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By Tom Demerly for tomdemerly.com.

I was once so poor, I didn’t have a coffee cup.

It didn’t matter much since I had neither coffee or a coffee maker. I had boxes of things I owned when I was rich, before I lost everything. But I wasn’t going to stay in one place long enough to unpack them, so what was left stayed in the boxes. I never unpacked. Nothing was permanent.

No coffee cup though.

My parents told stories of the depression when they were kids. The stories didn’t seem possible to me. When I didn’t have a coffee cup it occurred to me, “Well damn. Here is our depression. Exactly like my mom described.” Now you’re reading my story of not having a coffee cup.

Eventually things began to improve. I was good at what I did, a writer. Got a good job writing at a company in California. Money came in. California is expensive so you need to earn a lot of money to be even reasonably comfortable. You still won’t have any money left over, so you better keep your job or find a new one outside California. If you want to make any money, don’t move to California.

Moved from California to Michigan. Brought my two cats in a cat carrier on the plane. I had written a letter to the airline well in advance telling them my cats were the most valuable thing in the world to me. They met me at the airport and took extra care of me and my two cats on the flight from California back to Michigan. I was thankful for that. Nothing was more important. I figured if I couldn’t even care for two cats, I was pretty worthless. But in this case, with the help of the airlines, I managed fairly well. Thank God, and I’m not even religious. The airline was Southwest airlines. If you can, when you fly, fly on Southwest Airlines. They actually care about people. And cats. That’s rare these days.

Still no coffee cup though.

When I got back to Michigan I took back an old job that I liked but didn’t earn much money. I was going to help open a new business soon. There was, at least, the promise of improvement if not tangible improvement itself. Sometimes you can do pretty good on just the promise of things getting better. It’s better than knowing things are going to get worse. I’ve gotten good at sensing when that is going to happen. It’s a bad feeling and you better trust it.

My friends Paul and Sue, whom I’ve known forever, visited me right away when I moved back. They knew me before the recession, before I lost everything. I was actually well-off then. Owned a house, car, business. Those things can disappear in an instant, so fast you can’t believe it. You think you are secure. Trust me, you aren’t. A million dollars means nothing.

I know that when Paul and Sue and their sons saw how things were for me then they were… well, I don’t know what they were. They never said. Sue drove me to the store. When it became apparent I had no money for food, her and her two sons brought food to my house. I always made sure my cats had food. They came first.

Things kept getting better. Made a little money. Lived in a house with a big yard, grass (we didn’t have that in California) and plenty of windows. The first warm day I went outside and just laid down in the grass. It was the first time I felt safe in a long time. My cats watched me through the window. That was a good feeling. I still remember that moment, lying there in the grass.

Eventually things got much better. That’s America. You can have everything, lose everything, and get everything back again.

On one trip to the store I bought a coffee maker, $22, a huge can of coffee (don’t remember how much) and a coffee cup. It’s still my favorite cup. I worry about breaking it. It would be a bad omen.

So with this new coffee cup, I am pretty careful.

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By Tom Demerly for tomdemerly.com

1. Preserve Price.

Tim Brick, owner of Brick Wheels, a successful independent bike retailer in Traverse City, Michigan told me years ago: “Never discount. You will only go out of business slower.”

Price preservation and the perception of what a product is worth has been destroyed by weak-kneed and undercapitalized bike retailers who give discounts too easily.

Sometimes they give discounts in the hopes of attracting more business, but discounted business is bad business, and it only earns the retailer a reputation for being a sucker to customers who drive a hard bargain. And soon they all drive a hard bargain.

Retailers also give discounts just to keep the lights on. Don’t do that. Just close the business, declare bankruptcy and get a job. The entire industry has been dragged down by incestuous and incessant discounting that has destroyed price integrity, brand identity and even alienated customers who don’t want to negotiate.

If there is one malignant cancer that pervades the entire retail bicycle industry, it is rampant discounting. The problem is so bad most retailers who do it are in total denial of it.

Bike industry, take one tip from a guy who has both succeeded and failed for four decades in this business: Stop Discounting.

