Thursday, February 28, 2008

32 The Story of Bike Nashbar

Note : Some portions of this post are on the speculative side due to scarcity of information. A bigger discussion of this post can be viewed here, for which I thank the RBT readers.


If there's a more well known and unique-in-name local bicycle shop killer than your wife who says you can't buy any more cycling stuff this month with the savings, its got to be Nashbar.

Some also call it Trashbar.

In 1974, Arni Nashbar, a New Middletown Ohio advertising man, started a bicycle parts mail order company out of his home with $1,000. He did this possibly believing that a small company can make more money on items sold through a catalog than through retail. Since this was way back, we don't exactly know how it happened. Some people believe he bought out the business from an initial holding called Bike Warehouse, giving it his name - Nashbar LLP.

Whatever the story, ten years later, the company was grossing six million plus.

Arni's mail order business was thriving so much that in the late 80's, his bicycle mail order house had branched out, opening five stores - two in Ohio and one each near Detroit, Boston and Washington. The shops offered service, repair and discount services. Today, there appears to be one even in West Virginia.

Sometime in that age, they also began a used bikes advertising tabloid called Cycle Seller, repositioned brands,broke into the overseas markets and pretty soon called on programmers to open an e-commerce venture of the business, which is now famously your www.nashbar.com/.

Ran out of tires,tubes? Nashbar. Need cheap water bottles? Nashbar. How about a cheap bicycle, or tools, or lubes or whatever secrets you may need under your cycling tights to cope with 8 hours on the saddle?

Yes, Nashbar.

Any bicycling accessory your poor brain can think of will be available at Nashbar.

In the late 90's, the company invested in the U.S Postal Cycling Team as a sponsor, which inturn ended up giving Postal a 1.1 million dollars in business.

Nashbar expanded its offerings and distributed catalogues overseas. Private and even branded items easily sold here for 40% or more than what one could find through independant retailers. Nashbar buyers are often the serious bicyclists - racers, touring, and MTBers who could easily spend an average of 50-70 dollars per order.

Several times I myself have had a hard time believing the discounts in Nashbar prices. There is a blowout sale every day, every week, every month, one for Christmas, New Year and maybe even for Easter and Thanksgiving. The fashion in which they present this event to us make it seem as if its THE one grandiose event on your calender.

Its funny, but as if occasions aren't enough, their latest addition is a massive LEAP YEAR blowout, prices which are 30-90% off!! It seems to me as if the only number they haven't touched upon is "FREEE"!!!!



A "Leap Year Blowout" in my email. Oops, they CLEARLY forgot Lunar Eclipse Day, how bad!!


I'm sure you have asked yourself more than a dozen times : How in the world they could possibly do this - selling so cheap?!

It beats me. If you readers can help out, that'd be amazing.

Some things I can think of are :

They buy in bulk.

They nab manufacturers' closeouts, OEM's or slow-selling models of better brands and stamp their own brand names on imports.

To get around the exclusive dealer agreements of makers of more expensive bikes, the company deals directly with manufacturers in Taiwan and Japan - the same plants making many exclusive bikes - to produce its own line. ''We have a buying advantage from sheer volume,'' said John Rossi, Nashbar's director of retail development. ''As a result, we sell for what dealers buy for.'' He added: ''We have to overcome an initial objection to the name, but we point out to customers that the bikes have the features they are looking for.'' Since they opened, the outlets have increased sales volume by 20 percent. [Source]

They also have sweet return policy. You give back things you that didn't fit you, or you didn't want, and that later sells again for a much lower margin to someone else!

Nashbar is favorable to many because of their fast shipping and handling. I'm not sure how they do this, but I keep wondering whether they actually have stock that they ship or whether they have manufacturers ship directly to the customer.

Or they may have a lot of stock, and towering inventory that they are DESPERATE to move out.

Okay, anyway - back to the Nashbar story. After the Nashbar website was well established, Arni started lending programming and development expertise to other mail order houses, some of them being quite big. They became his customers.

