Bicycling Trade: It’s a long way for you to have come to attend this event. Why do you place such importance upon the Australian market when our population is so small?
John Burke: Well, I have probably been to Australia eight times in the last 20 years and it’s a wonderful country. So I always like coming to Australia. We have a great team of people here who work at Trek Australia, Phil McGlade, Jason Pye—all these really exceptional people, so I always like to see those people. Australian dealers are great, and the reason I know that is every time I’m here they’re fun to be around and over the years Philip has probably bought three groups of Australian dealers to the US and I’ve had them over to my house for dinner and they’re just great people. I never regret spending time with a customer, whether it’s Australia, China or Europe, it doesn’t matter.
Bicycling Trade: Trek was started by your father. So, how old were you when you first became involved, because obviously you’d have still been in nappies in 1976!
John Burke: In 1976 I would have been 14 years old and I remember going to the first product introduction of Trek, it was held at the Pine Knoll Restaurant in between Waterloo and Lake Mills, and I went to that event. I remember people coming to the house who worked at Trek to talk about various issues and I’d invite myself to the table for those things. So I would do that. I remember going out to Trek when I was a kid to count the inventory with my dad. Then I really didn’t get involved until sophomore year in college. I worked the summer at Trek and that’s when I fell in love with the bike business.
Bicycling Trade: Did you go straight from college into the company?
John Burke: I graduated from college, I got my wisdom teeth pulled the next day and I think two days later I was working at Trek and I’ve been there ever since.
Bicycling Trade: In the early days what sort of roles were you doing?
John Burke: I worked in the warehouse when I was in college and when I graduated from college I was lucky enough to be a salesman. A travelling salesman. So I had the area of Colorado, Wyoming, Utah, New Mexico, part of Texas, part of Nebraska, part of Idaho. It was a huge geographical territory. I did that job for about a year and a half and I was actually very good. I can sell things. When I was a little kid I could sell to raise money for the fireworks. They would have little kids sell flares, so I would sell the most amount of flares. So I kept my streak alive with bicycles!
But I will tell you it was the greatest educational experience, because when I was out in the field as a sales rep, when I started Trek was at its peak. It was 1984 and Trek was doing great. My father owned a number of other businesses so he didn’t run Trek day to day, it was just one of the businesses he owned. It must have almost been from the day I started that Trek started to go downhill and it just cratered and it was terrible.
So here I was out in the field selling product for a company that was having an amazing amount of problems and it was a company that my father owned. So it was a great educational experience. So I did that for a year and a half and then I was brought inside to run the customer service at Trek. I did that for about six months and then my father fired all the managers and so at 24 he put me in charge of all the sales and marketing. I had that job for a long time.
Bicycling Trade: For many years you’ve been a leading proponent of cycling advocacy. Have you seen a good return on your investment?
John Burke: Absolutely, in more ways than one. You know there’s a cycling boom that’s happening all around the world and when I originally got involved in it, I got involved in the United States. There’s a huge federal transportation budget and cycling was getting 20 million dollars, which is like one one hundredth of one percent or something ridiculous, and biking and walking made up 8% of the trips and yet it was getting nothing and I thought that was ridiculous.
But you know the interesting thing is, much like with anything else, if you don’t ask you don’t get. I really think that, especially at that point in time, no one was asking on cycling’s behalf. For sure no one was clearly laying out the simple benefits, like helping with congestion, helping with health issues, helping with environmental issues. I think I did a pretty good job of laying out that cycling is a simple solution for a lot of complicated problems.
It’s made a big difference in the United States. Trek was there at the start, and we made a difference and we got other companies involved and now the US Government spends 1.2 billion dollars a year. So has it made an impact there? Absolutely. Then you start going around the world and you start taking a look at what’s going on in Australia or Korea, all around the world people are waking up to the fact that bicycling is a cheap date.
