Trek Design Plan
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4REK "ICYCLE #ORPORATION WAS FOUNDED IN IN 7ATERLOO s !CQUISITION /VER THE LAST YEARS 4REK HAS PURCHASED 7) /VER THE PAST YEARS THE COMPANY HAS RISEN FROM A SMALL "ONTRAGER COMPONENTS 'ARY &ISHER "ICYCLES +LEIN "ICYCLES MANUFACTURER OF QUALITY BICYCLES TO THE DOMINANT 53 BASED AND ,E-OND BICYCLES TO lLL OUT ITS PRODUCT PORTFOLIO AND BRING MANUFACTURER WITH AN ESTIMATED MARKET SHARE AND ANNUAL AS MUCH DESIGN AND MANUFACTURING EXPERTISE IN HOUSE AS SALES OF OVER MILLION DOLLARS 0UBLICLY 4REKS ASSOCIATION POSSIBLE WITH ,ANCE !RMSTRONG AND HIS SEVEN CONSECUTIVE 4OUR DE &RANCE WINS HAS PROPELLED 4REK TO THE TOP OF THE INDUSTRY !S THE OFlCIAL s 0ARTNERSHIP 4REK HAS PARTNERED WITH CLOTHING MANUFACTURER BICYCLE SUPPLIER TO THE 53 0OSTAL 3ERVICE AND LATER $ISCOVERY .IKE TO DEVELOP AND DISTRIBUTE THEIR CYCLING LINE OF ACCESSORIES #HANNEL CYCLING TEAMS THE COMPANY DEVELOPED A HIGH END /THER PARTNERSHIPS INCLUDE EFFORTS WITH 6OLKSWAGEN TO CROSS BICYCLE PROGRAM AND GAINED INTERNATIONAL BRAND EXPOSURE /N PROMOTE THEIR OFFERINGS THE BUSINESS SIDE 4REKS GROWTH STRATEGY HAS BEEN MARKED BY THREE DOMINANT THEMES s /PERATIONAL %FlCIENCY 4REK HAS IMPROVED THE EFlCIENCY OF ITS MANUFACTURING AND DISTRIBUTION CAPACITY BOTH DOMESTICALLY AND INTERNATIONALLY THROUGH EFFORTS SUCH AS STRICT ADHERENCE TO 3IX 3IGMA METHODOLOGY
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4REK HAS ALSO LED THE CHARGE TO MODERNIZE THE RETAIL CHANNEL 4HIS STRATEGY HAS FOCUSED ON PROVIDING DEALERS GREATER OPERATIONAL SUPPORT AND REWARDING DEALERS FOR THE LEVEL OF 4REK INVENTORY THEY STOCK 4REK AIMS TO FOCUS ITS EFFORTS AND RESOURCES MAKING THEIR RETAIL CHANNEL EASIER TO MANAGE
4REKS $IRECTOR OF 2ETAIL DESCRIBED THE PROGRAMS AIMS
)N ADDITION 4REK HAS ALSO MOVED BEYOND SELLING BIKES JUST THROUGH INDEPENDENTLY ESTABLISHED RETAILERS 4REK HAS OPENED #ONCEPT 3TORES IN STRATEGIC MARKETS DElNED AS RETAILERS THAT STOCK AT LEAST PERCENT 4REK PRODUCT AND OFTEN 4REK BUILDS AND lNANCES THESE STORES WITH CURRENT DEALERS OR ON THEIR OWN AND THEN LETS THE LOCAL RETAILER RUN THE STORE h5NDER THE CONCEPT STORE MODEL 4REK ASSISTS RETAILERS WITH DESIGN lNANCING AND OTHER BUSINESS ASPECTS IN EXCHANGE FOR A MAJORITY OF mOOR SPACE DEDICATED TO 4REK PRODUCTSv ,ESSER 4HE $EALER ,EVEL PROGRAM IS A REWARDS SYSTEM AIMED AT EXISTING INDEPENDENT 4REK 2ETAILERS ARE AWARDED FOR THE AMOUNT OF 4REK MERCHANDISE THEY STOCK AS A PERCENTAGE OF STORE INVENTORY AS WELL AS SALES VOLUME 4HREE LEVELS OF REWARD EXIST
h 7EVE SAID FOR YEARS WED LIKE TO GET MORE DEALERS TO PUT MORE EGGS IN OUR BASKET &EWER VENDORS MAKES SENSE
TRYING TO SPREAD YOURSELF ACROSS MAKING A LOT OF PEOPLE HAPPY COSTS MORE MONEY SO WEVE TRIED TO ASK FOR MORE OF PEOPLES BUSINESSv ,ESSER )T REMAINS UNCERTAIN THOUGH HOW 4REKS STRATEGY IS PLAYING OUT WITH CONSUMERS !RE THEY RECEPTIVE TO THE ONE STOP SHOP OR IS VARIETY IMPORTANT TO MAKING A PURCHASE DECISION FOR A BIKE !DDITIONALLY THERE IS CONCERN WITHIN THE BIKE INDUSTRY THAT 4REK STYLE CONSOLIDATION WILL HURT THE CONSUMERS AS WELL AS THE INDUSTRY BY REDUCING CUSTOMER CHOICE 7HAT REMAINS CERTAIN IS THAT ALTHOUGH 4REKS RELATIONSHIP WITH ITS DEALERS HAS CHANGED CUSTOMERS IN STORE EXPERIENCE HAS REMAINED THE SAME !LTHOUGH 4REK IS THE LARGEST 53 BASED BICYCLE MANUFACTURER IT IS NOT IMMUNE TO EXTERNAL FORCES AND TRENDS WITHIN THE INDUSTRY 4HE FOLLOW ARE KEY TRENDS THAT WILL AFFECT 4REKS RETAIL STRATEGY IN THE NEAR FUTURE
s 3TANDARD 0ARTNERSHIP n $EALERS STOCK LESS THAN OF 4REK PRODUCT WITH A MINIMUM OF ANNUAL SALES s 0ARTNERSHIP 0LUS n $EALERS THAT STOCK BETWEEN AND OF 4REK PRODUCT WITH A MINIMUM OF ANNUAL SALES s 'OLD 0ARTNERSHIP n $EALERS THAT STOCK AND UP OF 4REK PRODUCT WITH A MINIMUM OF ANNUAL SALES
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3TARTING IN THE LATE S BICYCLE MANUFACTURERS BEGAN AN ATTEMPT TO PROFESSIONALIZE THE INDEPENDENT BICYCLE DEALER -ANUFACTURERS LOOKED TO STRENGTHEN THEIR RELATIONSHIP WITH THEIR DEALERS IN ORDER TO ENSURE THEIR PRODUCTS RECEIVED MAXIMUM EXPOSURE AND SHARE OF SHELF SPACE !S A RESULT THE MOST CONSISTENT CRITICISM OF MANUFACTURERS EFFORTS TO PROFESSIONALIZE DEALERS COMES FROM DEALERS THEMSELVES WHO ARE ANXIOUS THAT THE COMPANYS BEHAVIOR IS HEAVY HANDED IN A TYPICALLY RELAXED INDUSTRY
4ODAY THOUGH MANUFACTURERS MAY HAVE EXHAUSTED THE GAINS THAT CAN BE MADE FROM TRYING TO STRENGTHEN THEIR RELATIONSHIP WITH DEALERS 7HILE FOCUSING ON THE DEALER RELATIONSHIP MANUFACTURERS HAVE PAID NOTICEABLY LESS ATTENTION TO THE END CONSUMER IN STORES 4HE ACTUAL RETAIL EXPERIENCE AND SALES PROCESS HAS CHANGED LITTLE DURING THIS PERIOD )N DOING SO MANUFACTURERS MAY BE PAYING TOO MUCH ATTENTION TO A SINGLE CHANNEL INDEPENDENT BIKE DEALERS WHILE NEGLECTING OTHER OPTIONS