2. Don’t Play Favorites: No Sponsored Athletes, No Club Discounts. 

When retailers play favorites with some highly visible athletes and groups through “sponsorships” and discounts, they alienate the rank n’ file average customer who subsidizes the cool girl and guy by paying full price. They train the consumership that through performance and visibility they earn special pricing.

This sends a clear message: Some people are more special than others and price is flexible.

Most importantly, there is no consistent, empirical business metric in small bicycle retail that quantifies how many full-margin additional sales are added to the bottom line by sponsoring anyone. And if you can’t accurately measure a sales promotion, you shouldn’t do it.

Sponsorships of athletes and clubs sends a message of favoritism and exclusion, rewarding persistence in driving pricing down.

Even if a sports marketing campaign were run correctly, as it is at the brand level (not by retail stores) it is extremely time consuming and expensive to manage. One beverage industry metric stated that for every $1 spent on sponsorship to automotive racing, the company budgeted $10 talking about the sponsorship in paid media. No bike retailer can afford the money or time for that. And if they could, they should start a beer brand and sponsor a NASCAR driver.

The most recognizable engagement ring brand, Tiffany’s, has never given a free or discounted sparkler to a Kardashian in exchange for publicity. Instead, news media reports, “Kardashian’s Tiffany Sparkler Was $25M!”. That preserves the perception of value and makes the brand aspirational.

3. Don’t Have Too Much Inventory. 

The worst thing about the bike business is bikes, and bike brands ram inventory down retailers’ throats with a vengeance. Bike shops: less is more. It is better to have money in the bank than bikes on the floor.

Bicycle inventory is like fruit, the second it lands it begins to spoil. Something newer, cooler and better is already under development and months away from release. And with the evolution in media the word about upcoming innovations doesn’t spread fast, it spreads instantly. As soon as something new is announced, what is suddenly old (but current only hours before) is suddenly devalued.

Customers will buy new, relevant bikes sight-unseen if the retailer’s sales process is optimized to facilitate that purchase format. That preserves capital, maintains freshness and keeps prices up. It also provides customers with more options and better integrity in the purchase.

Bike shops with a lot of inventory on the floor, and a lot of invoices on their desk, are compelled to “sell what we’ve got” and that leads to an ugly paradigm of putting customers on the wrong size bike with the wrong equipment rather than ordering the right bike and adding another invoice to the pile.

Consumers should be wary of bike shops with too many bikes on the floor, they’re going to try to ram something they have in stock down your throat just to make an invoice due date instead of getting you the bike you should really have.

4. Do Have Lots of Capital.

Nearly every bicycle retailer is undercapitalized and over leveraged financially. The reason is simple: When you have $500K to invest in something, does opening a bike shop provide the highest return on that investment? No, it doesn’t. You could take that $500K to an Edward Jones office and earn a better return on it the next day with no work than if you did the heavy lifting and ditch-digging of opening, promoting and running a bicycle retail store. As a result, most bike retailers try to start a business with about $50-200K and make a go of it.

If they don’t own their own real estate free and clear, have to pay rent or a mortgage, pay at least one employee payroll (and mandatory withholding taxes and health insurance) then the math doesn’t work.

To make bike retail profitable you have to have deep pockets and a deeper work ethic. You have to love hard work and business, not bikes and bike rides.

In its current iteration, the bicycle retail business model is a rotten investment. But, a new, emerging business model long on service and profit margin and short on inventory and overhead is promising and will be the bike shop of tomorrow.

5. Manage Costs.

This doesn’t mean go cheap. If your biggest overhead item is marketing then you are doing it right. If your customers arrive at your store and consistently say, “I thought this place would be a lot bigger”, you’re doing it right.

If you’re biggest overhead item is inventory, you are already in trouble.

Starting and maintaining a bike shop can be done very cheaply. Never buy new fixtures, so many used fixtures from other retailers that have been closed are available they can be had for pennies on the dollar. Never pay for extraneous and non-paying expenses like alarm systems (they won’t prevent or deter theft anyway) and subscriptions to POS software systems. Those don’t add to the bottom line.

Use low-cost, streamlined, highly adaptive and simple systems to combat the asymmetrical retail war the little bike shop has to fight against the big box e-commerce giants. Think of how the Afghan Guerillas used crude weapons to bring the Soviet Union to its knees, and still give the Americans fits in rural Afghanistan. Be a retail guerilla, a retail Taliban. Keep your costs low, adaptable and maintain a large amount of liquid capital.

