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Q&A: The Trek Edition

A week or so ago -- right around the time that Thee Almighty Lance did the weekend of time trialing at the Tour de Gruene in Texas -- we had some interesting comments posted to the What’s New section of Competitive Cyclist:

‘I hear you will be a Trek dealer soon, I heard a lot of talks at the Gruene TT that Lance attended. Is this true?’ And in the same vein: ‘Ya, I was also a attendee at the TT that Lance just did in Texas, a lot of talk about spreading his message and also the Trek brand, Someone mentioned since you dropped Colnago you will pick up Trek? Why? Trek bikes aren’t better than your other brands, was Lance lying, please say yes.’

So, the $64,000 question: Is Competitive Cyclist preparing to become a Trek dealer? Before answering, some background is in order. Trek Bicycles are not currently available for sale anywhere on the internet. They have no on-line dealers, and Trek doesn’t sell consumer-direct. So for Competitive Cyclist to become an on-line Trek dealer, it’d be nothing short of an industry revolution.

Why isn’t Trek available for sale online? It’s not that they’re backwards. Rather, the entire bike industry -- or at least the brands that have the most exposure (and, let us note, that ‘exposure’ should never be mistaken with ‘net profit’) -- are plagued with terminal backwardness on certain key issues. Alongside Trek you can list Specialized, Cannondale, Giant, and Felt as companies that refuse to do business online.

Another piece of background, more general this time: American retail as we know it is collapsing. Read the NY Times or the Wall Street Journal for, like, 3 days in a row and you’ll get all the evidence that you need that today -- November 13, 2008 -- is the worst day EVER in American retail. And you know what? It’ll be eclipsed by tomorrow, then the next day, then the next day. It’s not that retail revenues will decline on a daily basis each day into the foreseeable future. Rather, a perfect storm is brewing: Retailers either are or will be in a state of worsening overstock. Wholesalers & manufacturers are or will be in a state of worsening overstock. Sales will come nowhere close to forecasts, and the sales that happen will be at cut-margin prices. Consumer confidence is plummeting. Consumer desire to buy any inessential goods -- be it indulgences or flat-out luxuries -- is corkscrewing earthward in flames. Unemployment is booming, credit is tanking, and interest rates of near-nil can’t stimulate spending. Commerce might be occurring, but profits? No. This is not a portrait of Competitive Cyclist. This is a portrait of the U S of A, and the bike business is hardly immune.

With this indisputably terrifying set of circumstances going on, can you give me a single good reason why the bike industry ‘titans’ named above wouldn’t be sprinting Cavendish-like to a revamped business strategy that incorporates sales channel diversification? In other words, should Trek open up Competitive Cyclist as an online dealer? Let’s analyze:

Why Trek would want to open up Competitive Cyclist as an online dealer:

No retailer on planet Earth is equally capable of channeling the PRO-ness of Lance and Contador, and we’d catalyze this into record sales of Madones. And it’s worth asking if it’s easily possible to buy a Madone with Campagnolo on it -- anywhere? Competitive Cyclist could offer true customization of Trek’s high-end framesets in a manner currently elusive to potential Trek customers. Trek’s days of Vanilla-and-Chocolate-only would be all over. Competitive Cyclist, we’re 31 Flavors. And Trek does big business as an aftermarket component wholesaler. More lucre for Trek there from Competitive Cyclist. Lastly, short of cyclingnews.com and velonews.com, an increasing body of evidence is piling up that Competitive Cyclist is one of the most-trafficked websites for things related to high-end bikes. Whether we ever meant to or not, we’ve effectively become a center of gravity in Malcom Gladwell’s ‘Law of the Few’. Trek’s presence on our site would add jet fuel to their sales throughout their dealer base. Retail customers might not buy from Competitive Cyclist, but these folks are reliable & regular visitors to Competitive Cyclist. We exert sizeable influence in cultivating their taste -- something that would help the entire Trek dealer base.

