When you are thinking about that next bike related purchase please consider that the internet company or national chain that may offer a perceived lower price is doing so without the service or contribution to local advocacy and our local biking community that we all benefit from and enjoy.
I see obvious parallels between Hollywood's creative industries and what the bike shop world is going through right now. I read the open letter and see someone asking customers to join him in putting his head in the sand in the hopes that if we ignore it, the Internet will magically go away. It reminds me of ABC's Charlie Gibson telling journalism students that their industry would be fine if everyone would stop reading online news for free and just buy more dead-tree newspapers.
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The problem round here is that the LBS, in general, is being screwed by the national distributor/importer.
Like in many other markets, the small shop is often paying more wholesale for an item than it is being sold for somewhere else.
Where the LBS can win is on a few different fronts: * becoming an e-LBS where they can get good wholesale prices * specialising on a particular area that 'the big boys' can't or won't play * holding stock of stuff you need now or need to try on (like helmets)
Is Sheldon Brown's Harris Cyclery an LBS or national chain? From the limited pics on their site, seems like a small operation. They benefit vastly from Brown's archives and the hard to find items like small tooth chain rings. Or what about ANT Bikes, one man shop making custom bikes? He doesn't seem to be hurting. His product is unique or rare and the Internet greatly expands the list of potential buyers. The business is changing. Niches would seem to be the way to go. Don't assume all your customers have to live in your town. I drove 6 hr to get a Touring bike, because the LBSs didn't carry the ones I wanted. And I bought it at an LBS, just not a local one.
The LBS, like so many other small businesses is often a victim of nothing but poor management. A reason that a lot of these bike shops fail is that despite the enthusiasm the store owners have for cycling, they are just really bad business people. This has nothing to do with the competition from web companies (because the consumers are very different) even though store owners like to decry online retailers as soon as their business starts to suffer from their own mistakes. In reality many stores are just bad at procurement, bad at hiring the right people, inconsistent with their service offering and generally terrible dealing with market forces.
The industry is still heavily biased towards brick and mortar stores and many bike shops are extremely successful in major and minor markets because they focus on quality service, having a great stock of parts and accessories and knowledgeable staff. Service is where the LBS can and should always outperform an online distributor. It's just a shame that so many fail what would otherwise be their loyal customers.
"Is Sheldon Brown's Harris Cyclery an LBS or national chain?"Harris Cyclery is a medium sized single-location LBS in suburban Boston. It's a decent shop, but nothing special; Sheldon didn't have a lot to do with the day-to-day operation in his final few years.
I bought my latest bike at a LBS two states over - because that was the closest location that I got decent service. I paid more than I could have online because of that above-and-beyond service.
More and more, any big-brand dealership (Trek/Cannondale/Specialized/etc) is a bad place to do business. The future of the LBS is custom bike builds - where you go in and order a bike that fits YOU correctly, with the parts that suit YOU. The dealership doesn't need to have $100K of useless inventory sitting there when everything is available next day by FedEx.