Soon, Arni retired and let his son open Spike Nashbar, trying to get into the baseball and volleyball market. His son took his own decisions at a young age, and almost came to a brilliant decision to shut down the software end of the business, something that a lot of their customers were upset about.

His daughter, Molly Nashbar became a TV star, sort of like Cycling's gift to the world run by the likes of Paris Hilton. A reality show on Women's Entertainment (WE) showed how she moved out to L.A without telling her folks and poured money into parties and botox treatments at her will.

So finally we now have Nashbar, having multiple locations in the United States and a thriving website. People identify them easily with CHEAP, CHEAP, CHEAP. Another favorable fact that if the store isn't in your state or city, you don't have to pay a sales tax, something thats often on the bill in your local store, isn't it?

Interestingly, Quantcast statistics says Nashbar's website reaches 154,000 unique people/customers every month. The website appeals to a primarily male, somewhat wealthy, more educated audience. Most visitors are from the 60-100 K income bracket and most are also Caucasian or folks from overseas. The typical visitor reads VeloNews, visits campmor.com, and buys from pcmag.com.

That clearly isn't me, but I do read Velonews from time to time and I'm over educated.

Fast forward...a lot of things happened between then and now. Some believe Nashbar, Supergo and Performance are all operated by the same holding company. Others have it thinking that the holding company is Performance Inc itself. This stuff is difficult to do journalism on so I'll leave that in the air and have readers help me out here.

If one of you happen to be an independent bike shop owner or work in one, comment on how your shops are coping in such a competitive retail industry.

32 comments:

  1. Anonymous11:33 PM

    The "store" in Beckley WV is the Performance Bike call center.

    It's no secret. Performance bought Nashbar back in 2000.

    Northcastle Partners is the current big investor in Performance.

    ReplyDelete
  2. Anonymous12:04 AM

    Most of the racers I know look on Nashbar as being being "Trashbar" and don't buy from them. My experience has been that most of their stuff is at the lower end of the quality scale and I can usually get just as good a deal on equipment through my team's shop.

    ReplyDelete
  3. Anon,

    Thank you. Quite a few of us believe that Nashbar and Performance are two two separate entities. Why in the world don't they have one website then?

    ReplyDelete
  4. Supergo was also bought by Performance some time ago, but I think that they have shut much of it down. I always check the prices in the two different on-line catalogues since there are sometimes variations. Performance is usually slightly higher, but also has some better end stuff. For basics, Nashbar is really good. And I am sure that the volume is what keeps the prices low. Performance is really huge.

    ReplyDelete
  5. Sprocket,

    Right again. This is what the Supergo website says :

    "- By partnering with both Performance Bicycle and Nashbar, we are now able to combine the best of these companies to give you: An unsurpassed product selection
    - The best prices in cycling
    - Customer service that will exceed your expectations

    ReplyDelete
  6. I'm a bike mechanic. It doesn't come up often, actually, but when people do say "well, I can buy this widget online for a fraction of the cost" I say, "Yes, that's a good deal. Buy the widget online."

    I think bike shops woefully undercharge for labor, and charge too much for retail items. I think LBSs charge too much for hard goods and don't charge enough for their time and skill.

    My shop can't compete with Nashbarf on retail price, but we can in expertise. It's like a doctor. A visit may only be for 10 minutes, but it costs you $80. You pay for their knowledge.

    Some people don't want to pay for my knowledge, and they end up spending money on stuff from Perfco, installing it wrong, breaking it, and taking it back for a refund.

    A mail order outfit isn't gonna come out to your house to install a crown race for you.

    The one time I went into PerfCo was for a crank bolt for an Octalink BB, and the head mechanic tried to sell me a bottom bracket cup, even after I tried to explain that they were fundamentally different parts.

    I have personally rebuilt a number of bikes from Perfco, and in Colorado we have a place called Bicycle Village which is pretty much the same thing. They hire 16 year old kids to work in their service department, and it shows.

    That being said, sometimes I do buy stuff from them online because occasionally they have better prices than our distributors.

