How’s Business – August 2020

Welcome to our monthly conversation with six bike shops selected from across Australia and New Zealand.

Knowing in advance that bicycle stock shortages would be a topical response this month, our follow up question was, ‘Do you think it’s possible for a workshop to be a profit centre in its own right?’

Damien Lack of Flemington Cycles in inner western Melbourne, Victoria said:

I think, like the whole industry, we’ve been pretty crazy with sales and huge amounts of repairs.

Physically it has been pretty draining, but business wise, it’s been exceptional.

We actually took a week’s break last week. We were all pretty exhausted, working 12 to 16 hour days every day. We were pretty tired and we knew that Flemington would be going into lockdown (some of the tower block flats that recorded Covid-19 cases are close by).

So we chose to take a week’s break, but coming back today, which is the first day we’ve re-opened, we’re filling up repairs again and two or three bike sales already this afternoon, so it’s been pretty positive.

The second lock down will be an interesting one. If people do the right thing I think we will find a lot more people won’t be out. But with your ambulance, doctors, nurses, a lot of them are coming through here because they’re using bicycles as their primary transport. They’re not catching public transport or driving as much.

We’re just waiting on stock to come through… it’s pretty low. We’re finding it hard. Stock is coming through and Giant’s been pretty good. They’re doing an allocation system.

We’re being allocated models that suit our market, which has been pretty good. They’re getting containers through, so we’re hoping that in the next month or two we’ll get back to a little bit of a normal flow.

We need more commuting range bikes. Being inner city, our commuting market is pretty huge. We’ve got a lot of people waiting on bikes like Cross City and Roam that you can use around town and on the bike paths.

We’re also running a little low on P&A but we did foresee the need for helmets, pumps, tubes and all that, so we did do a fair top up before it got too low. So we’ve been not too bad on P&A.

Surprisingly we had three Wahoo indoor trainers come today. Two of them went straight out to customers and one we’ve got sitting on the floor at the moment, but we’ve already had two people ring about it so I imagine it will be gone very quickly!

Workshop as profit centre?

That’s a good question. I think if you’re in the right area and you’re reaching the right market… potentially. But I believe the market still likes to touch and feel bikes and still be looking, even while they’re waiting for their bike to be serviced.

Mark Mannering of Bikes to Fit in Darwin, Northern Territory said:

Business is very, very good. This is the best virus we’ve ever had…

It’s just unfortunate that Australia is so heavily committed towards the Chinese product, but that’s just the way it is. We’ve created our own monster.

I’ve still got about 150 bikes in store, but they’re never the ones the customer is wanting, which is mountain bikes. Nigh on all our mountain bikes are gone except for some expensive stuff.

I definitely want mountain bikes from $500 to $1,100 retail. That’s where my market is generated. I’m left with road bikes and flat bars.

I made an investment in cross bikes and hybrids, knowing that the mountain bikes would be a problem. That worked out swimmingly well but there’s only about four of them left on the floor.

When China locked up I was apparently the smartest guy in the country, according to Advance Traders. They said, ‘Well, you got it right!’ because I threw money at it and bought 150 bikes, thinking it was going to tide me over for the three months, but when they got here, two days later they locked up the gyms and my stock was gone in three weeks.

It was great.

When China locked up, I had a bit of a think about it over the weekend. I said to my office girl, ‘I think I need to spend a shitload of money.’ She was not happy about it. So that evening when she’d gone home, I sent her a few emails from e-magazines, whatever that Pommie one is that they do and the American one and also your take on what was going to happen.

So when she came in the next morning she said, ‘Oh, I think you’re right you need to order some bikes!’

For a while there I was only guy in town that had any bikes. People walked in and said, ‘Wow! You’ve got bikes! Nobody else has.’

Forget about your social distancing. Nobody gave a stuff about the crosses on the floor. I had a queue out the door mate, it was great!

By that time, when I went to re-order, everyone else had woken up and they’d snaffled a lot of the good stock so it didn’t quite work out, that aspect of it, but I got my foot in the door early.

I placed a re-order of $90,000 months ago. I’m expecting fresh stock in August, but that will be only what I ordered and they won’t be able to top it up. It’s all pre-promised now.

Then my 2021 stock release, they’re saying now October. A long way to wait, but if you can’t sell it, you fix it! They’re bringing the wreckage of the sheds.

What’s wrong with that is some of the repair bills are worth more than the bikes. But because there’s no new bikes for them to buy, their only option is to fix it.

We had one case of Coronavirus sneak in the door the other day (into the door of the Northern Territory not the shop door) but he came from down south, that little place, what do they call it, Victoria?

But there’s not been any transmitted stuff, just imports. So we’ve done very well on that.

My thoughts are, when they want cleanliness, they rub the surfaces down with alcohol. We just pour it down our guts – same thing…

Workshop as profit centre?