7HILE NO RETAILERS HAVE ENTERED INTO EXCLUSIVE AGREEMENTS WITH ANY MANUFACTURER FOR THE LARGER MANUFACTURER THE CONSOLIDATION STRATEGY HAS BEEN SUCCESSFUL IN CREATING A NUMBER OF HIGH PROlLE BIKE DEALERS KNOWN FOR THEIR AFlLIATION WITH A GIVEN BRAND 6ILLAGE #YCLE IN #HICAGO AND 7HEEL AND 3PROCKET IN -ILWAUKEE BOTH 4REK DEALERS ARE TWO SUCH EXAMPLES 4HE MANUFACTURERS PUSH HAS HASTENED THE PROFESSIONALIZATION OF THE CYCLING INDUSTRY BRINGING MANY OPERATING ACTIVITIES COMMON TO OTHER INDUSTRIES TO CYCLING
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4HE INTERNET HAS INCREASED NOT ONLY THE AMOUNT OF INFORMATION THAT mOWS BETWEEN CONSUMERS RETAILERS SUPPLIERS MANUFACTURERS AND ADVERTISERS BUT ALSO THE RATE AT WHICH THAT INFORMATION mOWS 4RADITIONALLY IN THE BICYCLE INDUSTRY INFORMATION HAS BEEN ASYMMETRIC WHERE MANUFACTURERS AND RETAILERS HELD THE INFORMATION AND GAVE CONSUMERS ACCESS TO IT WHEN IT BENElTED THE MANUFACTURER OR DEALER 4HE INTERNET HAS BROUGHT BALANCE TO THE EQUATION #ONSUMERS ARE ABLE TO LEARN ABOUT A WIDER SELECTION OF BRANDS AND PRODUCTS lND MULTIPLE SOURCES OF PRODUCT REVIEWS AND LOCATE THE LOWEST PRICES ON PRODUCTS AND ACCESSORIES AND HAVE LOCATED PRODUCTS AND BRANDS THAT BETTER SUIT THEIR SPECIlC NEEDS INTERESTS AND ASPIRATIONS 4HIS HAS BEEN ESPECIALLY TRUE WITH BICYCLES E"AY HAS BEEN A SIGNIlCANT PART OF THE WEBS INmUENCE ON THE INDUSTRY AS WELL 5SED BIKES HAVE TRADITIONALLY DELIVERED HIGH VALUE FOR THE MONEY )N THE COMPANYS BICYCLE
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AUCTIONS BROUGHT IN OVER MILLION INDICATING THAT THERE IS SIGNIlCANT CUSTOMER DEMAND !LTHOUGH THIS AMOUNT DOES NOT EVEN REPRESENT OF ANNUAL SALES IN THE BICYCLE INDUSTRY THE NUMBER HAS GROWN FROM NOTHING IN JUST A FEW YEARS WITH VERY LITTLE MARKETING OR FANFARE 4HE ABILITY TO BUY AND SELL USED BIKES ONLINE HAS BECOME A LUCRATIVE MARKET FOR E"AY AND ONE THAT IS GROWING AT OTHER ONLINE EXCHANGES SUCH AS #RAIGSLIST 4HE EXTENT TO WHICH DEALERS HAVE BEEN PRESSURED IS IN QUESTION FOR WHILE SOME REPORT THE INTERNET AS A SOURCE OF INCREASED COMPETITION OTHERS CITE IT AS A POSITIVE FOR BOTH SALES AND CONSUMER COMMUNICATION !LSO IN QUESTION IS THE ULTIMATE IMPACT ON CONSUMERS 7HILE THERE HAVE BEEN CLEAR SHIFTS IN CONSUMER PURCHASING HABITS AND THEIR RELATIONSHIPS TO RETAILERS AND MANUFACTURERS AS A RESULT OF THE WEB THE INDUSTRY HAS NOT lGURED OUT HOW TO EFFECTIVELY USE THE INTERNET TO DRIVE SALES
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WBSJBCMFUIBUJTDSJUJDBMUPQSPKFDUPVUDPNFTѮFWBSJBCMFTUIBU DIBOHFGPSUIF5SFL"EWBOUBHFJTUIFQFSDFOUBHFPGUPUBMCJLFT UIBUBSFêOBODFEBOEMFBTFEѮFDVNVMBUJWFEJTDPVOUDBTI ëPXTGPSFBDIPGUIFGPVSZFBSQFSJPEBSFDPOWFSUFEJOUP/FU 1SFTFOU7BMVFUPBOBMZ[FUIFQSPêUBCJMJUZPGFBDITUSBUFHJFT ѮFTFOVNCFSTDBOCFVTFEUPDPNQBSFUPUIFBDUVBMMZDPTUBOE TVDDFTTEVSJOHUIFQSPDFTTPGUIFJNQMFNFOUJOHBOESVOOJOH UIFUXPQSPHSBNT
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iÌÊ*ÀiÃiÌÊ6>Õi 7ITH SUCCESS RANGING FROM MILLION TO MILLION THE OPPORTUNITY IS ATTRACTIVE
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Year 0
Year 1
Lease Program Trek Certified Used (from Lease) Trek Care Trek Certified Used
Cumulative Profits
$
Year 3
Year 4
(13,012,800)
(12,916,800)
(12,916,800)
3,588,300
10,366,200
15,552,000 16,745,400
20,736,000 23,124,600
2,400,000 (6,482,438)
2,400,000 31,695,563
2,400,000 67,227,563
2,400,000 100,113,563
(23,000,000)
(12,364,884)
(12,268,276)
(15,831,076)
(19,119,676)
(23,000,000) $
(26,025,421) $
19,180,686 $
73,177,086 $
Trek Finance Investment/Develop Cost
Year 2 (13,166,400)
114,337,686
NPV
$76,418,124.31
"DDFQUBODFGPSêOBODJOHBOEMFBTJOH CJLFTJTMPXPSDPNQFUJUJPOTFFUIFNPWFT Year 0 UIBU5SFLNBLFTBOEFOUFSTUIFNBSLFU Lease Program Trek Certified Used MPXJOHUIFJNQBDUPGUIFJOJUJBUJWF
,FZ7BSJBCMFT r1FSDFOUBHFPGCJLFTêOBODFE Year 1 Year 2 Year 3 r1FSDFOUBHFPGCJLFTMFBTFE (23,041,200) (22,772,400) 15,982,200
27,216,000 25,817,400
36,288,000 35,652,600
2,400,000 (9,260,625)
2,400,000 45,279,375
2,400,000 96,039,375
2,400,000 143,019,375
(23,000,000)
(13,630,183)
(12,650,698)
(17,743,498)
(22,441,498)
(23,000,000) $
(37,999,708) $
28,238,478 $
&YQFDUFE/FU1SFTFOU7BMVF 5,532,300 rNJMMJPO
Trek Finance
Cumulative Profits
$
(22,604,400)
-
(from Lease) Trek Care Trek Certified Used
Investment/Develop Cost
Year 4 (22,604,400)
111,124,878 $
NPV
$121,742,018.88
Year 0
Year 1
Lease Program Trek Certified Used (from Lease) Trek Care Trek Certified Used Trek Finance
5SFL#FFCF 'JTDIFS-JFT Investment/Develop Cost
172,314,078
(23,000,000)
Year 2
Year 3
Year 4
(32,916,000)
(32,532,000)
(32,292,000)
(32,292,000)
7,476,300
21,598,200
38,880,000 34,889,400
51,840,000 48,180,600
2,400,000 (12,038,813)
2,400,000 58,863,188
2,400,000 124,851,188
