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Giant USA announced that starting in March they will sell direct to consumers via a beta program with some of their Giant Retail Partner Stores, then make it available to everybody in August. The aim is to keep margins, costs, and returns as streamlined as possible for dealers and consumers alike, but is the program all it’s cracked up to be?

Check out how they’re going about this transition and what one dealer’s thoughts are…

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After Trek made the announcement to sell direct to consumer, last year, it is no surprise to see Giant USA is doing the same. Consumers’ demand for convenience seems to be over-ruling “personalized customer service” which has caused a struggle between what retailers and consumers expect from each other. To evolve and establish long-term growth, more companies are increasing their online presence to make the buying experience more aligned with consumers’ wants.

Like Trek’s program, Giant’s bikes will ship to the consumer’s shop of choice and all accessories will drop-ship straight from Giant’s warehouses to the consumer’s shipping address. According to Giant USA’s letter to dealers, the goal is to increase the dealer’s online presence and reach to consumers by helping them compete directly with the already established (and growing), “Direct to Consumer” companies and online retailers.

Bike Sales:

The ultimate goal is for the dealer to sell what they currently have in stock. When a consumer goes to purchase a bike online, if the bike is in stock, they can purchase it and simply go pick it up. If the bike is not in stock, it works just like a special order, where the customer does the ordering and the bike gets shipped to the dealer.  If the dealer has stocked that particular bike in the last 12 months, they receive 100% of the standard margin. If it is not a bike they’ve stocked, they get 80% of the margin, however, if the bike is sold through the retailer’s Giant-supported website they get 100% of the margin, regardless of stocking status.

Just like when a dealer places a special order for a bike, the dealer pays shipping unless they add the minimum amount that gives them free shipping. When a customer orders a bike online that the dealer doesn’t have in stock, the dealer has one day to add to the order should they wish to take advantage of free shipping.

Accessories:

Giant will sell and handle any returns on select Giant and Liv accessories ordered online. All accessory orders will ship directly to the consumer and the closest dealer to the consumer will receive 100% margin on any items they currently stock and 80% on non-stocking items. However should a customer order off of the shop’s Giant supported website, they will receive full margin regardless of whether or not they stock that item(s). All shipping on online orders will be paid by the customer.

One shop’s opinion:

I spoke with one long time Giant dealer and though there are some positives to this, their concerns on the surface outweigh the positives. Not being able to predict how bike returns will impact them as well as losing accessory sales by loyal customers to other retailers that may be closer to them (unless they use that shop’s “Giant supported” website) puts an initial cloud over things. They acknowledge that the overall IBD model does need to be restructured to accommodate the online sales element, and though they have every intention to do so, but the larger concern is that by Giant doing it for them and the shop not having a hand in how it’s done creates a bit of uncertainty.

“So, what it boils down to at this point is for us to make any and all foreseeable adjustments and see how it goes whilst keeping one’s head above water. You have to lead or get the f*** out of the way”.

GiantBicycles.com

32 COMMENTS

  1. Well of course Giant is doing this for the benefit of the company, and perhaps leaving shops to hang. It’s just a smarter way for them and consumers. It’s just smarter for the industry. I hope it also opens access to international market versions like the Propel SLR since stocking up every storefront is no longer an issue.

    Perhaps the only factor that can’t be helped is bike demos. In the interest of having bikes at the most convenient location, it’s not really a guarantee that everyone’s local shop will have a bike to demo. Consumer is just left guessing, and may potentially have to face a return process.

  2. Remember the “dot com bust”? Noone felt bad for people working in tech. And now look at web tech owning it in sales, and recreating business models. “What is this internet stuff. I’d never invest in a web site.” (deleted).

    This type of thing is needed even more in car sales – dealerships, and even worse dealer franchises need to die completely. That entire layer is useless and makes sales WORSE for the manufacturers. It’s just outdated.

  3. Consumers can regret bicycle purchases even when they have proper lbs guidance, I imagine this will be much worse when they are solely guided by their buddy’s advice and forums. How returns are handled has the potential to really hurt the lbs.

  4. i work at a giant shop. sucks that i am hearing this for the first time through you and not from our sales reps. our shop now has a million dollars in inventory that the consumer can now buy online. giant had some of the most stringent anti-internet sales rules now they are doing it themselves.

  5. The return process is not dealer friendly. If a consumer buys a bike, and decides to return it, it must meet this condition, “Bikes purchased online through Giant USA and returned to you must be in new, unused condition so they can go into your inventory. The consumer must also bring you the original receipt.” However, the part that is incredibly bad for the dealer is that the dealer will then be billed for the bike, by Giant, and then forced to put it into their stock, regardless of if it was a bike that they stock or if they even had any interaction with the consumer before the consumer purchased it.

