Trek Bicycle Corporation sent shockwaves through the independent bicycle dealer (IBD) channel in the United States last week by announcing it would launch a “click-and-collect” program next month that will enable consumers to order bikes at its site  online and collect them from their local dealer.

The Madison, WI company said its new “Trek Connect E-commerce” program, which will enable Trek retailers to launch a web store at no cost, will go live next month. Dealers who opt into the program will be eligible to earn a commission on every sale at Trekbikes.com, where consumers will be required to select from a list of local dealers to service their order before checking out. Those commission are expected to approach 80 percent of what a dealer would earn had they sold the products from their own inventory even though Trek will be fulfilling the orders from its own inventory. Dealers will earn a commission regardless of where the order is delivered.

For a nominal monthly fee, Trek is also offering its “committed retailers”  access to a suite of marketing tools and assets that can used to coordinate and automate search engine, email, social media, direct mail and in-store merchandising campaigns. Those retailers will also have exclusive access to Trek's design team for assistance with the creation of visual marketing assets.

“This is a massive investment in the long-term success of our brand and our retailers,” Trek President John Burke told more than 200 dealers during his keynote address at the Trek World retailer show Aug. 3. “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.”

While it is not clear what criteria Trek will use to designate committed retailers, the term is widely used in the industry to refer to dealers who agree not to sell competing bike brands. All but two of Trek’s concept stores are independently owned and operated.

A paradigm shift

Industry observers said the move puts Trek's two global rivals – Specialized Bicycle Components of Morgan Hill, CA and Giant Manufacturing Co. of Taiwan – on the defensive. While so-called “click-and-carry” models have been widely adopted in France and other bike crazy European countries, none of America’s major IBD bicycle companies sell bikes direct to consumer online.

“Trek has announced an order of magnitude paradigm shift in U.S. bike shop retailing,” said Jay Townley with the Gluskin Townley Group, which provides market search and consulting services. “Why? Trek is the number one brand group (with Electra and Bontrager) in the high end of the market and specifically the bike shop specialty channel of trade.  Trek going consumer direct in the forms announced will most certainly disrupt the U.S. bike shop channel and probably the whole bike market as well.”

The announcement triggered a flood of dealer calls to Giant USA, which has partnered with Shopatron to funnel all online sales inquires to local dealers. While Giant does use the “Click and Collect” model  in several countries, its senior U.S. executives assured dealers Thursday that they will not bring the concept to the United States unless it reinforces their bricks-and-mortar dealers.

“If we embrace this opportunity, it will be done at a super high level, supporting our investment in your brick and mortar,” Giant USA's General Manager Elysa Walk and Executive Director John T. Thompson explained in an email the company shared with The B.O.S.S. Report. “The way consumers buy bikes and gear is rapidly advancing and we want our retailers to win as the environment changes here in the USA. Our decision will be based on whether this model can enhance the strength of our retailer’s business in an evolving marketplace, as well as better serve consumers with access to world leading  products.'

Specialized has been selling parts and accessories direct to U.S. consumers online for five years, but  does not sell bikes online. Consumers browsing Cannondale.com also uses a dealer locator to refer online visitors to its local dealers. Neither Specialized or Cannondale could be reached for comment in time for this article.

Ripples of disruption
Trek Connect consummates a two-year pilot program with selected dealers and builds on lessons Trek learned through its Project One customization program. That program allows consumers to customize and build a Trek bike online, but still requires they order it from their local bike dealer.

Trek’s announcement comes amid broadening disruption in the North American IBD channel, where Shimano, Selle Royale, Graber, Kirt Kinetics and other parts and accessories brands have begun selling direct. On July 24, Accell North America, a subsidiary of Europe's largest bicycle company, announced it was responding to the trend by refocusing its US distributor on in-house brands. It also said it was retooling its Raleigh brand to address disappointing IBD sales and dealer complaints about its B2B website.

Some researchers project the number of U.S. bike shops will decline from their current level of about 3,950 to 2,500 by 2025 as more efficient omnichannel models squeeze dealers out of the market. Canyon Bicycles GMBH, which sells direct exclusively, now ships to 55 countries in Europe and Asia and is rumored to be eyeing the U.S. market. 

Reports emerged Wednesday that Giant this week told dealers attending an annual meeting in Canada that it was working on an e-commerce initiative similar to Trek Connect, but a spokesman for Giant USA declined to comment on the reports. Spokesmen for Specialized and Cannondale, did not respond to an inquiry in time for this article.

Retailer reaction to the news was as lively and mixed as one might expect. Critics predicted the emerging omnichannel model would ultimately replace dealers with contractors. Others welcomed the opportunity reduce their own inventory risk and focus more on the relationship building, fulfillment, service and other aspects of their retail business which the Bicycle Product Suppliers Associations views as critical to IBD sustainability.

“I’ve been thinking a lot about what Trek Connect means to our customers and David’s World Cycle and it’s really pretty simple: Customers not only have more choices than ever but also have less time. Trek Connect addresses both,” David Sanborn, owner of David's World Cycle, said in a statement released by Trek. “We ask three questions at David’s World Cycle whenever we ask ourselves what to do: Is it good for our customers, is it good for our partners, and is it good for David’s World Cycle? Trek Connect is a yes on all three.”

Trek Connect will launch in the United States in September and – depending on how it fares – Trek may expand it globally. Eventually, Trek anticipates enabling consumers to search local availability at Trek dealers.

“We are working toward that,” Trek spokesman Eric Bjorling told The B.O.S.S. Report. “There are a huge number of consumers that would buy today if they knew a dealer had the product they were looking for in their market.”

E-bikes on deck
Bjorling confirmed that Trek has also launched another pilot program inspired by developments in Europe.  Eight weeks ago, the company launched a pilot program with a group of select dealers interested in helping the company introduce its e-bikes to the United States. The company tentatively plans to offer three pavement e-bikes to the U.S. market in model year 2016 for the commuter and recreational use.

“We think e-bikes in the U.S. is $320 million a year business,” Bjorling said. “We estimated we are 2 percent of that and see it as a massive opportunity for brand like us.”