BIKES

12/11/2012

An open letter to Chain Reaction Cycles

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Written by: Zen Garage
goliath

An open letter from Matt Holmes of 2020 BMX Magazine to Chain Reaction Cycles, the largest online retailer in the cycling industry (in response to Chain Reaction Cycles enquiring about advertising in his magazine).

Hey Ged,

thanks for getting in touch with the magazine.

So firstly, I may as well get this out of the way. Chain Reaction will never have a place in 2020, BMX on these shores or (if i have it my way) any Australian cycling media.

To take on advertising from you would signal the death of not only my publications, but the DVD’s, TV productions, events I’ve put years into building up. I’d go as far as to say the industry I know here as a whole would be in jeopardy. How you honestly think you can expect me to work with Chain Reaction is beyond me? Arrogant is the only word that I can think of to describe the way Chain Reaction works.

Chain Reactions presence is one that I’ve seen begin to destroy the industry I have lived and breathed amongst as a rider and beyond for more than 25 years. Luckily BMX is not yet under your thumb like the road and MTB worlds on these shores and thats something we’re working very hard to ensure never changes. At ground zero within the BMX community here and hopefully the larger BMX industry world wide. I can add you to the likes of Dans Comp in the way your business model takes from our scene locally.

Taking dollars and jobs from a scene that is small to start with is something I now have to take personally for my own survival. But to add the real truth, your avoidance of Australian Goods and Services Taxes, import duties and warranty costs by your offshore business model, the industry here is simply unable to compete. So not only do you take dollars from the bike industry on an unfair playing ground, you’re taking dollars from our economy at every level. Freeloading on an industry and a country thats been built over years of hard work.

While the big picture paints a grim outlook, on a local scale, it becomes even more apparent. For example. Are Chain Reaction going to be there on a Saturday morning to help a rider with his bike? Are Chain Reaction employing Australian mechanics, sales people, or people to take care of warranty on these shores? Are Chain Reaction going to support grass roots events, large events, sponsor riders or be a part of a scene beyond your massive warehouse? There’s no need to add that your one advertisement (should I choose to take it) would not support the publication I’ve made for 13 years.

All I see is a company with absolutely no interest in anything but taking from the scene I love here. When you’ve undercut every Australian shop and distributor and all local distributions chains and shops are closed, who will be there to help a rider? Who will be the one to give a rider a chance to possibly work in a shop to chase his dream of travelling with his bike? It ain’t Chain Reaction who’ll offer support and knowledge on how to build a bike? To be part of a local skatepark event? It goes further, there will be no avenue for photographers and filmers, to no designers and artists, no one having any kind of support, the scene will have nothing left.

And from there, your sales will drop, as will the parent BMX company you bought from in larger numbers than the local distributor could at the time. Just like the mining industry on these shores, you’ll take all you can and when nothing is left you’ll walk away leaving a shadow of a former scene.

I have to say though, in your defence, I’m impressed with Chain Reactions aggressive move into the United States. To sell there cheaper than the shops can access product from their own country is a brave move. It could just be the impetus the BMX industry as a whole needs to realise the way you do business is leeching the life blood from our scene. And I hope this move is the beginning of not just local distributors and shops in every country that has a small industry being unable to compete against you, but those in the US. The birthplace and core of BMX. As it will be they who make the noise that brings your way of business into the limelight and sees the BMX companies take note. With any luck stopping supply to those that sell beyond geographical boundaries. Your business model in no way supports or grows a brand locally. It’s that simple.

While you may have decimated much of the MTB and road distribution chains and shops here in Australia, the BMX industry here on these shores will go head to head with you. Win or lose it’s a fight both I and the 20inch industry here is willing to take on, and at present there is no choice, we’re in the corner. And I can only hope the world’s BMX industry takes our lead.

Lastly, this and all communications between you and I will be printed online, in print and cc’d to all those that need to know as part of a bigger piece and movement that speaks out against the likes of your employer.

Cheers.
Matt Holmes
2020bmxmagazine
www.2020bmxmag.com.au



About the Author

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34 Comments


  1. I’ll be the first to lament what CRC has done to the industry but to be honest, it’s not as clear as a bunch of Irish guys destroying the industry. The unknown reality is that most brands happily negotiate with CRC to sell current or run out stock; CRC’s reach and business model makes them the #1 place to clear excess stock for many, many brands. I know of several brands that have met with CRC to negotiate on the pricing CRC was selling thier stuff and and this sort of thing is not unusual at all.

