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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.

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By Tom Demerly.

Cmdr. Brian W. Sebenaler, commanding officer of Naval Special Warfare Basic Training Command (BTC) speaks to members and guests during an establishment ceremony for the command held at Naval Amphibious Base Coronado. BTC reports to the Naval Special Warfare Center and is charged with the basic training of all naval special warfare forces, including both Navy SEAL and special warfare combatant-craft crewman (SWCC) basic training programs, which include the BUD/S course and SEAL qualification training for SEAL candidates, and basic crewmen training and crewmen qualification training for SWCC candidates. (U.S. Navy photo by Mass Communication Specialist 2nd Class Kevin S. Beauchamp/Released)

Cmdr. Brian W. Sebenaler, commanding officer of Naval Special Warfare Basic Training Command (BTC) speaks at Naval Amphibious Base Coronado. (U.S. Navy photo by Mass Communication Specialist 2nd Class Kevin S. Beauchamp)

52 years ago today President John F. Kennedy signed into law the formation of a new special operations unit called the U.S. Navy SEa, Air and Land” or “SE.A.L Teams”; the U.S. Naval Special Warfare Teams, the Navy SEALs.

No military unit is more misunderstood, misrepresented or misquoted. The Naval Special Warfare Teams are also justifiably celebrated as one of the most vigorous, capable and successful combat units in the entire U.S. arsenal.

Over the past 30 years I’ve been occasionally privileged to work and socialize with members of the Naval Special Warfare community. I’ve never failed to be impressed by their internal standards, training and capabilities. And by their humility.

The history books tell you the Naval Special Warfare Teams were born from the Underwater Demolition Teams, the “Frogmen”. Since then their mission and capabilities have expanded to include intelligence gathering, direct action, rescue, security, reconnaissance, technical and operational development and a host of other missions so diverse it has presented major challenges to these units.

(left) Athletes participate in the Navy SEAL Fitness Challenge in Dearborn, Michigan. (right) Naval Special Warfare Operator Mitch Hall wins the annual SuperSEAL triathlon in Coronado, California. (Photos by Tom Demerly).

(left) Athletes participate in the Navy SEAL Fitness Challenge in Dearborn, Michigan. (right) Naval Special Warfare Operator Mitch Hall wins the annual SuperSEAL triathlon in Coronado, California. (Photos by Tom Demerly).

Another great challenge facing the Naval Special Warfare community is the media’s love affair with them. Officially and unofficially the Navy has fed into this, with everything from support of Hollywood film projects to unsanctioned technical support of computer games and thousands of books.  In 2008 and 2009 Naval Special Warfare promoted a national fitness competition called the “Navy SEAL Fitness Challenge”. Naval Special Warfare has supported an annual triathlon called “SuperSEAL” and “Superfrog”.  Naval Special Warfare also sponsored the Ironman World Championship along with several triathletes who are active members of The Teams.  Next week a new Hollywood movie, “Lone Survivor”, joins over 40 popular movies featuring Naval Special Warfare operators as diverse as “G.I. Jane”, “Transformers” and “Act of Valor” that featured cast members from the Naval Special Warfare teams.

In the past decade there has been tremendous growth in the Naval Special Warfare community.  The last time I visited the Phil Bucklew Naval Special Warfare Center in Coronado, California during 2007 there was a construction project underway to house new Basic Underwater Demolition School students and expanded administration activities.

Naval Special Warfare has also seen its share of controversy.  In 2010 a west coast Naval Special Warfare operator and instructor was arrested for trafficking weapons smuggled from Afghanistan and sentenced to over 17 years in prison.  In 2013 Esquire magazine ran a feature story alleged to be an interview with a Naval Special Warfare Operator who claimed to have killed Osama bin Laden during a U.S. raid on Pakistan. The interview was sharply critical of treatment of Naval Special Warfare veterans.

What I’ve learned from the Naval Special Warfare Teams and their members is that they are human. While they are exceptionally dedicated, incredibly well trained and maintain an impressive level of proficiency in a vast array of skill sets they still suffer the fallibilities of the common man. They have difficulty in personal relationships like the rest of us and struggle with divorce and emotional challenges.