    ReplyDelete
  7. There was no convenient LBS near me while I lived in the States but there was a Performance store with an excellent mechanic. I had him assemble my Tarmac E5 and he did a great job. On the other hand, he was not a 16 year old, and I did give him a bottle of Belgian Delirium Tremens beer when the job was done.

    ReplyDelete
  8. Nato : You sure hit the bullseye with the comment. Since you said it anyway, how much is the markup on hard goods in your shop after you get it from distributors or wholesalers. And do you think that percentage can account for low labor costs in any way?

    Sprocket : I know thats tough, especially when you ride a lot or race.

    Buying online is convenient and cheap but the inexperienced at his pride will usually install it wrong, or get a substandard product or who knows, get cheated and not get anything at all!

    I think supporting local bike shops are a way of acknowledging your imperfections at repair, at the same time saying hey I'm part of the local bike community and I will support my bike shop for their goods and services.

    Long term advantages are often better this way. The bike shop knows you and substact some digits off your purchases. They give you free stuff at times - water bottles, tubes,maybe a co2 cartridge or two.

    Online purchase leaves something to be desired. I don't know about the rest, but I do like working on my bike and learning things myself. When I recognize a genuine problem I can't fix, I'll be always rolling it off the bike shop.

    But the other side to this is, if I notice poor service, long times, a marked ego/attitude etc in the employees there, I use the advantage of numbers and take it to another shop in the area. As a consumer I have my favorites.

    ReplyDelete
  9. DUDE! Don't give out the Nashbar secret! haha I order some stuff from there sometimes and now that more people know about it I have competition to get cheaper stuff than in stores! ugh, I hate you!

    only joking, yeah it's a good store in my opinion, I've bought my leg warmers, glove lining, and several other stuff the last 5 or 6 months I knew about it. I forget how I found it but I am surely glad I found it. Anyways, keep the good posts coming, I enjoy reading them!

    ReplyDelete
  10. Zach,

    I'm glad its working for you. As long as you become a better cyclist, I guess it doesn't matter how much you spend or where you spend it

    ReplyDelete
  11. I'm not in any way disclosing pricing in bike shops, since that's sort of a secret, but sort of not. I would never disclose wholesale pricing.

    I have a friend that works at a mountaineering/kayaking/general outdoors store.

    Generally speaking, a lot of stores that sell retail stuff like shorts, or climbing gear, or camp stoves, will generally charge a 100% markup, and that's called "keystoning."

    Basically, you sell it for twice what it costs. Now, that sounds like a lot, but generally speaking, a mountaineering store, or a running store will have a lot of money in overhead, wages, utilities, rent, etc. So about 30%-40% of that markup goes to pay expenses.

    If you see stuff for sale at a store, like 20%+ off, they're probably losing money when you factor in all their costs.

    Now, for bigger ticket items, markup is a lot lower. Like a kayak is probably only marked up 30% over cost.

    Something small, like those fabric deals that hold your sunglasses on, probably cost $1 and sells for $8.

    Now, you may say, "50% markup, that's outrageous!" In reality, Nashbarf is making the same exact margin on the stuff they sell. The difference is, Nashbarf buys something like 500 LX rear derailers direct from Shimano, so they get a very, very good deal.

    And LBS has to get their stuff from a distributor. That distributor buys 2000 LX rear derailers from Shimano, gets an even better deal, and then charges a markup to cover costs of shipping out one or two at a time.

    Some companies have MAPs, or minimum advertised prices. Campagnolo doesn't. If you go to say, Colorado Cyclist's website, they sell Record shifters for a price which is actually pretty close to the cost an LBS would pay from their distributors.

    Colorado Cyclist buys 200 full Record gruppos from Campy and gets a crazy good deal, then divies them out and sells the individual parts for a greatly discounted amount.

    A brand like Louis Garneau, however, has a very tightly controlled MAP. Their MAP and their MSRP are almost identical. Meaning, even if Nashbarf buys a million, they can't undersell the LBSs.

    I don't actually know how I feel about that, but a lot of people like or dislike MAPs.

