1) bike shops make almost zero money on their bikes. The margins are razor thin. They make a majority of their profit on accessories. For example, they buy kickstands for 25 cents and sell them for $12.
2) ERIKS actually used Macs in all their locations and used a custom built POS system. They only needed one IT guy who ran 8 stores when I was there (they have around 14 stores now). He said if they were using MS, they would've had to hire a bunch more support people. It helped keep costs down.
3) At first ERIK looked for lower rent, out of the way places to set up shops. What he called, "sub-prime" locations. Rent was lower, and because of their superior marketing, they didn't need a prime location to drive traffic.
4) They trained their sales staff. This was a biggie. As a new salesperson, you went through a full sales training. You were trained in sales techniques. How to close, how to get people to buy accessories, how to approach someone, how to go through the process and asking the right questions to get to a single bike to sell. By far this is really where they separated themselves from other stores. Most places would hire bike "enthusiasts" and let them casually sell a bike if a person was interested. They had a very pro-sales approach and it showed in their numbers.
5) Keeping wages low. This is probably a contentious subject for most. But as a salesperson, I made minimum wage, with a small percentage for commission. I think it was 1 or 2% of the total sales I had. By keeping the wages low and offering in store discounts and bike manufacturing discounts (which the manufacturers offer, not ERIKS) they were able to pitch potential employees that, "There's not a lot of money in the bike industry (lie), but people who work for us have a good quality of life and good perks of being a part of the bike community." By keeping wages low, they increased their own bottom line.
Please could you (or someone knowledgable) expand on point 2? Why would a MS based system require more maintenance? I am a longtime Mac user, and don't see why a windows setup would be more complex - it would seem easier to do as there would be more options, but what am I missing?
Thanks.
Whoa, that's startling. I always thought bike shops made tons on bikes. You're telling me this bike costs almost $800 even when the parts are bought in bulk?
> Macs in all their locations and used a custom built POS system.
Locking machines down to a POS, this would be no easier in OSX than Linux, and the premium hardware (with associated cost and limited options) makes this the opposite of thrifty.
While this article was noncommittal in offering up the reasons for HB's success, the pleasant sales experience was reiterated throughout the article. THIS IS HUGE IN RETAIL.
As of this coming Saturday, I'll be a year into operating a coffee shop I opened with two friends. Like HB, my shop has exceeded my expectations in the first year. FWIW, here are my observations on success:
If you have the best sales experience in town coupled with a great, consistent product, people will talk about you. I monitor every mention of keywords related to our shop on twitter, Facebook, yelp, instagram, tumblr, etc and after a year in operation, it's pretty clear that people value the attitude [or lack thereof] of my employees, our approachability, the quality and consistency of our product, and the beauty of our shop. In combination, these things help create and maintain a lot of positive buzz about the shop. Buzz begets buzz too. We've never once paid for advertising and instead let word of mouth and good product do the talking. First there were just tweets, Facebook mentions, and word of mouth. Then bloggers started writing about us. Then we had local press do a few stories on us. With time, all this turned into positive reputation and people outside of the city began to mention us. Recently we've received national press. We also just climbed atop the #1 ranking in yelp for coffee in Charleston, SC. Over the past year, I've made a concerted effort to keep people talking and it seems to have worked.
TLDR: If people see integrity in the ownership, quality in the product, and a pleasant sales environment, they will tell someone and they will be loyal to the brand. If you've done your job so well that you can inspire your customers to talk about you, you will grow, even if you aren't in a prime location.
A timely comment, as I've got a friend about to dive into this very enterprise (Coffeshop/craft beer combo) here in Atlanta.
Do you mind sharing what you felt were the key traffic drivers in the pre social media mention days? IOW, what drove people in your door the first 90 days of operation?
FWIW, my wife and I visited Charleston, SC in December from Austin, found your coffee shop on Yelp, and really enjoyed the experience. We came back twice on a four day trip.
We were just in San Diego, and part of our trip was looking for a coffee place "as good as Black Tap"
This is a great reminder of how good we have it in the Software world.
Look at their biggest expenses: Real Estate, Inventory, Staffing. For a little one-man SaaS, those are all zero. And their margins: 35%, as opposed to the ~99% margins for selling software.