2,400,000 185,925,188
(14,895,481)
(13,033,119)
(19,655,919)
(25,763,319)
Trek Care Trek Certified Used Trek Finance
&INANCIAL !NALYSIS
Investment/Develop Cost
(23,000,000)
3,588,300
10,366,200
16,745,400
23,124,600
2,400,000 (6,482,438)
2,400,000 31,695,563
2,400,000 67,227,563
2,400,000 100,113,563
(12,364,884)
(12,268,276)
Û>Õ>ÌÊvÊ/ÀiÊ`Û>Ì>}i Lease Program Cumulative Profits Trek Certified Used (from Lease) NPV Trek Care Trek Certified Used
Year 0 $
(23,000,000) $
i`ÕÊVVi«Ì>ViÊ,>Ìi Trek Finance Year 0 Lease Program Investment/Develop Cost Trek Certified Used (from LeaseProfits ) Cumulative $ Trek Care Trek Certified Used NPV
Year 1
Year 1
Lease Program Cumulative Profits Trek Certified Used (from Lease) NPV Trek Care Trek Certified Used
Year 0 $
(13,166,400) (26,025,421) $
Year 3
3,588,300
10,366,200
15,552,000 16,745,400
20,736,000 $76,418,124.31 23,124,600
2,400,000 (6,482,438)
2,400,000 31,695,563
2,400,000 67,227,563
2,400,000 100,113,563
Year 2
Year 3
(22,772,400) (12,268,276)
(22,604,400) (15,831,076)
(23,000,000) $
- $ (26,025,421) 5,532,300
19,180,686- $ 15,982,200
27,216,000 $ 73,177,086 25,817,400
2,400,000 45,279,375
2,400,000 96,039,375
2,400,000 (9,260,625) Year 1
(23,000,000) $
(13,630,183) Year 2 (23,041,200) (37,999,708) $
(12,650,698) Year 3 (22,772,400) 28,238,478 $ 15,982,200
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Trek Care Trek Certified Used
Trek Finance
Lease Program Cumulative Profits Trek Certified Used (from Lease) NPV Trek Care Trek Certified Used
Year 0 $
(23,000,000)
Year 1
(23,000,000) $
Cumulative Profits
$
36,288,000 114,337,686 35,652,600 $76,418,124.31 2,400,000 143,019,375
(17,743,498) Year 4 (22,604,400) 111,124,878 $
(22,441,498) (22,604,400) 172,314,078
27,216,000 25,817,400
36,288,000 $121,742,018.88 35,652,600
2,400,000 96,039,375
2,400,000 143,019,375
(17,743,498)
(22,441,498)
Year 4 (32,292,000) $ 111,124,878
(32,292,000) 172,314,078
7,476,300
21,598,200
38,880,000 34,889,400
51,840,000 $121,742,018.88 48,180,600
2,400,000 (12,038,813)
2,400,000 58,863,188
2,400,000 124,851,188
2,400,000 185,925,188
(14,895,481)
(13,033,119)
Year 2
(32,916,000) (49,973,994) $
Year 3
(32,532,000) 37,296,269 $
(19,655,919)
Year 4
(32,292,000) 149,072,669 $
(25,763,319) (32,292,000) 230,290,469
21,598,200
38,880,000 34,889,400
51,840,000 $167,065,913.45 48,180,600
2,400,000 (12,038,813)
2,400,000 58,863,188
2,400,000 124,851,188
2,400,000 185,925,188
(23,000,000)
(14,895,481)
(13,033,119)
(19,655,919)
(25,763,319)
(23,000,000) $
(49,973,994) $
37,296,269 $
149,072,669 $
NPV
230,290,469 $167,065,913.45
"DDFQUBODFGPSêOBODJOHBOEMFBTJOH CJLFTJTSFMBUJWFMZXJEFTQSFBEBOE DPNQFUJUJPOEPFTOPUQVSTVF5SFLT êOBODJOHTUSBUFHZ*NQMFNFOUBUJPOPGUIF "EWBOUBHFQSPHSBNJTFYDFMMFOUBOEXFMM SFDFJWFECZEFBMFST
5SFL#FFCF 'JTDIFS-JFT
(22,604,400) (19,119,676)
7,476,300
Trek Finance Investment/Develop Cost
(12,916,800) 114,337,686
Year 4
(23,041,200) (12,364,884)
(23,000,000)
(19,119,676)
(12,916,800) 73,177,086 $
"DDFQUBODFGPSêOBODJOHBOEMFBTJOH ,FZ7BSJBCMFT 2,400,000 2,400,000 Trek Finance (9,260,625) 45,279,375 CJLFTJTSFMBUJWFMZXJEFTQSFBEBOE r1FSDFOUBHFPGCJLFTêOBODFE DPNQFUJUJPOTMBHTCFIJOE5SFLTFĒPSUTUP Investment/Develop Cost (23,000,000) r1FSDFOUBHFPGCJLFTMFBTFE (13,630,183) (12,650,698) Year 0 Year 1 Year 2 Year 3 PĒFSêOBODJOHGPSCJLFT Lease Program (32,916,000) (32,532,000) Cumulative Profits $ (23,000,000) $&YQFDUFE/FU1SFTFOU7BMVF (37,999,708) $ 28,238,478 $ Trek Certified Used rNJMMJPO (from Lease) NPV
Investment/Develop Cost
Year 4
(13,012,800) 19,180,686 $
5,532,300
} ÊVVi«Ì>ViÊ,>Ìi
(15,831,076)
(23,000,000)
Trek Finance Investment/Develop Cost
Year 2
,FZ7BSJBCMFT r1FSDFOUBHFPGCJLFTêOBODFE r1FSDFOUBHFPGCJLFTMFBTFE &YQFDUFE/FU1SFTFOU7BMVF rNJMMJPO
&INANCIAL !NALYSIS
Û>Õ>ÌÊvÊ/ÀiÊ w`iVi ѮFSFBSFUISFFEJĒFSFOUTDFOBSJPTQSFTFOUFEGPS5SFL $POêEFODFѮFWBSJBCMFGPS5SFL$POêEFODFJTUIFBNPVOUUIF USBOTGPSNFESFUBJMFYQFSJFODFXJMMJODSFBTFPWFSBMMTBMFTѮF DVNVMBUJWFEJTDPVOUDBTIëPXTGPSFBDIPGUIFGPVSZFBSQFSJPE BSFDPOWFSUFEJOUP/FU1SFTFOU7BMVFUPBOBMZ[FUIFQSPêUBCJMJUZ PGUIFUIJTTUSBUFHJFT
iÌÊ*ÀiÃiÌÊ6>Õi 7ITH SUCCESS RANGING FROM MILLION TO MILLION THE OPPORTUNITY IS ATTRACTIVE
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Year 0
Year 1
Single store Trek sales growth($) Net per store sales growth (w/ cannibalization, 60%) Net per store sales growth (%) % of stores w/ Confidence Total IBD Trek sales growth (from base year) Growth in sales to Trek Investment/Develop Costs Cumulative Profits
$
Year 2
Year 3
Year 4
6,731
6,731
6,731
6,731
2,692 0.50% 20%
2,692 0.50% 30%
2,692 0.50% 40%
2,692 0.50% 50%
1,884,617 942,308.5
2,826,926 1,413,462.8
3,769,234 1,884,617.0
4,711,543 2,355,771.3
(500,000)
(800,000)
(450,000)
(475,000)
(500,000)
(500,000) $
142,309 $
963,463 $
NPV
