Wednesday, October 13, 2010

No one likes getting dumped.

Cervelo recently shocked the bike business by announcing that they were leaving the individual online retail business. Instead, they're going with a business model that allows customers to either order their bike online directly from Cervelo and pick it up at their local dealer or to purchase their bike directly from the dealer. Time will tell if this is a smart move on Cervelo's part, but it is intriguing, especially since Cervelo's three biggest dealers are online retailers. Only one of their online retailers has publicly commented on this news, Competitive Cyclist. This quote from the "What's New" page on their site (which is actually the personal blog of one of the owners of the company) says volumes - "It's not for the potential loss of business -- we'll finalize our plans for filling the Cervélo financial void by lunchtime. The bike business is where we're PRO, and this is akin to an ill-timed puncture, but no more than that."

Before I continue, I'll give full disclosure here - I used to work for Competitive Cyclist (CC). I can honestly say that I enjoyed my 6 years with them and that I have several friends that still work there and love their jobs. I think they operate a great business, offer excellent customer service, and that they are the Gold Standard for online retail. I would also like to add that I left on very amicable terms - I'm not aware of any sour grapes on either end. Now I'll continue....

I worked for CC when they brought Cervelo on, and it didn't take long for them to become the #1 brand in the company. Much of the success that CC has enjoyed over the last 5 years has come from Cervelo sales - one look at their photo gallery of sold bikes will tell you that much. For the owner of the company to post such an idiotic statement on the company's site instantly devalues everything that their salespeople have been telling customers about Cervelo for the last five years, and the tone of the statement speaks to the arrogance and maturity of the company's leadership. This statement is just the warm up - the rest of the blog post is dedicated to the reasons why Cervelo will fail and come running back to CC. Picture the speech, whether delivered aloud or mentally, that everyone has ever given to the person that just broke their heart and you'll be right on the money.

CC's owner regularly uses the "What's New" blog to chastise companies like Trek and Specialized for refusing to sell online. He advocates cutting out the local brick & mortar dealer, suggesting that they should go to consumer direct sales or - big surprise - let him sell their product . In the past, he even used Cervelo's allowance of online sales as a shining example of how to succeed in the bike business and included them in the so-called "Big Three" with Trek and Specialized (never mind that there are several other bike companies much bigger than Cervelo, or that Cervelo's annual sales are roughly equivalent to what Specialized does annually in shoes and gloves). He constantly goes on about how inferior brick & mortar retailers are, about how they "hold their vendors hostage" ( I can assure you the opposite is usually the case), about how they can't come close to the level of service he provides, blah blah blah. While he is a very smart guy and a good businessman, what he seems to forget is that Trek, Cannondale, Specialized, and the cyclists in Little Rock financed CC in the early years, only to have the door slammed in their face when CC became profitable enough shut down the brick & mortar side of the business. But now that one of his vendors has essentially taken his advice and cut him out of the equation, the customer direct strategy seems "fraught with risk for several reasons." I guess it seemed like a much better idea when someone else was getting dumped.

While companies like CC spew fiery rhetoric about how Cevelo will never make it without them, they are too self-absorbed to notice that brick and mortar Cervelo dealers have been dropping out like flies. I have no doubt that CC, Excel, and R&A Cycles sold a shitload of Cervelos over the last few years, but even those three behemoths combined can only sell the equivalent of about 15-20 decent-sized brick & mortar dealers. Cervelo has lost a bunch of brick and mortar dealers in the last five years, most of them dropping the line because one of the above dealers was constantly dropping their pants to move Cervelo inventory. If you're a non-internet dealer, where is your incentive to sell a brand that your online competitors are regularly selling at near wholesale pricing? I can tell you nothing is more frustrating than educating a person about a product you have in stock, letting them test ride, fitting them to the bike, etc. only to have them order online for a few bucks less. I don't want to blast online bike sales - if your local shop doesn't treat you right, you don't owe them your business just because their door is open. Or if you're the type of person that likes to do all of your own research, doesn't really need or want personalized service, doesn't feel the need to have a salesperson guide them through their purchase, or prefers to shop on a schedule that is outside "normal" business hours, shopping online is a great option. But it's important to realize that there is more to a good deal than just the final price - if you wish to use the time of an attentive, knowledgeable, salesperson and they treat you with respect and offer you a fair price, you shouldn't dismiss their efforts to save a couple of bucks. It's insulting and tacky.

As I said before, time will tell if this is the right move for Cervelo. One obstacle they face is getting back into showrooms of the dealers that have moved on without them - Cervelo is a great brand, but there a lot of great bikes out there these days, and with their limited product offering, it's hard to build a business around them if they are your primary line. Also, Trek and Specialized have been clear about the prospect of their dealers giving floor space to Cervelo, and those two lines can make or break a shop. And while I've been critical of CC in this post and I find their arrogance at times nauseating, I am sincerely sad to to see them get the rug pulled out from under them. CC is a company full of hard working people that did a lot for Cervelo and this seems like a shitty reward for that effort, so maybe their response to this news is forgivable - no one likes getting dumped.