Interview with Canyon Bicycles: “We stick to a ‘slow-build’ strategy”

March 20, 2017 by
Janine Nothlichs

“In the beginning, a lot of people told us at Canyon that selling bikes online was impossible. We have proven everybody wrong.” Frank Aldorf, Chief Brand Officer at Canyon Bicycles, met with us at the headquarters in Koblenz, Germany, to tell us more about the company. Canyon, founded in 1996, has been distance-selling bikes directly to consumers from its very first day. Today, Canyon sponsors two pro-cycling teams and has grown to sell online in 104 countries, boasting a staff of 850 worldwide and has a turnover of close to €159,000,000 each year.

This article previously appeared in Cross-Border Magazine nr.2, December 2016. This issue can be ordered here.
Pictures by Léon van Bon

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A true first-mover
Canyon evolved from a bike store founded in 1985 by Roman Arnold, who just like his father imported bike parts from Italy to resell them in Germany. After making the decision to create a new bike brand named Canyon, the company developed from a mail-order business into

an online pure-player. Shortly after, in the late nineties, e-commerce made its entry into European households, which gave Canyon a true first-mover advantage.

Close to the community
Arnold’s focus has since been on a close connection to the rider and the cycling community,which made him eager to provide the best bike possible. It was only after he proved successful in doing this that the decision was made to sell abroad. “People started requesting our bikes in other countries,” explains Frank Aldorf, “we started off in France and Italy, and today we sell in 104 countries. The desire to create the best bikes possible fuelled Canyon’s success to become a European business and finally a global brand.” Canyon operates 19 local offices with customer support and technical services to support its busiest markets on the ground. The decision to open local service centres was based on the market’s strength. Customers in all other countries must connect with the headquarters in Koblenz when they have a problem, and also ship their returns to Germany. Germany, France and the UK- which has been seeing a huge rise in cycling through the successes of the famous Sky Team- are the largest sales markets for the cycling brand, followed by Italy and Spain.

Competitive advantage
The first-mover mentality and online DNA clearly provide a competitive advantage in a sector where more and more brands are now starting to adopt multichannel marketing and direct-to-consumer strategies in addition to traditional sales channels. “People were telling Canyon it’s impossible to sell bikes online. We have proven everyone wrong. The business model has worked for us for a long time now, and we have gradually built up an expertise in running an online business. For others to add an online channel is not that easy, everyone must find their own way,” says Aldorf. “Canyon has a unique business model, which has given us a great advantage, but others are catching up fast. In the beginning, people thought we were destroying local bike shops by cutting out the middlemen. But that’s no longer the case, we weren’t trying to destroy anything – we were just the first to do this.”

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Bike shops shift the way they think
One wide-spread argument against direct-to-consumer online sales in the bike industry is that it cannibalises local bike stores. In some cases, brick and mortar shops even refuse to service bikes that were bought online. However, according to Aldorf, the industry is naturally shifting towards new business models and it is time for physical stores to adapt: “Our approach never had anything to do with ‘cutting off’ local bike shops. Slowly, shops are now learning that they also have to build their brand to create a solid base of returning customers.

They need to focus on the best service for their community. We are now at a point where bike shops are finally shifting the way they think; their perception of core-business is shifting towards a more service-oriented approach and we are very happy about this progress. We
always suggest to our customers to make use of their local bike shops. The way we see it, we never alienated them,” assures the brand officer

Replacing the human
Traditionally, just like running shoes or cars, sports bikes have been sold by experts able to offer advice about size, fitting and positioning of the rider. In an online model, this service must be replaced by software and information, navigating the buyer though his decision-
making process. Canyon has developed the PPS (Perfect Position System) tool to help people find the correct size for them, and additionally has a 30-day return policy with no questions asked. Canyon presents itself regularly at fairs and events to provide its customers
with physical touchpoints. They strive to hire native speaking, technologically savvy customer service representatives who are able to solve most questions about the bikes, which is not always an easy job. “It can be challenging to find people with the right language skills and

knowledge of bikes, but if they are willing, we can always train them to become an expert,” affirms Aldorf.

