Here Are Five Reasons Why Covid-19 Represents an Opportunity for Our Industry
We’re still only a few months into the Covid-19 Pandemic and things continue to change at a rapid rate. Although it’s early days, as I write this, Australia is now 29 days past its March 22nd peak daily new infection rate and New Zealand 23 days past its 28th March peak. Meanwhile the human toll, led by the USA and elsewhere, continues to soar, with no end in sight.
With every day it’s becoming more likely that our two Latz Report audience countries are going to be two of the most successful in the world at ‘flattening the curve’ and minimising the health impacts of the virus.
But what about the business and lifestyle impacts going forward, particularly for our bicycle industry?
On behalf of our readers I’ve been doing a lot of research, reading and thinking about this question and think there are five reasons that we can be at least cautiously optimistic about the future of our industry.
Reason One: Less Competition for Consumer Time and Dollars
The evidence is growing that overall, the Australian bicycle industry is doing very well right now. We expected that workshops would become busy, as many people dragged their old, unloved bikes out from the back of their sheds and took them down to their local bike shops for much needed service.
But what has been perhaps a little more surprising in these days of job uncertainty and rapidly rising unemployment, has been a surge in new bike sales. This trend appears to be both nationwide and across a fairly wide range of bike categories and price points.
Why is this happening?
Here’s my theory to at least partially explain it.
Think of all of the billions of dollars of usual discretionary consumer spending that can’t be spent at the moment. All tickets to all codes of professional sport, money usually spent at pubs and clubs, concerts, all forms of theatre, all forms of travel, restaurant dining, clothing and fashion – these are huge industry sectors that are almost entirely shut down.
Then there’s more billions being saved on petrol for commuting, public transport fares and other work related expenses. Not to mention the price of petrol, when you do finally need to refill your tank, being barely half what it was a few months ago. Still more dollars left in your pocket.
Sure, many consumers are being more careful with their spending right now and many businesses are in shut down, but we’re also about to see the biggest ‘pump priming’ of federal government money in the history of our nation, perhaps $200 billion or more. Plus all of the states and territories chipping in further billions.
Then there’s the limitations upon what we’re currently allowed to physically do. Not only are so many multi-billion dollar industries currently unable to take our money, but these outlets for millions of hours of our time and enjoyment are currently off limits.
What can Australia’s 25 million consumers do with all their pent up energy, time and money? They can’t play sport or even go to the gym, but they can walk, run and ride a bike.
I’ve been riding a particular cycle path for over 25 years and I’ve never seen it more busy than during my past two Saturday rides. I’m hearing reports from our readers across Australia of the same story repeating itself on their local trails and bike paths.
Considering all of the above, is it any wonder that bicycle retailers suddenly find themselves so busy?
The key question of course is, ‘How long will this last?’
Reason Two: Scarcity is Reducing Discounting Pressure
Bicycle retailers are reporting that customers’ behaviours have changed. They’re researching in advance via phone or online to see if the store has the item they’re looking for.
Then they’re shopping with purpose: coming in, buying and leaving. They’re not so keen spend time in higher risk public places to visit multiple shops and haggle for a better price.
Combine this with an already apparent shortage of stock and the need to discount is melting away like a mirage in the desert.
Discounting is the enemy of maximising profit. I’ve been campaigning for decades for our industry to reduce discounting through strategies ranging from collecting industry wide data so that everyone can forecast stock needs more accurately, through to reducing the emphasis on model years and the artificial obsolescence and discounting pressure that it induces.
Those strategies remain as valid as ever, but suddenly the virus has given us an opportunity for us to reset our industry overnight and finally make full margin on what we sell.
This not only relates to complete bicycles. I don’t think anyone will be needing to discount indoor trainers for a while.
Once again, ‘How long will this last?’ In this instance, we have the power to at least partially determine the answer this question through our own actions.
Reason Three: Accelerating Ebike Growth
It has been interesting to hear from multiple sources that many new, first time bicycle buyers are skipping the more traditional route of starting with an entry level bike for a few hundred dollars, possibly to be upgraded later.
Instead, many are handing over $1,500 to $3,500 or so, to go straight to an entry level ebike. This means thousands of new people are going to get the ‘ebike smile’ when they suddenly discover how easy and how much fun ebikes are to ride.
In these days of social isolation, boredom, more screen time and mental stress, they’ll be even more likely to become ebike advocates to their family and friends. Nothing beats the enthusiasm of a new convert.
I expect that next year when we see the ebike wholesale sales data for 2020 (fortunately our industry is already cooperating and collecting this data) we’ll see a dramatic acceleration in sales, which were already growing, from a very low base, at about 50% per year over the past two years.
Even if percentage rate of growth may slow after that, it will have been jumped forward a year or two by the current pandemic and I expect that the market will continue with solid expansion in the years beyond.
Reason Four: Social Distancing and Reallocating City Spaces Benefits Cycling
Even though the curve looks to have been flattened here, I think it will be quite a while until most people feel comfortable in crowded spaces.
This need to social distancing is causing a global revolution in a range of cities across all continents where streets are being closed to vehicle traffic so that there’s more space for cycling and walking.
