Reinventing the Conventional Distribution Channels or Why We Don’t Distribute Through Dealers

Reinventing the Conventional Distribution Channels or Why We Don’t Distribute Through Dealers

When we were starting EVELO several years ago, one of the key challenges that we needed to solve was distribution of the bikes. How do we distribute the bikes to the users and provide them with test-ride opportunities in the most effective way?

The Conventional Way

Traditionally, in the bicycle world, bikes would be sold through two common channels:

  • Local Bicycle Shops, and
  • Big Box Stores (e.g. Target)

However, while these channels work quite well for traditional bikes, electric bicycles’ distribution haven’t been particularly successful through either of them.

There are a number of reasons for this.

For most of the big box stores, electric bikes are not a good fit because of their price and complexity. Their staff can be ill-equipped to handle any service issues down the line and their typical consumer may not be willing to spend $2,000 on this sort of a product.

For traditional shops, we’ve found that a lot of the local bike shops shy away from electrics. Sometimes, it could be cultural – the folks who start bike shops may feel that if it’s not 100% purely human powered, it doesn’t belong there. Sometimes, it can be caused by unfamiliarity with the technology and being concerned about additional liability. Or it could be as simple as that there are not as many inquiries for such e-bikes to justify a shop’s owner to investigate it further.

When we started EVELO, our initial approach was similar – to explore relationships with local shops and establish a distribution network throughout the country. However, about a year, we began to notice that the growth using this method was slow. We’ve had some wonderful dealers onboard, but it would be an uphill battle to recruit each one and the volume was just not that high.

Merging Ideas to Come Up with a New Approach

Since the very beginning, we would sell direct to consumer and through a network of dealers.

So, since the dealer strategy wasn’t working, we decided to explore the 2 fundamental issues that customers would have that would prevent them from buying online: where to test-ride the bike prior to purchase and where to service the bike if there are issues down the line.

We’ve addressed each of these issues, although I’ll focus on the 2nd one in a separate blog post.

To enable people to do test-rides before making a decision about their bike, we’ve started and expanded something called the Ambassador Program. Many of our customers would report to us that they occasionally get stopped and asked questions on the street while riding by other people who are interested in an electric bike. So that gave us an idea.

What if we were able to systematically connect potential customers with existing EVELO customers in their area for a test-ride and honest feedback.

From the potential prospect’s perspective, I think that many of us, myself included, are typically curious in other people’s experience with a particular product we’re considering buying. It’s no coincidence that we’ll usually go to Amazon to check reviews before making any product purchase. And although we can read about it or talk to a salesperson, we typically go online to read user reviews to see what actual users think.

From the Ambassador’s perspective – for those folks who are really enthusiastic about electric bike technology – it’s a way to share their enthusiasm with other people in their community, and earn an income along the way.

For us, we facilitate the process and essentially enable any potential user to talk in-person (or over the phone) to an existing EVELO customer, who has signed up to be an Ambassador. When they meet for a test ride, which can typically last anywhere from 20 to 60 minutes, it’s unfiltered dialogue and honest feedback – which only gives us more and more incentive to ensure that our customers are happy with the product and service they receive.

After the meet, if the potential customer decided to move forward with the purchase, they can order directly from us and we’ll ship a 95% assembled bike directly to their door. The Ambassador, in turn, receives a modest “thank you” payment from us for their time.

What have we learned so far – the Pros and Cons:

The Pros:

The Ambassador Program is still fairly new, but we’ve been able to bring over 200 Ambassadors on-board already and growing quickly. If all goes well, by the end of 2015, we should be close to up to 400 or more. That means over 400 locations around the U.S. and Canada where people can demo EVELO bikes in person. This is much faster growth than we’d be able to achieve with dealer distribution only.

Ambassadors are also becoming the core of the EVELO community around the country. These folks join the program not just because they are enthusiastic about the product, but because they also see potential for electric bikes in their community and want to help grow it. We hold monthly Ambassador webinars – for both new and existing ones – and learn a ton every time.

Enables us to keep the product cost lower. When working through a dealer, there is typically a 35% to 40% mark up associated with selling a bike through the store. That is completely understandable, as the dealer does add quite a bit of value – especially if they can show you different models, offer ongoing service and support, and so on. However, our objective has always been to provide a high-quality electric bike line starting at a $2,000 price point – and distributing through dealers would force us to add that additional 35% to 40% markup. We believe that in today’s world, we can do better by shipping direct to consumer and finding other ways to demo and service the product (the latter of which I will explain in subsequent posts).

The Cons:

Controlling the quality of the presentation. Given that most of the Ambassadors actively use their bikes, this means that when a potential customer comes over for a test-ride, they don’t get to see a pristine, out-of-the-box product. We try to provide incentives to the Ambassadors, such as a $20 per month “cleaning credit” that covers the costs of cleaning and finetuning the bike before any demonstration – but that’s not a perfect solution either.

The “weirdness” factor. Over time, we’ve learned about what makes a good test ride experience. Explain the expectations upfront clearly. Ensure that both parties are communicating quickly. Meet in a nice, neutral place with somewhere to ride. And so on. As a whole, the vast majority of our prospects and Ambassadors like the experience and find it quite helpful. But at the same time, it’s still different enough from a traditional “visit a bike shop” experience that some folks can find it a bit weird.

The future of our distribution

Is traditional distribution through local stores better or worse than going direct to consumer with things like the Ambassador program to bridge the gap?

For us, the latter has worked better. It has allowed us to scale quicker, build a stronger community, and keep our prices lower to the end-user without sacrificing the quality of the product. Given that electric bikes are still just trying to gain a foothold in the U.S. market, no one has it all figured out yet completely.

As time goes on, our approaches may evolve and adjust with the market needs – but for the coming year and beyond, we want to focus on and keep improving the Ambassador Connection experience.