It’s really hard for me to see Specialized’s move into direct-to-consumer sales as anything but a way to take margin away from dealers. Which, yeah, fine, it’s their sandbox – at least on the surface. Digging a little deeper, it’s important to understand that this is pretty bad for their customers too.
I’m not going to get into how the relationship works with their dealer network (this is covered in the CyclingTips bit linked below). But, they left out a critical part of the hard screw that this will be, at least under the current model for consumers. When you buy a Specialized bike, the only way you actually get support for something is through an Authorized Specialized Dealer. I found that out the hard way when my Power Crank went sideways. Fortunately, I was able to find a dealer who would work with me, but when their margin on the bikes is swallowed by Specialized, their incentive structure to support Specialized’s customers goes out the window too. Frankly, it’s really hard for me to see how this won’t also reduce the number of dealers out there; especially in smaller markets.
And, then, there’s the elephant in the room: pricing. Direct sales buyers enter into an implicit pricing agreement with their direct-sales vendor. They get a massive discount on the hardware, but have to figure out the after-sales support themselves. The OEM can sell that low because they don’t have to support a dealer network, or that network’s need for sales margin. Effectively the buyer and OEM get to split the dealer’s slice of the pie. Win-Win if you’re comfortable with that. Where with Specialized’s arrangement, you get to pay their above average MSRPs, and… also need to figure out the after-sales support part. Oh, sorry, that’s not fair. You will be able to ring them up on the phone and have them fix, or maintain your new bike that way…
On the surface, all of this seems like a major degradation of retailer relations and financial support in terms of how they make their money. And indeed, there seem to be plenty of retailers who feel this way. That sentiment isn’t universal, though, at least based on comments from the owner of one multi-store chain who preferred to remain anonymous.