ѮFDIBOHFJOUIFSFUBJMFYQFSJFODFJO OPUFNCSBDFECZEFBMFSTBOEDVTUPNFST TIPXMJUUMFJOUFSFTUJOUIFOFXTUPSF FOWJSPONFOU
5SFL#FFCF 'JTDIFS-JFT
1,409,617 $
1,855,771
$
538,210
,FZ7BSJBCMF r*ODSFBTFECJLFTBMFT &YQFDUFE/FU1SFTFOU7BMVF r
&INANCIAL !NALYSIS
Û>Õ>ÌÊvÊ/ÀiÊ w`iVi i`ÕÊ->iÃÊ«>VÌ Year 0
Year 1
Single store Trek sales growth($) Net per store sales growth (w/ cannibalization, 60%) Net per store sales growth (%) % of stores w/ Confidence Total IBD Trek sales growth (from base year) Growth in sales to Trek Investment/Develop Costs Cumulative Profits
(500,000) $
(500,000) $
Year 2
Year 3
Year 4
13,462
13,462
13,462
13,462
5,385 1.00% 20%
5,385 1.00% 30%
5,385 1.00% 40%
5,385 1.00% 50%
3,769,234 1,884,617.0
5,653,851 2,826,925.5
7,538,468 3,769,234.0
9,423,085 4,711,542.5
(800,000)
(450,000)
(475,000)
(500,000)
1,084,617 $
2,376,926 $
3,294,234 $
4,211,543
$
2,058,312
NPV
*OTUJUVUFPG%FTJHO*MMJOPJT*OTUJUVUFPG5FDIOPMPHZ
ѮFDIBOHFJOUIFSFUBJMFYQFSJFODFJT FNCSBDFECZEFBMFSTBOEJNQMFNFOUFE OJDFMZEPOF$VTUPNFSTOPUJDFUIFDIBOHF JOUIFFOWJSPONFOUBOETIPXHSFBUFS JOUFSFTUJO5SFLCJDZDMFT
,FZ7BSJBCMF r*ODSFBTFECJLFTBMFT &YQFDUFE/FU1SFTFOU7BMVF rNJMMJPO
} Ê->iÃÊ«>VÌÊ Year 0
Year 1
Single store Trek sales growth($) Net per store sales growth (w/ cannibalization, 60%) Net per store sales growth (%) % of stores w/ Confidence Total IBD Trek sales growth (from base year) Growth in sales to Trek Investment/Develop Costs Cumulative Profits
(500,000) $
(500,000) $
Year 2
Year 3
Year 4
20,192
20,192
20,192
20,192
8,077 1.50% 20%
8,077 1.50% 30%
8,077 1.50% 40%
8,077 1.50% 50%
5,728,800 2,864,400.0
8,593,200 4,296,600.0
11,457,600 5,728,800.0
14,322,000 7,161,000.0
(800,000)
(450,000)
(475,000)
(500,000)
2,064,400 $
3,846,600 $
NPV
ѮFDIBOHFJOUIFSFUBJMFYQFSJFODFJTGVMMZ FNCSBDFECZEFBMFSTBOEJNQMFNFOUFE DPOTJTUFOUMZBOEUPUIFIJHIFTUTUBOEBSET $VTUPNFSTBSFFOUIVTJBTUJDBCPVUUIF DIBOHFBOETIPXHSFBUFSMPZBMUZUPUIF EFBMFSTBOE5SFLUIBUJNQMFNFOU5SFL $POêEFODF
5SFL#FFCF 'JTDIFS-JFT
5,253,800 $
6,661,000
$
3,638,867
,FZ7BSJBCMF r*ODSFBTFECJLFTBMFT &YQFDUFE/FU1SFTFOU7BMVF rNJMMJPO
ÌÌÀLÕÌÊEÊVÜi`}iiÌ 4HE WORK PRESENTED WAS COMPLETED FOR THE 2ESEARCH AND $EMONSTRATION COURSE A STUDENTS CAPSTONE PROJECT AT THE )NSTITUTE OF $ESIGNS -ASTER OF $ESIGN PROGRAM 4HE PROJECT APPLIES APPROPRIATE THEORIES AND METHODS TO A SELECTED PROBLEM AREA 4HE PROJECT IS A COMPREHENSIVE INVESTIGATION OF A RANGE OF POSSIBLE SOLUTIONS INCLUDING lNAL REALIZATION OF A SET OF CONCEPTS AND COMPLETE DOCUMENTATION OF THE DESIGN PROCESS USED
(ENNING &ISCHER HlSCHER IDIITEDU 4AYLOR ,IES TAYLORL IDIITEDU
4HIS SPECIlC PROJECT SOUGHT TO UNDERSTAND AND IMPROVE UPON THE CHANNEL AND RETAIL STRATEGIES 4REK A LEADING BICYCLE MANUFACTURER EMPLOYED TO GENERATE AND FULlLL CUSTOMER DEMAND AND LOYALTY 4HE STUDENT TEAM OF -ICHAEL "EEBE (ENNING &ISCHER AND 4AYLOR ,IES COMPLETED ALL PRESENTED WORK DURING THE 3PRING ACADEMIC SEMESTER *EREMY !LEXIS FACULTY )NSTITUTE OF $ESIGN SERVED AS PROJECT ADVISOR
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$ESIGN 0LAN !UTHORS -ICHAEL "EEBE BEEBE IDIITEDU
0ROJECT !DVISOR )NSTITUTE OF $ESIGN )LLINOIS )NSTITUTE OF 4ECHNOLOGY *EREMY !LEXIS
4HE PROJECTS SPECIlC PROCESS INVOLVED lVE MAJOR STAGES OF ACTIVITY 5NDERSTANDING #ONTEXT /BSERVING 5SERS 'ENERATING #ONCEPTS 3PECIFYING 3TRATEGIES AND -ODELING THE 2ESULTS 2ESEARCH METHODS USED INCLUDED LITERATURE REVIEWS COMPETITIVE ANALYSIS CONSUMER TREND ANALYSIS AND ETHNOGRAPHIC OBSERVATION AND INTERVIEWING !NALYSIS METHODS INCLUDED ORGANIC CLUSTERING STRUCTURED ANALYSIS USING THE )NSIGHT -ATRIX AND PARADOX ANALYSIS 3YNTHESIS WAS CONDUCTED VIA STRUCTURED BRAINSTORMING CONCEPT SCORING CONCEPT STRATEGIES SYSTEMS THINKING AND lNANCIAL MODELING
5SFL#FFCF 'JTDIFS-JFT
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4REK "ICYCLE #ORPORATION WAS FOUNDED IN IN 7ATERLOO s !CQUISITION /VER THE LAST YEARS 4REK HAS PURCHASED 7) /VER THE PAST YEARS THE COMPANY HAS RISEN FROM A SMALL "ONTRAGER COMPONENTS 'ARY &ISHER "ICYCLES +LEIN "ICYCLES MANUFACTURER OF QUALITY BICYCLES TO THE DOMINANT 53 BASED AND ,E-OND BICYCLES TO lLL OUT ITS PRODUCT PORTFOLIO AND BRING MANUFACTURER WITH AN ESTIMATED MARKET SHARE AND ANNUAL AS MUCH DESIGN AND MANUFACTURING EXPERTISE IN HOUSE AS SALES OF OVER MILLION DOLLARS 0UBLICLY 4REKS ASSOCIATION POSSIBLE WITH ,ANCE !RMSTRONG AND HIS SEVEN CONSECUTIVE 4OUR DE &RANCE WINS HAS PROPELLED 4REK TO THE TOP OF THE INDUSTRY !S THE OFlCIAL s 0ARTNERSHIP 4REK HAS PARTNERED WITH CLOTHING MANUFACTURER BICYCLE SUPPLIER TO THE 53 0OSTAL 3ERVICE AND LATER $ISCOVERY .IKE TO DEVELOP AND DISTRIBUTE THEIR CYCLING LINE OF ACCESSORIES #HANNEL CYCLING TEAMS THE COMPANY DEVELOPED A HIGH END /THER PARTNERSHIPS INCLUDE EFFORTS WITH 6OLKSWAGEN TO CROSS BICYCLE PROGRAM AND GAINED INTERNATIONAL BRAND EXPOSURE /N PROMOTE THEIR OFFERINGS THE BUSINESS SIDE 4REKS GROWTH STRATEGY HAS BEEN MARKED BY THREE DOMINANT THEMES s /PERATIONAL %FlCIENCY 4REK HAS IMPROVED THE EFlCIENCY OF ITS MANUFACTURING AND DISTRIBUTION CAPACITY BOTH DOMESTICALLY AND INTERNATIONALLY THROUGH EFFORTS SUCH AS STRICT ADHERENCE TO 3IX 3IGMA METHODOLOGY
