Alchemy Cycle Trader Branches Out From its Used Bike Roots

As every bicycle dealer knows, supply of new bikes is tight right now, it’s possibly going to get even tighter during 2021.

But are second-hand bikes a viable back-up option or stop-gap measure to at least keep a few more dollars coming through the door if the new bike supply really does get tighter in 2021?

I thought the best person to answer this question is the founder of what is possibly the biggest and best store in Australia founded upon selling second-hand bikes, Alchemy Cycle Trader.

Located in Melbourne’s outer eastern suburbs, Alchemy Cycle Trader was founded by Nigel Letty, an industry veteran best known for building the Bicycle Super Store chain before selling prior to starting this current business, which is managed full time by Cameron Letty, Nigel’s son.

It had been over two years since I’d previously visited this business, which had more than doubled in size since my previous visit, both in terms of staff, growing from four to 11 and premises, with one industrial unit being expanded to two.

In speaking to Nigel, it was quickly apparent, that although Alchemy Cycle Trader was founded upon the concept of being a specialist second-hand bicycle retailer, it has quickly diversified into other areas, with further diversification on the way.

“When we started, it was probably 90% second hand,” he recalled. Now it’s probably, 25% and that’s just because of the volumes we move.

“We can’t get second-hand stock that is going to be competitive and in the right condition and at the right price points.

“If we get a dually (dual suspension MTB) in for $3,500 we have a list of people we can ring and this is the way the conversation goes:

‘Hey, we’ve got a Specialized Stumpjumper…’

‘I can’t get down there till the weekend.’

‘Well, we’ve got two other people interested.’

‘Oh… I’ll be down shortly.’

“So, the second-hand stock moves very quickly, because we’ve set ourselves up with all of the records of our customers. But the new stock is definitely an easier resource.

“In order to sell and service second-hand bikes you’re learning all the time. To know every brand, every style, every era and to be able to service and repair them, has its own set of problems.  Easiest thing in the world is to sell a new small Giant TCR, you know all about that Giant road bike and can just ring up and order another.”

Inside the second store is car racks, ebikes hire bikes and some overflow stock storage.

“One of the things which is fantastic about dealing with second-hand bikes, is that you aren’t restricted by selling territories, floor plans or wholesaler limitations, but the downside is, depending upon the brand, you might not get wholesaler support when you need specific spare parts.  For example if I need a rear derailleur hanger. Who do I speak to? I just buy retail. So while it’s great, there’s also a downside.

“Another problem is, we get lots of people buying second hand and bringing their bikes in and we’re quoting them perhaps $1,000 to get them roadworthy. Now we do a roadworthy certificate and I wish that they would go in and get a bike checked before they bought it. We’re seeing bikes where we’re going, ‘Sorry, what do we do with that?”

For example, we had a Merida come in the other day. The guy proudly said, ‘Hey, check this out, I only paid $1,700!’ and we went, ‘Ok, but your rotors worn to under one millimetre thick, your brake pads are worn, your cassette, chain and chain ring are worn out, bottom bracket… your rear suspension unit has got to be sent away for specialists servicing…’

“We’re putting the numbers together and he’s thinking, ‘What have I done?’ It was $1,200 to repair it properly. It was a 2008 Merida Carbon dually. An old bike, but you try and buy a new dually under $4,500 new at the moment, you can’t do it! So people are selling their second-hand stuff, well above what they’re worth and uneducated consumers are getting caught.

“A shop selling second-hand bikes can get caught too. Not only with stolen bikes. You only need a few things go wrong and your cost has blown out. It’s not a great time to be in the second-hand bike market to be honest, the market is buoyant and you need to pay top dollar to have a chance of getting ‘in demand’ stock.  At the moment a consumer only has to put a bike up onto Gumtree and they’re just gone so fast. It used to be that they’d advertise and endure three months of stupidly low offers. Compared to that, we provided an easy service for these second-hand bike sellers, but now it’s a lot harder for us.”

Legal Considerations

To sell second-hand bicycles on a commercial basis, you need to obtain a second-hand dealer’s licence. We’ve briefly looked into this and it appears that this is state based legislation and that the fees and requirements vary quite significantly from state to state. Likewise police departments and their requirements are also state based. Therefore Nigel’s experiences outlined below relate to Victorian licencing and legal requirements.

“To get a second-hand dealer’s licence you just go on a website and put an application in,” Nigel said. “You’ve got to have a clear criminal history. You’ve got to give details of the premises, where they are and where the bikes will be stored and sold. They will inspect it. The police come through asking for systems, second-hand bikes etc, ‘Show us your records.’ We’ve got it all on hand.

“When someone comes to us wanting to sell a second-hand bike, we make sure that they’ve got clear title. So we will take all the information that we can. We have had two instances where stolen bikes have come into the premises. One we managed to catch it at the start, it was all very suspect, we went and did all the police checks. They got charged by the police.

“The other one, we totally had no idea. They were more than prepared to give their licence and details… they bought it second hand, was the story, so they didn’t have the original receipt. Then the person who owned it had seen it on our website. As soon as we got their phone call, we involved the police.  We said, ‘This is the claim from a person. They’re claiming their stolen bike has ended up here. We have all the details of the seller that they provided to us.’ We got the police involved right from the start and the person again was charged.

“We’re just really thorough and we make sure that before they bring a second-hand bike in here, they either bring their original receipt or they understand that we do a full security check and the research required. Bike Vault was one of the things which I hoped would really get some traction but it still seems that it has some way to go before it’s commonplace.”

Alchemy’s original store is in the street facing end unit of a multi-tenant light industrial concept. The large car park is also ideal for customer test rides.
Alchemy doubled their footprint by also taking over the unit directly opposite their original store.

Business Evolution

What started as a store with 90% second-hand bikes has today become a diversified bicycle retail business with multiple income sources and even more planned.

Alchemy Cycle Trader now sells a wide range of new bicycles, parts and accessories. They have a busy workshop servicing all types of bicycles, not only the ones they sell. They also have a strong and expanding online business. Each business division has a designated manager. Nigel only works part time in the business, doing business coaching on the other days.

Their second premises, directly across the car park from their original, specialises in sales and fitting of Thule car racks and ebikes. Nigel has ambitious plans for further expansion into other bicycle related services at least one of which would be a unique first for a retail store.

Whilst second-hand bicycles will continue to be a part of the mix going forward, its percentage share of the total Alchemy business looks set to diminish further as other departments grow and new services are added.

Nigel requested that we mention that he’s looking for a Workshop Manager to lead their world-class workshop. Anyone interested should call 03 9763 8261.

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