    I think Bikesnobnyc sums the whole deal up succinctly:

    Defenders of the local bicycle shop say that online shopping can in no way rival the experience of entering a bike shop, being ignored by a staff of professionals, and paying a premium to cover their salaries. Advocates of mail-order say that buying online frees them from the constraints of being able to handle products and actually knowing what they're getting before it arrives six days later in a mangled box missing half its hardware.

    ReplyDelete
  12. Nato :

    I appreciate the time you put into this comment. That was a good lesson..

    Why do some companies have MAP's while others do not, say Campy? And its interesting to learn the markup differences in big ticket vs smaller items. Its almost like they don't want to take a risk with bigger products so they can move them out the door, while they think people would always want smaller items so they'll buy them anyway, hence they won't mind the unseen "markup".. Am I thinking about this the right way? :)

    I'm sure bike shops have a lot of costs themselves, including rent, electricity,labor what not. Its a risky venture I'm sure, unless someone with a passion gets it going. They get people into bicycling and bike racing as well. No bike shops probably means lesser or no racing teams!

    Getting into the bike shop business is very well captured in this article which I really liked!

    The BSNY comment was awesome. Thanks!

    ReplyDelete
  13. Sprocket :

    Supergo was bought out by Performance, sure. A big question in the minds of some is why Performance ditched the name Supergo and stuck with Performance. Wouldn't the former have attracted more business?

    ReplyDelete
  14. As I recall, Supergo began as a chain of shops on the West Coast and expanded into mail order. I have a feeling that Performance wanted to build a national brand and since Supergo's product line was priced similarly to Performance, unlike Nashbar, they dropped the smaller brand rather than run two catalogues. I see that Performance has a lot of stores in CA as well now. Another explanation is from Dan Empfield at Slowtwitch.com, who wrote in 2002:

    Finally, there is the Supergo deal itself. Years ago Performance weaned itself off selling parts inexpensively, and with its acquisition of Bike Nashbar two years ago it probably owned over half of the bicycle mail order market. But then that pesky Supergo got itself onto the radar and was taking bigger and bigger chunks out of Performance/Nashbar's market share. This was double-trouble for the large conglomerate, as it not only meant lost market share, but an embarrassing admittal that Supergo could outbuy and undersell its larger competitor while offering similar customer service. The antidote was to buy Supergo, and while Performance says it won't make changes, I'll wager than the days of huge savings on Look pedals and Shimano derailleurs are numbered.

    ReplyDelete
  15. Sprocket :

    Wow, that was ruthless. Performance so reminds me of the Standard Oil Company in its early days.

    ReplyDelete
  16. Anonymous10:04 AM

    did anyone get in on the $90 campy centaur square taper cranks at nashbar recently? or the $50 hubs and brakes? i did.

    what's to complain about?

    ReplyDelete
  17. Bike shops don't make any money on bikes at all. At best they break even. It's all the other stuff, like lights, and tubes, and tires, and fenders and clothes and shoes that keeps the business going.

    My girlfriend is a chef at an Italian restaurant. They have $30 steaks that actually cost them $35. The reason they can sell those at a loss is because it gets people to buy a nice bottle of wine with dinner, some appetizers, and the like, all of which have very good margins. That's where they make money.

    Selling bikes is just a way for shops to sell accessories for the bikes.

    ReplyDelete
  18. Oh, another couple things:
    Bike racers are the most finicky, fickle, pain-in-the-ass customers there are. They want the best deal and have little shop loyalty. I say that both as a mechanic and a racer. They buy very high end bikes that the shop makes a very small margin on.

    The old couple who comes in every month for 5 years to buy tubes for their comfort bikes give more money to the shop than the bike racers do.

    You're right about tying up money in capital. A bike is a big investment for the shop, and a huge financial risk.

    With razor thin margins, the bike you're getting costs almost as much as they paid. A decent bike shop will have maybe 5 or so $2-3k bikes, bigger shops many more.