The only expense we have in the software world is the cost of building the product in the first place and the time away from other paying work spent doing support and maintenance. (And at most a few hundred bucks a month for hosting). Considering the you can realistically launch a working MVP with 3 weeks work behind it, and iterate out new features while in "maintenance" mode, it's really amazing how cheap and easy it is to get a profitable business going in our world.
I mean, sure, you can certainly build a software business with high expenses and low margins (take funding, staff up big, spend a year building your thing before shipping, acquire tens of millions of users with no revenue model). But the "mom & pop" model for software just blows the doors off the mom & pop model for retail.
What is this? I hate to be rude, but it reads something like "Hey, we wanted to know how to start a bike shop, and had some friends that did. ... Here's their renovations ... 1 year later, they rock, and they don't know why ... oh, and there's 1 or 2 BILLION dollar ideas in here, have fun!"
Have they done surveys? Have they asked their customers "how did you hear about us?" Did they bring on each of those employees with sales experience? What was their onboarding process? Did they just get lucky? How far away WAS that other bike shop?
It was a fine article, but I felt it lacked real details.
I think the lack of a detail is a big part of the article's point: it remains hard to know why retail businesses succeed or fail today. That's pretty significant in and of itself.
Preface: I've been an avid cyclist since 1986 and worked as a mechanic at shops for over ten years.
The article seems to have been written by an outsider that has absolutely no idea how bike shops work. Bicycles themselves are loss leaders -- they make very little profit there. Their money is made from upsell, service, and repeat customers. The margins stated in that article do not reflect my experience. Not by a long shot.
Of the many shops I worked at, very few things made them truly successful:
1) Love, Time, and Knowledge: Easy peasy. know your shit. The best shop I worked at was owned and run by a guy that started the store at the age of eight. Yes, EIGHT. He sold chains and tubes out of his parent's wallpaper store. I live 3000 miles away and still recommend that shop.
2) Location: The worst shop I worked at was on the richest street in a popular tourist destination. It didn't matter how bad the service was or that there was another better shop a mile away. Foot traffic was the only thing that kept (and keeps) them in business.
3) Niche: This only works if your expertise is in a specific type of cycling. The biggest source of failure is that (a) you didn't know as much as you thought or (b) there was another specialty shop that's too close.
4) Outside interest: Someone (usually a company) gives you boatloads of money no matter how bad you do. One shop I was employed at was a BRAND landmark. That shop lost money every month for decades, but it didn't matter; they still sold more BRANDs than any other brand in that city combined. It was a brand recognition issue that was probably considered a marketing cost.
In the end, there's a common industry joke I heard many times:
Q: How do you make a million dollars?
A: Take two million dollars and start a bike shop.
"it’s impossible to measure what part of their marketing is driving new customers and what part is wasted spending."
The article, which I enjoyed, uses the word "impossible" 2-3 times in this context. I do not think that word means what you think it means - it's not impossible to ask at point of sale "How did you hear about us?" and record that. Or even have short survey forms for people to complete while they wait (you'd rather people didn't wait; but to the extent that they are they'd rather fill in info to enter a competition or similar than be bored.)
I disagreed with pg's distinction about startups v real world businesses at the time, and this is part of the reason why - assuming the different types of new businesses are worlds apart because one needed $250k to launch and another didn't.
The size of initial capital investment isn't what separates startups from bicycle shops.
It's the size of the possible exits which does. Huckleberry Bikes cannot scale to a billion dollar exit in seven years. The sorts of businesses which PG considers startups can. That's why they are attractive to investors.
"Talking to Huckleberry, it also seems clear that the most important software tools for small business haven’t been invented yet. There is no “google analytics” for a shop or measurable ways they can promote themselves offline or online. "
Hmmm, I guess there's already people working on systems using cameras, face detection and recognition, and linking them to records of faces previously in the store (pr eben passing by), and to cash register sales (and credit card identities)?
I find the idea bth fascinating and creepy.
And I'm now wondering how many stores I walk into are doing it already? What're the chances that most big casinos don't already have something like this automatically alerting customer service when whales arrive (and security when card counters arrive)?
Big venues like football stadiums can contact your mobile phone company and get contact information for all the people who brought a cell phone to the event.
