At seven o'clock Monday morning the average MSRP of every new bike that Intense sells will drop 25 percent. That means a $7000 Pro-Build Tracer will cost $5000. Customers in the USA will have the option of either buying their Intense directly from the factory, or from their local Intense dealers for the same money. Intense will support direct-sales customers from its headquarters in Temecula, California, and also support its existing dealers by linking on-line buyers to them with a prepaid service contract.
With a few exceptions, outside the US, Intense will sell direct to customers only. Intense has been busy setting up warehouses and customer support centers in the regions where it sells abroad to ensure prompt delivery, as well as warranty and setup-assistance in a familiar language and time zone.Introducing Rider Direct
Intense calls it Rider Direct, and it's a big change in the brand's business model, which has been staunchly devoted to bike-shop sales since its inception. There are a number of factors which motivated Intense to make that decision, but they all boil down to one simple message: Intense just made it much simpler and less expensive to buy one of their bikes.
No secret that Canyon, YT, and Commencal have demonstrated that consumer direct is a powerful tool for mid-sized brands in Europe. Their success has forced every player, large or small, to consider adopting some sort of internet-based sales strategy.
The obvious motivation is a chance to "cut out the middle man" and pocket two slices of the pie that would normally go to their distributor and retailer, but if consumer direct were that simple, everyone would already be on the program. As intense discovered, there's more to the picture than meets the eye.
Well before the decision was made to adopt Rider Direct, Intense scrutinized the best and worst of YT and Canyon. They also experimented with Intense's key markets outside the USA (the UK, Europe, Australia, and Canada), instigating test programs to compare the conventional distributor/dealer/customer supply chain with dealer-direct and customer-direct alternatives. What they concluded was that internet sales have permanently altered customer buying habits. And, perhaps more important, that the distributor/dealer supply chain was broken.Fixing What's Broken
Mountain biking is a fair weather sport (except in the UK), so our buy/sell season is a short one. Currently, bike distributors and retail shops must purchase and warehouse a substantial inventory to ensure they will have the correct size, color and model for a customer who may never walk into the store. The situation is made worse as bike brands release next-season models in the early summer months, which blunts the value of inventory as retail sales peak.
Savvy bike buyers (and sellers) know this cycle well, so they lay in wait for wholesalers and retailers to close out their stock around August at embarrassingly low prices. It's a vicious cycle that devalues the MSRP of a bicycle (and profit margins) before the first one reaches the dealer's floor.
Bike brands like Intense already own and warehouse their bikes in every size and color. Why waste the time and expense to warehouse them twice more when they could ship them directly to their customer's doorstep? In the USA, where Intense will introduce a hybrid model, dealers can minimize their investment by displaying a small number of showroom models and depend upon Intense to restock them in short notice. Intense says they anticipate shipping orders in two to four days.
Intense says their pilot programs indicated that they could use the savings generated by the Rider Direct Hybrid model to substantially lower their MSRPs and still maintain a fair profit for themselves and for their dealers. For customers, it's a form of free-market price protection. Whether you buy from an Intense dealer, or factory direct, you'll pay a price that reflects the average between the old-school inflated MSRP that high-end brands ask for (but rarely get), and the end-of-season close-out prices that the vultures offer when next year's models arrive. With far less inventory in the supply chain, the close-out situation should be minimized.Will Intense Dealers Accept the Changes?
Intense CEO Andrew Herrick was realistic about the switch to Rider Direct in the USA. He admits that Intense stands to lose a number of retailers, but he believes that dealers who do give it a chance will benefit financially. He says that the sport is maturing and when that happens in a technical, high-end market, profit margins begin to drop. Comparing mountain bikes to the motorcycle industry, Herrick states that the margins on new motorcycles are between 20 and 15 percent - which is where he expects enthusiast-level mountain bikes to level off:
"That doesn't necessarily mean that bike dealers can't make a profit," says Herrick. "If they are careful with inventory, they will. The future of retail bicycle dealers will shift towards customer support and aftermarket sales. When we sell direct to a customer, we link them to the shop with a service contract. So either way, they have an opportunity to establish a long-term relationship"Jason Guthrie - Chainline Bikes:
I had the opportunity to speak frankly with Intense dealer Jason Guthrie, owner of Chainline Bikes
in San Diego, California. He thought Rider Direct was going to be helpful:
"I’m pretty sure this will help the shops a ton," says Guthrie. "It gives us another tool to be competitive. It’s one thing to have a high-end bike, but to have one that is more attainable is something special. With on-line stores buying close outs and selling them for less than I could buy one, we can now sell an Intense for a realistic price and not be affected by end-of-year discounts."
Chainline Bikes caters almost exclusively to high-end buyers, who often pay a premium for customized paint and accessories. When asked whether dropping prices and going customer direct would adversely affect Intense, Guthrie was also positive:
"There are people who don't even grocery shop. My wife goes on Amazon, places the order and they bring it over to our house," laughed Guthrie. "The service contract, that's a great option. It covers things, like converting to tubeless, and offers a chance to introduce on-line customers to our shop. I don’t think that Intense’s reputation for being a boutique brand will go away, because of the passion they have for their brand and their core following. As long as they keep their shops involved, as long as price is not the main force driving them."