6. Invest in Star Employees.

The online retailer you compete against is a faceless enemy. You can defeat him with a friendly face. If you have a star employee whom customers consistently ask for, reward them before anything else. Give them raises before you buy more bikes, pay them first and well and craft a set of “golden handcuffs” that makes it tough for them to go anywhere else. They are your brand, and if you lose them, you will have to rebuild your brand around another star employee. Worse yet, if you lose your star employee to another bicycle retailer across town or if your star opens their own shop, guess what happens, their customers follow them.

For a small bicycle retailer, the star employee is the single most important business tool. Develop them, value them, reward them, retain them.

7. Participate in the Sport. 

Instead of sponsoring the local hotshot, be the local hotshot. This doesn’t mean you have to do a nine-hour Ironman (but it helps) it just means you have to be present at events and participate credibly. This is a part of your business. It is work.

Set up the hours of your store so you can train. Close on key race weekends so you can be where the action is, as a part of the action. Ride the nicest bike you sell and show it off everywhere. Be an aspirational figurehead so when people see you on social media and in the store you have become “That Guy who Knows Everything and is Everywhere”.

If you build your hours correctly and manage your staff correctly the time you spend in the sport will directly and measurably bring full-price buyers into your store and keep them offline.

8. Differentiate Yourself. 

Build a voice, a brand and an identity. If your identity is so lifeless and generic that people confuse your business with others, you haven’t done that.

Understand that you will not please everyone. Nor is that the goal. If you talk about a donation to a wounded veteran’s charity in social media an anti-war activist may stop shopping with you. Fine. You can’t be everything to everyone.

Build your brand with clear vision and narrow focus. Don’t be generic. Don’t appeal to the masses. Keep your brand message narrow, unique and focused and be true to who you are.

If you are gay, fly the rainbow flag in front of your store and sponsor “Pride Rides”. If you are a veteran, have benefits for veteran’s organizations. If you are an animal rights activist, broadcast your donations to the local animal shelter and host an adoption day at your store. If you are an environmentalist, show your commitment to renewable energy and talk about how bikes preserve the environment.

Have the courage and identity to stand for something, be someone different and special. Brand yourself visibly and distinctly.

9. Be Highly Adaptive.

 Small bicycle retail is asymmetrical warfare: A small opponent taking on a much larger, better capitalized foe. Take a page from the teachings of Mao Tse Tung, Ho Chi Minh, Fidel Castro, Che Guevara and Osama Bin Laden’s play book: Never fight fair.

Change your floorplan frequently. Bring in small, low-priced, easily purchased new products first. Seek out niche brands the big-box guys don’t have and use the equalizing power of social media to partner with the brand to promote them.

Build a reputation as a brutal buyer who torments sales reps and sales managers with non-adherence to “program” buying. If the biggest brands’ credit manager loves you but the sales manager hates you, you are doing it right.

Within your brand identity continue to change and adapt. Use every social media platform. Embrace new media. Use video. Never stop changing, evolving and promoting. There are two types of businesses on the retail battlefield: the quick and the dead. Improvise, adapt, overcome.

10. Have An Exit Strategy.

One day, this will all end. What will you have to show for it? Did you squirrel away money in an offshore account? Did you buy real estate? Is your brand developed enough to have some sales value? And, if you begin to fail, and chances are overwhelming that you will, do you have a viable safety net?

It’s a pipe dream to sell a small bicycle retail business. Frankly, they aren’t worth anything. The inventory is usually older than six months, the fixtures are stale, the employees may not come with the deal and rest can be reinvented elsewhere better and cheaper. As a result, you have to have a viable exit strategy.

What is yours? What is your end game? When do you cry “Uncle” and walk away? Know those answers in advance and you can sleep more soundly at night as a bike retailer.

By Tom Demerly.

trojanhorse

In much the same way as Franklin Roosevelt is remembered for the Social Security Act of 1935, President Barack Obama will be remembered for the Affordable Care Act.

And it may be a larger success than any of us imagine.

The Affordable Care Act could be a masterfully engineered piece of legislation that has already set in motion the only means possible to topple big medicine and make U.S. health care affordable. But not how you think.