    For example, a consumer buys a Glory Advanced 27.5 0 ($8,520) in Florida, decides they aren’t going to take that trip to BC anymore and decides they want to return it. They then return it to the dealer that had to bring it in and that dealer is forced to pay Giant the cost of the bike and now has to put a bike in stock that they would never bring in and likely will not sell in their local market.

  6. Why don’t they just cut out the lbs and make shipment and returns to and from giant corporate. No different than buying a bike from competitive cyclist. None of this direct sales really matter until they cut out the retailer mark up.

  7. First I am not against Giant selling online. But if the bike Industry Does not have the IBD. The bike industry will die and only a couple of brands will survive. Now if Shimano and Sram would really start working with the IBD.

  8. I don’t understand what’s in it for anyone but Giant? If I go buy something at MSRP from them directly, but am still beholden to a bike shop to take delivery, I still lose out financially. They pay the LBS less. I pay more than I might have to – despite any relationships with the LBS.

    Also, if you’re spending this much on a bike and can’t attach handlebars to a steerer tube and tension a headset, stick a seatpost in, and attach a front wheel, you’re spending too much.

  9. Outta my way pushy sales guy at the local bike shop (LBS). Giant savings here I come! In fairness, my LBS will still get my business if I need to buy the odd water bottle every few months. Actually wait, the local bike shop still needs to compete on price for that water bottle sale versus my local sporting goods store which probably has cheaper water bottles anyway. Sorry LBS! Next time try not to be so pushy.

  10. I hear a lot of violins being played whenever I read about this transition from the IBD to direct-to-consumer sales. On the one hand you have the pro-capitalist, die-hard free-market bike consumer–he wants to part with as little money as possible when buying a bike. However, he still loves his LBS, because he has nowhere else to go on Saturday afternoons and no one to talk about the latest trendy hoppy IPA with a witty name.

    Then you have the IBD owner himself. He hopes that, by the goodness of your heart, you are the type of person who fuels your fireplace with hundred-dollar bills, and don’t mind paying 50% more at his shop then you could get by shopping on the internet. These guys want the same forces to keep them afloat, yet want consumers to engage in quasi-socialist practices by giving them what is essentially a handout–pay more to buy the product here so I can stay in business.

    I don’t get it. Like the weather, pressure moves from high to low. People will go to where less dollars come out of their wallet. For the IPA talk, there are internet forums so you can talk high-IBUs to your heart’s content.

    • Nope. You misread. Under the bikes info they write the dealer gets 100% OF the standard margin, not a 100% margin. Nowhere do they say what the standard margin on bikes actually is.

      • 100% OF the margin means, if there is a $150 profit (sold for price-cost-shipping) to be made, the shop will get all of it.
        I’m interested in how this shakes down. On the one had, I don’t like the idea because the retailer is cut out of the purchase. If someone buys the wrong bike, everything associated with the brand will be compromised.
        On the other hand, I like it because I’d be able to get something and not have to do anything. It’ll be more than I’m making from the existing online retailers.

    • That’s also not how margins work. Margin is % profit. A 50% margin would correctly describe the situation you proposed. A 100% margin would be any sale for any amount if the cost of the product to the seller was $0.

  11. One consideration that wasn’t mentioned is that most companies’ bread and butter bikes, (highest percent margin and volume), are under $700. Most direct to consumer brands that ship to the customer are higher end and said customers are more familiar with needs and “how to”. I anticipate a lot of shops building and prepping a bike only to have the customer change their minds or need a different size. There will likely be some growing pains to say the least. – ed.

  12. One thing in recent years is that Giant is trying to strong arm dealers into buying more and more of their products because they want to be bigger than Specialized just like how Specialized wants to be bigger than Trek.

    If you have gone into a Giant retailer lately they are stocking more and more Giant parts and accessories not because they wanted to and the products are better than other comparable products on the market but because they are told that they have to stock these product categories. While some of the shoes, helmets, clothing are fairly good for the most part they are nothing special.

    In fact I know dealers are dumping this product as soon as it comes in just to get rid of it and meet the obligation to Giant.

    I completely understand shopping and buying on-line and we all almost do it in one form or another. With that said I also believe the Giant will create this false demand for their products and tell dealers why they need to stock more and more of their product because if they do not then they are just missing margin they would have other wise gotten.