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4REK HAS ALSO LED THE CHARGE TO MODERNIZE THE RETAIL CHANNEL 4HIS STRATEGY HAS FOCUSED ON PROVIDING DEALERS GREATER OPERATIONAL SUPPORT AND REWARDING DEALERS FOR THE LEVEL OF 4REK INVENTORY THEY STOCK 4REK AIMS TO FOCUS ITS EFFORTS AND RESOURCES MAKING THEIR RETAIL CHANNEL EASIER TO MANAGE
4REKS $IRECTOR OF 2ETAIL DESCRIBED THE PROGRAMS AIMS
)N ADDITION 4REK HAS ALSO MOVED BEYOND SELLING BIKES JUST THROUGH INDEPENDENTLY ESTABLISHED RETAILERS 4REK HAS OPENED #ONCEPT 3TORES IN STRATEGIC MARKETS DElNED AS RETAILERS THAT STOCK AT LEAST PERCENT 4REK PRODUCT AND OFTEN 4REK BUILDS AND lNANCES THESE STORES WITH CURRENT DEALERS OR ON THEIR OWN AND THEN LETS THE LOCAL RETAILER RUN THE STORE h5NDER THE CONCEPT STORE MODEL 4REK ASSISTS RETAILERS WITH DESIGN lNANCING AND OTHER BUSINESS ASPECTS IN EXCHANGE FOR A MAJORITY OF mOOR SPACE DEDICATED TO 4REK PRODUCTSv ,ESSER 4HE $EALER ,EVEL PROGRAM IS A REWARDS SYSTEM AIMED AT EXISTING INDEPENDENT 4REK 2ETAILERS ARE AWARDED FOR THE AMOUNT OF 4REK MERCHANDISE THEY STOCK AS A PERCENTAGE OF STORE INVENTORY AS WELL AS SALES VOLUME 4HREE LEVELS OF REWARD EXIST
h 7EVE SAID FOR YEARS WED LIKE TO GET MORE DEALERS TO PUT MORE EGGS IN OUR BASKET &EWER VENDORS MAKES SENSE
TRYING TO SPREAD YOURSELF ACROSS MAKING A LOT OF PEOPLE HAPPY COSTS MORE MONEY SO WEVE TRIED TO ASK FOR MORE OF PEOPLES BUSINESSv ,ESSER )T REMAINS UNCERTAIN THOUGH HOW 4REKS STRATEGY IS PLAYING OUT WITH CONSUMERS !RE THEY RECEPTIVE TO THE ONE STOP SHOP OR IS VARIETY IMPORTANT TO MAKING A PURCHASE DECISION FOR A BIKE !DDITIONALLY THERE IS CONCERN WITHIN THE BIKE INDUSTRY THAT 4REK STYLE CONSOLIDATION WILL HURT THE CONSUMERS AS WELL AS THE INDUSTRY BY REDUCING CUSTOMER CHOICE 7HAT REMAINS CERTAIN IS THAT ALTHOUGH 4REKS RELATIONSHIP WITH ITS DEALERS HAS CHANGED CUSTOMERS IN STORE EXPERIENCE HAS REMAINED THE SAME !LTHOUGH 4REK IS THE LARGEST 53 BASED BICYCLE MANUFACTURER IT IS NOT IMMUNE TO EXTERNAL FORCES AND TRENDS WITHIN THE INDUSTRY 4HE FOLLOW ARE KEY TRENDS THAT WILL AFFECT 4REKS RETAIL STRATEGY IN THE NEAR FUTURE
s 3TANDARD 0ARTNERSHIP n $EALERS STOCK LESS THAN OF 4REK PRODUCT WITH A MINIMUM OF ANNUAL SALES s 0ARTNERSHIP 0LUS n $EALERS THAT STOCK BETWEEN AND OF 4REK PRODUCT WITH A MINIMUM OF ANNUAL SALES s 'OLD 0ARTNERSHIP n $EALERS THAT STOCK AND UP OF 4REK PRODUCT WITH A MINIMUM OF ANNUAL SALES
,ESSER #HRIS h4REK $EMANDS 2ETAIL #OMMITMENTv "ICYCLE 2ETAILER )NDUSTRY .EWS *ANUARY PG
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3TARTING IN THE LATE S BICYCLE MANUFACTURERS BEGAN AN ATTEMPT TO PROFESSIONALIZE THE INDEPENDENT BICYCLE DEALER -ANUFACTURERS LOOKED TO STRENGTHEN THEIR RELATIONSHIP WITH THEIR DEALERS IN ORDER TO ENSURE THEIR PRODUCTS RECEIVED MAXIMUM EXPOSURE AND SHARE OF SHELF SPACE !S A RESULT THE MOST CONSISTENT CRITICISM OF MANUFACTURERS EFFORTS TO PROFESSIONALIZE DEALERS COMES FROM DEALERS THEMSELVES WHO ARE ANXIOUS THAT THE COMPANYS BEHAVIOR IS HEAVY HANDED IN A TYPICALLY RELAXED INDUSTRY
4ODAY THOUGH MANUFACTURERS MAY HAVE EXHAUSTED THE GAINS THAT CAN BE MADE FROM TRYING TO STRENGTHEN THEIR RELATIONSHIP WITH DEALERS 7HILE FOCUSING ON THE DEALER RELATIONSHIP MANUFACTURERS HAVE PAID NOTICEABLY LESS ATTENTION TO THE END CONSUMER IN STORES 4HE ACTUAL RETAIL EXPERIENCE AND SALES PROCESS HAS CHANGED LITTLE DURING THIS PERIOD )N DOING SO MANUFACTURERS MAY BE PAYING TOO MUCH ATTENTION TO A SINGLE CHANNEL INDEPENDENT BIKE DEALERS WHILE NEGLECTING OTHER OPTIONS
7HILE NO RETAILERS HAVE ENTERED INTO EXCLUSIVE AGREEMENTS WITH ANY MANUFACTURER FOR THE LARGER MANUFACTURER THE CONSOLIDATION STRATEGY HAS BEEN SUCCESSFUL IN CREATING A NUMBER OF HIGH PROlLE BIKE DEALERS KNOWN FOR THEIR AFlLIATION WITH A GIVEN BRAND 6ILLAGE #YCLE IN #HICAGO AND 7HEEL AND 3PROCKET IN -ILWAUKEE BOTH 4REK DEALERS ARE TWO SUCH EXAMPLES 4HE MANUFACTURERS PUSH HAS HASTENED THE PROFESSIONALIZATION OF THE CYCLING INDUSTRY BRINGING MANY OPERATING ACTIVITIES COMMON TO OTHER INDUSTRIES TO CYCLING
