How’s Business? – April 2024

Welcome to How’s Business brought to you by our new sponsor, Dirt Works, where right now if you buy an eeSILK stem you can get a free eeSILK seatpost (conditions apply).

In summary, this month’s respondents painted an overall picture of a tough market for bike sales, but repairs still going fairly well, as many consumers opt to keep an existing bike going rather than buy a new one.

For this month’s follow up question I asked, “What level of bike discounting are you seeing now, both from your suppliers, competitors and within your own store compared to last year?”

While there is always variation, most responses were pretty consistent in saying that there’s still a lot of discounting in the market. From their comments it appears that this discounting is more driven by weak consumer demand and a desire by both retailers and wholesalers to prop up sales volumes, more than the need to sell through overstocks.

Aaron Bashford from Tathra Beach and Bike on the far south coast of NSW said:

Business is pretty good. We’ve had a couple of new trail networks open up around us, like, an hour north of us in Narooma and 45 minutes south of us in Eden.

That’s boosted local interest in mountain biking. Keeping more people on their bikes more often. It’s definitely helped our situation.

Servicing for us is always busy, which is great. We’re booked out a couple of weeks in advance.

Sales wise, we’ve been ok. We’re at the tail end of getting rid of excess stock that we had after covid. We received a few too many bikes, so we’ve just got over that hurdle, particularly for low-end stock.

So now we’re back to normal sales. For whatever reason we seem to be… we don’t have the infrastructure to commute to work around here like they have in the cities, but we’re selling a lot of e-bikes, and a lot of commuter e-bikes of late. We’ve just had a month or two of your hard tail e-bike or your step through e-bikes bouncing – we’ve had a bit of a run on those of late. I’m not sure exactly why, but it has been interesting.

Everything else is just sort of normal, if not a bit slow. Dual suspension non e-bike sales are on the slow side… definitely this year they have been, noticeably! I have notice that because I haven’t had to order any stock of them for a fair while! (laughs) But overall, we’re going well I’d say.

We’re actually moving out of surf almost entirely now. This store started as a very small surf store and then (bike) trails started in the area, thanks to a local crew of trail builders. They started building the trails just as a way to ride home without having to go on the roads. It went from there and now there’s 55 k’s of trails right behind us. Directly on the hill behind us is a trail network.

Then the bike sales grew from that and now we’re 99% bike. Next year we intend to stock entirely bike, basically.

There’s a Sportspower in Bega (a larger town than Tathra, 18km inland) but we’re the biggest bicycle dealer in the area. We deal with a lot of customers from Bermagui, Bega, Merimbula, all around.

Our main brands are Specialized, Trek, Santa Cruz and Focus. I went a bit heavy with brands and I’m sort of in a reduction phase. They’re the main ones, but we do a lot of niche high end stuff too. It worked very well for me through covid because I had so many brands I could draw on whatever I could get. But it’s a few too many to represent correctly.

Level of bike discounting now?

Late last year there was really significant discounting from brands that we hold. It’s less now. The spring sales that everyone was doing were wild – Specialized in particular. Everyone had sales on at the end of last year, now the discounting has sort of slowed down.

But I tell you what, it’s made me a lot more cautious of re-stocking when you know there will probably be another sale around the corner. We’ve been really conscious of holding off and only purchasing stock which has been reduced.

That’s been in my mind ever since it went crazy with discounting last year. Because you can screw yourself over by putting more stock on, then two months later there’s drastic sales. I don’t go to town with stock orders and I keep my eyes out for sales.

A lot of our floor stock last year we reduced to cost price, just to be in the zone of some of the sale items. Maybe that’s partly why we’re not selling many dual suspension mountain bikes in particular at the moment – we’re not seeing sales for $3,000 bikes at all.

I’m definitely more zoned in on being a service store, to be honest. Yes, we’re a retailer and we’ve got lots of bikes in the store, but I’m trying to have more of a service focus more and more each year – like that being the core of the business and in the future, retail being a smaller percentage than it is now. We’ll see.

Phil Hopkins, from Kingston Foreshore Cycles on Lake Burley Griffin in Canberra, ACT said:

Business is best described as totally unpredictable! But the general trend is still very quiet. We’ve dropped in sales and increased in servicing, like everybody.

Then suddenly we’ll have a flurry and you’ll think, “Oh, my goodness! Here we go – we’re off again!” I’ll sell bikes, things will go out the door, flat out… then the next week, nothing! (laughs) It’s just completely unpredictable.

Being in the inner south of Canberra, we have a lot of people who are within a commutable distance to work. And commuting conditions here are very good. So late January, into February, with people coming back to work, people starting university, that sort of thing, our sales of commuters and e-assist bikes were extremely healthy. Then once that cohort had their bikes, that was it. It just stopped.

Our workshop is very busy. Clearly lots of people are saying, “How can make what I’ve got keep going?”

A lot of my bike retailer colleagues within five kilometres, especially in the Fyshwick area, are having to extend their workshop wait times from four to six weeks. There’s no doubt that has benefitted us, because we have always had a policy of getting things done at the time.

I will have a lot of people coming to our small shop saying, “Surely I don’t have to wait six weeks to get a new chain put on!” Or something like that.

I say, “Of course you don’t, we have the capability to do things on the spot.” I think a lot of the larger retailers are not favourable to taking walk-ins. “I just need my gears tuned,” that sort of stuff.

That is one of our strengths, but every now and then it comes up to bite us, because we just suddenly are over committed. I’m lucky in that I have a couple of casual staff on call. I can just say, “Can you come in tomorrow?” and they say, “I’m there.” That’s how they want to do it, which works very well for us.