    With the bikes it should be interesting. So as an example, a customer has always wanted to see on of Giants long travel mtb’s or downhill bikes. They order it online and have it shipped to the shop. This is a special order. The shop pays the freight (so $100.00?) takes the time to build a bike like this (so 1 to 2 hours), customer comes in and it;s either the wrong size or it’s just not what they hoped the bike would be and does not want want the bike. Can the shop send it back to Giant which would mean dis assembling the bike and re-boxing (another hour). I know that this is extreme but this is also a reality that does happen. Is the retailer reimbursed but Giant for all of this wasted time or do they consider it just the cost of doing business?

    I aslo wonder what is considered a stocking bike buy the dealer. Does that mean all of the colors and sizes of a model? So if you had not ordered the red model in size XL does that mean you have not stocked the bike even if you had every other size and color?

    Taking 20% from the dealer is quite a bit. So if a bike has an MSRP of $3000.00 and a dealer cost is $1800.00 (40% margin) but you are now only collecting $2400.00 for that same bike and you still have to assemble it and pay freight is a huge hit. I know with all costs of running a shop that many dealers I have spoke with need to run their business at a 34% margin at a minimum to just break even.

    Hope you are all ready for $300.00 bike tunes and $50.00 tire changes. It’s how the car dealers make money. They don’t make it on selling you the car they make it on the service. Only problem is that most people cannot live with out their car and just pay it where is if a bike dealer did the same thing they would just turn around and walk out of the store.

    • Dave, dealers are stuck with the bike, they cannot be returned to Giant. So, if a person were to buy that bike just to see it, the dealer will be billed for the bike with no recourse. From Giant, “Bikes ordered by consumers online and returned to retailers are NOT to be returned
      to Giant” and “Giant can credit the purchase price of the bike back to the consumer, and bill your account for your cost of the bike now in your inventory.”

  13. Worth mentioning that the dealers only get credit to their account, not a check in hand. So Giant sells the shops more product and in turn the dealer must sell this product to get “paid”. Im sure issuing credit to all the dealers will clear up dealers accounts………….

  14. Most shops around me already charge $65 per hour service rates. The LBS model of large storefront and tons of bikes on display is no longer sustainable. Time to cut that overhead and become service centers where applicable. The mobile repair industry looks very innovative. I like my LBS but it’s not worth adding 40% to my bike budget. I built 4 high end bikes last year..no way i can afford that with the LBS help. That would of been like $6k to $7k more. They don’t really help our local seen. Its actually been damaged due to the racer/poor etiquette people it’s brought to our pre existing group rides.

  15. I enjoy this gem:
    “They acknowledge that the overall IBD model does need to be restructured to accommodate the online sales element, and though they have every intention to do so, but the larger concern is that by Giant doing it for them and the shop not having a hand in how it’s done creates a bit of uncertainty.”

    Of course Giant did it for you. They gave you 20 years to figure out how to do it yourself, and you never did.

    Also, “direct sales” means no shop need be involved. Like YT or Turner. Trek and Giant are just trying to cash in on a popular idea without actually changing much. Too little, too late guys.

    • You do understand this program is not aimed at 99% of the people who read Bikerumor. They are not looking to serve the people buying high end Canyons and YT’s. This is for the average person looking to buy a “regular” bike. All of the elitist on here barking about “send it to me direct to my door or lose my business” don’t get it at all. 90% of Giant’s customers can’t build their own bike, nor do they want to. There is very little profit or margin on the bikes we buy and not really a concern for Trek and Giant

  16. @bearco. I can certainly understand saving money and this is not directly pointed at you but if you look around your local community all we are starting to have left in downtown shopping areas are Starbucks Chipotle, Jamba Juice, nail and hair salons. The small local business is going away because everyone feels like they need to save more and more on the stuff they buy.

    And we wonder why people are complaining that the cannot get a job that pays them decently and why small businesses are struggling so much.

    Remember that most small businesses are your neighbors, the first job for a teenager, and these small businesses pay taxes into your community to help pay for police, fire, local infrastructure, etc.

    So when you also support online vendors just to save a buck the only people that are bette off are these large companies.

    I know that this is a bit simplistic but you get my point.

  17. I’m sorry. I didn’t know I was supposed to be bankrupt so you can live better. When I bought a Titanium bike, I would have liked to have bought local, or from a US company. But 3.5X for the virtually the same bike, is just not going to cut it. I have compassion for the local guy. Really do. But the nature of business and everything in general is that things change, and one has to adapt. Has happened over and over again in every industry and service. Many will go out of business, some will adapt and grow, and others will just change to services i.e. mobile bike repair. Even beyond this, money I save on one purchase, is generally money to spend elsewhere at best, or staying even or reducing debt. After all, I still have a house, utilities, medical, and other transportation (just 3 vehicles in 30 years). In fact, it’s saving money elsewhere, is why I have been able to buy bikes and associated items. Why should the LBS, or anyone else expect to be held to different standard?

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