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4HE INTERNET HAS INCREASED NOT ONLY THE AMOUNT OF INFORMATION THAT mOWS BETWEEN CONSUMERS RETAILERS SUPPLIERS MANUFACTURERS AND ADVERTISERS BUT ALSO THE RATE AT WHICH THAT INFORMATION mOWS 4RADITIONALLY IN THE BICYCLE INDUSTRY INFORMATION HAS BEEN ASYMMETRIC WHERE MANUFACTURERS AND RETAILERS HELD THE INFORMATION AND GAVE CONSUMERS ACCESS TO IT WHEN IT BENElTED THE MANUFACTURER OR DEALER 4HE INTERNET HAS BROUGHT BALANCE TO THE EQUATION #ONSUMERS ARE ABLE TO LEARN ABOUT A WIDER SELECTION OF BRANDS AND PRODUCTS lND MULTIPLE SOURCES OF PRODUCT REVIEWS AND LOCATE THE LOWEST PRICES ON PRODUCTS AND ACCESSORIES AND HAVE LOCATED PRODUCTS AND BRANDS THAT BETTER SUIT THEIR SPECIlC NEEDS INTERESTS AND ASPIRATIONS 4HIS HAS BEEN ESPECIALLY TRUE WITH BICYCLES E"AY HAS BEEN A SIGNIlCANT PART OF THE WEBS INmUENCE ON THE INDUSTRY AS WELL 5SED BIKES HAVE TRADITIONALLY DELIVERED HIGH VALUE FOR THE MONEY )N THE COMPANYS BICYCLE
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AUCTIONS BROUGHT IN OVER MILLION INDICATING THAT THERE IS SIGNIlCANT CUSTOMER DEMAND !LTHOUGH THIS AMOUNT DOES NOT EVEN REPRESENT OF ANNUAL SALES IN THE BICYCLE INDUSTRY THE NUMBER HAS GROWN FROM NOTHING IN JUST A FEW YEARS WITH VERY LITTLE MARKETING OR FANFARE 4HE ABILITY TO BUY AND SELL USED BIKES ONLINE HAS BECOME A LUCRATIVE MARKET FOR E"AY AND ONE THAT IS GROWING AT OTHER ONLINE EXCHANGES SUCH AS #RAIGSLIST 4HE EXTENT TO WHICH DEALERS HAVE BEEN PRESSURED IS IN QUESTION FOR WHILE SOME REPORT THE INTERNET AS A SOURCE OF INCREASED COMPETITION OTHERS CITE IT AS A POSITIVE FOR BOTH SALES AND CONSUMER COMMUNICATION !LSO IN QUESTION IS THE ULTIMATE IMPACT ON CONSUMERS 7HILE THERE HAVE BEEN CLEAR SHIFTS IN CONSUMER PURCHASING HABITS AND THEIR RELATIONSHIPS TO RETAILERS AND MANUFACTURERS AS A RESULT OF THE WEB THE INDUSTRY HAS NOT lGURED OUT HOW TO EFFECTIVELY USE THE INTERNET TO DRIVE SALES
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"IG BOX RETAILERS SUCH AS 7AL -ART HAVE DRIVEN DOWN PRICES AT THE LOW END OF THE MARKET 7HERE THERE USED TO BE A MORE mUID CONTINUUM BETWEEN THE HIGHEST PRICES AT LOW END RETAILERS AND THE LOWEST PRICES AT INDEPENDENT BIKE DEALERS NOW THERE IS A LARGER GAP 7HERE CONSUMERS COULD ONCE BE LURED TO DEALERS WITH THEIR VALUE ADDED SERVICES THE PRICE GAP IS NOW LARGER AND MORE DIFlCULT TO OVERCOME 4HERE IS CONCERN IN THE INDUSTRY ABOUT THE COMMODITIZATION OF BICYCLES AT THE LOWER END !T THE HIGH END OF THE MARKET SMALL NICHE MANUFACTURERS OFFER FULLY CUSTOMIZED BIKES WITH UNIQUE MATERIALS AND COMPONENTS 4HESE MANUFACTURERS OPERATE EASILY VIA THE WEB WITHOUT THE OVERHEAD OF A TYPICAL DEALER 4HEY CAN OFFER A ONE OF A KIND PRODUCT FOR PRICES COMPARABLE TO MASS MANUFACTURED HIGH END BIKES AT INDEPENDENT DEALERS !DDITIONAL PRESSURE COMES FROM SPECIALTY SPORTING GOODS RETAILERS SUCH AS 2%) WHO OFFER A BROAD LINE OF PRODUCTS AND TOUT HIGH QUALITY SERVICE AND KNOWLEDGEABLE STAFF 4HEY CHOOSE NOT TO PRICE COMPETE LIKE A BIG BOX RETAILER BUT OFFER CONSUMERS A HEIGHTENED EXPERIENCE WHILE SHOPPING 4HESE RETAILERS ARE STOCKING A WIDE RANGE OF PRICES THAT ARE VERY SIMILAR TO INDEPENDENT BICYCLE DEALERS BARING THE VERY TOP END BIKES
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&EATURES
5SFL#FFCF 'JTDIFS-JFT
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&EATURES
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NÊ/Ài >Ài
r&YUFOEFEDPWFSBHFGPSGPSLT TIPDLTBOE 0&.QBSUT r1VSDIBTFEUISPVHIBVUIPSJ[FE5SFLEFBMFST BOEPS5SFL r1BZNFOUUISPVHINPOUIMZ TFNJBOOVBMBOE BOOVBMGFFT DVTUPNFSDIPPTFT
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5SFL#FFCF 'JTDIFS-JFT
&INANCIAL !NALYSIS
Û>Õ>ÌÊvÊ/ÀiÊ`Û>Ì>}i 5SFLDVSSFOUMZPXOTPGUIF"NFSJDBONBSLFUGPSCJDZDMFT XJUIUPUBMSFWFOVFBSPVOENJMMJPOѮF5SFL"EWBOUBHF BOEUIF5SFL$POêEFODFTUSBUFHJFTCPUIQSPWJEFBOPQQPSUVOJUZ UPDBQUVSFNPSFNBSLFUTIBSFBOEJODSFBTFSFWFOVFBOEQSPêU GPSEFBMFSTBOE5SFL
WBSJBCMFUIBUJTDSJUJDBMUPQSPKFDUPVUDPNFTѮFWBSJBCMFTUIBU DIBOHFGPSUIF5SFL"EWBOUBHFJTUIFQFSDFOUBHFPGUPUBMCJLFT UIBUBSFêOBODFEBOEMFBTFEѮFDVNVMBUJWFEJTDPVOUDBTI ëPXTGPSFBDIPGUIFGPVSZFBSQFSJPEBSFDPOWFSUFEJOUP/FU 1SFTFOU7BMVFUPBOBMZ[FUIFQSPêUBCJMJUZPGFBDITUSBUFHJFT ѮFTFOVNCFSTDBOCFVTFEUPDPNQBSFUPUIFBDUVBMMZDPTUBOE TVDDFTTEVSJOHUIFQSPDFTTPGUIFJNQMFNFOUJOHBOESVOOJOH UIFUXPQSPHSBNT
#VUIPXNVDIXJMMUIFQSPHSBNJODSFBTFSFWFOVFBOEQSPêU ѮFSFBSFUISFFEJĒFSFOUTDFOBSJPTQSFTFOUFEGPSFBDITUSBUFHZ UPEFUFSNJOFQPUFOUJBMWBMVF&BDITDFOBSJPDIBOHFTPOF
iÌÊ*ÀiÃiÌÊ6>Õi 7ITH SUCCESS RANGING FROM MILLION TO MILLION THE OPPORTUNITY IS ATTRACTIVE
ÜÊVVi«Ì>ViÊ,>ÌiÊ
*OTUJUVUFPG%FTJHO*MMJOPJT*OTUJUVUFPG5FDIOPMPHZ
Year 0
Year 1
Lease Program Trek Certified Used (from Lease) Trek Care Trek Certified Used
Cumulative Profits
$
Year 3
Year 4
(13,012,800)
(12,916,800)
(12,916,800)
3,588,300
10,366,200
15,552,000 16,745,400
20,736,000 23,124,600
2,400,000 (6,482,438)
2,400,000 31,695,563
2,400,000 67,227,563
2,400,000 100,113,563
(23,000,000)
(12,364,884)
(12,268,276)
(15,831,076)
(19,119,676)
(23,000,000) $
(26,025,421) $
19,180,686 $
73,177,086 $
Trek Finance Investment/Develop Cost
Year 2 (13,166,400)
114,337,686
NPV
$76,418,124.31
"DDFQUBODFGPSêOBODJOHBOEMFBTJOH CJLFTJTMPXPSDPNQFUJUJPOTFFUIFNPWFT Year 0 UIBU5SFLNBLFTBOEFOUFSTUIFNBSLFU Lease Program Trek Certified Used MPXJOHUIFJNQBDUPGUIFJOJUJBUJWF
