Frame and Wheel and the rider of the future

Frame and Wheel was out on a ride on Saturday afternoon and caught up with a dedicated local rider on a route that is very pleasant and quiet, but for some reason not frequented by cyclists. Seeing another cyclist on this route was unusual; seeing another cyclist on this route riding the finest bicycle Frame and Wheel has seen so far this year was downright strange. The rider was on a carbon fiber Colnago EPS with Campagnola Bora deep dish carbon tubulars. Frame and Wheel is pretty sure that the components were Campagnola Record or Super Record. The rider, who is fifty-three years old and the CEO of a local start up, was clearly not the sort one is likely to encounter in Central Park on a Saturday morning. The pace picked up and after a few miles of conversation, Frame and Wheel learned that this rider spent a portion of his youth racing bicycles professionally in the 80s. This helped Frame and Wheel understand why he was riding a modern incarnation of a classic racing bicycle.

It was interesting to learn that this rider had obtained the frame in New York from a contact and had it built up at his favorite local bike shop in Maine. He said that the whole process had taken a while, but that he was happy to wait. The rider said that he considered himself a dedicated "Euro" brand buyer and noted that local bike shops did not carry the brands he wanted to buy. Not too surprisingly, the rider remembers the Austro-Daimler brand given that the Team, Ultima and Superleicht were in the market in the 80s. 

Frame and Wheel recognizes that this rider is perhaps the only cyclist in the entire state of Maine (or perhaps New England) with such a refined and classic taste in racing bicycles; it is a stark reminder that the number of people who seek classic brands and obtain their bicycles in this manner are the exception rather than the rule (most consumers are "ride it now" consumers and are happy with the Big Three). Nevertheless, Frame and Wheel believes that as Internet literacy increases, bicycle consumers will change their buying habits even more and this will put pressure on the existing push model of bicycle distribution to change. No independent bike store can carry every brand that the Internet carries, but the one thing the IBS carries that the Internet does not is the mechanic and the community. As Frame and Wheel and this rider parted ways, the rider mentioned that he was bringing his bike to the local bike store for a tune up, convincing Frame and Wheel that this rider is the Rider of the Future, rather than the Rider of the Apocalypse.

The business plan: how will customers view the brand vs. the Big Three

Frame and Wheel believes that most consumers will view the Austro-Daimler brand as something classic, nostalgic, European and very much different from the Big Three (Trek, Specialized and Giant). One reason is that the name is hyphenated and has words that are clearly not of Anglo Saxon origin. Meanwhile, the history of the brand is in Austria and Germany and the actual company that used the name is long gone. Meanwhile, the availability of the frame is going to be very limited, relative to the availability of the Big Three brands. This creates the impression of a boutique brand, which suggests premium pricing. The Euroland name also suggests an imported product, something that is not allied with the "buy local" movement, at least at first inspection. The IBS may view the brand as a requisite "Euro" offering for the customers out there who are either from Europe or prefer to embrance the European roots of the sport. Some customers may view the brand sentimentally: it is a name that had its moment in the late 70s and 80s, but has faded from view. The restoration of the brand is very similar to the Mini Cooper restoration by BMW, and some consumers may make the association. After all of these first impressions have been made, the consumer will notice that the company is doing something different: it is using the Internet to innovate how bicycles are sold so that all stakeholders in the industry (the IBS, the rider and the manufacturer) are beneficiaries. It is creating a model where consumers can obtain the selection, price and convenience of the Intenet with the support, service and community of the IBS. This is the mission statement of the company and in simplest terms, it means creating a model that allows the consumer to buy a frame on line and then have their favorite IBS recommend and provide components, assemble it and provide the follow up service. All the stakeholders stand to benefit using this approach, and Frame and Wheel beleives that this is how the consumer will ultimately view the brand relative to the Big Three.

Fashion Week and the Bicycle Industry

Frame and Wheel agrees that the bike business has an element of fashion to it. Consumers watch what the pros ride and they say to themselves: I want to ride that bike. Same is true with fashion: consumers see what a celebrity wears to the Oscars and they say: I want to wear the same thing.  Both bicycle and fashion consumers are happy to settle for slightly different versions once they find out the cost of the versions they see in the magazines and on television.