James Matty - Squatch Bikes and Brews:
Team mechanic and test rider Chappy Feine. When on-line buyers seek advice, they'll be speaking with the people who build and ride Intense.
Across the country in Brevard, North Carolina, I also spoke with James Matty, owner of Squatch Bikes and Brews
. I asked Matty if and how Intense's direct sales hybrid was going to affect the way his shop does business in the future. Matty seemed positive about the change, but he takes a wait-and-see attitude:
"For us, I think that having better inventory control and product readily available for customers is going to be better for overall volume of sales," says Matty. "I see it being better for local bike shops. People who bought on line before will continue to do so, but now Intense will be directing them to us. As far as the price of the bikes? People are looking for bang for their buck. With high-end boutique bikes, you don't see them selling as much. People are looking for value builds. I think the industry has pushed a little too hard."
To reduce its MSRPs, Intense is lowering its own profit margins, as well as the margins it offers to dealers that elect to stay on the program. Matty seemed okay with that. Intense's Andrew Herrick calls the concept of lowering profit margins, while increasing the volume of sales "the modern, transactional model." It's one of the pillars supporting the brand's move to direct sales. Matty maintains, however, that the transactional model was developed for much larger companies that primarily sell widgets at low price tags and at volumes that dwarf the cycling industry's.
"With this model [Rider Direct hybrid], I see it somewhere in between." predicts Matty. "As long as a bike shop does a little homework and watches their dollars, they will see their profits go up. Ratios will balance out, we will see more people mountain biking, and an increase in sales of smaller items and service. Low margins are like so many industries today. You have to look at your ratios and percentages. If I can sell three instead of one. If at the end of the year, my profits are higher. Why wouldn't I like that?"
Matty views initial success of Rider Direct with positive skepticism. I asked him about that, and how the changes were going to affect Intense's relationship with its core customers:
"I think, out of the gate, they are going to suffer internally." says Matty. "They are going to have a learning curve to figure out what the inventory should be like. When you are running a boutique manufacturing plant like they are, as long as they are maintaining quality and servicing their customers well - as long as they have that human touch like the bike shops - and they're hitting on price - I think those things are hard to beat. All that the on-line shops have to offer is low numbers."Doug Wolkon - North of the Border Bikes:
Back to Southern California. Doug Wolkon, owner of North of the Border Bike Shop
, has a different take on Rider Direct. Doug's shop sits at the trailhead of one of San Diego's most popular trail networks, so his sales are split almost evenly between high-end bikes like Intense, and entry-level models purchased by newbies. Wolkon believes that there are other compelling reasons that Intense is reducing its pricing:
"Retail pricing at the boutique level is totally fictitious," says Wolkon. "Dropping the MSRP 20 percent just brings the prices to a realistic level - what customers are really paying for them. I'd rather sell less bikes at a higher margin. When things are hard to get, everyone wants one. After everyone has one, nobody wants one anymore. There's too many brands out there, and everyone is trying to grasp so much of the market. I think that there's just not enough market."What Rider Direct Means for Intense Buyers
When we met to discuss the big changes in store, Intense founder Jeff Steber said: "We have always been a rider-driven company, and we have never been afraid of doing things differently. This time, instead of bringing out a new bike, we are bringing out a better way to do business. It's still about the rider. Prices of high end bikes have gotten out of hand. We've found a way to drop our prices, so now people who maybe could never dream of owning a high-end bike can afford something like our new Tracer."
No cheap bikes:
First and foremost, Intense is well aware that performance and pride of ownership are inseparable among its core customers. They will offer their entire 2018 range as advertised and without downgrading anything to reach their new set pricing. Andrew Herrick states that soon, every high-end bike maker will have to make a similar adjustment in their prices.
To maintain its core customers and rider-driven mission statement, Intense plans to wow them with personalized service. A completely reconstructed website
directs customer requests to real Intense employees who speak their language in their time zones. Ready to ride - almost:
Bikes will be shipped to the customer 90-percent assembled, along with a gift box packed with instructions, user manuals, accessories, and a high-quality tool set that includes everything the owner needs to finish, adjust and tune the bike. Most riders will be able to get their bikes up and running in a half hour. If the new owner doesn't feel up to the task, Intense's free service contract should cover the cost to have it done by his or her local bike shop.Get the bike you want:
Regardless of whether you are an on-line shopper or you choose to buy from a retailer, you won't have to search around for your dream bike. Intense will be shipping your bike directly from its warehouse, so you'll be able get the size, model, and color you want, instead of settling for the closest match that your retailer has in stock - or being diverted to another brand of bike altogether. If intense is sold out, you'll be communicating with the factory, so you'll get the straight story the first time around. Join the family:
Perhaps the best aspect of Rider Direct is that owners and potential customers will be interacting with the people who make, design, assemble, ship and ride Intense bicycles. Who could better answer your questions? The power of internet sales is that, for the first time in the mass market, an individual who is making a purchase can communicate directly with a person who helped make the product. It seems that Intense is prepared to take full advantage of that opportunity and hopefully customers will too. The bicycle industry will surely be watching.