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This shows the challenge which Canyon must face being a bike brand, a bike retailer and an online company at the same time. “What people experience in online retail- for example when they buy on Amazon, is the same as what they expect from us, in this sector the standards are very high. As a bike brand, we must fulfil our customers’ expectations of having the best quality possible. We have to combine being a great online seller, a great online bicycle retailer and a perfect bike brand, which is a big challenge. While other companies are playing on just one field, we are trying to stay on top of the game on all three”, Frank Aldorf explains. Feedback and comments via social media and other platforms are always welcome, as Canyon believes in learning from the criticism they receive

Global branding
Canyon is known for being the sponsor of two pro-cycling teams, Katusha and Movistar. Of course, for the public to see Nairo Quintana win the Vuelta d’Espana on a Canyon bike, for example, it does a great deal for creating international demand. However, from a marketing
and branding perspective, Canyon does much more than sponsorship. There is a small marketing budget for each of the 19 countries who have teams on the ground. If there are matters that need to be spread globally, these teams can activate them on a local level.
Sponsoring is just one ingredient of Canyon’s marketing tactics. Aldorf claims that “Our focus is on the sport. We sponsor various teams in mountain biking and triathlon and invest in that sport. We love that our bikes compete on the highest level, however, we also put in a lot of
efforts into local, community-centred levels that are not based around the pros. We go to events, organize test rides and bike festivals. Here we expand our community and create a fan-base. Trade shows such as Eurobike (largest cycling trade-show in Europe, red.) are shifting their purpose for us: these are no longer simple industry events, they serve as a platform where thousands of people can get up-close with and try out our bikes.”

Centralized but local
It sounds like a contradiction: Being close to riders and community, and at the same time running a centralized company from a single German head office. But according to Frank Aldorf, it is a benefit rather than a challenge. Canyon’s strategy is an interesting combination
of a very centralized global approach when it comes to the general brand message, and a local representation taking care of customer care, technical support and translating the overall brand messages into what resonates best with the local audience. “Our local offices
are much better at understanding the specific needs of their markets than we could ever imagine here in Koblenz. Being local is much more than just offering a new language. It is about customer expectations, the way they wish to pay and the way they interact. Being
close to the rider is where you need the local teams who understand all the nuances and differences.” Frank Aldorf is convinced: “Our story is created here and then exported across the world. It’s easier this way and prevents our brand identity from becoming fragmented.”

Curious (little) adaptations  
When shipping to various international destinations, the assembly team at the Koblenz- based factory has to take into account local requirements when building the bikes, some examples may be:

•Bikes going to UK or Japan need to have the brakes changed to the opposite side.
•In France the law requires a bell to be included in the package.
•Boxes for shipments to Australia need to be suitable for indicating all contents on the
outside.
•In Switzerland, Canyon is called ‘Pure Cycling’ – usually the payoff of the brand

name- because the name ‘Canyon’ was already taken by a local mountain bike brand.

‘Slow-build’ strategy
Ever since pursuing international expansion, Canyon has relied on a slow-build strategy when entering new markets. This requires that quality is safeguarded when entering a market with a smaller product range, slowly building up a market share and then investing more along the way as the market grows. Frank Aldorf explains: “This plan has served us very well. It is a rather conservative approach but it has ensured we are able to serve our existing markets well and at the same time open a new market. People should not have to wait longer for their bikes just because we are expanding elsewhere. However, we also still have room to ramp up our facilities here, and space to grow.”

Off to overseas
In May 2016, Canyon announced a major step in its global expansion: A move to the US market. An investment and partnership with the US-based TSG Consumer Partners, LLC, enables Canyon to finally open up the market, following an extensive period of preparation.
“This is such a large market, at times it’s almost daunting,” admits Aldorf, adding: “We’re getting to know the terrain, for an understanding of all the possibilities. Still, as a brand you need to make the best possible start. We have to stick to our successful pattern of ‘slow-build’, even though this market is so big and therefore the opportunity is so big, there is so much demand. However, we are still a small company and we have to be careful not to bite off more than we can chew.”

Managing expectations
The main challenges of the US market include legal requirements, tax issues and differences in consumer expectations. “This will be the most demanding consumer base we have ever served. The US customers expect good service as the quality of service there is very high.
We might feel we are doing a great job here in Europe, but that probably won’t be enough for our US consumers. Still, we must strive to reach these standards.” Another important factor is expectation management. The idea of not entering the market with the full range is a safe bet, but must be communicated carefully to avoid disappointment. Canyon has assembled a new team to work on liability issues, quality management, safety documents and all other prerequisites to sell into the USA.
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