    The questions that need to be asked are much deeper than pointing fingers at CRC, Wiggle etc. They should be put the the brands that are double dipping, saying they support the traditonal chanels of sale, then knowingly contradict this by working with the likes of CRC to clear their own shelves.

    So while many complain about what CRC does and is doing, how many ask the questions of the brands that CRC sells?


  2. [...] anti- Chain Reaction Cycles rant An open letter to Chain Reaction Cycles | Zen Garage Taking dollars and jobs from a scene that is small to start with is something I now have to [...]


  3. Dim

    While I agree that the large chains have had a largely negative impact on the role of the local bike shop, (although it can be argued that the increased availabilty of products and competition has led to cycling becoming more accessible – how many local bike shops still have their heads up their butts with their elitist attitudes), singling out CRC for merely enquiring over advertising is perhaps a bit harsh. CRC are just one of many, Wiggle, Evans, PBK, etc etc. Why not target them all instead of singling out one?

    There are arguments both ways. Big retailers increase the availability of products and make the sport more popular. Smaller retailers suffer unless they can offer a quality service.

    Unfortunately, certainly in the UK, a large amount of traditional retailers are so arrogant they put people off buying. I own a mid range Kona CX bike which i did buy online. I did shop locally first but found that both local bike shops to me, unless you were riding 200km+ a week, had all the latest gear or were willing to buy their chosen brand had very little interest in serving you. Then again, their are some great traditional retailers that are struggling.


  4. I have visted Evans now on about 10 occasions this year, and have found the staff in there stores, without exception to be a toally useless, moronic bunch, with no intrest, and certainly no enthusiasm or knowledge about cycling. There only motive seems to be to try and sell junk that is quite unnessacary to customers. The once small, knowlegable bike shop, who would offer advice and assistance and would seemingly bend over backwards to assist a customer seem now purely focussed on profit. Several times I have gone into a store, to be given information that is completly wrong. In comparrison, I hae found CRC to be very helpful, (albeit it sometimes takes a while to speak to anybody) However, they are knowledgeable, friendly and cheap, and they have an excellent returns policy. Why would anybody venture out to see a bunch of losers at Evans, to be fobbed off, ripped off, and given dud information, when they can simply log onto CRC, ask the relevant questions, get what they want at a fraction of the price, and have it delivered next day?


    • Halfords too, but they do actually employ those with knowledge quite often – pity they don’t pay them the living wage they need to live and, subsequently, care.


  5. JT

    The industry is massive, and as a result you are going to have monopoly in it. The internet is massive, therefore if CRC/Wiggle etc weren’t there then someone else would be. It is the way of the world and economics and this will never change and it is the same in every industry. There is still plenty of room out there for all smaller dealers – The argument is a bit like moaning at Tesco’s for taking over the world with their stores and what about all the local grocery stores… Granted it will have an impact, but you always need the smaller grocery stores, and there will always be space for them. CRC would be one hell of a lot worse if they were just corporate pigs and this article is making that point unequivocally.


  6. Jimmy Dee

    Bearing in mind CRC do give back to the industry in the form of a well supported World Cup team, the excellent customer service, i think this is a VERY unfair, one-sided letter.

    Also Australian import tax and how Oz customs deal with it has nothing to do with CRC, as long as they are declaring the correct values on the commercial invoices etc then they are trading within the law and your argument is bogus.


  7. that letter may give them all the ideas they need to fully infiltrate the BMX world! watch it, they may take on Nikes business model next, acting like they are actually at one with us! unfortunately the kids and adults associated with BMX will often value a low price more than a thriving scene, which may be why BMX isn’t as good as it used to be!


  8. SD

    UK cycling trade was here 10 years ago. Most people in the retail trade pulled their socks up and improved their web presence. Many people in cycling wholesale found a way to make money by working with CR. ultimately if you want something interesting, niche or new Chain Reaction won’t have it anyway. Like the first comment says lots of people use it to clear stock.
    The US online retailers like Velotech are more of a concern. They get goods at prices without the additional UK import duty.