The frames Frame and Wheel will obtain from Asia can be delivered with all the latest details that are currently in fashion: internal cabling for the brakes and the derailleuers; integrated seat posts; BB30, etc. These are additions that the industry has added to the basic bike frame and convinced the market as being the next necessary thing. Frame and Wheel wants to keep it simple: the demo frames that have been ordered are pretty basic when it comes to features: BSA bottom bracket, external cabling, traditional seat post (Frame and Wheel did go for braze on front derailleur rather than the traditional version and internal rear cabling, because these innovations are pretty simple). Frame and Wheel even kept the paint job to a single color: white. The reasoning is this: internal cabling can be a real pain for the mechanic, especially if the system is new and not proven; integrated seat posts save some weight and look cool, but they make it very difficult to travel with the frame (not to mention higher shipping costs), and it requires taking a hacksaw to the frame. Once it is cut, its resale potential is limited because the frame can only fit a person who is the same height as the original owner.

Frame and Wheel's intention of keeping things simple complements the Austro-Daimler brand: in the early 80s, there was not a planned obsolescense strategy by bike companies; a series of models were introduced and that was it; the frames were not repainted and tweaked each year, and then thrust upon the dealer. The significance is that the bike industry resembles in many ways the fashion industry. Indeed, Fashion Week in New York conicides with Euro Bike in Europe and the big trade show in Nevada next week. Frame and Wheel believes that it is useful to look at the fashion industry to get a better understanding about the bike industry and the consumer.

Frame and Wheel found two interesting article in the Wall Street Journal that describe what designers think about their markets. Luxury-Goods Firms Turn Up Volume on Value refers to a Bain & Co. study that concludes that the luxury consumers "want styles with longevity" and the "new watchword in luxury is value, in the form of quality and staying power." One retail executive is optimistic about the core luxury shopper, but identifies the "middle territory" as the biggest problem. The middle territory are consumers who are aspirational shoppers, consumers who stretched their budgets to obtain the latest, trendy thing (a $1,500 handbag without a point of view). Elsewhere, one designers says she is ready for "real clothes, things that I wnat to buy and keep for years" or real clothing and value. Respondents to the the Bain & Co. study say that two thirds of their purchases this year have been weighted towards "classic" styles; and about 80% of shoppers say that they are willing to pay for apparel that lasts more than one season. Designers Reclaim Individual Voices notes that designers are going "classic and risk-free"

Frame and Wheel reads about these sentiments when perusing the website of titanium and steel frame manufacturers. Indeed, Rob Penn, the author of It's All about the Bike, says very clearly that he wants a bike that he can grow old with, and that would last forever;  he dismisses carbon frames and reveals himself as a purisit. Regardless, Mr. Penn purchases a custom steel O'Rourke frame and he is happy with it.

Frame and Wheel agrees that there is great joy in having a bicycle that will last longer than a season, and that will not be obsolete within two seasons. Frame and Wheel tried Mr. Penn's approach years ago and ended up with a very heavy Moots mountain bike (which is in the attic). The reality is that the bicycle industry has adopted the car industry's planned obsolescence strategy. This is a classic "push strategy" that results in huge investments in manufacturing, distribution and sales infrastructure (in the pursuit of ecnomies of scale); the bikes are built and pushed into the market. Although planned obsolescence results in new innovations coming to the market, it also means that the forever bike is going to become obsolete pretty quickly given that the technology is changing so rapidly. The bigger problem is that planned obsolescence creates a lot of waste and exasperation with waste and rapidly changing fashions is clearly identifiable in the fashion industry.
Frame and Wheel suspects that consumers of bicycles feel the same way and thus remains committed to developing a sustainability strategy that address the frailties of carbon. The timing then is perhaps right for a classic brand that offers quality and longevity to the consumer through the use of a pull model and the principles of frugal innovation as well as a sustainability strategy. Frame and Wheel notes that with control of a classic brand in hand, the company could very well retain a local steel frame builder to develop reissue frames. A topic for another post.

Austro-Daimler trademark

Frame and Wheel applied for the rights to the Austro-Daimler trademark in the United States. The company has retained counsel on this matter and applied to the USPTO in August to obtain the rights for the lettering and the logo. The rights to the logo expired in the United States back in the 80s when Steyr-Daimler-Puch USA stopped importing the frames in the wake of that company's breakup. The rights to the lettering are a little bit more complex given that the name Daimler is a reference to Gottleib Daimler, the founder of the company that produces Mercedez-Benz (and which is now known as Daimler AG). However, the trademark is not being used in commerce and the application states that it will be used in the distribution and marketing of bicycles, rather than automobiles. Most people of Frame and Wheel's generation have never heard of Austro-Daimler (but then again many were not racing in the early 80s).

