Performance Shakes It Up In San Diego

By Ben Delaney

SAN DIEGO, CA—Performance, the retail and mail-order giant, is shaking up one of the nation's most dynamic markets with its purchase of the seven-store Bike USA chain.

In addition to making Performance the biggest bike retailer in San Diego—now with nine stores—the acquisition forced a tectonic shift in the market positioning of several brands.

Trek and Specialized, which did a combined $3 million in sales through Bike USA, are scrambling to replace that business with other retailers.

The two suppliers refuse to do business with Performance because of its direct-mail emphasis. Their departure opens the door for competitors.

The transition also created confusion and anxiety among shop employees.

Meanwhile, the late December acquisition reflects the growing clout of Performance, already the nation's largest direct-mail cycling company as well as the largest retailer with 43 retail stores in nine states.

"The Bike USA acquisition is evidence that we continue to aggressively grow the retail side of our business by not only opening new Performance stores, but also by acquiring successful cycling stores," Garry Snook, founder and chief executive officer of Performance, said in a news release.

Performance bought Bike USA from Don and Jerie Clark, who founded the company in 1989. Sale terms were not disclosed. Don Clark said the couple wanted to retire and selling was the "only way we saw being able to do that."

Before the Bike USA acquisition, Performance closed two of its four San Diego locations due to dissatisfaction with location.



Jumping Ship. Trek and Specialized officials said they may open new retail accounts in San Diego to offset the sales volume they are losing with Performance. The San Diego area has a population of 2.7 million people.

"San Diego is an important market for us. We want to work with the very best retailers, and our plans do not include Performance," said Mike Sinyard, Specialized's president and founder.

Sinyard, who said Specialized sold $1 million through Bike USA, visited San Diego of goods retailers in January.

Trek President John Burke said his company pulled about $2 million in sales from the chain.

"It's not in our best interest to be in Bike USA under Performance," Burke said. "The important thing is we have a high market share in the San Diego area that we intend to keep growing."

Serotta also pulled out. However, Performance picked up Giant and Jamis, whose bikes will appear with Performance's house brand.

Cannondale is one of the companies staying with Performance. It began selling bikes in Performance's Boulder, Colorado, store last year.

"What we look for are good retailers, whether they be an independent IBD or another type of retailer," said Scott Montgomery, Cannondale's director.



Shop Opera. For some shop employees, the change in ownership has been unsettling.

Glenn Ford, assistant manager of the Kearny Mesa store, said many employees were disappointed with the transition from Bike USA to Performance.

Bike USA gave employees $100 with their last check and asked them to sign a termination of employment agreement. This is standard procedure for ownership changes, Clark said. Performance then rehired all but one employee.

"They probably aren't going to be comfortable with a change in their lives, but that change was made as smoothly as possible," Clark said.

A few employees—including a store and assistant manager—decided to work elsewhere because of the ownership change.

Clark said his employees "got everything and anything that was owed to them and more. We went way out of our way to ensure that everyone got hired by Performance at their same salary."

Performance also brought San Diego's pay practices in line with corporate policy. One result was that assistant managers and service managers who had been salaried are now paid by the hour.

Under Performance, employees will receive comparable or higher take-home pay if work hours stay the same. But some employees said they fear a falloff in income during the slow winter months.

Some employees who spoke to Bicycle Retailer & Industry News also lamented the loss of Bike USA's family-style operation, but many said they appreciate the fringe benefits that Performance offers.



Local Rivals. Some San Diego retailers said they aren't necessarily afraid of Performance entering their market.

"We are concerned, but not overly so," said Todd Hayman, owner of Zumwalt's College Cyclery.

"There used to be a Performance shop down the street from me. It drove in customers looking for lower scale parts, or the smaller family-owned kind of shop that we are," he said.

John Carroll, manager of Mission Cyclery, said the ownership shift will not negatively affect his family's two stores.

"They bought out Bike USA and chased away what built it—the lines, the staff and the reputation. Their following is gone," Carroll said.

Snook disagreed and said Performance plans to grow Bike USA's customer base the way it grew its business in Washington, D.C., after acquiring several Bikes USA locations there last year. Those stores, which also carried Trek and Specialized until the acquisition, were not affiliated with the Bike USA chain in San Diego.