Matching supply with demand

Frame and Wheel has mentioned the idea of using eBay as a channel for selling framesets. Some believe that this would undermine the value of the brand given that eBay suggests used products. This is a fair observation, and Frame and Wheel agrees. However, Frame and Wheel sees that there are many organizations selling new items on eBay, and is aware that many consumers frequently purchase new items on eBay from eBay stores in order to obtain selection, speedy delivery and competitive pricing. Many vendors offer money back arrangements and privileges consumers have come to expect from all vendors.

Frame and Wheel is admittedly drawn to the auction mechanism of eBay, because it facilitates a market price, and the infrastructure is all there and many people are familiar with it. It is something that makes sense if Frame and Wheel has ten frames sets in inventory. But using eBay does not solve the problem of financing costs.

A large expense for bicycle brands is among other things the cost of financing an order: factories want 50% down payment for large orders, and for an order in the thousands of frames, this is a large sum of money. A bicycle brand will obtain a working capital or bridging loan to make the order . Frame and Wheel is too small to obtain a loan, and is not keen to do so, given the cost and the risk. A better way will be to act on the consumer's willingness to pay six months in advance for their frameset, and reward them for doing so by giving them "up front" the discount they would normally get at the end of the year.

For example, a frameset that retails for $2,000 at the beginning of 2012 typically can be had for 25-30% off at the end of 2012 as IBD's try to clear out inventory (think of all the odd sized frames languishing from the racks at the local IBD). Frame and Wheel envisages a scenario where a consumer pays $1,500 for a $2,000 frameset in September of 2011 and takes delivery of the frameset in March 2012. This is the amount they would have paid if they had waited until the end of 2012, but since they are ordering in advance, they pay less, and have the opportunity to choose colors and models. The only tradeoff is that they have to wait.

In addition to providing some choice, this model would match supply and demand and provide Frame and Wheel with the cash necessary to execute the order. This method will require an order book on Frame and Wheel's website or Facebook page: it does not necessarily require eBay, given that Frame and Wheel will order as many framesets as the market desires. Perhaps it is a model that is more suitable for Groupon.