Frame and Wheel decided on this strategy for a number of reasons. First, there are no barriers to entry in the bicycle industry. Anyone can retain a manufacturer in China to make open mold or custom frames for them and anyone can put any components or wheels they wish on to that frame. The only thing that is needed to differentiate one bike form the next is a brand name. What is in a name is the next question. Given that Frame and Wheel is not doing anything innovative with the actual frame or components (leave that to the experts in Asia), Frame and Wheel believes that it is pretty cheeky to name the frame after the founder of the company. So what are the other options?

How about restoring an old brand, the way BMW restored Mini Cooper? Frame and Wheel raced on an Austro-Daimler Superleicht in the 80s in New England, Colorado and France; the name has special significance for Frame and Wheel. You can see the old frame on this blog. Frame and Wheel knew the company went bankrupt years ago but realized that rights to the trademark had not been renewed with the USPTO. Frame and Wheel recognizes that to develop a brand from the ground up is probably a better route, but the fact is that there are greater chances of success if the company tries to improve something that has been mismanaged or fallen by the wayside than invest huge amounts of time and capital in building something up from the ground up. This is especially true given that Frame and Wheel is not a bike builder and cannot innovate the actual manufacture of the bicycle (Frame and Wheel however can innovate how bicycles are sold). 

Second, the Austro-Daimler trademark is certainly more recognized in the market than anything Frame and Wheel could conjure up. For some people (particularly for older riders) it will be noticed immediately and remembered for what it was: a premium racing bicycle trademark. This is important. Frame and Wheel is convinced that consumers want to be sure that their brand is noticed as either good value for money or worth the money they paid for it. This gets back to the intangible factors about brand perception etc. If a consumer spends thousands of dollars on something, they want other people to know that what they spent their money on is worth it or that it has cache or that it is a fine product. Much of this is signaled in the brand. Frame and Wheel believes that a good quality carbon frame coupled with a restored premium brand is a better market position than the same frame with a new but unknown brand. 

Finally, Frame and Wheel notes that there are few German trademarks in the bicycle industry outside of Stevens and Canyon. However, there are plenty of legendary German cyclists: Jens Voigt, Jan Ulrich, Erik Zabel, etc. Frame and Wheel appreciates that everything has been tried before and on the darkest days, Frame and Wheel recognizes that someone might have tried this before only to be rebuffed by corporate lawyers. Indeed, Frame and Wheel approached General Dynamics, the owner of one of the remains of Styer-Daimler-Puch and enquired about the trademark: they kindly said they had no information outside of some existing legal issues related to the trademark (probably the Daimler question). Frame and Wheel also enquired with Daimler AG: they never replied. Frame and Wheel enquired with IVM Engineering in Austria: they believe that they still own the trademark and did not want to entertain any ideas about restoring it. Perhaps that is why there are no Austro-Daimler bicycles in the market today.

However, there are compelling arguments supporting the application and Frame and Wheel will let his counsel make them, but the last thing Frame and Wheel wants is a long drawn out dispute as there are no resources for fighting corporate lawyers that have deep pockets. The timing for this application will take a long time, at least a year, and during this time Frame and Wheel will assemble some frames using the Austro-Daimler trademark to demonstrate that the company is not a trademark "squatter" and using the trademark in commerce. This is an important consideration for the USPTO. 

More images of Austro-Daimler Olympian

Here are some more pictures of the Austro-Daimler Olympian. Some more close ups of the it has Wienmann brakes and Huret drive drain. The blue lettering is nice on the cream colored frame. It is not the "Champagne" color used on the SuperLiecht.

The business plan: perceived benefits

The perceived benefits of the frame include its performance characteristics (light weight, racing geometry, full carbon features, high quality, etc), its brand (recognized in the market), the company's support for the frame (warranty, crash replacement, sustainability program), the use of the auction model on eBay to derive value for consumer, its crossover brand positioning, which means that frame can be found in the IBS as well as on the Internet, and the company's intention of working with the IBS to establish the brand rather than cutting out the IBS. 

