I was sent a post the other day by Carson Stanwood, long time PR Guy in the outdoor and bike verticals. It was an article in the Competitive Cyclist about the bike industry and what Specialized and Trek were doing to dramatically reduce inventories of high-end bikes. 

Here it is in a nutshell. Specialized and Trek are both offering over $1000 in a cash back offer to consumers. Participating retailers will need to pony up at least $14,000 to buy the high-end bikes from one of the brands. And retailers are expected to kick-in 45% of the cash back to the consumers.

Bike retailers make about 6% margin on high-end performance bikes. So for this program, when you include buying the inventory, and the 45% of the cash back to the consumer…retailer margins will be somewhere in the area of 2-3%. Not a sustainable business model. 

I hope the rest of the industry will not go this way. Why?

1. We further educate consumers to not only look for huge discounts but to expect them. And there is a big difference in the two. 

2.  This short term solution to a long term problem is bad for business. Long manufacturing lead times are the problem. Sporting goods manufacturers must come up with a production model that can better react to a changing marketplace. Market dynamics will happen again, and again. And the short term solution to an inflated inventory? Deep discounts for an ever smarter consumer base.

3. Manufacturers and retailers need to talk more. What…retailers didn’t pick up on the signs of a recession in the Fall of 2008 when they placed their orders? And by the end of the year when the recession was at full throttle, manufacturers didn’t think to put some real heat on the retailers about their rosy orders?

Here’s a possible path to the solution. Pre-sell.

Manufacturers should get their high-end product protos and product information out there earlier to the retailers and to the public. Create demand. Get the protos into the shops and let the consumers touch and feel them. Let the salespeople get all goofy over these products. Retailers should then take advanced orders and tell consumers that there will be a limited run…so if you want this baby, put your order in now, with a down payment.

Retailer: “Our shop will only be ordering a very few of these bikes over our pre-order number.” Consumer: “Oh, you’d save one for me wouldn’t you?”  Retailer: ” Nope. That’s the reason for the pre-order.”

And manufacturers should use the blogosphere to create the pre-sell buzz. Show your influencers. Let them ride the bike. See all the product info. And they’ll publish. And consumers will read.

The resulting buzz will make it easier for retailers to get commitments from consumers…and retailers, in turn, to make commitments to manufacturers.

What is that I’m smellin. Is that the sizzle?