Thursday, July 26, 2007

San Diego Vendor Sued By Specialized Bikes


A San Diego vendor took the unusual step today of informing the U.S. bike community that they were being sued by Specialized Bicycles. An accounting of their ordeal was sent in the weekly electronic email Bicycle Newswire which is delivered to approximately 12,000 vendors and suppliers.

The vendor, Bicycle Warehouse provided a semi-detailed account of being jerked around by Specialized over the terms of their arrangement--of opening a large store that they had collaborated on, only to be told later they could not sell Specialized bikes there because it was too close to another vendor, about 7.8 miles away, according to their account.

They also said after trying to accommodate Specialized by opening another store--and then being refused product, Specialized sent them notice that they were being sued.

The account, signed by the owners of Bicycle Warehouse, Mike and Debbe Simmons, does not go into any detail about the fact that the vendor offers their products online, which could well conflict with the terms of their agreement with the bike company. Clearly stated on their site next to a photo of a Specialized bike is the message, "This item may be purchased online and shipped to any U.S. address."

What's more, when I Googled "Specialized Bikes", the Bicycle Warehouse appeared at the very top of the search results--above Specialized Bicycles' corporate website. In the business of Internet, coming up at the top of search results is the only way to sell more product online.

I sent an email to Debbe Simmons asking her about these aspects of their agreement and expect to hear back from her.

But the public, electronically distributed message appears to violate a well-established notion that if you discuss a lawsuit publicly--or even with one other person, it can land you in even greater water than you're already in.

It also raises the more important issue about bike sales over the Internet. Bicycle Warehouse clearly sells Specialized products over the Internet. And with just about everyone having the capability--and the business requirement-- to create a website, have vendor-supplier agreements kept up with the times and included the eventuality--or possibility that the vendor will be violating its territorial provisions by selling product online?

And if they do sell on the Internet--which invariably they will--under what conditions can they?

I emailed a local vendor, Glenn Davgin, part owner of Piermont Bicycles, a popular bike shop in the well-trafficked area of the New York City to Nyack, NY, bike run to ask him whether he was allowed to sell bikes on the Internet.

"We are not allowed to sell new bikes on the web, it is in the dealer agreements," he answered.

He also said that the clause is there to protect him, because as a smaller bike shop, "I would never be able to compete to the big mail order houses on price alone if mail order was opened up on new bikes."

Sounds reasonable.

But this also raises the issue whether within the context of their geographical territory system, suppliers could designate either mail order houses or other Internet stores to carry their product.

And of the vendors who are supposed to be sticking to a set area, how would other vendors, and indeed the supplier, know that they were selling product outside their area?

It seems like an impossible conundrum that is bound to change the nature of how suppliers write their contracts, how bike stores market their products, and how people purchase their bikes. Clearly, many shoppers could look locally for a bike, and then can go online to find the cheapest advertised price.

These pressures could lead to the decline of the local bike shop if they don't have a good Internet presence with an attractive online store, user friendly access, easy shipping, product guarantees and return options, and local and international reach.

Still it makes no sense whatsoever NOT to enable stores to sell product online. It could greatly increase their sales and their reach, and would also allow them to tailor their message through the Internet without a concomitant increase in costs for bricks and mortar build.

As of press time, no comment back from Specialized or from Bicycle Warehouse.

More on this later.


Anonymous said...

Bicycle Warehouse offered bikes for sale online only ONLY AFTER Specialized opened a Specialized Concept store on top of their main location, dropped them as a dealer and called in their credit line.

The heart of the dispute is that Specialized is trying to force their largest dealer in each major GTA [geographic trading area] to become a Specialized Concept store with at least 60% of sales devoted to Specialized product and getting them to drop any other "major" bike brand they may carry [Cannondale, Trek, Giant]. Smaller brands like Bianchi are usually OK.

For Bike Warehouse this would have meant dropping Giant and putting all of their [financial] eggs in one basket. Eliminating consumer choice, but securing greater market share for Specialized.

Imagine Sony going to Best Buy and saying you must drop Samsung and Phillips or we won't sell to you. Bicycle Warehouse faced a similar decision and chose not to be muscled by Specialized. It was their choice.

There are great bike dealers that go the one major brand route, [usually with Trek] and there are great bike stores that stock 4 or 5 brands. Either way can succeed.

This was about money and market share, nothing more. The bicycle industry has joined the rest of the capitalist, corporate, rat race, for better and for worse.

Anonymous said...

I live in the area.
But am not a dedicated "Specialized" customer.
I be presently searching for the brandname of shoes. As Specialized dealers in the county are no fun.
Then I found of B.W. being shown on a google link with the Specialized name.
But no connection could be name, when I search, to make contact.

It'd be real funny had Chuck @ Pacific Coast Cycles, a longtime dealer of Speciaized. Attempted the same act. If he tried to open a 2nd shop.