,FZ7BSJBCMFT r1FSDFOUBHFPGCJLFTêOBODFE Year 1 Year 2 Year 3 r1FSDFOUBHFPGCJLFTMFBTFE (23,041,200) (22,772,400) 15,982,200
27,216,000 25,817,400
36,288,000 35,652,600
2,400,000 (9,260,625)
2,400,000 45,279,375
2,400,000 96,039,375
2,400,000 143,019,375
(23,000,000)
(13,630,183)
(12,650,698)
(17,743,498)
(22,441,498)
(23,000,000) $
(37,999,708) $
28,238,478 $
&YQFDUFE/FU1SFTFOU7BMVF 5,532,300 rNJMMJPO
Trek Finance
Cumulative Profits
$
(22,604,400)
-
(from Lease) Trek Care Trek Certified Used
Investment/Develop Cost
Year 4 (22,604,400)
111,124,878 $
NPV
$121,742,018.88
Year 0
Year 1
Lease Program Trek Certified Used (from Lease) Trek Care Trek Certified Used Trek Finance
5SFL#FFCF 'JTDIFS-JFT Investment/Develop Cost
172,314,078
(23,000,000)
Year 2
Year 3
Year 4
(32,916,000)
(32,532,000)
(32,292,000)
(32,292,000)
7,476,300
21,598,200
38,880,000 34,889,400
51,840,000 48,180,600
2,400,000 (12,038,813)
2,400,000 58,863,188
2,400,000 124,851,188
2,400,000 185,925,188
(14,895,481)
(13,033,119)
(19,655,919)
(25,763,319)
Trek Care Trek Certified Used Trek Finance
&INANCIAL !NALYSIS
Investment/Develop Cost
(23,000,000)
3,588,300
10,366,200
16,745,400
23,124,600
2,400,000 (6,482,438)
2,400,000 31,695,563
2,400,000 67,227,563
2,400,000 100,113,563
(12,364,884)
(12,268,276)
Û>Õ>ÌÊvÊ/ÀiÊ`Û>Ì>}i Lease Program Cumulative Profits Trek Certified Used (from Lease) NPV Trek Care Trek Certified Used
Year 0 $
(23,000,000) $
i`ÕÊVVi«Ì>ViÊ,>Ìi Trek Finance Year 0 Lease Program Investment/Develop Cost Trek Certified Used (from LeaseProfits ) Cumulative $ Trek Care Trek Certified Used NPV
Year 1
Year 1
Lease Program Cumulative Profits Trek Certified Used (from Lease) NPV Trek Care Trek Certified Used
Year 0 $
(13,166,400) (26,025,421) $
Year 3
3,588,300
10,366,200
15,552,000 16,745,400
20,736,000 $76,418,124.31 23,124,600
2,400,000 (6,482,438)
2,400,000 31,695,563
2,400,000 67,227,563
2,400,000 100,113,563
Year 2
Year 3
(22,772,400) (12,268,276)
(22,604,400) (15,831,076)
(23,000,000) $
- $ (26,025,421) 5,532,300
19,180,686- $ 15,982,200
27,216,000 $ 73,177,086 25,817,400
2,400,000 45,279,375
2,400,000 96,039,375
2,400,000 (9,260,625) Year 1
(23,000,000) $
(13,630,183) Year 2 (23,041,200) (37,999,708) $
(12,650,698) Year 3 (22,772,400) 28,238,478 $ 15,982,200
*OTUJUVUFPG%FTJHO*MMJOPJT*OTUJUVUFPG5FDIOPMPHZ
Trek Care Trek Certified Used
Trek Finance
Lease Program Cumulative Profits Trek Certified Used (from Lease) NPV Trek Care Trek Certified Used
Year 0 $
(23,000,000)
Year 1
(23,000,000) $
Cumulative Profits
$
36,288,000 114,337,686 35,652,600 $76,418,124.31 2,400,000 143,019,375
(17,743,498) Year 4 (22,604,400) 111,124,878 $
(22,441,498) (22,604,400) 172,314,078
27,216,000 25,817,400
36,288,000 $121,742,018.88 35,652,600
2,400,000 96,039,375
2,400,000 143,019,375
(17,743,498)
(22,441,498)
Year 4 (32,292,000) $ 111,124,878
(32,292,000) 172,314,078
7,476,300
21,598,200
38,880,000 34,889,400
51,840,000 $121,742,018.88 48,180,600
2,400,000 (12,038,813)
2,400,000 58,863,188
2,400,000 124,851,188
2,400,000 185,925,188
(14,895,481)
(13,033,119)
Year 2
(32,916,000) (49,973,994) $
Year 3
(32,532,000) 37,296,269 $
(19,655,919)
Year 4
(32,292,000) 149,072,669 $
(25,763,319) (32,292,000) 230,290,469
21,598,200
38,880,000 34,889,400
51,840,000 $167,065,913.45 48,180,600
2,400,000 (12,038,813)
2,400,000 58,863,188
2,400,000 124,851,188
2,400,000 185,925,188
(23,000,000)
(14,895,481)
(13,033,119)
(19,655,919)
(25,763,319)
(23,000,000) $
(49,973,994) $
37,296,269 $
149,072,669 $
NPV
230,290,469 $167,065,913.45
"DDFQUBODFGPSêOBODJOHBOEMFBTJOH CJLFTJTSFMBUJWFMZXJEFTQSFBEBOE DPNQFUJUJPOEPFTOPUQVSTVF5SFLT êOBODJOHTUSBUFHZ*NQMFNFOUBUJPOPGUIF "EWBOUBHFQSPHSBNJTFYDFMMFOUBOEXFMM SFDFJWFECZEFBMFST
5SFL#FFCF 'JTDIFS-JFT
(22,604,400) (19,119,676)
7,476,300
Trek Finance Investment/Develop Cost
(12,916,800) 114,337,686
Year 4
(23,041,200) (12,364,884)
(23,000,000)
(19,119,676)
(12,916,800) 73,177,086 $
"DDFQUBODFGPSêOBODJOHBOEMFBTJOH ,FZ7BSJBCMFT 2,400,000 2,400,000 Trek Finance (9,260,625) 45,279,375 CJLFTJTSFMBUJWFMZXJEFTQSFBEBOE r1FSDFOUBHFPGCJLFTêOBODFE DPNQFUJUJPOTMBHTCFIJOE5SFLTFĒPSUTUP Investment/Develop Cost (23,000,000) r1FSDFOUBHFPGCJLFTMFBTFE (13,630,183) (12,650,698) Year 0 Year 1 Year 2 Year 3 PĒFSêOBODJOHGPSCJLFT Lease Program (32,916,000) (32,532,000) Cumulative Profits $ (23,000,000) $&YQFDUFE/FU1SFTFOU7BMVF (37,999,708) $ 28,238,478 $ Trek Certified Used rNJMMJPO (from Lease) NPV
Investment/Develop Cost
Year 4
(13,012,800) 19,180,686 $
5,532,300
} ÊVVi«Ì>ViÊ,>Ìi
(15,831,076)
(23,000,000)
Trek Finance Investment/Develop Cost
Year 2
,FZ7BSJBCMFT r1FSDFOUBHFPGCJLFTêOBODFE r1FSDFOUBHFPGCJLFTMFBTFE &YQFDUFE/FU1SFTFOU7BMVF rNJMMJPO
&INANCIAL !NALYSIS