  9. Rob

    I’ve had so many bad bike shop experiences I loath going to them. Way better service from CRC. I do my own maintenance, better, more care, cheaper and mostly faster. Bike shops in general need to find what service means, and till then just keep selling sub $1000 bikes to the average punter.


  10. Nothing wrong with CRC but lots wrong with the bitterness of others in their shadows!


    • ha, see below, then think again before you make a chain reactionary comment without thinking about the bigger picture! any retail worker or un-blinkered cyclist with a local shop and scene can instantly see the issues with CR.


  11. MTB Mike

    This is a great letter and explains what the effect is of online disounting. CR has a negative effect on a local cycling econmy. The likes of CR do not pay any taxes (tax on company profit, Employees etc) to countries in which they supply goods to individuals, and through this system countries lose out much needed revenues. CR has the benefit of trading cheaper than retailers as thay also have no “bricks and mortar” operations anywhere outside of Ireland, no labour laws to contend with, no local tax laws. This undercutting of prices then disenfranchises the retailer, as the latter appear to be ‘ripping off’ the customer in direct comparison on price. As a result the local retailer cannot retain experienced, knowledgable staff, and will employ cheaper, less experienced staff to try and be competitive in an effort to retain market share, hence the perceived drop in service levels. The number of local riders being supported by retailers is diminishing, compared to 6 years ago, and this trend will continue. The comment that they support a good WC team…well that’s a branding exercise, just like any business that wants to attract customers in that market would do. Furthermore, staff in retailers mentioned in the comments, probably also seem tiresome and loathe, as a result of hearing the same tune 10 times a day ” ahh, but I can get it cheaper on CR” – well why did the buyer go to the bike shop first? The reason…so they could touch, see, feel the product, which is a basic consumer behavioral trait. There are reports of some customers that have gone as far as to try on shoes to make sure they buy the correct size from CR. Unfortunately, manufactuerers and distributors who need to clear stock have found that CR is the easiest avenue, rather than discounting it to distributors/retailers.


  12. SD

    I repeat “UK cycling trade was here 10 years ago.” The world still turns & The BMX racing scene is bigger than ever.


  13. Mark

    I am pretty sure Chain Reaction started as a regular bike shop in Northern Ireland, the management there took the family business and expanded it, the ideal for any business is to grow…. Don’t they have a warehouse in the US too MTB Mike?? CRC also employs around 600 people too, not bad for a time of global recession. http://pwc.blogs.com/northern-ireland/2012/07/chain-reaction-cycles-named-as-uks-best-management-team.html
    Consumers want cheaper prices and better service, if LBS’s do not respond to this and continue with their snobbish, elitist attitude then they do not deserve to survive. Bike stores should offer exceptional service at affordable prices, not the hyped up profit margins that the shops were used to in the 90’s early 2000’s for the minimal amount of effort.
    Perhaps a letter to Tim Berners Lee complaining about the advent of the internet might be more appropriate, after all with out the www there would be no CRC mega deals…then again there would also be no where to post this open letter. Whilst I am on this subject it is bizarre that this is hosted on a site with an online shop, kinda hypocritical don’t you think?
    This is a global market, deal with it…
    Whilst I am ranting why not put your money where your mouth is and give away profits from your magazine to support local projects, while your at it give away all the free parts you get to ‘test’, or is this your worry, if CRC corner the market then you wont have any freebies sent to you?
    The bike industry is full of people who think the world owes them a living for having some relationship to a minority interest that self perpetuates it’s own bullshit, seemingly some of them even have enough money to turn down advertisements!


  14. FBS

    People should look at the bigger picture.
    If CR discounts products more than your local bike can afford to do, it will ultimately close down most of the shops.
    Once most of these shops close, there will obviously be less places to buy BMX parts so more and more people will end up having to buy from CR.
    Eventually you will only be able to get certain products from CR. Once they become the main dealer for most brands, the distributors will be relying on them for their income. When that happens, CR will be able to dictate to the distributors on prices.
    Ultimately it will put strain on the distro’s finances who won’t be able to therefore take as much from the Brand Owners who in turn will also lose out financially. Many of the smaller distributors & brands will not survive this.
    This will slowly kill the sport and when CR are done with the “dead sport”, they will ditch it as quickly as they jumped on the BMX bandwagon.