Customers will see the benefit of the auction model in purchasing their frames: it means that they will have the opportunity to obtain value if they buy their frames in the off season when everyone else is not thinking about buying frames. It also means that consumers will have the chance to obtain value if market demand for their particular size is not strong. The auction model also gives the consumer the opportunity to choose components or use the components they have at hand; this will be seen as a cost savings, an efficient use of existing resources and materials and as opportunity to customize. Also, using eBay and Pay Pal infrastructure is increasingly easy for many people: the consumer is increasingly Internet literate and eBay accounts and Pay Pal accounts are increasingly common. 

Customers will see the benefit of the brand. It is a high end brand that is recognized with older cyclists. The brand was used by professional racing teams in the 80s and Davis Phinney among others. It taps into the Mini Cooper business model and it makes a statement about the person who rides it: older generation, good taste, etc. Perception is important and with racing bikes as much as it is with cars. Customers will also see the benefit of the company's commitment to providing its customers standard benefits such as warranty, crash replacement and safety certification (EN testing and USPC standards): the brand will not enter the market without all of those features in place. Customers will see the benefits of the sustainability program which will take the form of a deposit arrangement or a return.

Finally, consumers will see the benefit of the brand positioning as a crossover brand, one where it can be obtained directly from the manufacturer through an auction model as well as from the independent bicycle store using an agency model. The consumer will learn that the business model benefits the IBS, which is important for many consumers, and is convenient and good value for the consumer. The real benefit of the brand is that shows that the Internet and the IBS can thrive together.

The business plan: customer priorities

Frame and Wheel brought the car into the brand  new Toyota dealer for its 35k service and cannot help noticing the increased emphasis the dealer places on the environment. On the floor of the assistant service manager's fishbowl office is a placard proclaiming the dealers committment to proper disposal or recycling of oil, transmission fluid, tires,brake bads, drums and other parts of the car. The placard explains that proper disposal and recycling cost the dealer extra and these fees are thus passed on to me the customer. Tough luck, but better than dumping the stuff in the water table. On the wall in the hallway, there are signs stating environmental improvements: a curtain over the garage door that keeps the heat in during the winter and the cool in during the summer; the use of water efficient machinery and appliances; the green bathrooms. Indeed, the bathroom is a model of environmental enlightenment: water that activates only when your hand passes under the faucet, soap dispensers that push out just enough soap, paper towel dispensers that automatically spit out a shred of recycled paper towel; the strong smell of pine in the bathroom, etc. Clearly, autmobile dealerships have a strong interest in being seen as green: automobiles still create a lot of pollution and dealers trade in the busienss. Anything they can do to improve perception helps.

The point is that Frame and Wheel recognizes that there has to be a sustainability strategy for any bicycle brand. Sustainability is increasingly a priority for many consumers (in addition to the value, quality, safety, support, prestige, etc.) and there is no reason why it cannot be one for a bicycle company. Currently, most manufacturers do not seem to have a strategy especially when it comes to carbon frames and wheels. Where do all those crashed carbon frames and wheels end up? Frame and Wheel learned that this material is recyclable: BMW will soon introduce cars that have carbon bodies, and it points out that carbon can be recycled back into a raw material and used to make a carbon product that requires less strength. Frame and Wheel beleives that a sustainability strategy will become an other reason for the customer to buy the frame. This strategy could take the shape of a deposit policy: the customer pays $2,500 of which $500 is a deposit that gets credited to the customer when they are tired of the frame or when it becomes damaged, obsolete etc. The customer brings the frame to the agent or sends it directly to the manufacturer and the deposit is returned. The company then takes the frame and brings it to its recycling partner and uses it to make other components or simply sells it. Alternatively, it can take the shape of an exchange program through a regional composite organziation or a recycling center: return your old composite frame to these facilities and receive a credit or a discount towards your frame. Frame and Wheel, with control over its brand, could simply establish and OEM arrangement with a local steel framebuilder and have steel biccyles in the market at a lower price point. Steel is not the most competitive material for racing long distances, but for many it is good enough for many.

One last thing:  Ira, the owner of the dealership is raoming aboutout saying hello to everyone, including Frame and Wheel, in the waiting room. He asks if I am being treated well. I mentioned that the mechanic was a bit behind schedule, but other than that, the waiting room is excellent, which it is as far as car dealership waiting rooms go, and I am pleased. He says thank you and moves on. It did make an impression though: Frame and Wheel will send the president of the company to check on its IBS dealers when the time comes, and for that matter, to check on its customers. There is no substitute for recognition from the top, and that too is likey to become a customer priority