Big casinos have crazy video surveillance but I think there's still a lot of humans in the loop. They've got the budget for it, after all.
Of course, the easiest way to track people and their purchases is to sign them up for the store loyalty program and offer them nominal discounts. Works for grocery stores, at least. Bike stores are trickier. Fewer repeat customers.
I'm not from San Francisco, but is 7th/Market really "a bad neighborhood"? I mean, maybe it's not Midtown Manhattan nice, but I also doubt it's East New York bad.
(I used to work at the University of Chicago, and took the Red Line to the 55th St. bus. I only had my shoes stolen on the Red Line once, and only watched a high speed chase come to an end with guns-a-blazin' while waiting for the bus once... but I'd still consider that a sketchy neighborhood.)
I've lived in NYC and SF. SF doesn't have bad neighborhoods, just annoying ones. Crackheads are a nuisance but they aren't very dangerous. Oakland might have some bad neighborhoods. Honestly the burbs scare me the most. I'm probably more likely to be shot by a high schooler in Fremont than SF.
Well, after living in Harlem, south side of Chicago and SF, I would say the spot where Tu Lanh used to be (6th betwe Market/Mission at night, is an exciting little spot that reminds me of the others, but that's just one spot. I used to walk around there at night, you just have to be alert. It's far from one of the "worst areas".
Waiting at the Redline stop, I only knew one person who was brave enough.
It's bad, but I would say its notoriety comes more from the fact that it's so bad relative to the neighboring blocks. Walk two blocks and you're at the Westfield mall / Union Square.
"There is no “google analytics” for a shop or measurable ways they can promote themselves offline or online. Somewhere in all of this, there is probably a billion dollar startup idea or two."
There are a couple of startups already looking at tracking customer behaviour in the real world based on MAC address[1] but hands down the best way of tracking the success of a marketing campaign is with coupons. If you're running Google ads for a bricks and mortar business, don't send people to your home page, send them to a landing page which has a special offer on it, or some other identifiable thing so that when people come in and ask about the XYZ you know where they came from.
I don't think tracking people in store (already quite established, as you point out) was what the article was referring to. I understood it to mean that it's difficult to see if people are walking into your store because of something they saw online, and if so, what.
Seems like Google could do this quite easily. Provide a WiFi service that customers in-store would auto-sign into, that way they can tell if a customer visiting the store has been exposed to any mention of the shop online. I imagine only Google or Apple, or maybe Facebook, could do this because of the sheer amount of information they tend to have on peoples browsing history and location tracking ability.
There is an underserved niche in the biking industry and that is "urban chic" bike clothing from multiple vendors. Clothing is one area where brick and morter retail wins out over online retail because nothing beats trying clothes on. In SF, I've tried clothing on from Chrome, Mission Workshop, SWRVE, Rapha, etc.
Sizing between the brands is notoriously fickle and it's impossible to know if one brand will fit just right while another brand you can't even fit your thighs into the pants. For example, Chrome fits me really well, while Rapha doesn't fit at all. SWRVE on the other hand is only sold at 4 stores in the city (Huckleberry Bikes is one of them, the other three are MissionBike, BoxDog and PushBike). While I haven't been to HB, I have been to PushBike and MissionBike Co, and both have a very very limited selection and sizes of SWRVE clothing. The only non-cycling company that has decent stuff is Lululemon. I'm shocked that in a city like SF that has lots of cyclists, that it is so hard to find good biking clothing.
Given the growth of urban cycling, I'm honestly surprised no one has noticed that you could create just a store that has an excellent selection of fashionable everyday cycling clothing.
I hope the guys at HB are reading this, because I plan on going by there to see if their clothing selection is any better than PushBike and MissionBike Co.
Interesting read as usual from the folks at priceonomics but it seems like a lot of the problems about pinpointing how people found them have solutions that work to some degree including:
- Provide a nominal discount with a coupon code "goog" so you know users came from Google. Or you can do a printed coupon with a tracking code embedded. I see coupons all the time for bike shops like Valenica and American Cyclery.
- Just ask how people heard about you. Most people will tell you because making up a story is harder and it'll be natural since your sales associates are so personable.
