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THE INC. LIFE

Will Canyon Disrupt the Performance Bicycle Industry? It Already Has

My interview with Canyon Bicycles founder and CEO Roman Arnold about how becoming a major player as a D2C bike manufacturer starts with making great bikes.

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BY Jeff Haden - 10 Jul 2018

Will Canyon Disrupt the Performance Bicycle Industry? It Already Has

PHOTO CREDIT: Getty Images

Like golfers, many cyclists tend to think they're just one piece of new equipment away from real success. Electronic shifters. A lighter carbon frame. Aerodynamic carbon wheels. "If I just had (that)," the thinking goes, "then I would never get dropped."

I'm in a different camp. I know my bike is never the biggest limiting factor. I am. So when I need bike advice, I just listen to people a lot smarter than me.

Like Jeremiah Bishop, a professional cyclist, national champion in short track and marathon mountain biking, and a 16-time member of the U.S. National team. (He's also an outstanding coach: As I share in my book, The Motivation Myth, in just four months Jeremiah trained me to complete the 100-mile, 11,000 feet of climbing Alpine Loop Gran Fondo. So if he can do that for me...)

When Jeremiah speaks, I listen. So when he told me he now rides Canyon bikes, a direct-to-consumer bike manufacturer making major waves in the cycling industry, I borrowed a friend's Endurance CF SLX for a week. (That's a friend.) Fast, comfortable, handles great, disc brakes that are powerful and predictable... it's an awesome bike.

I wish I could have kept it longer; there are some climbs and descents (hi Reddish Knob!) I would love to try.

And clearly I'm not the only person who feels this way: Two teams competing in this year's Tour de France, Movistar and Katusha, ride Canyon bikes.

So yeah. They make great bikes. But what's even more interesting is how Canyon arrived at this point.

In 1985, Roman and Franc Arnold started a company in Germany that sold Italian bike parts. They changed the name to Canyon in 2001 when they started making bikes they sold online and delivered directly to customers. Today Canyon makes high-end road, mountain, triathlon, and commuter bikes it sells in more than 100 countries.

Including, as of last year, the U.S. (More on that in a moment.)

While D2C isn't unique in the cycling industry -- some smaller brands allow consumers to order directly from the manufacturer, while at least one major brand lets you order from a website and then take delivery at a local retailer -- Canyon seeks to be one of the first brands to sell high-end performance bikes directly at a discount price. And on a much larger scale.

Since I love talking to entrepreneurs that make products I love, I talked with Canyon Bicycles founder and CEO Roman Arnold to find out more.

In the U.S. we had heard about Canyon bikes... but couldn't buy them. Since people tend to want what they can't easily have, that definitely gave the brand a certain cachet. Did that factor into your decision as to when to enter the U.S. market?

Of course, it was good that Canyon's special quality, independent design and value-performance ratio were already known before its market entry into the USA.

But delaying entry to drive demand was not a strategy. Canyon has evolved from an international to a global brand and we wanted to make this next step to the U.S.A. especially good: With its own HQ, showroom and service center.

We prepared as well as we could for the largest market in the world, and it took time to ensure our strategy was in place to meet our global standards of service. Even though the rest of the world is large, the USA is a special market. We are happy to finally be operating the website, service center and showroom in the U.S.!

How important is racing to marketing your brand?

Racing is of enormous importance for Canyon. We are a performance brand and I,myself, come from racing. This is our "laboratory" -- racing is in our DNA! We get valuable feedback from all our professionals -- road bike, mountain bike, triathlon -- and this feedback goes directly into our bikes. The benefits go far beyond visibility for marketing, it's about real product development.

Just as Ferrari and Formula 1 belong together, Canyon and performance/racing fit together.

I talked to a bike shop owner concerned that an e-commerce model would negatively impact his store's sales. That may be true... but in my experience, a rising tide floats all boats, and if a direct to consumer model increases the number of riders and the number of purchases...

In general, the retail market has been selling more through the various online channels in recent years.

It is true, the bike dealers have less traffic in their shops. I was a bike shop owner myself and I know what that means. But, we cannot change the Internet and Canyon, in particular, is not the enemy.

If independent shops get it right, they can ultimately even benefit from this development and can become a service partner. BikeRepair.com is a good example where the dealer can become a local service partner for any brand.

The Internet can never replace the service, that's clear. The independent trade has completely different threats. With a sales concept like Canyon's, however, there are opportunities. Ultimately, any dealer can win new customers.

We must all be realistic; online sales for bicycles and parts are certainly not only available at Canyon. In some countries, highly informed customers already buy 70 to 80 percent of their accessories and all aftermarket goods online -- no longer from the dealer!

But if our customer stands with his bike in the shop of an independent dealer, there is a potentially new customer; not for a bike, but maybe for a lot more: Accessories and service, to mention just a few possibilities.

What are some lessons you learned early on that inform how you run your business today?

The basic idea of my father, whose model I continued and developed, was to go directly to the customer during races. The blue trailer from that time is still in the Canyon showroom and it reminds us every day that direct contact with the customer is our core value, from day one.

At that time we were still called "Radsport Arnold." We listened to what customers wanted. They ordered, and we delivered at the next race.

"Customer focus is key" is not new to us. The customer is king, and we need direct feedback.

What Canyon represents today is the logical consequence of this very early insight that the Internet now provides. Our goal is always to do the best for our customers, and we want to be better at it than others.

We call this "Pure Cycling." To be part of the community and to listen and respond to the community.

