Direct to consumer sales

[sedluk]

I know that some on this forum are very interested in direct to consumer sale. I think there are parallels in other markets and thought that starting a thread specifically about this issue would be better than it coming up in other unrelated threads.

Bloomberg has an interesting article about this in the bike industry. We all know that the internet will change the way people buy stuff over time. If you would have asked me 15 years ago, I would have expected the demise of large shopping malls and the ever increasing proliferation of strip malls. So far it has not happened that way and the world has more malls now than it did 15 years ago.

I don’t really take a side on if direct to consumer sales would be a benefit to the world. I am suspicious of the idea that if more companies sold direct to the public, somehow all of our products would suddenly cost half as much and that we would all benefit as much as if we were all earning twice as much. It seems like a wonderful idea, maybe I am a sceptic because I have never seen an example of this in any marketplace on the earth.

Time will tell but so far these direct to consumer brands have had a surprisingly difficult time in the market. I am not sure why direct to consumer companies are not thriving. I enjoy bikes and kites and while of course the idea of getting products at a lower price seems attractive, it just seems like the direct to consumer products are not the products that most consumers really want. I don’t want the direct to consumer bikes or kites, the ones that I want are never direct to consumer. Maybe someday this will change but it has been experimented with for a long time and so far not much traction.

http://www.bloomberg.com/news/articles/ ... bike-shops

[Nem0]

Have a look on this page...
http://takoon-family.com/
They starting this way of seeling their products for half price...

[dylan*]

Just to pick apart your example with bikes and kites, I think they are a bit of a different case, since with bikes there is a lot you can tweak and adjust, and maintenance and repairs to be done, which all (or mostly all) bike shops do for you. There are lots of repairs and upgrades that you will probably not do on your own unless you really know what you are doing. So while direct sales exist, a local bike shop still has a lot of value.

With kiteboarding, there isn't much you can do with kites aside from warranty issues, which are easily handled online as long as the company actually has customer service present, since there are a few that totally ignore you when you email them. But that's a separate topic.

What exactly is the value in a local kite shop if you are buying kites? Aside from the fact that there are some old people who still like shopping in person, but I think that is irrelevant to this discussion because that applies to any product in the world. It's not like there are aftermarket parts you can really buy for your kites, most shops won't repair your gear for you, so... what's the point?

Of course it is nice to have a local shop because you can have fast and easy service if you want to pick up near gear or need a warranty repair/replacement. But kites are so expensive that it is a huge barrier to many that want to ride. The crazy markup that shops put on kites just makes it even worse. I'm looking at a new kite that would be better for foiling and was checking out the new Core gear, and a single 12m was something like $1500 (without a bar, that's another $500-700!!!!!), which is insane considering their wholesale is probably something like $800, which I would consider a fair price.

There's just so much overhead to running a shop, I totally understand that they probably need to charge that much in order to survive. But they just don't provide enough value to justify the markup, in my opinion.

[corbett]

Guys,

all you need to do is get a tax number, give some bullshit story to whomever you're buying the kites from and there you go. Tell them you run a school or something. You can give them a bullshit tax number, no ones going to care, some of them hardly understand English.

It's easy to buy wholesale. What do you think that prick selling kites from his car did?

I can start a business in a few clicks and go from unemployed to CEO of my a biz in secs.

[corbett]

What kind of people run kite shops these days? well the kind that own a little shitty river boat and insist people call him "captain" in everyday life.

Instead of just "Tyron"

[sedluk]

Dylan,

You make a good point with bikes, I build my own and order all my stuff but that is not the case for many buyers.

Maybe DSLR camera might be a better example, most people just buy them online and they are rather expensive. The lenses can cost thousands, the local shops do not repair them. Canon and Nikon could just sell direct and skip the camera shops.

It might happen someday but I find it interesting that it hasn't.

Maybe someone can come up with an good example of a product where most of the suppliers have gone direct and they have the majority of the market share. You would think that if it was a competitive way to do business, that once it was popular in a industry, it would take over.

[dylan*]

I think Amazon might be a great example. There are a lot of vendors popping up on Amazon selling their products direct (well, direct-ish) that are cheaper than you will find them in the store. Bookstores have gone out of business because they only carry certain books, whereas Amazon just has everything.

This is a good case of: "what value does the store provide?" if you just have a school reading list, why not just order them in 5 minutes rather than drive somewhere to find them?

do you need a salesman to help you pick out a good book? maybe they have the same taste as you, maybe not. oh look, Amazon has a whole section for recommendations for me, and i can read reviews right on the site. The salesman's opinion is no longer valuable to me. Apparently other people felt this way too, and it's very difficult to find a book store these days, because they just don't enhance your experience enough to make them worthwhile over just clicking a few buttons on Amazon.