We’ve all seen the charts and YouTubes comparing the cost of medical procedures in the U.S. to other countries. They make a case for health care being significantly more expensive in the U.S. than in other countries that already have a state subsidized or administered medical system.  It’s possible the authors of the ACA did a masterful “Potomac two-step” in selling the ACA to the powerful medical, pharmaceutical and hospital lobby. Washington sold them a Trojan horse.

ACA critics have pointed to a host of administrative problems that are likely short lived. Those problems aren’t “structural”.

A structural problem built into ACA is that the weight of medical costs in the U.S. is spread over the broader economic “ice” of the American population. That ice is still too thin to support big medicine’s current financial weight. One of two things can happen: The ice can break or some weight can be removed.

Since ACA is law, and law can presumably be enforced, the “ice” that is ACA will be held up by Washington. The weight that comes off the ACA ice will be U.S. “Big Medicine” getting whittled down to functional size. No more massive, glossy prescription drug marketing campaigns. No more mini-malls and valet parking at hospitals. No more health care providers filing endless reams of electronic files, paying staff to interpret billing and insurance logistics and creating their own internal television networks to promote themselves. Malpractice litigation will be reformed. Medicine will become more medical, less commercial and litigious.

The ACA will dry up hospital "malls" and commercial dining areas and other accessories to hospital operation.

The ACA will dry up hospital “malls” and commercial dining area and other accessories to hospital operation.

There will be blood. Hospital staff, already strained in many places, will be trimmed. Logistics will be streamlined, even doctors will earn less. Health care suppliers will suffer mightily; with many going bankrupt like auto component suppliers did in the U.S. automotive bailout. And just like the automotive bailout many of the financial negotiations that were abrasive and costly between unions and car companies will now be quickly dispensed in bankruptcy court. And for once, it will be the medical companies that will take the hit. The ACA may protect the citizen-patient.

“Health care quality will contract while health care access will expand.”

If this is the direction of ACA, intended or not, the process will be an abrasive one. We the people in the first decade of ACA will experience constant changes in health care logistics and a general decline in the quality of health care. In short, our health care infrastructure will contract to a scale similar to those of countries with functioning social medicine. In many ways that will appear as a downgrade. But in the spirit of ACA it will spread access to health care across a broader population. Instead of high-income people getting great health care and middle and lower class people getting none or reduced levels with exposure to financial ruin, everyone will get a roughly equivalent level of healthcare services and products. Health care quality will contract while health care access will expand. The optimal balance will be when the two conflicting agendas meet in the middle.

It’s possible President Obama’s ACA will be remembered as the savior of the American patient, not the American medical industry. Getting there will require a long and painful period of financial and legislative surgery that includes some painful amputations with no anaesthetic.

2014 New Year's fireworks on the Burj Khalifa, Dhubai.

2014 New Year’s fireworks on the Burj Khalifa, Dhubai.

1. You do not know when you will die.

2. It will be sooner than you expect.

3. There will be things you wish you had done.

4. Not fearing death makes you more alive.

5. You will fail in life. Try again. Don’t give up.

6. Don’t fear failure. Instead, fear not trying.

7. Happiness is a balance of striving for new and being content with now. Do both.

8. True friends are one of the most important things.

9. Understand what you can control and control it vigorously. Let the rest go.

10. Plan for later but live for now

By Tom Demerly.

the-waltons-40th-anniversary-today-show-interview

I walked into my friend Mark’s house around 6:30 PM one evening. He lives about a block away. I was returning, in a small way, one of the many big favors he has done for me since I moved back to Michigan. What I saw was shocking. To me at least.

Mark and his wife were seated at a small, round table with a tablecloth. They each had plates, and cups. They were eating food with knives, forks and spoons. It was like the set of a 1950’s movie: a husband and wife having dinner around 6:30 PM, a new baby sound asleep in another room. It was positively… normal.

It struck me pretty hard: This is what that fleeting, ephemeral thing called “normal” looks like.

Like many people I didn’t have  a “normal” family when I was a kid. I had a dad with mental problems, a single mom, and two sisters long gone for those reasons. My childhood was not bad. I didn’t have everything I wanted, I did have everything I needed. But my childhood was different from what I saw at Mark’s house that night.