New Zealand’s government is funding ‘pop up’ temporary bicycle lanes and wider footpaths. Transport Minister Julie Anne Genter has invited cities in New Zealand to apply for 90% funding to widen sidewalks and carve out temporary cycleways, measures that can be put in place in hours and days rather than the weeks and months (or in Australia, years) that it can often take to install such infrastructure.
Genter believes that pop-up bike lanes and temporarily widened sidewalks, “will be so successful that communities will want to make them permanent.”
There have been plenty of precedents of this being true, most famously the ‘temporary’ reclaiming of Times Square in New York City which years later remains a cyclist and pedestrian friendly landmark.
With so much less vehicle traffic on the roads, this is politically easier to do right now. The roads have not been quieter for decades and the air has not been cleaner.
This is making a wide range of people, including some prominent mainstream media commentators, not just ‘hard core cyclists’, stop and take stock about how nice it would be to have less air and noise pollution and more space for people.
There are also questions relating to the future nature of work. Has the five day commute into the office changed for ever now that so many of us have suddenly been forced to work from home and discovered that thanks to new communication tools, we can still be quite productive? It would be a great time to own shares in Zoom!
But when the vehicle traffic does return to at least closer to pre-virus levels, we’ll need more cycling infrastructure if we want to keep some of the air and noise benefits we’re seeing now.
And there are mountains of data showing that improved infrastructure for cycling leads to increased cycling activity, which in turn leads to a stronger bicycle industry. This brings me to my final point…
Reason Five: Rare Opportunity for Federal Government Funding
This is another area where New Zealand is streets ahead of Australia. New Zealand’s federal government not only already funds cycling infrastructure, but they’ve been doing so at an increasing rate in recent years.
Throughout the 119 year history of Australia as a nation, the federal governments from all parties have never given significant funding for infrastructure to make cycling safer and more popular. They’ve always fobbed it off upon the states and territories… with one important exception.
It’s hard to believe that we’re approaching 13 years since the ‘Global Financial Crisis’ began in mid 2007 and ran through to early 2009.
The then ‘Rudd/Gillard/Rudd’ Labor government was desperate to avoid a recession in Australia, so were looking to fund ‘shovel ready’ projects to provide jobs and economic activity. Most famous, or infamous of these projects were new halls for every school and the ‘pink batts’ insulation scheme.
But less well publicised was that, thanks to the initiative and lobbying of state and federal cycling advocates led by Stephen Hodge of what was then the Cycling Promotion Fund, we were able to secure a one off grant of $40 million in federal funding to build a range of cycling projects nationwide.
After matching funds from state and local governments, the total value of projects built through this initiative was closer to $100 million.
Fast forward a decade and those paths are still being ridden by cyclists every day. In fact, even more so at present.
Today the current Prime Minister, Scott Morrison, is already talking about ‘priming the pump’ and ‘building roads and bridges’ to get the economy moving again after the virus threat subsides.
The challenge that faces the cycling community, once again led at the federal level by Stephen Hodge in what is now We Ride Australia, is to leverage years of hard work that has built strong relationships with key government ministers, to make sure that cycling gets a slice of this pie.
This is no small challenge when dealing with a federal government that has all but totally ignored cycling, walking, active transportation and many related positive opportunities.
But the pie will be so large that even if we only get a few crumbs, that could be a figure of perhaps $100 million. If state and local government co-funding amounts to the same proportion as last time, that could result in $250 million of new spending upon cycling infrastructure.
Because bicycle paths and other facilities are so utterly dirt cheap to build compared to roads, a sum of that magnitude can build a significant amount of badly needed, high quality infrastructure Australia wide.
That in turn will mean more people riding, more often, buying more and better quality bikes and wearing through more tyres, brake pads and drivetrain components.
All of that means ongoing dollars for our industry, not just a one off stimulus.
These coming months are crucial in this rare opportunity that requires extra lobbying effort. But ironically it comes at a time when We Ride Australia’s funding is falling due to some cancelled memberships and delayed payment arrangements for others.
Fortunately, you can help in more ways than just providing money. As business people and employers, your comments are given extra weight by politicians. Now is a crucial time to write to your local Federal MP’s in particular and explain why allocating some of the upcoming stimulus money to cycling infrastructure is such a great idea.
Quite apart from the proven boost it would give to cycling activity and our industry, thereby creating ongoing jobs, it’s a well proven fact that more construction jobs are created per capital dollar expended on smaller, less mechanised construction projects such as bike paths compared with major roads.
You could do our industry a great service right now by reminding your local MP’s of these facts.
Conclusion
On one hand I don’t think that Covid-19 will be the ‘magic bullet’ that some cycling advocates and others are currently suggestion that suddenly changes our world forever to a cleaner, quieter, more cycling and walking friendly place.
But on the other hand, if we take maximum advantage of the five opportunities outlined above, it could propel us forward in a matter of months, to a point that would have otherwise taken us years to reach.
So whilst we all can excuse ourselves for having occasional moments of depression or frustration, particularly after weeks of lock down, looking at the bigger picture and longer term, we have plenty to be grateful for. Not only are Australia and New Zealand two of the safest places to be living right now, but the bike industry looks set weather this storm in far better shape than many others.