In some of these cities you can build a mile of four lane freeway and it will cost you 300 million dollars. It’s amazing! Then you can sit back and you can go, ‘You know what? We can make this entire city bicycle friendly for 41 million dollars. Do we want one mile of four lane freeway through the middle of the city or do we want the entire city to be bicycle friendly so our kids can ride their bikes to school in the morning and so people can take trips that are three kilometres or less that they can ride their bikes safety? Do we want something that will bring vitality to the city?’
You don’t bring vitality to the city by people driving around in cars. I am not an anti-car guy. I drive a car. Every time a car passes a cyclist they should say thank you, because it’s one less car that’s on the road.
Bicycling Trade: You’ve pioneered the B-Cycle in Denver and more recently you’ve funded the B-Cycle program in Madison, Wisconsin. (Editor’s note, Madison is the closest city to Trek and home to many Trek employees.) What do you think is the future of bike share? How important is it as part of your corporate strategy at Trek?
John Burke: I like to try a lot of new things. I’m a big believer in trying new things. I saw what happened in Paris with the Vélib System and I thought that was awesome. I thought, ‘That’s cool!’
So we get involved in bike sharing and it’s been a roller coaster of a ride. We’ve put bike sharing into about 15 different cities and I was insistent that it go into Madison and there were some problems with Madison’s finances etc so we just gave the system to Madison.
The reason we gave the system to Madison was one, we like to do good things as a company and two, I really wanted to learn about bike sharing. Unfortunately, what I’ve learned is bike sharing systems don’t make money. They just don’t make money. There might be some communities with really good weather that you can run the sharing system 12 months out of the year and there are a lot of people involved with cycling, they might, but for the most part they don’t make money.
So then you’ve got to say, ‘Okay, how’s this work out?’ We’re in our second year in Madison and what I can tell you is that bike sharing brings incredible vitality to the city. It gets people to ride their bikes instead of being in cars. It takes cars off the streets, so that cars that need to be on the street can get to where they want to go. It helps solves urban parking problems because for every new parking garage that you build, each one of those spaces costs $40,000. It’s amazing!
But what we’ve learned so far is that a bike sharing system needs to be like the bus system and that is the Government needs to subsidise it. I don’t think bike sharing on its own will generate enough revenue to make it a break even proposition. That’s what I think.
Taking Madison for example, you have a world class bike sharing system that loses $250,000 a year. Is the city getting $250,000 a year out of that? I would say absolutely! It’s making Madison a better place to live, I mean, I already went through it There are just so many benefits that it brings.
Bicycling Trade: There are social benefits that are broad benefits that are hard to get an individual to pay for.
John Burke: Yes it is.
There are a lot of bike sharing systems going in in the United States, so we’ll see how they do over the next five years.
Bicycling Trade: A lot of eyes will be on New York especially, being the biggest one.
John Burke: Yes, a lot of eyes will be on New York.
Bicycling Trade: Moving on to Trek, what impression do you want to leave in the customers’ minds about Trek? What do you want your brand to mean to them?
John Burke: You know there are a couple of things. First of all it’s just best in class products. We put an amazing amount of resources into developing new products. We have a huge engineering staff, a huge design staff and we have this brilliant creative department. We have a lot of assets and I think when you take a look at things like new Madones or new Domanes or you take a look at new Superflys, or you take a look at what we’re doing with wheels, it really is amazing how many new awesome products we’re pumping out.
So that’s the number one thing. It’s just that, ‘Wow! That company is a new product machine’. I think that that’s the key thing for consumers and retailers.
And for retailers I think the key message is that is a great company that cares about our success and that’s what separates Trek from every other bicycle company. We really care about our retailers. We just don’t care about them in terms of ‘How are you?’ We care about retailers in terms of ‘How are you? How is your business? What can we do to help?’
Our continuous improvement program, there’s a whole bunch of things we do to really advance retailers. And I think that we’re really good at that and we’re going to get better at it.