My family was fractured. Fractured by distance, disapproval, loneliness, lack of communication, forgiveness and trust. In other words, we’re like most families. We have our problems. We have more skeletons than a medical school.  One sister got married in Africa; I’ve got a niece in who lives in Japan. The only way we could keep our distance any better would involve NASA.

Two things that happened in the last decade caused me to revisit the value of family: I almost died and so did my 91-year old mom. As I type this she lays in Beaumont Hospital after two heart surgeries in three days.

When I moved back to Michigan my friends urged me to moderate the fractures in my family. It took time, but I did. It was frightening and humbling. It has also been rewarding and invigorating.

Peace efforts within a family are a lot like negotiating between warring factions in a third world country. Since I have a little exposure to the later, I used what I learned there.

Firstly, you approach it with ownership of your own mistakes and a lot of humility. Secondly, you do a lot of listening. You do what author Stephen Covey said, “Seek first to understand, then to be understood.” Thirdly, you bring some pretty thick skin.

A critical mindset is that you have to leave the past where it belongs- behind you.  You talk a lot about how things could be. Should be. You replace blame with empathy; you replace the lesser past with the idea of a greater future. And you focus on the half of the glass that is full. And mostly, you forgive. Living in the previous world of family arguments, disconnects, betrayals, broken promises and let-downs cannot result in a constructive dialog. It doesn’t foster healing.

Not everyone will get it at first. Families are made of complex personalities and complex pasts. But the behaviors of listening, understanding and forgiving are as contagious as the ones that drive families apart.

Ultimately we decide which behaviors we want in our family by which ones we choose to live in our present. When we make that decision and live it, we get along better.

By Tom Demerly.

Photo Credit: Collin Rodefer via Viral Nova.

Photo Credit: Collin Rodefer via Viral Nova.

The year I was born, 1961, journalist John Howard Griffin disguised himself as an African-American man riding buses through the segregated south. He chronicled the racism, discrimination and bigotry he experienced in the masterwork, Black Like Me.

Fast-forward 51 years and our country has made significant progress in all areas of equality.

Mostly.

I’m a 52-year old Caucasian male. Several months ago I left a good full time job as a writer in California to assist in a business a friend opened. Before the new business became fully operational my plan was to get another full time job in retail management, writing or other field I’ve had success in. I have a college education, a good work history and a strong resume in two different industries.

I filled out over 100 online applications that asked my name and other basic information. The questions included, as an “option”, my age. Most also asked me if I would answer optional questions about race and ethnic origin. I always did. I figured the more complete my application, the better my chances.

I got one interview. They weren’t interested.

In reviewing my experience, qualifications and accomplishments and also counting the demographic of the staff in a few of the businesses I was applying for I realized something. I am now a member of a new undesirable demographic, the white, middle-aged male.

My experience does not compare to the brutal racism and discrimination of African-Americans in the Deep South during the 1960’s. It does not. I have never been refused service in a restaurant, relegated to poor seating on public transportation or threatened with lynching.

Quite the opposite in fact. Because I am a well-spoken white middle-aged man everyone assumes I am well off. I get good seats in restaurants; great service and young people treat me with respect. They assume when they see me that I own a car, a house, have a good job. They pre-judge that. I have none of those things.

What I do have is a new appreciation for the type of silent, antiseptic discrimination afforded by online job applications and data-sorting algorithms. They compare key words and “optional” responses to a predetermined desirable profile of the best hire. Regardless of my experience, results, qualifications or talent my key words may not match their key words. So, in a competitive job search something in my key words on an automated job application is kicking my applications out.

Something. I wonder what that is…

I now have the slightest notion of what being discriminated against may be like. I don’t pretend to understand the full gravity of discrimination in our historical context. But, I couldn’t help but reflect on the Nelson Mandela quote, “For to be free is not merely to cast off one’s chains, but to live in a way that respects and enhances the freedom of others.”

If we claim to have made progress against discrimination in the United States then any mechanism that facilitates it based on age, race, national origin or ethnicity is wrong. That an online job application can even query this data as an “option” is wrong.

