Trek to sell direct with Trek Connect
Trek boldly announced that beginning in September, consumers will be able to buy complete bikes directly from the Trek website. The bike will then be shipped to a dealer of the customer’s choice and that dealer will get a commission on the sale in exchange for handling final build-up.
Called Trek Connect E-commerce, the new program is designed to support a new omni-channel strategy along with Trek Connect Retail Marketing, which is a suite of digital, direct mail, and seasonal point-of-purchase assets. Bike shops will be able to get their own Trek E-commerce website with personalized branding.
“This is a massive investment in the long-term success of our brand and our retailers,” said Trek president John Burke. “We believe the most successful companies in the future will all be omni-channel enabled and we are doing everything we can to make sure that future for our retailers is bright.”
Unlike bikes, which will only be shipped to a Trek dealer, consumers will have the option to ship accessory purchases to their home address or to a retailer for pickup, a process referred to as “click and collect.” In this case the consumer will bear the shipping costs. The local dealer chosen by the customer will still get a commission when the product is shipped direct to the consumer.
John Burke referred to this move as the biggest investment Trek has ever made. The lynch pin is a robust and clean website that had to be designed from the ground up. Comprehensive catalogs, photos, information and inventory control had to be integrated to allow the consumer to look through the product line-up, make an intelligent decision, and purchase a product based on available inventory. Additionally, online and telephone support staff will be put in place, and a massive warehousing operation will be established to build up and store these bikes so that they can be shipped quickly and efficiently. Time and money was also spent reaching out and educating Trek’s dealer network. As the program matures, Trek will glean a lot more information about its customers, creating a multitude of possibilities for customer personalization, marketing and outreach.
Will consumer costs go down?
The short answer is no. With this initial rollout of Trek Connect, bikes will be sold at advertised retail price. There will be no undercutting of the local bike shops or other retail channels.
So what is the benefit to the consumer? Initially, this is just another way for consumers to shop. Many bike buyers prefer to shop online where they can do research, customization and view inventory all from the comfort of their home. How the program evolves down the road remains to be seen.
How are returns handled and who pays for it?
One of the sticky areas of online buying, especially for a complex fitted item such as a bike, are returns. In this case it’s not a huge issue. If the bike doesn’t fit, the consumer simply returns it to the local bike shop where they picked it up.
On the back end, that returned bike will be moved into store inventory and the commission will be reversed. But Trek believes that when you factor the number of bikes they expect to ship and average return rate, the rate of return will be low.
Good and bad for dealers
It’s obvious that the internet is not going away so the role of the local bike shop has to change in order to add value and thrive in a changing marketplace. In this initial model, the local bike shop can potentially reap thousands of dollars in commission inventory on each bike while taking on fewer costs. And the process of putting a bike together and handing it off to a customer is fairly simple. There is also the potential for the formation of a lasting relationship between the customer and the shop.
On the downside is the prospect of dealing with multiple returns. The local bike shop will bear the brunt of unhappy customers who ordered the wrong size bike or parts, and the prospect for such errors increases when purchases are made on-line.
And of course there is the increasing uncertainty that comes with change. This is the opening act in an evolving saga in which the local bike shop has little control. Instead the bike manufacturer holds most of the cards, forcing shops to find new ways to add genuine value to the bike buying experience.
Direct-to-consumer companies such as Bikesdirect and Fezzari have been growing steadily in recent years. And popular brands such as Canyon and YT Industries are eyeing the US market. But Trek’s announcement is the most significant thus far. Will they be alone in this online model or will Specialized, Cannondale, Giant and the other big brands follow suit? Only time will tell.