    Think about that next time you're in your favorite bike shop. Do a mental addition of all the msrp's you see on the bikes on the floor, and you get a good idea how much money is tied up in inventory that moves slowly.

    You can put $100 into some tubes, and sell them all quickly and make a good margin. We go through dozens of boxes of tubes every summer. After you sell one box, that pays for the next two.

    Multiply that, and you can afford to pay your mechanics and salespeople to deal with the whims of the "high-end" customers.

    College students getting $300 mtbs and retired couples getting $300 comfort bikes are the best customers, from a fiscal point of view.

    ReplyDelete
  19. Nato,

    A case in point is the similarity of the bike shop to other businesses. And you highlighted this. Its the small things that can make margins. Interestingly, when I did my college internship in a well to do compressor company, the aftermarket department selling small parts and services made a huge contribution to the total earnings compared to the other sides of the business. They put a lot of emphasis on doing well in this area, hence came the need to motivate employees, getting as much business as possible, moving stuff out the door etc...

    Even if its the box of small screws, customers keep coming back for them. The potential is great.

    I hope people reading this understand how a bike shop makes money. Thanks again.

    ReplyDelete
  20. Anonymous5:38 PM

    On markups:

    People are more price sensitive the more they pay for something, cause they do more research on the subject, and therefore feel they should get the best deal (often meaning lowest price not best overall lifetime value). On the other hand on the little stuff, there is less sensitivity since convienence trumps price. The difference in paying $3 vs $4 for a tube is neglible, even though it is a 33% premium, but adding that same premium to a $2000 bicycle means you're paying an additional $660. that price differential will make you go online to buy that bike and assemble it yourself.

    To Nato, I bet your girlfriend's restaurant has a $15 appitizer that costs them $3-5 to make, but is a great seller.

    ReplyDelete
  21. Thanks for the very informative post and discussion. I work in e-commerce, and I am involved in a retail/on-line business in a field unrelated to bicycling.

    Although I know nothing about the inside workings of the bicycle industry, I suspect that retail will always be retail, and that it is more or less like the industry I am in.

    Nato remarked, as a bike mechanic, that margins on bicycles, especially the high end ones, are much lower than for clothing and accessories. While true, this is probably misleading.

    A bike shop wouldn't be bike shop if it didn't have bikes, right? If the industry works anything like other fields, here is what really happens.

    1. First of all, the manufacturers give a lot of trade credit on the bikes. Those are expensive bikes, but the bike shop owner doesn't pay the invoice immediately. It's quite possible that he can finance his entire inventory on trade credit.

    2. What does the bike shop advertise when it advertises. Bicycles, of course! Who pays for those advertisements? Probably the manufacturers, through what is called co-op advertising. They may well pay to have a professional advertisement produced, with their own bikes featured, of course. They may be paying much of the cost of placement too, perhaps even to the point where the bike shop makes a profit on its own advertising.

    3. Is the invoice price really the price that the bike shop pays. Probably not. There are usually a lot of incentive payments in retail. For example, the shop owner may receive an incentive at the end of the season for selling a quota. There are a lot of ways this could work, of course. All retail works this way.

    4. Large retailers, especially chains, may be paid to display products, allow demonstrations, etc.

    5. The person who manages all of these promotions, incentives, etc. is the manufacturer's rep. The rep is an independent businessman who probably serves a territory, and gets a percentage of sales, as well as a lot of incentive payments, in exchange for managing the entire process for the manufacturer. If there is a agreement with the shop owner, the Rep manages it, sees that its terms are fulfilled. The Rep helps the shop owner a great deal. He may in effect be taking inventory for the shop, automatically generating the orders for new inventory.

    6. I don't know what the story is in bicycles, but I expect that shop owners have agreements that allow them to return unsold inventory. If not, they may have agreements that give them big discounts on what doesn't sell by some date, since this is a very seasonal business.

    7. Furthermore, the manufacturer's rep has a lot of other services he or she provides, like free sales training for employees.

    Nato, my apologies if I am not fully informed about your field, but I am guessing that it works a lot like mine. Retail is retail.

