When FLO started in 2011, we made the decision to sell our products via a consumer direct sales channel. The industry standard at the time was to sell products through a retail bike shop, but for us, selling directly to the consumer made more sense. This became a key part of our business model. So why did we choose to forge a path in a new direction? It’s a win win for FLO and the consumer. For FLO, the feedback from our customers leads to more specific research, improved design, and an overall better product. Our customers end up with a well engineered cycling wheel, direct communication with the brand, and great pricing.
Where We Are Today
Today, the industry is in the middle of a massive change. Shimano has cut most distributors from their business model, Trek has introduced a new sales model for their bikes, and Canyon breaks ground in the USA this year. In an attempt to break away from the retail sales model, the aforementioned companies are adopting a hybrid sales model, which is considered consumer direct by some. However, at FLO, we believe in a pure consumer direct sales model. Why? Because we believe it is best for the brand and the consumer. Read on to learn how we are defining consumer direct sales.
Hybrid Sales Model
Several brands are trying to find hybrid models that incorporate traditional retail and consumer direct sales. There are several reasons for this.
1. Existing brands that traditionally sell through retail break down their distribution network when converting to a consumer direct model.
2. Customer support and service is usually handled at local bike shops when you sell through retail stores. If a retail brand makes the decision to stop retail sales, their existing support network vanishes.
3. Selling internationally becomes challenging. Typically, there is an international distributor that handles distribution in the foreign country and the shops handle product support and speak the foreign language.
Issues We See with the Hybrid Sales Model
In our opinion the hybrid model doesn’t fix the problems, it applies a band-aid. Here are a few thoughts on the issues created with a hybrid model.
1. The cost of the product traditionally stays the same. The margins of consumer direct sales go up for the company selling the product, but the consumer pays the same.
2. Support is split between shops and the brand. This makes it confusing for the consumer and can deliver a less than desirable consumer experience.
3. International sales are still handled through international distributors. This greatly increases the pricing internationally and in most cases, domestically.
4. International customers are not in direct contact with the brand. This is bad for the brand and the consumer since the conversation between both isn’t happening.
5. The consumer view is changing. Consumers are choosing to buy directly from brands and expect the brand to take care of warranty and support issues, should any arise.
Issues We See with the Consumer Direct Sales Model
Over the past six years, we have learned a great deal about consumer direct sales. In that time both the industry and the consumer have changed. We’ve combed through our analytics and sales numbers and identified the following issues with the consumer direct sales model.
1. Shipping product internationally is confusing for international buyers. Some common consumer questions we receive: Do you ship internationally? Do I have to pay import duty or tax in my country? How long does shipping take? Is warranty covered internationally?
The Benefits of the Consumer Direct Sales Model as We See Them
The benefits of consumer direct sales are mutual for the brand and the consumer. These are the benefits we’ve seen after six years of consumer direct sales.
1. Cost. The MSRP of traditional retail (brick and mortar bike shop) is 5x the manufacturing cost, simply because the product changes hands so many times on the way to the buyer. With consumer direct sales, multiple lines of markup are cut out and the price the consumer pays is greatly reduced.
2. Communication. There is direct contact between the brand and the consumer. This keeps the messaging to the consumer pure and allows the brand to receive accurate and timely feedback from the consumer. All of this creates a worldwide relationship between the consumer and the brand, instead of just a local one.
3. Support and warranty are handled directly by the brand.
How We Are Defining Consumer Direct Sales and Improving our Model
In its purest form, a “consumer direct sales model” means that a consumer buys a product directly from the brand manufacturer. This is regardless of where the customer lives. At FLO, we started with consumer direct sales, and we are now fine-tuning our model by introducing new improvements to our site.
The industry is changing and we are making efforts to create the best consumer direct sales model we can. The benefits for the consumer and FLO are just beginning. We’d love your feedback on what you are looking for from FLO as we improve our consumer direct sales model.
Co-founder at FLO Cycling. Jon manages the day to day operations and acts as the lead engineer for all FLO products.