Re: [CR]Raleigh Buying Up Their Betters - related re-post of CR article about Raleigh USA Sales (long)


Example: Production Builders:Cinelli

From: "Steve Neago" <questor@cinci.rr.com>
To: <classicrendezvous@bikelist.org>
Subject: Re: [CR]Raleigh Buying Up Their Betters - related re-post of CR article about Raleigh USA Sales (long)
Date: Thu, 15 Apr 2004 22:25:09 -0400


Archive-URL: http://search.bikelist.org/getmsg.asp?Filename=classicrendezvous.10402.0044.eml From: "Steve Neago" <questor@cinci.rr.com> Date: Sun, 1 Feb 2004 19:37:51 -0500 Subject: [CR]80s Huffy/Raleigh sales affected by Wal-Mart - long

This is FYI about Huffy/Raleigh in the mid 1980s where Wal-Mart, the world's largest retailer, likely contributed to the decline of quality racing cycles... The abbreviated article at the URL below questions Wal-Mart business practices and pricing which have led to later financial hardship experienced by some preferred suppliers such as Huffy Corporation.

The article snip below briefly describes how the Wal-Mart retail chain has affected the bicycle market in the USA since the mid-1980s. It briefly describes how John Marotti, former President of the Huffy Company when they experimented with franchising the Raleigh USA cycling line in the in 1980's, tried to work with Wal-Mart to increase retail bike sales in the USA. Knowledgeable Raleigh owners may be interested in the fact that Huffy experimented in the mid-1980s with placing high-quality bikes at Wal-Mart and other mass retailers test markets in the USA. At that time, however, low price were the retailers main concerns and higher priced bikes like Raleigh did not fit their marketing plans. =20

I found the article interesting because it seems to show how mid-80s volume retail bike deals were made with the world's largest retail chain. These sales deals between manufacturer and retailer for low-cost bikes (and competing BMX and Mountain bikes not mentioned in the article) strongly contributed to the decline in sales of quality racing bikes in the USA after the mid-1980s.

John Mariotti is now in the housewares and venture capital industry. A recent online biography of Mr. Mariotti says he, "led Huffy Bicycles (1983-1992) to the preeminent position in the U.S. bicycle market, with a 33% share and over $300 million in sales. Huffy was the acknowledged product innovation, advertising and promotion leader, and the best known bicycle brand in North America. The Celina, Ohio factory where Huffy bicycles were then manufactured was widely known as the most productive in the world, and for its exemplary, high-involvement working relationship with its United Steel Worker workforce, and where it pioneered what is now known as TQM, Lean Production and Mass Customization.

I found the article titled "The Wal-Mart You Don't Know" on the Internet at the following URL: http://www.fastcompany.com/magazine/77/walmart.html. It is hard to verify supposed facts in the article, but it is believable.0

Regards, Steve Neago Milford, OH

"THE WAL-MART YOU DON'T KNOW" From: FASTCOMPANY Magazine Issue 77 | December 2003, Page 68 By: Charles Fishman Photographs by: Livia Corona0

Wal-Mart also clearly does not hesitate to use its power, magnifying the Darwinian forces already at work in modern global capitalism. Caught in the Wal-Mart squeeze, Huffy didn't just relinquish profits to keep its commitment to the retailer. It handed those profits to the competition. What does the {sales marketing} squeeze look like at Wal-Mart? It is usually thoroughly rational, sometimes devastatingly so.

John Mariotti is a veteran of the consumer-products world--he spent nine years as president of Huffy Bicycle Co., a division of Huffy Corp., and is now chairman of World Kitchen, the company that sells Oxo, Revere, Corning, and Ekco brand housewares.

He could not be clearer on his opinion about Wal-Mart: It's a great company, and a great company to do business with. "Wal-Mart has done more good for America by several thousand orders of magnitude than they've done bad," Mariotti says. "They have raised the bar, and raised the bar for everybody."

Mariotti describes one episode from Huffy's relationship with Wal-Mart. It's a tale he tells to illustrate an admiring point he makes about the retailer. "They demand you do what you say you are going to do." But it's also a classic example of the damned-if-you-do, damned-if-you-don't Wal-Mart squeeze. When Mariotti was at Huffy throughout the 1980s, the company sold a range of bikes to Wal-Mart, 20 or so models, in a spread of prices and profitability. It was a leading manufacturer of bikes in the United States, in places like Ponca City, Oklahoma; Celina, Ohio; and Farmington, Missouri.

One year, Huffy had committed to supply Wal-Mart with an entry-level, thin-margin bike--as many as Wal-Mart needed. Sales of the low-end bike took off. "I woke up May 1"--the heart of the bike production cycle for the summer--"and I needed 900,000 bikes," he says. "My factories could only run 450,000." As it happened, that same year, Huffy's fancier, more-profitable bikes were doing well, too, at Wal-Mart and other places. Huffy found itself in a bind.

With other retailers, perhaps, Mariotti might have sat down, renegotiated, tried to talk his way out of the corner. Not with Wal-Mart. "I made the deal up front with them," he says. "I knew how high was up. I was duty-bound to supply my customer." So he did something extraordinary. To free up production in order to make Wal-Mart's cheap bikes, he gave the designs for four of his higher-end, higher-margin products to rival manufacturers. "I conceded business to my competitors, because I just ran out of capacity," he says. Huffy didn't just relinquish profits to keep Wal-Mart happy--it handed those profits to its competition. "Wal-Mart didn't tell me what to do," Mariotti says. "They didn't have to." The retailer, he adds, "is tough as nails. But they give you a chance to compete. If you can't compete, that's your problem."

In the years since Mariotti left Huffy, the bike maker's relationship with Wal-Mart has been vital (though Huffy Corp. has lost money in three out of the last five years). It is the number-three seller of bikes in the United States. And Wal-Mart is the number-one retailer of bikes. But here's one last statistic about bicycles: Roughly 98% are now imported from places such as China, Mexico, and Taiwan. Huffy made its last bike in the United States in 1999.