Bike Industry Rumbles

Shimano is doing something that doesn’t make a lot of sense…  Maybe.

Do pay attention.  If you ride a bike, or buy a bike, or want to get an older bike repaired, this is going to affect you!

The Backstory: 

For a long time now pricing on Shimano components has been an Issue.  The problem has been that vendors in the U.S. market have had to contend with a situation.  U.S. vendors, such as your local Independent Bicycle Dealer (IBD), buy components at wholesale prices from “authorized” vendors.  If the IBDs are to stay in business, they must make a profit on the transaction, so the product is marked up to the Shimano recommended retail price.  So far so good.  But…

Savvy internet shoppers have long since discovered that they can buy components from European vendors, on-line, at prices well below U.S. retail.  In fact, in many cases those prices have been below the U.S. wholesale price.  What is the U.S. dealer to do when faced with clients who ask, “Why is it that I can get this part at a much lower price than you are selling it for?  Will you match it?”

It is simply not possible for a small business to price-match an item that is selling below that vendor’s cost.  And bear in mind, that vendor was “playing by the rules,” purchasing through Shimano approved channels.  The situation had become pretty much intolerable.

Naturally, Shimano has heard complaints from U.S. vendors and industry groups, and demands that they get their European pricing under control.  For years, no apparent action was taken.  That has recently changed.

The Current Situation:

Shimano has recently announced seeping changes to improve the pricing situation in the U.S.A.  They are now limiting the number of full-line Shimano distributors from 18 to 6.  I’m quoting Bicycle Retailer and Industry News below.

The decision to streamline its distribution network, said Yutaka Taniyama, vice president of Shimano American’s bicycle division, will ultimately benefit its retail customers.

“Independent bicycle dealers have been and will continue to be our key customer base. By having a direct business relationship with them, we will be more aligned with their businesses, have closer relationships with cyclists, and offer more support and effective solutions to dealers’ challenges in the market,” he said.

Next year retailers must either buy their components directly from Shimano American or from six authorized distributors—Giant USA, Trek Bicycle, Quality Bicycle Products, KHS Inc., Seattle Bike Supply or Raleigh   America.

Canadian retailers can purchase Shimano parts through Cycles Lambert in Levis, Quebec, or through Shimano Canada. Cycles Lambert will be Shimano’s only authorized distributor in Canada. The decision to streamline its distribution network, said Yutaka Taniyama, vice president of Shimano American’s bicycle division, will ultimately benefit its retail customers.

Sounds cool, right?  But wait a minute.  How does clobbering US distributors bring the European market into line?  How does this control the pricing of stuff being sold in Europe?  From my own perspective, it looks like the whole move is designed to cut out a lot of folks with whom I’ve been doing business, and force the majority of the market to go “Dealer Direct.”  In other words, if I want to get parts to service you, my customers, I must now deal with one of a handful of sullpiers, or deal riderctly with Shimano. I don’t see how this stops me from being under-cut by the Euro-market.  I do see a lot of difficulty coming.  I suspect I’m going to have a much harder time finding various parts that some of you depend on.

From where I stand, the whole thing looks sketchy.  I’m having a hard time seeing the “benefit” to me as a retailer, or to you as a consumer.  It’s certainly going to be an interesting year ahead.  Stay tuned.