Yes. This store can run purely off repairs, we don’t need to sell. I can get that much out of my workshop.

I’ve got two mechanics, but my show room lads can fix a puncture. That’s all I ask them to do down in the showroom. Anything more than that has to go to the workshop because it’s going to be greasy, dirty – cleaning, oiling, all that kind of stuff.

I artificially resolved our workshop backlog. We were that busy putting new bikes together that everyone was told 15 to 20 days to get their bike repair back.

Eventually when we started running out of new bikes to put together, that let us concentrate back on the repairs. But in spite of the fact that you do the repair, they were still leaving them sitting in the shop. We had too many bikes leaning on other bikes instead of in the racking system.

So I just put a sign on the door saying that we weren’t taking any more bikes. Five or six days later a few of the bikes got picked up and now we’re back to about two or three day turn around.

Clayton Wells of Cluster Cycles in Port Lincoln on the Eyre Peninsula of South Australia said:

At the moment it’s a bit quieter than last week. It’s the second week of the school holidays here. Last week we had a few tourists come into town with bikes and I was inundated with repairs, punctures and things like that.

Before that, it has been the repairs that are keeping us going, because we can’t get any bike stock. Both of my main suppliers, Apollo and Giant… Giant stuff is just trickling through, but they can’t fulfill back orders. We’re just getting an allocation of bikes. Most Fridays we get an email which tells us what we can have. For me it’s only about three bikes, but I have three people a day coming in wanting to buy bikes and I’ve got nothing.

Apollo are saying September for some of their stuff, but I think they may have brought some forward because their Neo kids’ bikes have just come in.

I’ve noticed that everything has gone up in price as well. Wholesale prices are easily up 5%.

I’ve got a couple of $1,200 and up bikes in stock but for that $450 to $750 range, I’ve got nothing.

Even for the kids’ bikes, 16 inch and 24 inch boys bikes – they were really popular at Christmas and they haven’t got those in stock.

Just to get anything to sell, I’ve been scouring the internet. But even that’s dried up. I was just trying to have something to sell people, even without much mark up, and then try to make it up by selling helmets and accessories.

I’ve been buying new bikes off the internet. I got a couple from CyclingDeal. I got a couple of kids bikes from Toys ‘R Us.

The next two months is going to be quieter. All it will take is a new virus cluster in South Australia and all of a sudden it will be back to panic stations again. If everyone stays in their own State, all well and good.

I’ve scaled right back. I’ve put off my part time kid who was working after school. I’m just doing everything myself for the moment.

I haven’t paid myself for the past couple of months and I’m careful what I’m ordering.

My landlord’s been really good. He’s reduced my rent, because in Port Lincoln we do pay high rental. I think you just have to keep it tight if you want to survive.

Workshop as profit centre?

If you’re in the city and you advertise it well, I think you would. You’ve got access to more people. But regionally, there’s that tipping point. The people pulling bikes out of sheds, that’s on the decrease already. I’ve only got access to say 15,000 people on the Eyre Peninsula. I think we’re over that tipping point of people pulling bikes out of sheds and getting them fixed up.

You’re not going to charge them $70 per hour to work on their bike. They’re just not going to get it fixed…

If they’re geared up to do forks and things like that as well… I know some guys interstate who used to be into motorcycles and they’ve gone into bicycle forks and shocks servicing as a niche market and they’re doing really well.

I think you have to sell bikes as well to make that profit. I don’t think I could survive otherwise.

Jamie Bulling of My Ride Invercargill at the southern end of the South Island of New Zealand said:

We came out lockdown about a month and a half ago and all this pent up demand came in at once. It was like pre-Christmas there for a wee while.

It has started to peter off again. Last week was somewhat busy but this week is practically dead. So we’re back to that winter quiet period.

But the upshot of that is it’s only going to be a few weeks until the start of the season where things kick off again. This time last year we were completely dead and had been for a month and a half.

You’ve got either the foolhardy or the dumb left cycling here in winter… Right now it’s six degrees (at 3pm). It got to about eight degrees today, but it didn’t last long. But we’ve got a local cross country series at the start of every month through the winter period and that means that we don’t die off 100%.

I’m going for a ride after work tonight, just as the sun is going down.

We’re not too bad for stock at the moment. I’ve got mates who are sending me photos from overseas of bike shop floors completely empty and suppliers in the USA are telling them, ‘Three more months before I can get you anything entry level.’

We’re still well stocked for most sizes and models. We’ll have to see what the coming months do with the manufacturers having stock.

Our distributors tell us that there’s bikes available. And we’ve been able to order apparel and accessories with out delay.

Our main brands are Scott and Avanti.

Workshop as profit centre?

I 100% believe that. At the end of the day, the bike trade on the retail side is changing so much that shops almost have to adapt to be a really good service centre as well.