This is extremely important, and we can do this very well because we are in direct contact with our customers.

In my opinion your model works because it focuses on experienced and knowledgeable cyclists. (Few beginners are willing to spend thousands of dollars on a new bike.) Do you plan to further "democratize performance" by eventually selling entry-level bikes? Or are the margins too small?

Canyon is still quite a new player in the U.S. market. But we are familiar with your premise: Early adopters tend to buy more expensive bikes.

The situation is different in Europe, where we have been a market player for much longer. In addition, not all models are yet available in the USA; the complete offering will gradually be expanded.

Many entrepreneurs struggle with the idea of taking on a large investor, fearing they will lose control, etc. How hard was it to decide to partner with TSG? What made you choose them?

Over the years I have had an extremely high number of inquiries, from partnership to complete takeover. None of them triggered anything in me.

But TSG was different. They asked differently: Better, more consistent, and honest.

Of course, such a process does not work overnight. But there must be a concrete basis of trust from the very first moment. TSG has shown this regular, constant, genuine interest. We have built up an absolute relationship of trust over 1.5 years.

Of course, this was difficult for me at the beginning. After all, I founded Canyon. But my goal even then was to make Canyon a global brand and that of course included the USA.

So for that expansion I clearly needed a partner. Today I have to say: The partnership with TSG was one of the best decisions in my life!

We all see this cooperation less as an intervention but rather as a challenge. TSG demands Canyon at its best and that's a good thing! In our daily business this makes us better, stronger, and more focused. I couldn't imagine a better partner, because TSG has also found Canyon to be an excellent performer.

D2C means reducing significant cost from the sales/marketing/distribution equation. Yet if customers struggle to finish-assemble their bikes, or you have major customer service problems, that could negate those savings. How did you go about designing a system that ensures customers are happy and require little or no additional "handling"?

I can't confirm that our "Direct 2 Consumer" concept reduces these costs. In marketing, for example, we have at least the same effort, and sales are also cost-intensive -- just look at our investment in our Call Center.

Of course, saving the dealer margin is undisputed, and fortunately, we can pass most of this directly to our customers. This is what we mean by "Democratize Performance."

This also means that we offer our customers an extensive service network, which in the near future will be based on four pillars:

  1. Direct contact with Canyon in each country with its own team, FAQs and global telephone service.
  2. Premium service providers such as Velofix, which take over delivery, installation and maintenance on site.
  3. Platforms such as BikeRepair, which provide customers with a qualified overview of the portfolio and quality of the "dealer around the corner" in a constantly changing business world.
  4. Canyon Affiliate Partners; specialist dealers who want to offer Canyon customers their qualified service on their own initiative -- naturally after appropriate certification.

You knew the European market really well. Is the U.S. market different in terms of marketing, expectations, etc? And if so, how have you worked to adapt and address that?

With TSG we found the right partner who has always focused on consumer brands. TSG is just as much focused on the end customer as Canyon is -- that's why we fit together so perfectly.

Of course, the expectations of our service in the U.S. were and are very high. That is why we have planned our entry into this important market over a long period. There was a large team preparing this step from Koblenz, and now Canyon USA has 30 employees in Carlsbad. We have only hired experienced employees from the industry who know all the needs of the U.S. market very well.

We have our own managing director in the USA, and Canyon USA President Blair Clark who is an absolute industry veteran.

To successfully enter a new market, one must not only know its mentality, but to understand it. You have to become part of the community. This is something Canyon has always lived by. We want to inspire people worldwide through cycling. That is why we are explicitly committed to supporting "People for Bikes"(whose advocacy and efforts to get more people on bikes is legendary), and IMBA (the International Mountain Bike Association), for example.

We chose California because it has a strong cycling culture, and people ride bikes year round.

Where would you like the brand, and the business, to be in five years?

Overall, I hope that our brand essence "Pure Cycling," which is not a claim but an attitude, will receive more attention worldwide. And that cycling simply becomes even more important!

It is simply great to experience nature and to be outside. In Europe, the bike industry already is where the car industry would like to be with regard to E-bikes. E-bike is a huge trend and is becoming even more important globally. The world is becoming increasingly urbanized and individual transportation as we know it today will soon no longer be conceivable.

In addition, more and more people want to make their daily life more active, at best "track" it. The bike is perfectly suited for this.

It is ultimately about sustainability. Our goal is to make Canyon one of the most important players in this future-oriented, sustainable industry: Directly with the customer, directly in the community.

You started in business when you were 18 or 19. What do you wish you could go back and tell your 19 year-old self?

I would tell him three things. One, do what you love! Not what someone else is telling you. Be passionate, then you can make a difference! Second, think big! Even if you can't use it today.

And third, be patient.

Looking back, what was a huge turning point for you: In terms of business, or a connection, or an enabling customer, or an innovation...?

Actually there were two or three things, but ultimately it's a very decisive one. You have to think big and unconventionally. Visualize what's possible.

In concrete terms, however, I was strongly influenced by Stephen Covey's The 7 Habits of Highly Efficient People. Questions such as "What have I learned?" or concrete approaches such as "Begin with the end in mind" have shaped me.

For example, I planned already early on that Canyon should become a global brand. That's why I secured canyon.com very early on -- which seemed completely excessive at the time, at least for financial reasons, but today we see this was only logical, consistent and correct.

Ultimately, one thing is crucial: You have to define your own, non-negotiable values and align everything you do -- both privately and commercially -- with those values.

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