Why Trek wouldn’t want to open up Competitive Cyclist as an online dealer:

One word: Fear. The ‘titan’ companies cited above have a GM/UAW-like relationship with their dealer base. They resent them, but they rely on them. The titans look at their dealers as little more than vending machines. They believe most of them are technically undereducated about their products; that they add little marketing value to the products; that they devote too little floor space to their products. The titans believe their dealers want territories that are too big; that they want profit margins that are unreasonably large; that they want payment terms that are too long. Are these beliefs true? We don’t know if they’re empirically true, but that doesn’t mean the titans don’t feel that they’re true. But, not unlike GM/UAW, the titans have no other choice. There is no other sales channel for the sale of their goods, and no one is to blame more for that than the titans themselves. To use a brilliant phrase coined by Allen Lim, they’ve pre-fucked themselves. They’ve become so addicted to their mono-channel sales approach that they can’t risk disrupting that sales channel. By opening up Competitive Cyclist, they risk an insurrection from their dealers, since these dealers look at any competition, regardless of relevance, as a direct threat.

Why Competitive Cyclist would want to be an online dealer for Trek:

We have zero hesitancy to say it: Trek bikes are outstanding. The Madone is as sweet as PRO road bikes get. They ride beautifully, and what they’ve done with the paint in the last year is gorgeous. An Astana bike with white tape, white SRAM hoods, and deep cross-section Bontrager wheels slays us. In terms of technical merit & aesthetics, a Madone can go toe-to-toe for 12 rounds with any other PRO bike out there. Beyond that, bike-biz-wise, Lance is like Jesus, Zarathustra, and General Patton all wrapped up in one. If anyone can inject monumental buzz into an industry in desperate need of it for 2009, it’s Lance-in-comeback-mode. And he’ll do it in the guise of Trek spokesmodel. What retailer doesn’t love the wealthy ingénue who, rather than work to gain connoisseurship in something, instead by default buys the best-marketed, most-pricey thing in the store? How many $1,000 bottles of wine get bought in restaurants every night by folks who acknowledge they can barely discern Barolo from bourbon? Easy money isn’t a sin in any industry. And our bet is that no company attracts more easy money than Trek. In our minds, they deserve it. They took the risk on Lance back in ’98, and they deserve to reap the rewards. In terms of an expansion into online sales, no brand possesses the potential to devour additional market share like Trek. We’d be eager to play a part in it, and be a fellow beneficiary of it.

Why Competitive Cyclist wouldn’t want to be an online dealer for Trek:

It’s the classic tagline of SST Records from back in the 80′s: ‘Corporate Rock Still Sucks.’ Is there any thought more frightful than big-ringing down the road and seeing somebody on a hybrid -- or worse -- someone on a road bike with 105, and it’s the same brand as yours? The beauty of riding a Cervélo, for example, is that it’s sustenance for the elitism so elemental to us. We’re everyman in all realms of our lives except the world of bikes. Goddamit, we’re snobs about our bikes because it makes us feel ALIVE. Selling out: We’re not sure if we’ve got it in us.

Conclusion

Is there a likelihood that Competitive Cyclist will become an online Trek dealer in the future? A more likely scenario, we suppose, is one where Trek goes consumer-direct. We have no evidence for this, though important signs point to it. Given the collapse of the US economy, Trek will doubtlessly see a decline in orders from their dealers; their dealers will become less reliable in terms of paying their bills on time; and the allure of a monumental increase in their gross profit margin (which comes by selling bikes directly to you at MSRP, instead of strictly selling bikes to dealers at wholesale) will possibly be too great of a temptation.. Beyond this, too many admired American companies have shown agility in balancing a wholesale distribution model with a consumer-direct model. I write this while listening to an Apple iPod with Bang & Olufsen headphones, wearing a Patagonia shirt, Banana Republic pants, a set of Nike shoes, with Oakley glasses balanced on my head. All of these brands offer their products online for direct-to-consumer sales. All of them, too, offer their products through 3rd party retailers. (Well, maybe Banana Republic doesn’t, but you get my point.) Why wouldn’t Trek be eager to join this Hall of Fame group of businesses?

My comments aren’t applicable solely to Trek. The other titans I mention face the same immense challenges, and if they choose not to give deep consideration to diversifying their approach to sales channels -- either by working with Competitive Cyclist, or another highly-illuminated-and-organized online retailer (does another one exist?!?), or by going consumer-direct -- in our view it’s a plain statement of their fear of their existing dealer network. And this, in our minds, is a short-sighted strategy.