Û>Õ>ÌÊvÊ/ÀiÊ w`iVi ѮFSFBSFUISFFEJĒFSFOUTDFOBSJPTQSFTFOUFEGPS5SFL $POêEFODFѮFWBSJBCMFGPS5SFL$POêEFODFJTUIFBNPVOUUIF USBOTGPSNFESFUBJMFYQFSJFODFXJMMJODSFBTFPWFSBMMTBMFTѮF DVNVMBUJWFEJTDPVOUDBTIëPXTGPSFBDIPGUIFGPVSZFBSQFSJPE BSFDPOWFSUFEJOUP/FU1SFTFOU7BMVFUPBOBMZ[FUIFQSPêUBCJMJUZ PGUIFUIJTTUSBUFHJFT
iÌÊ*ÀiÃiÌÊ6>Õi 7ITH SUCCESS RANGING FROM MILLION TO MILLION THE OPPORTUNITY IS ATTRACTIVE
ÜÊ->iÃÊ«>VÌÊ
*OTUJUVUFPG%FTJHO*MMJOPJT*OTUJUVUFPG5FDIOPMPHZ
Year 0
Year 1
Single store Trek sales growth($) Net per store sales growth (w/ cannibalization, 60%) Net per store sales growth (%) % of stores w/ Confidence Total IBD Trek sales growth (from base year) Growth in sales to Trek Investment/Develop Costs Cumulative Profits
$
Year 2
Year 3
Year 4
6,731
6,731
6,731
6,731
2,692 0.50% 20%
2,692 0.50% 30%
2,692 0.50% 40%
2,692 0.50% 50%
1,884,617 942,308.5
2,826,926 1,413,462.8
3,769,234 1,884,617.0
4,711,543 2,355,771.3
(500,000)
(800,000)
(450,000)
(475,000)
(500,000)
(500,000) $
142,309 $
963,463 $
NPV
ѮFDIBOHFJOUIFSFUBJMFYQFSJFODFJO OPUFNCSBDFECZEFBMFSTBOEDVTUPNFST TIPXMJUUMFJOUFSFTUJOUIFOFXTUPSF FOWJSPONFOU
5SFL#FFCF 'JTDIFS-JFT
1,409,617 $
1,855,771
$
538,210
,FZ7BSJBCMF r*ODSFBTFECJLFTBMFT &YQFDUFE/FU1SFTFOU7BMVF r
&INANCIAL !NALYSIS
Û>Õ>ÌÊvÊ/ÀiÊ w`iVi i`ÕÊ->iÃÊ«>VÌ Year 0
Year 1
Single store Trek sales growth($) Net per store sales growth (w/ cannibalization, 60%) Net per store sales growth (%) % of stores w/ Confidence Total IBD Trek sales growth (from base year) Growth in sales to Trek Investment/Develop Costs Cumulative Profits
(500,000) $
(500,000) $
Year 2
Year 3
Year 4
13,462
13,462
13,462
13,462
5,385 1.00% 20%
5,385 1.00% 30%
5,385 1.00% 40%
5,385 1.00% 50%
3,769,234 1,884,617.0
5,653,851 2,826,925.5
7,538,468 3,769,234.0
9,423,085 4,711,542.5
(800,000)
(450,000)
(475,000)
(500,000)
1,084,617 $
2,376,926 $
3,294,234 $
4,211,543
$
2,058,312
NPV
*OTUJUVUFPG%FTJHO*MMJOPJT*OTUJUVUFPG5FDIOPMPHZ
ѮFDIBOHFJOUIFSFUBJMFYQFSJFODFJT FNCSBDFECZEFBMFSTBOEJNQMFNFOUFE OJDFMZEPOF$VTUPNFSTOPUJDFUIFDIBOHF JOUIFFOWJSPONFOUBOETIPXHSFBUFS JOUFSFTUJO5SFLCJDZDMFT
,FZ7BSJBCMF r*ODSFBTFECJLFTBMFT &YQFDUFE/FU1SFTFOU7BMVF rNJMMJPO
} Ê->iÃÊ«>VÌÊ Year 0
Year 1
Single store Trek sales growth($) Net per store sales growth (w/ cannibalization, 60%) Net per store sales growth (%) % of stores w/ Confidence Total IBD Trek sales growth (from base year) Growth in sales to Trek Investment/Develop Costs Cumulative Profits
(500,000) $
(500,000) $
Year 2
Year 3
Year 4
20,192
20,192
20,192
20,192
8,077 1.50% 20%
8,077 1.50% 30%
8,077 1.50% 40%
8,077 1.50% 50%
5,728,800 2,864,400.0
8,593,200 4,296,600.0
11,457,600 5,728,800.0
14,322,000 7,161,000.0
(800,000)
(450,000)
(475,000)
(500,000)
2,064,400 $
3,846,600 $
NPV
ѮFDIBOHFJOUIFSFUBJMFYQFSJFODFJTGVMMZ FNCSBDFECZEFBMFSTBOEJNQMFNFOUFE DPOTJTUFOUMZBOEUPUIFIJHIFTUTUBOEBSET $VTUPNFSTBSFFOUIVTJBTUJDBCPVUUIF DIBOHFBOETIPXHSFBUFSMPZBMUZUPUIF EFBMFSTBOE5SFLUIBUJNQMFNFOU5SFL $POêEFODF
5SFL#FFCF 'JTDIFS-JFT
5,253,800 $
6,661,000
$
3,638,867
,FZ7BSJBCMF r*ODSFBTFECJLFTBMFT &YQFDUFE/FU1SFTFOU7BMVF rNJMMJPO
ÌÌÀLÕÌÊEÊVÜi`}iiÌ 4HE WORK PRESENTED WAS COMPLETED FOR THE 2ESEARCH AND $EMONSTRATION COURSE A STUDENTS CAPSTONE PROJECT AT THE )NSTITUTE OF $ESIGNS -ASTER OF $ESIGN PROGRAM 4HE PROJECT APPLIES APPROPRIATE THEORIES AND METHODS TO A SELECTED PROBLEM AREA 4HE PROJECT IS A COMPREHENSIVE INVESTIGATION OF A RANGE OF POSSIBLE SOLUTIONS INCLUDING lNAL REALIZATION OF A SET OF CONCEPTS AND COMPLETE DOCUMENTATION OF THE DESIGN PROCESS USED
(ENNING &ISCHER HlSCHER IDIITEDU 4AYLOR ,IES TAYLORL IDIITEDU
4HIS SPECIlC PROJECT SOUGHT TO UNDERSTAND AND IMPROVE UPON THE CHANNEL AND RETAIL STRATEGIES 4REK A LEADING BICYCLE MANUFACTURER EMPLOYED TO GENERATE AND FULlLL CUSTOMER DEMAND AND LOYALTY 4HE STUDENT TEAM OF -ICHAEL "EEBE (ENNING &ISCHER AND 4AYLOR ,IES COMPLETED ALL PRESENTED WORK DURING THE 3PRING ACADEMIC SEMESTER *EREMY !LEXIS FACULTY )NSTITUTE OF $ESIGN SERVED AS PROJECT ADVISOR
*OTUJUVUFPG%FTJHO*MMJOPJT*OTUJUVUFPG5FDIOPMPHZ
$ESIGN 0LAN !UTHORS -ICHAEL "EEBE BEEBE IDIITEDU
0ROJECT !DVISOR )NSTITUTE OF $ESIGN )LLINOIS )NSTITUTE OF 4ECHNOLOGY *EREMY !LEXIS
4HE PROJECTS SPECIlC PROCESS INVOLVED lVE MAJOR STAGES OF ACTIVITY 5NDERSTANDING #ONTEXT /BSERVING 5SERS 'ENERATING #ONCEPTS 3PECIFYING 3TRATEGIES AND -ODELING THE 2ESULTS 2ESEARCH METHODS USED INCLUDED LITERATURE REVIEWS COMPETITIVE ANALYSIS CONSUMER TREND ANALYSIS AND ETHNOGRAPHIC OBSERVATION AND INTERVIEWING !NALYSIS METHODS INCLUDED ORGANIC CLUSTERING STRUCTURED ANALYSIS USING THE )NSIGHT -ATRIX AND PARADOX ANALYSIS 3YNTHESIS WAS CONDUCTED VIA STRUCTURED BRAINSTORMING CONCEPT SCORING CONCEPT STRATEGIES SYSTEMS THINKING AND lNANCIAL MODELING
5SFL#FFCF 'JTDIFS-JFT
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