than they have ever had before. Consumers can use the Internet to find out everything there is to know about a specific product, including where to purchase it at the lowest price, 24 hours a day, 7 days a week!

The Internet and E-Commerce will require a shift in thinking for all manufacturers, wholesalers and retailers - virtually everyone involved in every aspect of each and every channel of trade, including the global bicycle industry.

Too much focus on B2C! In the bicycle business, one of the very first reactions seemed to be a rush by some manufacturers and brands to sell consumers directly through web sites utilizing e-commerce software. Customer service issues soon cropped up, as they have with all B2C (Business-to-Consumer) retail web sites, and some of those who moved so quickly to embrace consumer direct selling online soon backed off and re-thought their business models. Some of the early adopters concluded that they needed to incorporate retail stores into their e-commerce planning.

Pure-plays - pure web-based B2C retailers like www.bike.com and other sporting goods and outdoor web sites selling bicycles and related products started popping up in 1999. Amazon.com is the granddaddy of all pure-plays, but doesn't as yet sell bicycle products. The significance of a pure-play retailer like bike.com is that it doesn't have traditional retail storefronts or a mail order catalog - it only has the Internet and its sole channel of trade is online.

Multi-channel retail - the wave of the future? Before any of the pure-plays specializing in bicycle retailing could make their first sale, the concept of multi-channel retailing had already come into being. A great example of a multi-channel retailer, as we will discuss in more detail, is REI. Such a multi-channel retailer integrates traditional brick-and-mortar retailing with consumer-direct retailing, including catalog, mail order and/or web site e-commerce retailing. Each merchandising and selling method utilized by a multi-channel retailer reinforces and strengthens, to some degree, the other methods it utilizes.

A September 20, 1999 Ad Age article reports that retail experts "believe multi-channel retailing" is the wave of the future. Why? According to Ad Age, "Consumers will increasingly have access to information that can help them make intelligent buying decisions. Gone are the hidden margins. Gone are the inflated margins."The expert's conclusion: "multi-channel retailing will be the only way to survive."

Pure-play Internet retailers will face shakeout in 2001. According to an April 17, 2000 Knight-Ridder/Tribune Business News article that covers a report released by Forrester Research Inc., a leading market research firm, pure-plays face tough times. "Most Internet retailers will go out of business by the end of 2001 as a result of their weak financial performances, increasing competitive pressures and the flight of investors away from certain kinds of sagging dot.com stocks."

The most likely survivors - brick-and-mortar and catalog retailers! Forrester Research said in its report that "the most likely survivors of a shakeout will be brick-and-mortar retailers and traditional catalog companies, both of which are continuing to find innovative ways to use the Internet in combination with their established brand names and customer bases." We can add to this their established inventories and inventory control systems as well.

Specialty Bicycle Retailers - bike shops have a lot of potential going forward. According to the Ad Age article we mentioned earlier, for some retailers "the answer is to find ways to bring people out of their homes and into an old-fashioned store for an entertaining experience." Couple this with the fact that many consumers still want and seek out a personal, one-on-one relationship with local retailers - and you have the formula for the current and long-term success of specialty retailing, including specialty bicycle retailers (bike shops)!

Profitability Increases for Specialty Retailers. According to an article that appeared July 5, 2000 on SportsTrend.com, "Specialty sport shops showed improved profitability, while full-line sporting goods stores struggled to maintain their profitability levels, according to data in the NSGA Cost of Doing Business Survey for Retail Sporting Good Stores."

Shopping in brick-and-mortar stores - including specialty bicycle retailers, will become a form of recreational activity: shopping as entertainment! Entertainment and experience shopping are emerging as the future of brick-and-mortar retailing. Climbing walls, rain caves, bike trails and service training are all examples of the entertainment-experience-shopping trend.

The real impact of the Internet is that it is forcing both on-line and off-line retailers to build new competencies! Product information, depth and variety of choice and customer service will all have to be exemplary. The Internet is changing consumersˇ¦ expectations of the shopping experience. The ability of retailers to customize products and services to meet the wants and needs of individual customers will no longer be optional.