Bicycling Trade: In America you’re the number one dealer brand. Are you finding it tougher as years go by to maintain that position, or is it easier?
John Burke: It’s always tough. It’s always tough. I care more about, ‘Are we living up to our potential?’ I’m more concerned about the process: Are we living up to our potential? Are we putting out best in class products? Are we taking care of our customers? Are we doing all the stuff we need to be doing? If we do that stuff we’ll grow our business.
Bicycling Trade: In Australia, Giant is the number one brand, measured by dealer sales, whereas they’re a long way behind Trek and Specialized in the USA. Why do you think the market shares are so different between the two countries?
John Burke: I think that has to do with first mover advantage. I think Giant has been in Australia with their own business for a long time and they’ve consistently done a really good job.
They’ve earned it.
Bicycling Trade: Are you looking to become the number one by volume in Australia or do you have other goals here?
John Burke: No, I think our goal is let’s put out best in class products. Let’s make our customers really successful. Let’s do great marketing and let’s have stuff in stock. If we’re number three, we’re number three. If we’re number one, we’re number one. I just want to go, are we doing a good job of living up to our potential? That’s what I care about.
Bicycling Trade: Turning to the pro road team sponsorship side of your business…
John Burke: Thank you! (laughing)
Bicycling Trade: It must be a tough year for you with all the drug allegations surrounding past and present Trek sponsored teams, how do these allegations. How do these allegations make you feel and will they affect your ongoing sponsorship of pro teams?
John Burke: That’s a complicated question, so let me answer it in a couple of different ways.
First of all I love racing. I have this great love for the sport. I go to the Tour de France every year. I wake up at 5 o’clock in the morning every Sunday in the spring to watch the Classics. I’m glued to it. I think that bicycle racing is the most fascinating sport and the more you watch it the more you appreciate it. So I think bicycle racing is fascinating.
Trek’s always going to be involved in racing because I love racing and also we really use our teams to develop products. I don’t think a lot of companies do that. If you take a look at the new Domane, I mean the amount of hours that Fabian Cancellara put in not only testing those bikes but interacting with the engineering staff etc.
I was just in that new product room for an hour and I heard from four different people how awesome the new Domane is. Okay, well if you trace that all the way back, a lot of that goes back to our engineers working with Fabian Cancellara to develop that product. So some people say, ‘Is racing worth the investment?’ Yes, for Trek it really is. So, that’s a really good thing for Trek.
When you take a look at the doping scandals or whatever that consumes the sport, Trek supplies bikes. We don’t own a team. We don’t test athletes and it’s such a complicated situation and I think it’s becoming more complicated with time.
Bicycling Trade: Just returning back to Australia, are you glad that you made the push to have a direct presence here?
John Burke: Absolutely. We had a great relationship with the Cook family (previous distributors of Trek in Australia) and we still do. I’m having dinner tonight with Tony and Christine. Wonderful people. But, Australia’s a sizeable market and when Trek comes into a market it’s able to invest in inventory, invest in computer systems. It’s able to make big investments that distributors can’t make. Retailers have the benefit of that. Consumers end up being the beneficiaries of that and I think it’s a great move.
Bicycling Trade: How closely do you follow the progress of your Australian subsidiary?
John Burke: Every day. I get a sales report every day.
Bicycling Trade: Not Saturday and Sunday I hope!
John Burke: Friday sales roll in on Saturday, so I take a look. It interests me.
Bicycling Trade: That’s amazing!
What is your impression of Australian bike shops compared to USA dealers?
John Burke: I think they’re very similar. I think there are a lot of good things going on. It’s like any other business. I was talking to an Australian dealer yesterday in Canberra, a great store, but I walk out of there and there are 10 things you can do to improve.
Just like if you take a look at Trek’s business. I mean some people look at Trek and say, “Wow, that’s an amazing place!”