    Many people won’t care as long as they can save a few quid on their products.


  15. SD

    @FBS again the UK bike trade had to deal with the appearance of CRC 10 years ago we have more cyclists and shops than ever before.


  16. James Fisher

    This is a very short-sighted letter by Matt Holmes, all it shows is bitterness and an inability to comprehend current and future trends of a global economy. Crying that you are being undercut isn’t going to get your customers back – at the end of the day all that really matters is the bottom line, and accepting (rather than denying) that will allow profitability in this new era.

    I like many others wrench on my own gear and have no need for the services offered by a bike shop, and honestly could care less about a ‘scene’ that is funded by charging me more than I need to be charged for goods and services. In my eyes the ‘scene’ and ‘events’ are always going to be there – they are fueled by riders, products, and sponsorships (most of which are manufacturer / product related).

    Additionally, I am a huge fan of having the same low prices available to me every day, regardless of where I live and which retail outlets I am loyal to. I travel globally to ride on a regular basis and have no desire to maintain loyalty to one shop in order to be rewarded with a good discount.

    Of course there will always be a place for a local shop, but their role will have to change strategically if they want to maintain a profitable business. With the advent of the internet there is far greater access to information, and with the lower pricing there are more people riding high-end bikes and componentry than ever – so believe it or not, it’s not that hard to find a product you want, or even try it first hand, without ever stepping foot in a retail store.

    As for warranty, I think this will be another place where there will be developments in the future. A local shop is adding no value to this chain, and a better system would be to have customer support staff at distribution / warranty centres to deal directly with end-users. With the advent of the internet, products can very easily be inspected virtually / photographically, and taking out a middle man will generally allow faster service at reduced cost. This is of course thinking forward and is not something that will change overnight – but is a good example of what customers want.

    Finally, you accuse CRC of ‘taking from the scene’ – but if anything, CRC has allowed far more people to get into riding, and thus is probably a strong contributor to growth – completely contrary to your short-sighted claim.

    I like a myriad of others globally will continue to support CRC, and enjoy not paying the wages of multiple people along the way who add no value to my purchase. I have asked questions and returned goods to CRC before and the level of service has been as high as I could expect.

    Failing to open your eyes to trends that have already changed – and will continue to change well into the future – will be detrimental to only you and the business/es you represent.


    • Brigtop

      Capitalist, mindless consumerist idiot. you understand nothing and are no value to the cycling world. have you not read MTB Mike’s comment? you sound like the kind of person that would love a town full of supermarkets, rather than good old local, personal, unique shops. enjoy ‘paying the [minimum] wages’ (not fair living wages) and lining he pockets of some fat cat (that couldn’t care less about the business they are in as long as it makes money). this is what you want for cycling? FU


    • I can’t disagree with everything Mr. Fisher says, but I can point out that the local shop deserves a level playing field, which would at least give them a fighting chance. What is the rationale for allowing purchases from ChainReactionCycles.uk (which our shop is in no way affiliated with, by the way) to escape import duties and taxes that have to be paid for local purchases? That alone puts the local shop at a pretty big disadvantage, as well as depriving the local community of a funding mechanism used for roads, schools, police and other important services.

      We haven’t figured out this “globalization” thing yet, but clearly it’s going to affect a lot more in our communities than brick & mortar retail. Something will need to be done to address companies that move offshore to avoid revenue issues. Perhaps an elimination of sales taxes & duties entirely, replaced with an income tax?

      It may seem like I’ve moved off-subject, but that’s not really the case. Our on-line “communities” can only do so much for us; there remains a lot that requires local involvement and funding, and cross-border transactions are a very real threat to such things. –MIke Jacoubowsky, Partner, Chain Reaction Bicycles (California)


      • adam

        It’s up to the Australian Govt. and Post office to collect taxes due on imports and nothing to do with foreign importers.
        CRC pay corporation tax in the UK and collect VAT on EU sales just as every other UK company does. They also comply with all the other laws on minimum wage etc.
        I shop around if I need components and sometimes find the likes of Merlin and Rose in Germany cheaper. This should alert Australians that there is a fare amount of price gouging occurring down under. That is what should concern you.