In terms of why the location works, my best guess would be because the mid-Market area is becoming gentrified as more and more startups move in and rents rise and young professionals with disposal income will pass by the store on their way to work.
It was a smart move to open at that location on Market, especially with the perks that the city was offering. It is right on a major bike commuter route, and I suspect hundreds of bike commuters ride by each day.
There are some other great shops in town, Box Dog for instance, but their access to commuters is probably better than any other shop in town.
all the bike shops in my city are also repair places which is where they make all their money charging crazy hourly rates to change a tire or for tuning, and from triple marked up accessories. they all know each other too and will collectively bulk buy everything to get a cheaper wholesale price
[+] [-] at-fates-hands|13 years ago|reply
Full disclosure - this is who I worked for (http://www.eriksbikeshop.com/EriksHistory.aspx)
Some things about what made ERIKS so successful:
1) bike shops make almost zero money on their bikes. The margins are razor thin. They make a majority of their profit on accessories. For example, they buy kickstands for 25 cents and sell them for $12.
2) ERIKS actually used Macs in all their locations and used a custom built POS system. They only needed one IT guy who ran 8 stores when I was there (they have around 14 stores now). He said if they were using MS, they would've had to hire a bunch more support people. It helped keep costs down.
3) At first ERIK looked for lower rent, out of the way places to set up shops. What he called, "sub-prime" locations. Rent was lower, and because of their superior marketing, they didn't need a prime location to drive traffic.
4) They trained their sales staff. This was a biggie. As a new salesperson, you went through a full sales training. You were trained in sales techniques. How to close, how to get people to buy accessories, how to approach someone, how to go through the process and asking the right questions to get to a single bike to sell. By far this is really where they separated themselves from other stores. Most places would hire bike "enthusiasts" and let them casually sell a bike if a person was interested. They had a very pro-sales approach and it showed in their numbers.
5) Keeping wages low. This is probably a contentious subject for most. But as a salesperson, I made minimum wage, with a small percentage for commission. I think it was 1 or 2% of the total sales I had. By keeping the wages low and offering in store discounts and bike manufacturing discounts (which the manufacturers offer, not ERIKS) they were able to pitch potential employees that, "There's not a lot of money in the bike industry (lie), but people who work for us have a good quality of life and good perks of being a part of the bike community." By keeping wages low, they increased their own bottom line.
[+] [-] lostlogin|13 years ago|reply
[+] [-] makmanalp|13 years ago|reply
http://www.eriksbikeshop.com/2013-Furley-Cyclocross-Bike/PR3...
[+] [-] arethuza|13 years ago|reply
That is perfectly possible with Windows.
[+] [-] r0s|13 years ago|reply
Locking machines down to a POS, this would be no easier in OSX than Linux, and the premium hardware (with associated cost and limited options) makes this the opposite of thrifty.
[+] [-] rjett|13 years ago|reply
As of this coming Saturday, I'll be a year into operating a coffee shop I opened with two friends. Like HB, my shop has exceeded my expectations in the first year. FWIW, here are my observations on success: If you have the best sales experience in town coupled with a great, consistent product, people will talk about you. I monitor every mention of keywords related to our shop on twitter, Facebook, yelp, instagram, tumblr, etc and after a year in operation, it's pretty clear that people value the attitude [or lack thereof] of my employees, our approachability, the quality and consistency of our product, and the beauty of our shop. In combination, these things help create and maintain a lot of positive buzz about the shop. Buzz begets buzz too. We've never once paid for advertising and instead let word of mouth and good product do the talking. First there were just tweets, Facebook mentions, and word of mouth. Then bloggers started writing about us. Then we had local press do a few stories on us. With time, all this turned into positive reputation and people outside of the city began to mention us. Recently we've received national press. We also just climbed atop the #1 ranking in yelp for coffee in Charleston, SC. Over the past year, I've made a concerted effort to keep people talking and it seems to have worked.
TLDR: If people see integrity in the ownership, quality in the product, and a pleasant sales environment, they will tell someone and they will be loyal to the brand. If you've done your job so well that you can inspire your customers to talk about you, you will grow, even if you aren't in a prime location.
[+] [-] phasetransition|13 years ago|reply
Do you mind sharing what you felt were the key traffic drivers in the pre social media mention days? IOW, what drove people in your door the first 90 days of operation?
