From: jackson@ponder.csci.unt.edu (Bruce Jackson)
Subject: Re: Manufacturer Marketing Policies - 2 Big Questions
Organization: University of North Texas, Denton
Date: Thu, 3 Sep 1992 14:12:25 GMT

In article <1992Sep2.232909.7285@ac.dal.ca> wulfie@ac.dal.ca writes:

>Also, What steps do the different manufacturers take to protect their dealers.
>I was under the impression that some limit the number of dealers in a given
>area so that they don't undercut eachothers prices or go bust...  However,
>What I see happening in the NS market with Schwinn is making me do some
>serious thinking...

The manufacturers have very little to do with protecting dealers.
The size of `terrirories' that you have depends on your sales rep.
Often you have to play hardball with a sales rep.  One time when I
was working in a shop that sold mostly Centurion road bikes and
Diamond Back Mtn bikes our sales rep. sliped and mentioned that a
bike shop on the other side of town was thinking about carrying
Centurion and Diamond Back bikes.  We made it very clear that if they
started selling to the other shop that we would stop buying their
bikes and blow out our inventory at cost so that the other shop would
not be able to sell theirs at a profit until we were sold out.  Of
course if you only sell a few hundred bikes a year from a distributor
it is harder to muscle the rep. into something like this.

My experience with Schwinn has been that they are very good about
protecting their dealers.  I don't know if you have a bad sales
rep. or they are less protective than when I was in the business.
Back when I worked in shops you had to about sell your soul to sell
their bikes.  They asked us to sign an agreement that our shop would
sell at least 51% Schwinns.  With the other lines of bikes we `cherry
picked' their line which means that we only sold the particular models
and colors that sold well and skiped the dogs.  Schwinn laid down the
law for us and told us that we would have to carry nearly their entire
line if we were going to sell them.  In other words they insisted that
if we sold Schwinns that we would be a "Schwinn Shop."  At the same
time Trek was offering to floor plan us (almost unheard of in the
bike business at the time), and Panasonic, Miyata, and WSI were almost
breaking down the doors trying to sell us bikes.  Of course from the
business point of view a Schwinn dealership was like money in the
bank when it came to the "family market" side of things.  Schwinn
also enforced minimum margins to protect their dealers.  I think that
at the time we were prohibited from selling Schwinns at less than
21% margin.  This was to make it so that no dealer would be enough
cheaper in price for it to be worth while for someone to drive out
of town for a bike.  I can't for the life of me understand how this
practice is not considered price fixing and illegal.

The ultimate size of your territory will depend a lot on population
density, how well you represent the line, and on whether your sales
rep. is a weasle.  I know of cases where two Schwinn shops were only
a few blocks apart but this was in a shoping center filled area of
Dallas which easily had enough of a market to support both shops.

Anyway, good luck selling those bikes (believe me, I remember how hard
it can be to turn a profit running a bike shop).

Bruce  -  jackson@cs.unt.edu
Newsgroups: rec.bicycles.marketplace