If we’re going to rest on the laurels of reduced racism and improved equality it means we favor no one, exclude no one, either in person or through an antiseptic, automated system. I don’t think we’re there yet. That means we need to improve our standards of equality in all areas, including job searches and candidate screening.

Until we do, we’re simply trading one version of discrimination for another.

By Tom Demerly.

cali

I survived the collapse of Detroit, the Middle East after 9/11 and watched East Germans through binoculars while dodging spies. I’ve never had a sense of looming change like California. The ground beneath your feet is unstable, and it’s not just geology.

California is ruled by silent fear. The culture is collectively grasping the dead image of the California dream.

It must be similar to sailing on the RMS Titanic in 1912 or being on Wall Street on 9/10. Everything seems fine, but there is a tectonic uneasiness. Consider that both the Titanic tragedy and the 9/11 attacks happened by the slightest of circumstances. California is vulnerable to a similar flutter of the butterfly’s wings. It is a culture perched on the fulcrum of the American dream, or nightmare. It can so easily go either way.

I lived in Mission Viejo, California for a year. The neighborhood was idyllic with soaring palms, manicured landscaping, and artificial lakes. Traffic jams of BMW’s delivered perfectly coiffed teenagers to the local high school in what looked like a cattle call for an Abercrombie catalog shoot. If nothing else, Californians are beautiful.

When I arrived in California I walked around a corner to discover two 40-ish females hefting their breasts in comparison. “Oh!” The woman remarked when she noticed me, “We’re sorry… we just got these.” Californians eat natural foods but have artificial breasts. They are afraid of the inevitability of aging and spend enormous amounts in a losing battle to avoid it. There is a cultural aversion to dressing your age in California.

California is crowded. So crowded that I lived inside a massive, sprawling strip mall. The expanse of strip malls is like a skin-eating disease on the terrain. The lesions have connected with each other across the tissue of the landscape to engulf the corporate housing boxes of consumers. We were caged there between purchases and labor shifts.  It resembled an above ground ant nest with nice landscaping. The ants drove Benzs instead of following scent trails.

My cell between the strip malls in California had 2 windows, 2 rooms and cost about $1600 a month. Now I live in a house with 17 windows, 9 rooms and it is $800 a month. I also have a massive yard. In California I slept with my head 9 feet from the front bumpers of cars parked outside. And their constantly bleating alarms. I did have a nice pool though.

Southern California is fragile. One morning on my five-mile commute to work a traffic light went out. One traffic light. The ripple effect throughout Orange County was bizarre. Nearly the entire distance of my five-mile route was delayed or stopped because of one traffic light failure. One. What would happen if there were power failures here like the East Coast power failure of 2003?

California works (now) because of a little known but real principle of space management called the “chicken coop” theory: When there are too many chickens in the coop to all sit on the floor at once you must continually bang on the side of the coop to keep some chickens in the air. The result is an unsustainable society of increasingly collective fatigue. If every Californian had to drive somewhere at once the roads could not handle the number of vehicles. If too many Californians flush their toilets at once…

You may ask, “What about the authentic surf culture? The liberal, progressive attitude and the tolerant society?” Those are the depictions of California we see in themed mall stores, music videos and media. The reality has shifted to an industry of depicting those things. Instead of being California, California is in the business of selling California to the rest of the world, or at least what they think California is. Or was.

What was most embarrassing is that many Californians were very up-tight about being laid-back. They were incapable of poking fun at themselves. When they made fun of me for calling a carbonated beverage “pop” I would reply, “Sorry dude, it’s totally soda man, that was so lame of me…” they would stare at me blankly, as if I had just taken the laid back Dude-God’s name in vein. The reality is that the California surfer dude is simply a hillbilly with a trust fund. Sorry to totally harsh on your scene dudes.

Mostly, Californians are lonely and afraid, and I was one of them. I asked a close friend who was moving if he needed help. He said, in all seriousness, “I don’t want you to help me because you might need me to help you.” That was California in a nutshell.

I went to the same pretty little check out girl at the grocery store every time for a year. The last week I lived there the girl asked, “Why do you always come through my line?”

“I think you are pretty.” I told her. She told me she was taking her break at six and asked if I wanted to have coffee with her next door at Starbucks.

“No,” I said. “I am moving back to Detroit tomorrow.”