[+] [-] jefflinwood|13 years ago|reply
We were just in San Diego, and part of our trip was looking for a coffee place "as good as Black Tap"
[+] [-] jasonkester|13 years ago|reply
Look at their biggest expenses: Real Estate, Inventory, Staffing. For a little one-man SaaS, those are all zero. And their margins: 35%, as opposed to the ~99% margins for selling software.
The only expense we have in the software world is the cost of building the product in the first place and the time away from other paying work spent doing support and maintenance. (And at most a few hundred bucks a month for hosting). Considering the you can realistically launch a working MVP with 3 weeks work behind it, and iterate out new features while in "maintenance" mode, it's really amazing how cheap and easy it is to get a profitable business going in our world.
I mean, sure, you can certainly build a software business with high expenses and low margins (take funding, staff up big, spend a year building your thing before shipping, acquire tens of millions of users with no revenue model). But the "mom & pop" model for software just blows the doors off the mom & pop model for retail.
[+] [-] nappy-doo|13 years ago|reply
[+] [-] cunninghamd|13 years ago|reply
Have they done surveys? Have they asked their customers "how did you hear about us?" Did they bring on each of those employees with sales experience? What was their onboarding process? Did they just get lucky? How far away WAS that other bike shop?
It was a fine article, but I felt it lacked real details.
[+] [-] jsm|13 years ago|reply
[+] [-] frankiejr|13 years ago|reply
The article seems to have been written by an outsider that has absolutely no idea how bike shops work. Bicycles themselves are loss leaders -- they make very little profit there. Their money is made from upsell, service, and repeat customers. The margins stated in that article do not reflect my experience. Not by a long shot.
Of the many shops I worked at, very few things made them truly successful:
1) Love, Time, and Knowledge: Easy peasy. know your shit. The best shop I worked at was owned and run by a guy that started the store at the age of eight. Yes, EIGHT. He sold chains and tubes out of his parent's wallpaper store. I live 3000 miles away and still recommend that shop.
2) Location: The worst shop I worked at was on the richest street in a popular tourist destination. It didn't matter how bad the service was or that there was another better shop a mile away. Foot traffic was the only thing that kept (and keeps) them in business.
3) Niche: This only works if your expertise is in a specific type of cycling. The biggest source of failure is that (a) you didn't know as much as you thought or (b) there was another specialty shop that's too close.
4) Outside interest: Someone (usually a company) gives you boatloads of money no matter how bad you do. One shop I was employed at was a BRAND landmark. That shop lost money every month for decades, but it didn't matter; they still sold more BRANDs than any other brand in that city combined. It was a brand recognition issue that was probably considered a marketing cost.
In the end, there's a common industry joke I heard many times: Q: How do you make a million dollars? A: Take two million dollars and start a bike shop.
[+] [-] JacobAldridge|13 years ago|reply
The article, which I enjoyed, uses the word "impossible" 2-3 times in this context. I do not think that word means what you think it means - it's not impossible to ask at point of sale "How did you hear about us?" and record that. Or even have short survey forms for people to complete while they wait (you'd rather people didn't wait; but to the extent that they are they'd rather fill in info to enter a competition or similar than be bored.)
I disagreed with pg's distinction about startups v real world businesses at the time, and this is part of the reason why - assuming the different types of new businesses are worlds apart because one needed $250k to launch and another didn't.
[+] [-] brudgers|13 years ago|reply
It's the size of the possible exits which does. Huckleberry Bikes cannot scale to a billion dollar exit in seven years. The sorts of businesses which PG considers startups can. That's why they are attractive to investors.
[+] [-] bigiain|13 years ago|reply
Hmmm, I guess there's already people working on systems using cameras, face detection and recognition, and linking them to records of faces previously in the store (pr eben passing by), and to cash register sales (and credit card identities)?
I find the idea bth fascinating and creepy.
And I'm now wondering how many stores I walk into are doing it already? What're the chances that most big casinos don't already have something like this automatically alerting customer service when whales arrive (and security when card counters arrive)?
[+] [-] fennecfoxen|13 years ago|reply
Big casinos have crazy video surveillance but I think there's still a lot of humans in the loop. They've got the budget for it, after all.
