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

(Example: Books:Ron Kitching)

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.

_______________________________________________


----- Original Message -----
From: Steve Neago
To: kohl57@starpower.net


<classicrendezvous@bikelist.org> Sent: Thursday, April 15, 2004 10:04 PM Subject: Re: [CR]Raleigh Buying Up Their Betters


> I would like to add that by the early 1970s, the bike boom had taken off and
> Raleigh UK did not have the manufacturing capacity to keep up with worldwide
> demand.
>
> This is why manufacturing had to be "offshored" to plants in foreign
> countries including India and competitors were gobbled up - Raleigh sales
> had exceeded their Raleigh UK plants abilities to keep up with market
> demand...
>
> As the bike boom curtailed, Raleigh UK was left with aging plants, declining
> market demand, and an inability to "modernize" its infrastructure and
> product lines as labor union troubles mounted. This was not a good time to
> buy up competitor bike companies, so Raleigh UK experimented with
> franchising the Raleigh brand name to Huffman Bicycles in the USA for
> increased sales in a declining market.
>
> The 1980s BMX craze left no "upgrade path" for BMX users to higher end
> Raleigh 531 and 753 frames. Raleigh high priced bikes were not able to
> compete on a price basis with mass market BMX producers such as Huffy or
> Murray. Raleigh could not obtain shelf space in the worlds largest market -
> the USA - nor in Wal-mart nor at other mass merchandise retailers.
>
> As I mentioned in an earlier CR post with a marketing case study about
> Huffy, the President of Huffy at that time was interviewed and had to
> terminate the Raleigh franchise in the mid1980s because far more profit and
> revenue came from BMX and lower end bikes. In fact, Wal-Mart asked Huffy
> for a large order of "loss-leader" bikes that stripped manufacturing
> capacity from Raleigh frames made in the USA. This is when Huffy briefly
> experimented with manufacturing in the Asian market and eventually resigned
> the Raleigh USA franchise.
>
> In the late 1980s, TI Investments sold the Raleigh International company to
> Derby Investments in the USA that later sold off Raleigh in the late 1990s
> to a small USA investors group that made Reynolds carbon frames.
>
> All these problems eventually contributed to the decline and fall of the
> Raleigh empire.
>
> Regards, Steve Neago
> Cincinnati, OH
>
> ----- Original Message -----
> From: <kohl57@starpower.net>
> To: <richardsachs@juno.com>; <joebz@optonline.net>;
> <classicrendezvous@bikelist.org>
> Sent: Thursday, April 15, 2004 9:33 AM
> Subject: Re: [CR]Raleigh Buying Up Their Betters
>
>
> >
> >
> > Original Message:
> > -----------------
> > From: richardsachs@juno.com
> > Date: Thu, 15 Apr 2004 12:35:09 GMT
> > To: joebz@optonline.net, classicrendezvous@bikelist.org
> > Subject: Re: [CR]Brit v Italian bikes
> >
> >
> >
> > Joe B-Z wrote:
> > "But the most evil thing that Raleigh did was to buy up the better
> > competition like BSA, first whore the name out in their own country, and
> > then subject it to further groveling in India. I think you could still buy
> > a BSA in India today."
> >
> >
> > it wasn't evil if you were a shareholder!
> > <g>
> >
> > Actually this is often overstated methinks... Raleigh gobbling up everyone
> > else to ensure primacy for their inferior product.
> >
> > In fact, Raleigh only bought up Humber (1933), Rudge-Whitworth (1944),
> > Triumph (1954?) and finally BSA-Sunbeam-New Hudson in 1957. It looks like
> > BSA did some of their own "gobbling" before that!! Ask Sunbeam
> enthusiasts!
> >
> > What gets confused so often is that Raleigh itself was bought out in 1961
> > by Tube Investments which owned British Cycle Corp makers of Phillips,
> > Hercules, Sun, and most of the other manufacturers except Dawes and
> > Elswick-Hooper. TI were smart: they bought the company but they kept
> > Raleigh's superior management and marketing, better known name and most
> > importantly got their huge (really too big even by then) Nottingham plant.
> >
> > Of course BSA had an outstanding lightweight line... they were, I think,
> > better regarded by clubmen than any of the big manufacturers. In their
> > days, the Gold Vase and the Tour of Britain models were top of the heap
> for
> > those who couldn't afford the fancy handbuilt jobs. BSA offered the more
> > desirable (even then) Cyclo-Benelux gears where Raleigh remained devoted
> > (too long) to Sturmey-Archer hubs gears since, of course, they owned them
> > too. BSA are well known in the USA since they supplied most of the
> > lightweight, racing and track bike fittings from the early 1930s onwards.
> > After Raleigh got BSA, it all just fizzled out.
> >
> > And yes.. it WAS sad to see BSA and Sunbeam at the end, their once
> renowned
> > names stuck on kiddie trikes and low-end juvenile bikes.
> >
> > Peter Kohler
> > Washington DC USA
> >
> >
> >
> >
> > --------------------------------------------------------------------
> > mail2web - Check your email from the web at
> > http://mail2web.com/ .