    Howard Metzenberg

    ReplyDelete
  22. If I remember correctly, Supergo came out of Bikecology (sp?), a store located on Wilshire Blvd in Santa Monica in the eighties. I used to go there with my dad, and remember when the name changed. I remember drooling over the Cannondale mountain bikes with the roller brakes :)

    ReplyDelete
  23. they have good prices but.... shipping sucks, specially for service out side the 48 continental states, the slowest service ever, plus charges dont go together with the service, in other words too expensive for a slow service to areas served by the usps ofering priority mail service,something is wrong in their shipping department.

    ReplyDelete
  24. Anonymous2:23 PM

    The margins in the bike business are rather tight.
    Walmart works on a 28% net margin.
    We have to remember that the bike it self takes at least 40-45 mins to assemble,adjust and test before selling.
    The floor space it takes is appx 6sq ft. this is expensive. an hour to sell to the customer and a $300.00
    has lost the shop $20 more or less.

    The business is not exactly as described as to the terms.
    there is not returning of merchandise and some times products arrive very late in the season.
    This is critical in the north.
    Also lately mfgs have started to
    bring out the following year models before the end of the current year.
    This instantaneously discounts the current inventory. They don't give a discount on the remaining inventory to help hold margins.

    Hopefully you find a shop with concerned trained and helpful personnel that are true professionals. Treat them as they would like to be treated.

    As to the lower pricing from performance and Nashbar ect.
    Many of the parts are purchased at
    a cost that is for a mfg entity.
    They buy as a mfg would.
    Ford buys spark plugs at a cost much lower that Advanced Auto parts. Now open a store with over purchases ect and your acquisition cost is very low.This shifting of product happens because there is a blurred line between the retail and mfg side of the business.

    ReplyDelete
  25. Anonymous2:21 PM

    They spam their customers and -- adding insult to injury -- compromise customers' personal data.

    Founder of Nashbar - Garry Snook: gsnook@performanceinc.com

    Other addresses:

    custserv@nashbar.com,
    productsupport@nashbar.com,
    webmaster@nashbar.com,
    technical@nashbar.com,
    affiliates@nashbar.com

    ReplyDelete
    Replies
    1. I sent Garry a note. Their webstore is broken (again) and no one is at Nashbar on the weekend. Sometimes I wonder how some companies stay in business.

      Delete
  26. Anonymous2:54 PM

    As to the comment about them SPAMing cutomers... I have PROOF. I use boutique email addresses for every vendor I deal with. It is NASHBAR@mydomain.net that comes back from MULTIPLE sources other than NASHBAR!!! On in particular is Outsider Mag. That bugs the hell out of me when my address is SOLD !!!!

    ReplyDelete
  27. Anonymous2:55 PM

    As to the comment about them SPAMing cutomers... I have PROOF. I use boutique email addresses for every vendor I deal with. It is NASHBAR@mydomain.net that comes back from MULTIPLE sources other than NASHBAR!!! On in particular is Outsider Mag. That bugs the hell out of me when my address is SOLD !!!!

    ReplyDelete
  28. Anonymous10:01 AM

    I'm old. I used to get the Bike Warehouse catalogs back in the 70's. Then suddenly they started arriving with the logo Bike Nashbar on them. So.... yeah. The dude clearly bought out Bike Warehouse.

    ReplyDelete
  29. Nashbar's shopping cart is broken - again. And they are closed on Saturdays. Nashbar should maybe just do mail order. I look forward to going to my LBS today.

    ReplyDelete
  30. Recently, a woman at Bike Nashbar denied they were ever named Bike Warehouse. I recall clearly the day they changed their name (it was as plain as the mail-order catalog I got from), and discussing it with my cousin, who thought the new name sounded dumb.

    ReplyDelete
  31. Anonymous8:34 AM

    Nice article. Been wondering about Nashbar for a long time. They just entered the 27.5 Mountain bike market. I am tempted to buy it but their just I am just not sure if I trust buying a bike online.

    ReplyDelete

Thank you. I read every single comment.