Trying to understand the industry

Well those distributors are providing services.

1) They are a central point for placing orders. Imagine ordering all your components from individual manufacturers, both large and small with all their different ordering systems.
2) Same with the manufacturer side. They deal with the distributors and maybe some online sales, as opposed to trying to deal with a thousand bike shops.
3) Storage/warehousing is done at the distributor, not at the manufacturer. This is huge.
4) Shipping costs can be a killer if everything is individual, as opposed to multiple manufactures shipping tons of individual orders.
 
My point of this thread is the margin with this many hands in the cookie jar is being distributed improperly. I'm not issuing concern to the sales rep that backs these distribution companies, but why shouldn't that sales rep not work directly for the manufacturer instead of the distributor?

I am sure I am not saying this when it hasn't been thought of in the past. Maybe some bike manufacturers (Salsa, surley, park tools, others...) like to use it and some don't.

Would the consumer like to know that they are buying the product from manufacturer to the bike shop with no distribution center in between? I'd hope so.
 
Piston Honda said:
Logistics isn't free though. Each manufacturer would have to raise a new division to handle what the distributor already does for them.
Click to expand...
Aren't these distributors also using a shipping service (FedEx\UPS\etc.) to get the product from their warehouse to bike shop? The shipping service is the logistics.
 
Gene said:
My point of this thread is the margin with this many hands in the cookie jar is being distributed improperly. I'm not issuing concern to the sales rep that backs these distribution companies, but why shouldn't that sales rep not work directly for the manufacturer instead of the distributor?

I am sure I am not saying this when it hasn't been thought of in the past. Maybe some bike manufacturers (Salsa, surley, park tools, others...) like to use it and some don't.

Would the consumer like to know that they are buying the product from manufacturer to the bike shop with no distribution center in between? I'd hope so.
Click to expand...
Salsa and Surly, as well as others are owned by a pretty huge distributor. https://www.qbp.com/brands
 
Santapez said:
Well those distributors are providing services.

1) They are a central point for placing orders. Imagine ordering all your components from individual manufacturers, both large and small with all their different ordering systems.
2) Same with the manufacturer side. They deal with the distributors and maybe some online sales, as opposed to trying to deal with a thousand bike shops.
3) Storage/warehousing is done at the distributor, not at the manufacturer. This is huge.
4) Shipping costs can be a killer if everything is individual, as opposed to multiple manufactures shipping tons of individual orders.
Click to expand...
Is that margin difference actually benefiting the bike shop though? If the cost of distributor is taking 8 of the 10 cookies and leaving 2 to the bike shop is that fair for convenience of service?
 
Gene said:
consumers getting crumbs
Click to expand...

?

esplain please.

1610742219420.png
 
Gene said:
Aren't these distributors also using a shipping service (FedEx\UPS\etc.) to get the product from their warehouse to bike shop? The shipping service is the logistics.
Click to expand...
Distribution isn't just slapping a label on a few bike boxes. Inventory needs to be housed, which is the role of regional distribution centers. UPS/FedEx logistics division can play that role, but now they're the new distributor you want to do away with.
 
Gene said:
My point of this thread is the margin with this many hands in the cookie jar is being distributed improperly.
Click to expand...
I disagree with this. I do get that bike shops are being squeezed, but it's because they're on the tail end of the distribution channel and they just get the least material with which to operate at an acceptable margin. Think of it like your circulatory system - your heart produces a lot of oxygenated blood, which gets distributed throughout your body via arteries. Each artery gets a bunch of blood that it transports to specific areas where it parcels out its payload in capillaries. No capillary handles as much blood as any single artery, and no single artery carries the full load from the heart (okay, so the aorta does for a moment, but give me some latitude here!) So when you're talking about how much blood is at stake to parcel out from each point in that chain, the capillaries get the smallest amount. Bike shops are capillaries. Distributors are arteries. And Manufacturers are the heart. At each step along the supply chain, everyone is doing what they can to survive as an entity - they aren't looking to gut the lower entity. And if they do, just like when you go out in the cold and your fingers and toes freeze, it's because the heart is doing what it has to to keep the entire system alive and sometimes that means allowing some of the smaller entities to die so the larger parts can survive. It's a survival choice, not a concentrated effort to gut those smaller than themselves. Are there some companies that gouge? I'm sure there are. But I'd wager that the majority of them are merely operating at a pretty razor thin margin themselves and the only way that works is to push their rising costs down to those beneath them. If there is a place that should be revisited in terms of what it takes from the industry relative to what it gives, it'd probably be C-suite compensation. But that's true in every industry.
 
Gene said:
The exact problem with the industry that uses distributors. Eliminating the distribution center and having the manufacturer going direct to bike shop is what should happen in my opinion... btw, amazing job on the rebuilt fork you performed on my Niner a month ago. Loving it!
Click to expand...

Ask High Gear how throwing in with distributor/manufacturer (Trek) worked out for them. Their business practices (much like Spec/Giant, who also offer the same "get-everything-here" services) don't help. Cutting out the middleman didn't help them.

Gene said:
So it all still comes down to the Amazon stores of the world distributing and shop and consumers getting crumbs in the end I guess.....
Click to expand...

Surprisingly, you need to be approved by QBP to sell products online, and a rigorous approval process to sell on Amazon. They don't play around with yanking that privilege from people, either.

