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Bye Bye, Bears. Hello, Bikes


Special Report (Enterprise) MARKETING -- HARD LESSONS

BYE-BYE, BEARS. HELLO, BIKES

John N. Sortino blew it at Vermont Teddy Bear Co. Now, he's trying to prove himself with startup No.2: Chicago Bicycle Co. "I wanted to start a company and do it right this time," he says.

Once again, Sortino is trying to carve out a niche in a well-established market. In 1994, while still running Vermont Teddy Bear, he opened a factory in downtown Chicago to make old-fashioned-style "cruisers"--bikes with springy seats, upright handlebars, and a cushy ride. His idea: to sell them to aging baby boomers the same way he sold teddy bears--through the mail. "I know I can sell as many bikes as I want," Sortino boasts.

But Chicago Bicycle, with headquarters in Burlington, Vt., is still trying to get its sales in gear. Last September, during a month of test-marketing through radio ads in New York City, it received 6,000 phone calls but few orders for the bikes, which start at $750. Sales for the year reached $300,000. Tom Stendahl, president of Schwinn Cycling & Fitness Inc., the country's largest cruiser maker, questions the idea. "In this business, you need personal service," he says. "I doubt many people are going to want to buy bikes through the mail." Sortino tries to solve that problem with a network of bicycle-savvy college students who deliver and adjust bikes for mail-order customers. Concedes Sortino: "The weakest part of Chicago Bicycle is direct mail."

Another problem is stiff competition--and Chicago Bicycle's steep prices. Cruisers have been hot sellers for the past two years, and powerhouses Schwinn, Huffy, Trek, and Giant all have large retail networks selling their versions for $150 to $350. Florida grocery stores now sell foreign-made models for under $100.

SCIENCE PROJECT. Still, Sortino is convinced he has another hit. "I've scientifically worked on every piece of this business," he says. He plans another radio blitz in the spring and hopes to set up a factory and dealer network in Europe later this year. Sortino says sales will run between $2 million and $3 million this year.

Sortino, who is talking to backers and hopes to take the company public in three years, is putting his own money at risk this time around: He has more than $1 million sunk in Chicago Bicycle so far. Maybe that's why he isn't taking any more chances on his management expertise. He has already hired two former executives from bikemaker Cannondale Corp. in Georgetown, Conn., as chief financial officer and head of European operations, and he plans to hire a CEO this summer.BY GEOFFREY SMITH IN BURLINGTON, VT.


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