Of course, the easiest way to track people and their purchases is to sign them up for the store loyalty program and offer them nominal discounts. Works for grocery stores, at least. Bike stores are trickier. Fewer repeat customers.
[+] [-] hessenwolf|13 years ago|reply
[+] [-] jrockway|13 years ago|reply
(I used to work at the University of Chicago, and took the Red Line to the 55th St. bus. I only had my shoes stolen on the Red Line once, and only watched a high speed chase come to an end with guns-a-blazin' while waiting for the bus once... but I'd still consider that a sketchy neighborhood.)
[+] [-] l1ghtm4n|13 years ago|reply
[+] [-] gtani|13 years ago|reply
Waiting at the Redline stop, I only knew one person who was brave enough.
[+] [-] thomaspaine|13 years ago|reply
It's bad, but I would say its notoriety comes more from the fact that it's so bad relative to the neighboring blocks. Walk two blocks and you're at the Westfield mall / Union Square.
[+] [-] samstave|13 years ago|reply
Lets wait to see how twitter and square bring the area up in 2 years.
[+] [-] fennecfoxen|13 years ago|reply
Startup idea or two? Don't mind if I do.
- http://www.ekahau.com/solutions/retail.html
- http://www.nearbuysystems.com/solutions/in-store-analytics.h...
And here's some additional coverage of that space in the media, with regards to car dealerships:
- http://online.wsj.com/article/SB1000142412788732478440457814... (google URL and click for HTTP Referer if you get paywalled, but I don't think you will)
[+] [-] dools|13 years ago|reply
[1]http://www.fastcompany.com/3004781/google-analytics-real-lif...
[+] [-] _mulder_|13 years ago|reply
Seems like Google could do this quite easily. Provide a WiFi service that customers in-store would auto-sign into, that way they can tell if a customer visiting the store has been exposed to any mention of the shop online. I imagine only Google or Apple, or maybe Facebook, could do this because of the sheer amount of information they tend to have on peoples browsing history and location tracking ability.
[+] [-] malandrew|13 years ago|reply
Sizing between the brands is notoriously fickle and it's impossible to know if one brand will fit just right while another brand you can't even fit your thighs into the pants. For example, Chrome fits me really well, while Rapha doesn't fit at all. SWRVE on the other hand is only sold at 4 stores in the city (Huckleberry Bikes is one of them, the other three are MissionBike, BoxDog and PushBike). While I haven't been to HB, I have been to PushBike and MissionBike Co, and both have a very very limited selection and sizes of SWRVE clothing. The only non-cycling company that has decent stuff is Lululemon. I'm shocked that in a city like SF that has lots of cyclists, that it is so hard to find good biking clothing.
Given the growth of urban cycling, I'm honestly surprised no one has noticed that you could create just a store that has an excellent selection of fashionable everyday cycling clothing.
I hope the guys at HB are reading this, because I plan on going by there to see if their clothing selection is any better than PushBike and MissionBike Co.
[+] [-] grecy|13 years ago|reply
https://www.google.com/maps?q=&layer=c&z=17&iwlo...
Looks like Midtown rags to me.
[+] [-] rohin|13 years ago|reply
[+] [-] guelo|13 years ago|reply
[+] [-] cmbaus|13 years ago|reply
[+] [-] calbear81|13 years ago|reply
- Provide a nominal discount with a coupon code "goog" so you know users came from Google. Or you can do a printed coupon with a tracking code embedded. I see coupons all the time for bike shops like Valenica and American Cyclery.
- Just ask how people heard about you. Most people will tell you because making up a story is harder and it'll be natural since your sales associates are so personable.
In terms of why the location works, my best guess would be because the mid-Market area is becoming gentrified as more and more startups move in and rents rise and young professionals with disposal income will pass by the store on their way to work.
[+] [-] cmbaus|13 years ago|reply
There are some other great shops in town, Box Dog for instance, but their access to commuters is probably better than any other shop in town.
[+] [-] cheald|13 years ago|reply
[+] [-] hexonexxon|13 years ago|reply
[+] [-] lamby|13 years ago|reply
http://forum.slowtwitch.com/gforum.cgi?do=post_view_flat;pos...;
[+] [-] unknown|13 years ago|reply
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