So what value does a kite shop provide that makes it worth spending almost double on a kite rather than clicking a few buttons online and having it delivered to your door?

- Is it worth paying double to have a place to drive to for warranty issues, rather than just sending an email/making a phone call?

- Is it worth paying double to have a place to drive to to ask a salesman about their opinion on kites, rather than reading forums/websites for (slightly more) unbiased reviews?

- Is it worth paying double to be able to borrow demo kites (if they let you do this outside of the "demo events" that are held everywhere) so you can try before you buy? Or is a 30-day money-back guarantee enough so you can just return it if you don't like it?

[longwhitecloud]

Wow - the new takoon sales model!

what was that sick takoon vid given out for download in 2003? i remember it being epic...

[longwhitecloud]

bikes are large and cost a bit to ship

[Hardwater Kiter]

I've worked in the bike industry most of my life. I spent 8 year as an inside rep and buyer for a parts distributor. Ive seen many vendors go consumer direct and have it blow up in their face. Dealing with large numbers of consumers is time consuming and often frustrating. As a vendor, unless you hire staff specifically to deal with the public, all those people the shops dealt with come to you directly with every little question and issue, real or perceived.

Most of those vendors came back to us asking for us to carry them again. Some died out.

On the other hand take a company like Trek. Yes you can buy them online but the bike is delivered to a Trek dealer and assembled there. And the dealer gets the Lions share of the purchase price. There are no discounts for Trek purchases online, only MSRP. Whereas shops will often cut customers a deal or throw in service or accessories to close the sale.

Now kites on the other hand is a comparatively tiny market. And compared to a bike shop, kite shops don't offer nearly as much in terms of technical support because there isnt as much need. Yes very few do in house repairs. And kites need little to near zero maintenance compared to bikes.

But, a good kite shop is still the front line for a brand. The shop guys are the ones you see out riding the gear that they sell. They are the ones that get to know you and can point you in the right direction and ensure you get the best gear for your needs and wants. And they often cut you a deal when they can especially if you are a loyal customer. And here's a fun fact, unless you're a huge shop doing huge volume, the margins are pretty slim. I don't know where the notion that we get "crazy markup" on kites comes from. Margins in the bike industry are generally pretty bad compared to other retail segments. The margins for kites is worse.

If you do huge numbers and qualify for volume discounts or front load at the beginning of the season and lock in a discount your margins are better but still not great.

Part of the problem is lack of distribution control. As I said, a good shop is extremely valuable in supporting brands and a kiting community in a given location. Unfortunately lack of distribution controls means (using Corbet's example) means dang near anyone looking to get kites at wholesale can do so if they make the effort. And some manufacturers seem to think that opening "dealers" all over the place is a way to get their brands to market faster but in the end all it does is devalue the brand when people who make their living doing other stuff just cut deals to thier Brobrahs or dump whatever they don't use or sell on eBay because they have no other means to sell kites. If you're a "dealer" and selling new kites on Craigslist, you aren't a legit dealer. Vendors need to focus on supporting quality dealers, not just opening up anyone who applies.

Another aspect of having a local dealer is having access to demos. We offer demos to all of our students and clients. In the bike and ski business if I hope to get you to drop $3000 on a bike or ski package, I better have a demo for you to try before you buy. Sometimes demos are free, some programs charge a fee that is applied towards the purchase of whatever kite you settle on. And after we sell you a kite, if you come to us we offer a check out session to show you tips and tricks and get you dialed in on your new wing. Online direct sales can't do that.

But not every dealer will do this. Some dealers get their demos (which are usually sold to them at a discount) and just put them into retail inventory, fetching them a huge margin. There are a lot of unscrupulous dealers in the ski, bike and kite biz. When you open up anyone who applies that is the result.

And as tempting as the pricing through direct sales is, after the shops are gone and everyone has drank the direct sales model koolaid, what do you do when the manufacturer starts increasing the pricing knowing full well you have no bargaining power?

The Trek model is interesting. Something similar to that could likely work for kite. But a number of issues need to be addressed and resolved at the distribution level beforehand.

If you really want to save a ton of cash and go direct there is always the Pansh option. They are making better kites these days and they have the best pricing going. Granted it's a gamble whether or not your kite will be correct when it comes time to fly it but think of the money you save. A quiver, like a full quiver, of A15s will run you about the same as 2 Flysurfers. Pretty amazing. But I think buy and large you get what you pay for.