(left) At the Phil H. Bucklew Naval Special Warfare Center for SuperSEAL triathlon. (center) On board an 11-meter RIB off Coronado Island. (right) With Naval Special Warfare Development Group original member and author Chuck Pfarrer

(left) At the Phil H. Bucklew Naval Special Warfare Center for SuperSEAL triathlon. (center) On board an 11-meter RIB off Coronado Island. (right) With Naval Special Warfare Development Group original member and author Chuck Pfarrer.

One of many things that makes them exceptional is they do all this set against the backdrop of a necessity to maintain operational security and rarely disclose their true challenges among non-military relationships. This makes their tremendous burden even greater.

Naval Special Warfare is a community worthy of effusive praise and recognition. They have shouldered a mighty share of the burden of the Vietnam Conflict, numerous “peace time” actions, Operation Iraqi Freedom, the Global War on Terror and other conflicts while maintaining a level of inter-unit quality almost unmatched in the world.  On their 52nd birthday it’s worth acknowledging their contribution.

Authors Note: If you are a fan of books about the U.S. Naval Special Warfare Teams you may find my review for MILTECHREV.com of Greg E. Mathieson Sr. and David Gatley’s impressive new book, Naval Special Warfare here of interest. It is the definitive work on Naval Special Warfare available to the public:

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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.

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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.”

By Tom Demerly.

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Amazon.com has lead the online customer service race with their patented “One Click” buying system for web purchases. It is fast, convenient and respectful.

The single largest retail mistake is failing to make the customer experience the top priority. Every operational decision should emanate from customer service and convenience.

Modern retailers have fallen into four traps of subordinating customer service:

  1. The sales staff is very poor.
  2. The checkout process is too long.
  3. They offer repeated, hollow apologies.
  4. They try to collect too much information without a reward.

First: Retail is at the bottom of the job ladder in all but a handful of niche markets. The pay is bad, the hours are long and the work is not inspiring.  If retailers spent more time training staff personally, not through an automated curriculum, staff quality would improve and a basic human need for the employee would be fulfilled; the need for interaction as a valued person. The most demoralizing part of being an employee is feeling like a poorly maintained cog in a machine. Everything from automated job applications to slide show training sends a clear message to employees; they’re a commodity. Personal and recurrent customer service training communicates and maintains not only the standards of customer service but also the nuances like tone, posture and other forms of subtle conduct. Retailers need to invest time in personally mentoring their sales staff. Then sales staff will mentor customers into being loyal.

Second: In a race to collect data and maintain inventory retailers have adopted checkout systems that take too long. I wrote about this here. The checkout experience has become painful. It should be quick and respectful. Two key mistakes are poorly handled defects in the transaction and making the customer wait. Customers: It’s not your fault if a bar code scans incorrectly. If even five percent of customers walked out when a bar code or checkout error occurred the retail industry would change. Vote with your dollars. If checkout is cumbersome or protracted, don’t reward that with the sale. Shop elsewhere.

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The basics of retail excellence haven’t changed in a century: Courtesy, quick check-out, owning mistakes and compensating the customer for them and respecting the customer’s privacy and time.

Third: Sincerely apologizing for a customer service error is step one, but the pay-off is fixing it. Repeatedly apologizing makes the retailer look less competent. The best way for a retailer to say, “I’m sorry” is to quickly solve the problem. If an item is incorrectly priced the retailer should deeply discount the item on the spot to compensate for the mistake and as an incentive to return. The apology has to be tangible.  Five hollow “I’m sorry”s from a minimum wage Walmartian mean nothing.

“The best way for a retailer to say, “I’m sorry” is to quickly solve the problem.”

Finally: Retailers collect too much data. This is especially true of online retailers and service providers like cell phone companies. While collecting customer data is important in diffusing frustration from a bad experience (when the first three topics in this article are ignored) retailers miss two key steps in customer data collection: 1. Customers should be compensated for their data. 2. Customers should receive an acknowledgement that their data made a difference. It is frustrating to throw your personal information and opinions into a black hole and never know what happened to them.

This list is short but each of these items forms the foundation of building a loyal customer base. That is the key to profitability.

People shop at Walmart because they have to. People shop at Target because they like to. If you were a retailer, which customer would you rather have? If you’re a customer, which experience would you rather reinforce?