Matt Evans in the The Business Journal
GREENSBORO -- A lot of retailers are nervous about this holiday shopping season, what with war and recession expected to take a toll on consumer spending.
But Dale Brown isn't too concerned about missing a big holiday surge in sales, because he doesn't usually get one no matter what the economy looks like.
It's a fact of life for independent bike shops like Brown's Cycles de Oro near Battleground and Wendover in Greensboro: Most of the bikes that end up underneath Christmas trees come from places like Wal-Mart or Toys R Us. The "big boxes" sell a lot of bikes, and they sell them cheap.
"When I started in this business, bike shops would do between 25 percent and 50 percent of their business each year for Christmas," Brown said. "Now it's usually 10 percent at the most."
Those were the good old days for bike maniacs like Brown, who helped Cycles de Oro founder Bob Kraus start the shop in 1975 and then took over when Kraus moved on in the early 1980s.
First the oil crises of the '70s forced people to consider nongasoline-burning forms of transportation, then the health and ecology crazes that came later solidified bicycling in the national psyche.
Brown remembers those years as the "bike boom" -- a great time to be a bike seller, but also a harbinger of a fundamental change coming in the business: The end of the family bike shop.
You may remember family bike shops, the kind that really only sold basic, economy-priced bicycles. But you're not likely to find one in business today.
"When the `bike boom' expanded the concept of bicycling, the mass marketers got interested," he said. "They saw millions of sales and they wanted a piece of the action, and they got it. A lot of family bike shop businesses were usurped and just went out of business."
Finding their niche
Which is why most independent bike shops did what Cycles de Oro did years ago: decrease the focus on general- purpose economy bikes and start catering instead to the serious bicyclists -- road racers, mountain bikers, tri-athletes -- who wanted the good stuff, not the cheap stuff.
That meant sponsoring clubs and races, carrying lesser-known but high- quality brand names, and stocking any gizmo or gadget a hard-core biker might want. It worked.
And though lots of shops didn't survive, those that did found a profitable niche.
And now it's starting all over again. The profitable market that entrepreneurs like Brown and other bike shop owners have found is once again under assault.
"The challenging thing for us now is that even though bike shops only sell 25 percent of the units, we do 50 percent of the dollars," which is attracting renewed attention from the mass marketers, Brown said. "As they move more into higher-priced bikes, they're pushing into our price range and we have to decide whether to stay where we are and compete or move to an even higher level."
For his part, Brown has decided he's not going to start selling jet-propelled, 24-carat gold bikes.
"My personal feeling is it's going to shake out in our favor," Brown said. "Service and quality and performance will bring customers back to us."
You may be able to buy a bike at any big general merchandise retail chain these days, but you probably can't get it serviced there. And you probably can't get shock absorbers and toe clips for it, nor find a sales clerk who knows as much about the bike as a well-versed customer does.
"They're going to find the mid-range market pretty unattractive for their bottom lines," Brown said. "People who spend $350 on a bike expect a lot more than people who spend $100."
Variety and service
Walk into Cycles de Oro today and you'll find just about anything you can think of for or related to bikes. A few kids bikes, a selection of budget models, and then every price point up to the multi-thousands of dollars, including a few models that don't even look like bikes.
Helmets, shoes and accessories of every kind line the walls and there's more in the back by the repair shop.
Customers like Michael Satterfield, vice president of retail for Bassett Furniture Industries, notice the difference between shopping at Cycles de Oro and a mass market shop. He races 20 to 40 times and cycles up to 6,000 miles each year -- just the kind of customer Brown caters to.
"I've been riding or racing for the last 20 years and the whole industry has changed in that time," Satterfield said. "One reason (Brown) is successful is he's changed, too."
Satterfield said Brown serves each segment of the market, from low-end to high, while focusing on the kind of serious rider who appreciates and will pay for quality.
"He realizes the needs of his customers. Many people want to take it (their purchase) with them right away, so he makes sure he has the right inventory on hand," Satterfield said. "He does a great job with accessories. Really, it's Dale and his staff, period. They build relationships and endear customers and make them want to come back."
For Brown, who said he started in the bike business "with one foot in hippie mode," deciding to compete with the major retailers on the mid-to-high-range turf he used to share only with fellow independent bike shops means he's had to get serious about his business practices.
"Small bike shops in general have been famous for being under-capitalized, poorly managed, with bad inventory control and no profit," Brown said. "We can't be as laid back as we used to be."
Attention to detail
So Brown and his staff have buckled down and done their homework. The store is laid out with nooks and dedicated areas for particular products to give customers a "homey" feeling while shopping. And aisles are laid out with no long, straight sightlines, just like the retail consultants will dictate.
A greasy-fingered mechanic doesn't have to come out from the back to help a browsing customer. The shop employs specialists for each kind of bike and there's always a "go-to" person around who knows pretty much everything about everything.
While there's enough inventory on hand, there aren't 10 different models of heart rate monitors on the shelf anymore. The shop has had to figure out what items turn over at what pace, and has cut back on the slow-movers and given more space to what sells fast.
"We've had to tighten our belts a bit and become better business people," Brown said. "It hurts in some ways -- in not being able to offer some of the slower-turning merchandise. But on the other hand, it has focused us in on what people really do want."
Will it save the market share from the big box competition?
There's a school of thought that says lower prices always win, but Brown doesn't think so. Neither does customer Satterfield, who knows from his work at Bassett that some customers will pay a premium for quality.
"My experience tells me there's going to be more change in the industry, but if you're a savvy enough retailer there's definitely going to be room for you," Satterfield said. "Some of the better goods will be sold at Wal-Mart, sure, but the consumers who wants to buy those kinds of goods probably won't be making repeat purchases there. At some point, service becomes an issue."