The adage is, ‘you can always find it cheaper online.’ That might well be the case, but I’m not going to turn away someone who rolls in with a consumer direct brand that needs to be put together.

I’m going to charge them what my time’s worth and hopefully make a loyal customer out of them.

Greg Stoyles from Mercer Cycles in historic port city of Fremantle, Western Australia said:

Business is good. Obviously stock is the only issue at the moment. That’s hurting when you’re turning customers away.

Ebikes still remain strong for us and repairs are still going strong.

It’s slower but it’s still pretty good.

We need mountain bikes. Any mountain bikes.

“It’s Billy’s birthday, we want to buy him a bike, what have you got?” and it’s literally, “Nothing.” From $500 to $2,000.

Juvenile bikes are ok because a couple of local suppliers had some stock so I did a big bulk buy of about 30 or 40 bikes in early March and we’re just starting to see hole now where we can’t supply stock.

I bought the shop last September. It’s been hard. Like anything, the change in operating style… we’re trying to carry more bikes in stock. And we’ve picked up a couple more brands.

We do Giant, Specialized, Kalkhoff, Gazelle, Focus, Cervelo.

We’re focusing on ebikes because it’s such a growing business.

It’s different. It has it’s good points and bad points. It’s nice to deal with the general public and get to ride my bike to work every day. I still think there’s money to be made if you work hard and do the right thing by customers.

Fremantle has a big hospitality community. We’ve helped workers out who use their bikes for transport but have lost their jobs. We’ve done free services. A guy from the local coffee shop who went through a tyre, he hasn’t been getting much work so we just threw him a new tyre for free.

We’re trying to support the community, because we’ve seen a pick up in repairs and general business.

Workshop as profit centre?

That’s a tough one. Probably not given the overheads. With the rent, the square metreage that the workshop takes up, and then a wage cost for a good qualified mechanic. I don’t think it would be particularly viable.

It would depend upon the per square metre rent cost. If you were saying $500 per square metre and the workshop took up say 20 square metres, it’s a fair amount of rent considering what sales that space could generate.

Jake Southall, of Sydney Electric Bikes with four locations across Sydney, NSW said:

Business has slowed a little bit because of winter. But considering it is the middle of winter, it’s very busy.

We do two main categories, rental bikes for food delivery and sales and they’re both very strong.

Supply is a bit of an issue but because we sell the broadest range for any shop in the country for ebikes, we’re fortunate that when one brand sells out, usually something else is coming in.

So far we haven’t had any major shortages.

Mechanical and service work in the workshop is a little bit quieter, which is pretty normal for this time of year.

But there’s still a lot of interest in ebikes. I just did another story this morning for ABC radio. We had a big video for Better Homes and Gardens that should be going on air in August.

If Covid rears its ugly head in NSW which it looks like it’s about to (again) especially when there’s just been a case confirmed in Star City Casino, which is just around the corner from our Pyrmont store, then we might go back into some form of lockdown.

While that’s terrible for most people in the country, for bike shops it’s pretty much a positive, so I guess we can’t really lose at the moment.

Workshop as profit centre?

That’s interesting. I know that when I first started the business 10 years ago, I ended up being next to a company called Bike Brain, which was run by a lovely guy called Israel.

His model was just a workshop, no bike sales. But I think that after three or four years of doing that, he believed that it just wasn’t a model that could make enough money.

For us it’s always been that the workshop is an integral aspect, in particular for sales. I believe that if people come into the shop and they see a busy workshop, that gives them confidence that not only are you going to sell them a bike, but that you can fix it.

That’s mechanical, but for electrical stuff, that’s even more important.

So it’s important for us, we’re always very busy and we have a lot of staff. You’d hope that as long as you’re charging the right rate, that if you’re busy, that it is making money. But I’m not the kind of operator who studies the figures forensically. So I couldn’t tell you exactly if that was the case. But I’d say you don’t have much of a choice. You can’t really just sell bikes without repairing them.

It adds to the profit, yes, but I think ultimately, my feeling is that the business grows and the profit comes from selling bikes, predominantly.

I know that in Europe there are some studies that another company did years ago and they made me feel like the general consensus was in countries where cycling has is a higher percentage of typical users, then a workshop is really the engine room of a shop and that it’s very important for sales.  

I think for us, if sales do go quiet for a period of time, whether it’s a couple of days or a week over winter, then the workshop does tick over and give you crucial income. But also it justifies having staff there. A lot of our staff do a mixture of sales and mechanical, so if we’re quiet on sales and walk-ins quieten down over winter, there’s always stuff for them to do in the workshop.

When you look at it like that, you’ve got to have a workshop. Certainly for the new stores we’ve opened up (in Engadine and Hornsby) the main asset we find we need in a smaller shop is that the person who is running and managing the store is predominantly a mechanic in addition to being good with sales, because that’s a crucial combination.