Ordering from Shimano or SRAM is great...if you happen to need to buy a few thousand dollars of parts. If you don't, they kill you with shipping. Likewise with smaller manufacturers (yeah, White Industries stuff is nice, but you HAVE to buy it from them, which all but ensures you are either eating the cost of shipping, or making the customer pay--and imagine how they feel about that).

The distributors play a vital role in bringing together a glom of manufacturers (just like Grainger/McMaster do for industrial stuff), so you don't need to buy 25 derailleurs to break even, when you only need 2; except now, you can buy a case of water bottles and a couple of boxes of nutrition.

A tertiary thing is that many distributors offer their own lines of credit--which many of the smaller manufacturers won't do for you. I'd put it this way: if you didn't need the credit to run your business, you wouldn't need to run the business, know what I'm saying?
 
1speed said:
I disagree with this. I do get that bike shops are being squeezed, but it's because they're on the tail end of the distribution channel and they just get the least material with which to operate at an acceptable margin. Think of it like your circulatory system - your heart produces a lot of oxygenated blood, which gets distributed throughout your body via arteries. Each artery gets a bunch of blood that it transports to specific areas where it parcels out its payload in capillaries. No capillary handles as much blood as any single artery, and no single artery carries the full load from the heart (okay, so the aorta does for a moment, but give me some latitude here!) So when you're talking about how much blood is at stake to parcel out from each point in that chain, the capillaries get the smallest amount. Bike shops are capillaries. Distributors are arteries. And Manufacturers are the heart. At each step along the supply chain, everyone is doing what they can to survive as an entity - they aren't looking to gut the lower entity. And if they do, just like when you go out in the cold and your fingers and toes freeze, it's because the heart is doing what it has to to keep the entire system alive and sometimes that means allowing some of the smaller entities to die so the larger parts can survive. It's a survival choice, not a concentrated effort to gut those smaller than themselves. Are there some companies that gouge? I'm sure there are. But I'd wager that the majority of them are merely operating at a pretty razor thin margin themselves and the only way that works is to push their rising costs down to those beneath them. If there is a place that should be revisited in terms of what it takes from the industry relative to what it gives, it'd probably be C-suite compensation. But that's true in every industry.
Click to expand...
I like the living comparison
 
Karate Monkey said:
Ask High Gear how throwing in with distributor/manufacturer (Trek) worked out for them. Their business practices (much like Spec/Giant, who also offer the same "get-everything-here" services) don't help. Cutting out the middleman didn't help them.



Surprisingly, you need to be approved by QBP to sell products online, and a rigorous approval process to sell on Amazon. They don't play around with yanking that privilege from people, either.

Ordering from Shimano or SRAM is great...if you happen to need to buy a few thousand dollars of parts. If you don't, they kill you with shipping. Likewise with smaller manufacturers (yeah, White Industries stuff is nice, but you HAVE to buy it from them, which all but ensures you are either eating the cost of shipping, or making the customer pay--and imagine how they feel about that).

The distributors play a vital role in bringing together a glom of manufacturers (just like Grainger/McMaster do for industrial stuff), so you don't need to buy 25 derailleurs to break even, when you only need 2; except now, you can buy a case of water bottles and a couple of boxes of nutrition.

A tertiary thing is that many distributors offer their own lines of credit--which many of the smaller manufacturers won't do for you. I'd put it this way: if you didn't need the credit to run your business, you wouldn't need to run the business, know what I'm saying?
Click to expand...
So what you're saying is distributors benefit the bike shop?
 
I have a slightly broader insight to this as an Employee of a component manufacturer that shall remain nameless. My purchase price is at Manufacturer's cost so I can see first hand the markup to a Distributor like QBP or Salsa, then to the shop, then to the Consumer. I could come up with really specific numbers if someone is really interested, but I can't talk about what Product it would be, just numbers.
 
jimvreeland said:
I have a slightly broader insight to this as an Employee of a component manufacturer that shall remain nameless. My purchase price is at Manufacturer's cost so I can see first hand the markup to a Distributor like QBP or Salsa, then to the shop, then to the Consumer. I could come up with really specific numbers if someone is really interested, but I can't talk about what Product it would be, just numbers.
Click to expand...
Percent on a derailleur.
 
Karate Monkey said:
Ask High Gear how throwing in with distributor/manufacturer (Trek) worked out for them. Their business practices (much like Spec/Giant, who also offer the same "get-everything-here" services) don't help. Cutting out the middleman didn't help them.
Click to expand...
Yeah, ask Knapp's how being a Specialized Concept Shop works for them.
 
Karate Monkey said:
Ask High Gear how throwing in with distributor/manufacturer (Trek) worked out for them.
Click to expand...

Couple of things happened there. I'd put some questionable management decisions at the top of the list,
and nothing to do with Trek other than they enabled.
 
Patrick said:
Couple of things happened there. I'd put some questionable management decisions at the top of the list,
and nothing to do with Trek other than they enabled.
Click to expand...

I jumped ship when I noticed the profit line was pinned in the wrong direction, that was all due to bad decisions in the upper ranks. All Trek did was throw them a lifeline and let them hang themselves with it, which they did.
 
You must log in or register to reply here.
Back
Top Bottom