Just as we are accustomed to being served region-specific content in the online environment, restrictions also apply to the bicycles we can purchase depending on our geographic location. But who decides what we can buy and what factors influence those decisions?
Market-specific product lines are fairly commonplace, as anyone who has ever toggled the country settings on the website of any major bike brand knows. It s frustrating to see the exact product you want from a brand you like, only to discover it s not available in your area. Surely if a brand goes to the trouble of creating a product, they d want universal consumer access to it? The truth is they likely do, but multiple barriers stand in the way.
PRODUCT MAKERS, PRICE TAKERS
Depending on whether or not you believe Steve Jobs knew anything about consumer behaviour, you might subscribe to his view that a lot of times, people don t know what they want until you show it to them .
Apple was a true disruptor, creating new markets with a succession of innovative products that consumers had to have even if they didn t completely understand why at the time.
In contrast, innovative disruption rarely visits the bicycle industry. SRAM s launch of its Force road groupset in 2006 is the most recent example of a single company influencing the complete road bike market in a significant way.
Instead, unabated segmentation has acted as something of a proxy for innovation and many brands product portfolios can be too extensive for a single market to support as a consequence.
Barriers to entry in the bicycle industry are also relatively low, so popular product segments can easily be overrun with me-too brands all seeking to take a slice of what can often be a small pie.
This deluge of reiterative products drives down prices, which is great for the consumer, but it creates a situation in which a brand s depth of stock will be kept to a minimum to avoid oversupply. This has a knock-on effect to the number of product variations available in a given market, as we shall see later.
EYES ON THE GROUND
It is the task of a brand s distributor (interchangeable with subsidiaries, branch offices and importers for the sake of this article) to understand the market, qualify feedback and quantify real demand. If the distributor is really clever (or likely just plain lucky), it will supply the market at or near the intersection of five demand-side dimensions: product, place, volume, price and time.
But can a distributor know, for example, that seven consumers will want a 49cm volt green Ultegra-equipped composite aero road bike in June when the brand it represents offers two other colours of the same model?
No, so conservative tendencies take hold. There is a reason for all of those red, white and black bikes.
So how to calculate demand? Due to the long production lead-times in the bicycle industry MY2017 bikes arriving in June this year would have been ordered in January or perhaps earlier demand has to be based on projections.
Historical sales data is a crude but serviceable baseline for this exercise. Next comes the economy. Is employment rising or falling? What about interest rates? How is cycling participation trending? If it s growing, is infrastructure growing commensurately?
Depending on whether the market place is projected to expand or contract, that needs to be converted into an overall demand figure. Only then can the market size of individual categories (ie, Road, MTB, Track, etc), their respective segments (ie, aero, comfort, super lightweight) and specifications (aero disc, aero mechanical disc, aero Ultegra mechanical disc) be determined.
This is only part of an exhaustive process which should also take into account the supply pipeline, network capacity, conversion rates, competitor dynamics and so on. In reality, many distributors will start with a basic sales target and decide from there which products they take from a supplier s portfolio.
Let s assume a brand s distributor has projected market demand (or set a sales target) for 500 Shimano 105-equipped aluminium aero road bikes in 2016.
The first question it might ask is can the manufacturer supply that quantity? If so, can the order be spread out to improve cash flow and reduce sunk cost? How many production runs will there be for that model and in which month will they occur?
Next, does the brand or manufacturer have a minimum order quantity per model, colour or size? Will there be enough bikes produced at the same time to fill a container, or will some need to be air-freighted separately or consolidated into another shipment? Will the factory allow this? Is there enough margin in the product to air freight it?
In going through this process, a distributor may be forced to remove very small and very large frame sizes, eliminate colours or even drop entire product lines. The original order plan may look very different from the order finally placed.
It shouldn t be assumed that no thought is given to the consumers in this process. It is very often the case that a distributor will intensely lobby its supplier to reduce its minimum order quantities to import a few units of a given model/size/colour. In the current environment every sale is fought hard for and distributors have customers (retailers) to answer to as well.
THE SECRET MENU
Sometimes the product line offered by the brand still doesn t address all the needs of a particular market. This is where SMU (Special Make Up) products come in.
SMU s are essentially a market-specific modification of an existing product. It could simply be an inline product painted in a different colour, or perhaps the specification can be changed. Asian markets in particular require different crank lengths, handlebar widths or even a change to the size- or level- designation: for example, labelling a 49cm road bike as Small (it s an easier concept to understand) or making the Road Sport 2 bike the Road Ltd bike (it sounds more expensive).
Merida Reacto Honor (re-branded Reacto 300 for the Chinese market)
Often, these are the bikes that consumers see as being geo-blocked, when it fact they were only ever intended for release in a limited number of markets.
HIDE AND SEEK
Several months after a distributor s product line is fixed for the coming model year again, it might look quite different from what was originally planned due to supply barriers the brand s website will be updated with the actual products ordered by each market.
It s only then that a brand loyalist may realise the version of bike he prefers is hidden from view when toggling to his location. What are his options, other than substitution? Usually, they are relative to a brand s scale and reach, the price of the item and where it is in the supply chain.
Specialized Allez DSW Elite, yellow available only in select Asian markets
The first step might be for the distributor to check with the brand to see if another distributor has ordered any of the requested bikes. If it has, it s a case of the brand acting as intermediary to negotiate reallocation of the bike from one country to the other.
If the requested bike is not available from production, then the distributor may try to buy directly from its counterpart who has available stock. However, this is actually more complex when a bike has been customs-cleared and had various input costs applied (freight, import duties, taxes, etc). If the countries of each distributor have different product regulations (ie lights, reflectors, brake orientation), that also creates an import hazard.
If all else fails, some consumers may engage the services of a colleague or friend who is a frequent traveller to purchase the bike from wherever it is available. The obvious question is who s responsible if the bike is damaged in transit?
TOO COMPLICATED TO CHANGE?
As illustrated above, products don t necessarily become geo-blocked because the distributor hasn t paid attention to market demand. Often they are at the mercy of the brand who in turn is trying hard to keep its factory s production lines humming along. This is only made possible by enforcing strict minimum order quantities to crowd out small production runs which disrupt efficient workflow.
It s an imperfect system, exacerbated by the industry s continued penchant for model years which sees entire product lines superficially refreshed every year. Imagine being a distributor who has tried to offer three colours of a particular model one year, only to be stuck with two colours at the end of the season. The brand then releases three new colours of the exact same model and calls it new . It s a difficult situation.
Responsibility ultimately rests with a brand. Though it may be impossible to please everybody in life, it is possible to change a strategy.
When a brand tries to be all things to all people, it inevitably creates supply-side issues that can ironically result in less choice for consumers. One solution is to focus on product segments a brand is good at, which affords the distributor more bandwidth within those segments. Easy to do? Relatively speaking, yes but don t expect to see more options in your country any time soon.