    • Mad Mike

      Spot on, James Fisher.
      Though I do confess to enjoying the petulant rant of a snack-sized Gerry Harvey. This argument is age old, and Matt Holmes brings neither fresh perspective nor constructive action points to this discussion; just cliche talking points of someone who’s forgotten the last time he paid full price for his bike bits.


  17. Again, reading through the comments, many are missing the crux of the argument.

    Consider for a minute if you will this…. CRC is a shop. It’s the brands that sell to the shop. Who’s to blame? The shop for doing what it does, or the brands for supporting/supplying said shop?

    I applaud CRC for being a smart, resourceful and progressive business. I deplore all the brands that sell to CRC knowing damn well they are undercutting their own distribution and retail network, the very guys that they nail to the wall with insane yearly contracts and minimum orders. I can think of several so called high end US ’boutique’ brands doing just this. Insane contracts for dealers then letting CRC blow out stock at 45% off….


  18. Helen Copper

    Maybe you should be more concerned about the reasons why Australian online retail cannot compete: the tax level for imports, the postal prices and the labour costs.
    The labour costs (due to the minimum wage in Australia) make business far more costly to run in Australia, as does the high postal prices.
    I’m not sure your anger is correctly directed – this could apply to any retailer importing into Australia (Amazon/ASOS etc).
    Until the playing field is levelled, and Australian E-comm ups its game, you can’t blame people for shopping at cheaper prices with better service,


  19. Paul

    As a consumer, both online and instore, and an ex employee for 10 years at Halfords I would point out CRCs flaws as a reason that independents can survive. The online shop of CRC certainly benefits the rider who knows what they want but look at what they can’t offer. A fitting service for your recently bought chain set, a maintenance service for your bike, a face to face service which I believe is still worth paying that little bit extra for. Then the fact that when a child gets their first bike and subsequent bikes as they grow they need to try that bike for size. The commuter who buys that £120 bike and spends the same again on accessories and then due to informing that customer about the wear put through a bike used daily there is the regular service that is needed. The same commuter and other people growing in appreciation for cycling who then want to upgrade to a £300-£400 cycle or want to spend money upgrading their current steed.

    The ‘bread and butter’ for us was the up to £200 cycle and that had to be remembered. It was great to work on the handful of customers bikes worth more but that would have never have been enough to keep the business afloat so when they came in trying to price match components I either massaged the fitting cost or simply told them to get it from CRC and bring it in for fitting. The problem I found with our small local independents was that they didn’t care about the little fish and were just chasing the big sales. The level of customer service was appalling due to the elitist attitudes others in this thread have mentioned.

    The fact is there is still a market out there for the independent cycle shop but they need to adapt instead of thinking of the good old days. I for one know that if my parents or grandparents wanted to buy a bike for their grandchild or great grandchild they wouldn’t look on the Internet!


  20. Nels

    I think you are barking up the wrong tree Mr Holmes. Here’s a small example that us poor Australian consumers have to put up with when it comes to obtaining products in Australia. My rear wheel needs re-spoking after some years of hard trail work (Mavis Crossmax), so i approach my LBS to enquirer about replacement spokes. I have a good re pore with my LBS and have been a faithful customer for quite some years. My lbs enquirers about replacement spokes from the Australian Mavic distributor to be informed that cost of the new spokes to him are $10 each, my lbs informs me of the price and is willing to pass the price on without any mark up only willing to charge my for the wheel rebuild as im a faithful customer. so here’s the deal 24 new spokes at $10 each and i need 24 so $240 just for the spokes and $50-$70 for the rebuild, that works out to around $300+ for the work Hmmm well ok then i can soak that up, but wait heres the king hit Mavic Aust dont have any in stock and 3-4 weeks wait……fuck!!!
    I dont want to wait 3-4 weeks i want to ride for fucks sake
    so its the world wide web i turn to for help
    CRC – 2012 crosmax St complete wheel to my door $300
    Jenson USA- 24 replacement spokes $130 to my door
    some obscure UK bike shop- 24 replacement spokes $150 to my door
    So you tell me Mr Holmes where im going wrong?
    all i want to do is ride my bike without being arse fisted and taken for a ride
    My LBS shares my frustrations and this isnt just related to the local bike industry this has been going on in Aust for ages and us Aussies are sick of being ripped off and taken for a ride so to speak.
    I think most Aust distributors in any industry have to remember that to the consumer the world is only one click of a mouse away and they have to shape up or ship out


  21. MarkG

    In South Africa the price of bikes and parts in bike shops is becoming exorbitant, and as a result I have no choice but to turn to companies like CRC. It’s either that or to not ride at all. And if everyone stops riding both CRC and all local bike shops will shut down.