It is still about Customer Service! The grim reality is that stubbornly poor customer service and response systems will hurt specialty bicycle dealers more than all the online, mail order and mass merchant competition combined. The Internet is forcing both online and brick-and-mortar retailers to build new competencies, including the ability to deliver customized products and world-class customer service - because it is changing consumersˇ¦ expectations of the shopping experience.

The specialty bicycle retailer channel of trade needs to focus in the Internet as a tool that can be of great value to brick-and-mortar retailers of all types and sizes. In-store technologies and the integration of online and in-store activities may have an even greater impact on the future of Specialty Bicycle Retailers than pure online selling ever will.

There is a huge opportunity for brick-and-mortar specialty bicycle retailers as they become interactive and multi-channel - if they also build their critical competency around the customer.

Traditional multi-channel models that work. Traditional specialty retail models like those presented by Performance Bicycles, REI and Decathlon are, we believe, excellent examples of successful multi-channel retailing. One of the reasons we think their models are exemplary is that each of these multi-channel retail leaders has continually improved, modified and changed to keep up with the latest innovations in merchandising and changes in demographics, and each has provided consistent world class customer service.

New and emerging multi-channel models are being proposed or introduced on a regular and frequent basis. Following is just a sampling of new, multi-channel specialty bicycle retail models:

• Specialized: multi-channel "dealer alliance"
• Derby USA: bikeshop.com "clicks and mortar"
• NBDA: bikeshopsonline.com "click-on-bricks"
• Bicycle Dealers: multi-channel "brick-and-mortar"

Time will tell which of these models and those yet to come will be sustainable over the long term. However, the fact that there are multi-channel models to choose from should be very encouraging to the specialty bicycle retail channel of trade - because this means both suppliers and retailers will have a much greater opportunity to find a model that will fit well with their business and strategic plans.

Business-to-Business E-Commerce should be embraced and utilized by the global bicycle industry! We have been advocating this same business strategy for the better part of a year. The advantages to the international bicycle industry are tremendous. Business-to-Business (B2B) isnˇ¦t as colorful as online auctions and selling merchandise to consumers. However, B2B has what is becoming a proven ability to transform entire industries.

• The global bicycle industry desperately needs real efficiency in all of its channels of distribution. We need the communications and connectivity that the Internet and B2B E-Commerce have to drive company-to-company selling, ordering, billing and virtually every aspect of commerce ˇV all done computer to computer.
• Electronic exchanges connect suppliers and customers - allowing them to get a precise picture at any time of their inventories, costs, and customer requirements.
• Business analysts predict that within the next five years B2B online business will penetrate virtually all U.S. supply chains. However, not all business sectors will embrace B2B e-commerce at the same pace. According to Stuart D. Woodring, vice president of research at Forrester Research, companies "that are unprepared to compete online will be pushed aside by competitors who understand how to use the Internet to generate new value and efficiencies for their customers."
• The total cost of doing business could fall by as much as 12.5 percent. According to "To B2B or not to B2B?", an article by Elise Ackerman published in the February 7, 2000 issue of U.S. News & World Report, the "Internet has the potential to save companies boatloads of money." How much is a boatload of money? Goldman Sachs estimates "that the Net could reduce purchasing costs in industries like forest products and electronics by more than 20 percent. As a result, the total cost of doing business could fall by as much as 12.5 percent."

What an opportunity for the global bicycle industry! All the B2B pioneering work has been done in other industries. All the bicycle industry has to do is sit down and make some very simple collective decisions about technology and communications standards - and we have the very real potential of reducing our cost of doing business substantially. Just imagine what it would mean to the global bicycle industry, and your business, if we could reduce our total cost of doing business by, say, just 6 ? percent, or about half of what the experts say is really possible by an industry-wide deployment of B2B technology!

If you want to experience what is possible from B2B e-commerce, visit the member sign-up section of this web site and fill out a registration form right now!

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