But there’s a thousand things we need to improve. I take a look at Australian bike dealers I think they’re the same as bike dealers in the US or good bike retailers in Europe. I think they do a lot of things really well, but I think there are areas for improvement.
But I will also tell you that this whole issue, the internet, is a big issue for retailers. It’s bigger than they think. Retailers need to critically look at their businesses and they need to be on the continuous improvement program, otherwise they’re going to be eaten alive.
Bicycling Trade: It’s interesting you say it’s bigger than they think, because every retailer I go to, the first thing they want to talk about is the internet. So they already think it’s a big deal at least in Australia, but you’re saying it’s bigger than they think.
John Burke: Yes, it’s bigger than they think.
Bicycling Trade: You have a line of being very tough on ‘dealer only’ in your distribution channel.
John Burke: Just think about this. Think about, I always like to put myself in the customer’s shoes. So if I was a cycling consumer and I was going to buy on the internet, what I’d do is, I’d go to the bike shop and I’d look at all the stuff, then I’d go home and I’d buy it. To me I think this is bullshit. So there you have Mr Bicycle Dealer who’s paying the rent. He’s spending the money on the rent for the showroom that you’re going to walk into and look at all this stuff. That’s expensive, and then he’s spending the money on all the inventory that you’re going to pick up and feel and touch and try on and look at. That’s his investment. And then you’re going to talk to his people. You’re going to ask them for their expertise and then you’re going to turn around and walk out the door and buy it from Wiggle or Chain Reaction.
I mean, I think bike shops are integral to the sustainability of the bike business. Wiggle and Chain Reaction aren’t doing anything to grow the bike business. They aren’t attending any advocacy meetings. They’re not there for that. They’re not there to help sponsor racers or support racers. They just clean up. I just think that bike shops need to take a more aggressive stance in supporting brands that support them.
Bicycling Trade: Do you think other brands might be starting to follow your lead or take from your example?
John Burke: Specialized does. And I think that’s about it. But that’s fine. I think it’s a great opportunity for Trek.
Bicycling Trade: What do you think Australian dealers need to focus on in order to survive and thrive in the years to come?
John Burke: I think, number one, they’ve got to run a good business. If you’re in business, run a good business.
John Burke: I’ll give you an example. In the US in a group of 100 Trek dealers, I’ll say ‘how many of you have a budget?’ 10% of the hands will go up. Okay, so you guys are now competing with Amazon, Wiggle, Chain Reaction, e-Bay and you don’t need to have a budget?
Do you have a budget? Are you training your people? Do you have a marketing plan? Do you have sales goals? How well merchandised is your store?
All this stuff matters. It’s not one silver bullet. You’ve got to be passionate about your business and you’ve got to want to push it over the line every frik’n day. Because there are other people there who are trying to put you out of business. So you’ve got to be passionate about it.
I’ve got to tell you, I do these continuous improvement events, about 100 every year and the number one factor between the guys who succeed and the guys who don’t, are just who’s passionate about it. Give me a guy who’s passionate who runs a lousy business and I’ll turn him into a winner, I’ve got that one.
Bicycling Trade: Can passion be rekindled or learnt? Or is passion either there or not? What do you think?
John Burke: For sure, it’s either there or not, but it can be acquired. I’ve seen it.
Bicycling Trade: What do you is think the catalyst for acquiring passion?
John Burke: It’s a choice. It is a choice and I’ll talk about that tomorrow, but you need to sit down with yourself and have a little meeting…
I mean we talk about the internet and scary goblins out there, but this is a great time for cycling.
Sometimes I show a picture at a meeting and say, “How’d you like to be in this business?” And I show a picture of an ocean with a bunch of wind turbines in it and people go, “That would be great!”
Dude, we’re in a green business! We’re right in the zone! It doesn’t get any better than this! Right?
I just think that people who are in the bike business, we’re going to have so many great things going for us over the next 25 years. It’s an amazing time. So I think a little smile on the face and a little passion in the heart and you’ll go a long way.