  22. Nathan

    When are Aussie retailers going to stop whining?! If the retailers here can’t compete with CRC and Wiggle then you Aussie retailers need to challenge your distributors. CRC and Co don’t pay 10% Aussie G.S.T. or 20% UK V.A.T. on exports but do offer FREE POSTAGE on virtually everything, which on a sub-$100 purchase probably costs more than paying the 10% G.S.T. On the other hand hardly any national bike shops here offer free postage within Australia.

    I’ve been to loads of LBS’s in the UK and Oz and half of them don’t know what they’re doing, when I find a good one I’ll hang around and maybe buy some products if they don’t take the p1ss on the price. LBS, national bike shops and every other retailer in Oz need to stop complaining and get on with it, those that do will prosper and thrive!


  23. Marcus

    Unfortunately for Australians, Australian retailers are still living in the 1950’s. They can see the way the world is going but instead of trying to compete, they lobby the government to increase charges to stop people buying online. Australian distributors rarely keep stock and have to order in anything you want and believe they have a right to charge their 40%-100% mark up. Add this to the disgusting arrogant attitude and ridiculous mark ups on most items, I say thank god for CRC, Wiggle and anyone else who can offer me good prices, quick delivery and great attitude.


  24. Steve

    I am more than happy to shop locally…if I wasn’t treated like a Moron ! When you get quoted $1,700 for a Rohloff hub (which by the way, very few local shops are willing to stock, we certainly have none where i’m located), then get a phone call that they made a miscalculation and the price will be $1,850, you do get a little agitated. On top of that, you get another phone call stating that the bike build will cost $400 instead of $300 because the shifter is apparently fiddly to fit and took some time ? Really ?? Maybe they were taking advantage of the fact that I only had a couple weeks before I was off for my overseas bike tour ? Oh, hows about being quoted $2,650 for a Surly Travellers Check, when I could have it landed here in Australia for $1,500. Why should I pay an extra $1,000 ? Do I have MORON printed on my forehead ? Hang on a minute, maybe I do ? Not sure, I sure as hell felt like it when I was trying to milk blood from a stone being as nice as I possibly could whilst get jipped when I was ignorant and naive to what was going on. The mark ups here are absurd !
    If you want the local shopper to compete against these overseas giants the key is to provide exceptional customer service. But I have had more than my fair share of lousy service, because I don’t want Lycra or the latest carbon fibre frame and conventional derailleur gears. No ! … I’m placed in the ‘too hard basket’ and when told they will get back to me with a quote for a product they don’t have in stock only to not get back to me at all ??
    There is a positive to all this though. You see with all the pain I endured with all this, I learnt to research all the parts I want on line with sites like MTBR, Sheldon Brown, etc. I also learnt to put my own bikes together. Having 10 bikes in my garage can become rather stressful when you have a 1000 questions on how to go about things and being snobbed off because your not paying them for every cent of their time to answer your questions.

    Thank you CRC and all the rest of the online bike shops ! I know im at least $5,000 better off in my pocket because of you ;)


  25. Stewy

    I’ll be honest I’m seeing “saves us money”….
    I pay that 10-20% more at my LBS because they organise rides, organise and maintain trails, support the local race scene, employ local people, spend their money in the community.
    Sending your money offshore to save some bucks is money not spent in your community. A good LBS is a cycling hub for local riders. I’ve come to know they LBS guys from being loyal and I get back tenfold what CRC can offer.
    If your LBS sucks. Find one that is community based and it’ll be the best investment you have made in your cycling career. I haven’t paid for labour in over a year. My bike runs perfect and I always have guys to ride with. If you care for the sport. Support the sport!!! A marketed race team isn’t supporting the sport.
    The dude who owns my LBS isn’t a millionaire like the CRC owners. Who is taking more???
    Find a good LBS and you’ll see. If your not getting good overall experience, it’s not a good LBS



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