Level of bike discounting now?

I would say 30% to 40% for pre 2024 stock. There are some very good offers out there from wholesalers.

I think that does get leverage, but the climate is such that in a way it doesn’t matter how much you discount, you’re not going to clear that stock. People are that cautious that even if you have a $4,000 bike at 40% off, which is any extraordinary saving, they buyer has already made the decision that they’re not going to purchase.

I’ve had some bikes on my floor, and I’m sure other shops are the same, that having been sitting here for a year and I’ve discounted them 40%. I’m going, “Far out, how good a deal do you want!” And they’re still here.

But there are some bikes I can sell full price. I might do an in-kind of 5% product in-kind. I rarely sell without an incentive. And even though I probably don’t have to do that sometimes, I still do.

Some of my bikepacking models, touring, back-country, like Surly, I don’t need to discount.

Robbie Shepherd from Scotty Browns Bicycle Emporium in Christchurch, New Zealand said:

Business has been really good actually. At the moment we’re pumping because we’ve got a race called Le Race from the centre of Christchurch to Akaroa. We’re the sponsor for that race. At the moment we’re doing a lot of the bike checks and servicing for that. It’s on this weekend.
It’s a road race that has over 1,800 metres of climbing in a 100 k race. (This is more like a Gran Fondo mass participation event with hundreds of entries in each of its previous years. Ed)

Eighteen months ago, we designed and opened our new store. Scotty has been around for 30 years and our old shop got a wee bit too small so we moved into this premise. Since then, we’ve been getting bigger and bigger.

We’ve got more space, it looks really cool, we’re doing really cool clothing and designs and it’s look pretty upwards for us, to be honest. Scotty is spending a lot of time on the website and design. He’s trying to cut back his time on the floor and let us young guys jump into that and help.

Level of bike discounting now?

I’m not sure on percentage, but we’re definitely doing a lot higher discounts. A lot of brands have been hurting. They’re discounting bikes to us, so we can bring the price down.

We’re selling a lot more bikes that are on sale from the supplier, but we’re still making the same percentage margin, essentially. They’re selling through amazing.

Darren McNeill from Treadlies in Kingston, just south of Hobart, Tasmania said:

It’s ok. Workshop is absolutely flat out. Public holidays and all those sorts of things always keeps that side of the business very busy. This time of year is the pick of the weather, which I think is why the workshop is so busy.

But the sales side of it… a mixed bag. Some days are good and other days there’s just not much going on. And that’s across all of my brands. Not just entry level, but high level, mid level, it’s all pretty flat.

Lots of parts and accessories, a bit of clothing, lots of helmets, tyres… everybody is fixing up what they’ve got… putting new drivetrains on, getting suspension serviced. But there’s not new bike sales. It’s very much, “I’ll keep what I’ve got for a bit longer.”

Level of bike discounting now?

Giant has rolling sales at the moment, where they might offer some pretty substantial discounts on bikes. Some of our other brands are doing similar things. But it’s very competitive.

If a customer is coming in with a price that they’ve seen from another store, they know they can get good deals. It’s definitely a buyers’ market. There is a lot of discounting going on.

It feels a lot higher than last year, on the shop floor – I haven’t compared the numbers, but it feels like there’s more discounting still going on.

I think we’re probably cutting into our own margins a bit at the moment. From bikes that we bought when demand was high and now we’re just trying to move stuff on when demand is low.

Dave Walsh from Treadly Bike Shop in the inner city Adelaide suburb of Norwood, SA said:

Business is better this year. We had a fairly quiet winter and an almost non-event for Christmas. But I don’t think we’re alone there, judging from when you speak to other folks in the same game.

January and February picked up appreciably, which was good. March is pretty good – probably similar to last year, whereas January and February were a little bit up on last year.

Cargo bikes did well for us. On the back of folks deciding to take the kids to school this year or a bit of a new year’s resolution to change their lifestyle.

Over the last 12 months we’ve worked with suppliers on getting some good floor stock and test bikes in that category and hopefully there’s a payoff there.

There are some brands we’ve had historically that have always been strong, to some degree, for us and then we took on Tern in the last half of last year, which is a well followed brand.

Then we took on Wombat just at the start of this year. That’s been a good one for us as well.

Level of bike discounting now?

A lot of it came on more towards the end of last year. We saw more discounting from our suppliers, and that’s continued this year. I don’t think it’s too much different.

We certainly get customers coming in and price checking against what other shops and brands are offering.

For some of the harder to move stuff or stock lines that we’re moving away from, we’ve taken on some of the discounting ourselves. So that’s hurt us far more.

Most of our suppliers, if there’s discounts across the market, are offering us wholesale discounts as well, so the margin percentage seems to hold up – maybe it might hurt a little.

Don Taylor from Fully Ampd in the south-eastern suburbs of Melbourne said:

It’s quiet. It has its moments, but there’s just no continuity. You can be absolutely dead then you have a day or two in a row where you think, “Oh! It’s starting to pick up.” Then it’s absolutely dead again.

I haven’t gone down and seen it for myself, but I believe that the Trek shop just a couple of k’s away from here on the corner of Springvale and Dandenong Roads has closed. (I checked Google which said ‘Permanently Closed’ then checked the Trek website which said ‘Moved to Knox’ which is a relatively new existing Trek store, a few kilometres further East. Ed)

And One Big Bike in Dandenong closed last month. They’re gone! (Google confirms ‘Permanently Closed’. This was the original Bicycle Superstore with a giant-sized bicycle sculpture on the roof that’s probably been there for about 40 years. Ed)

That probably gives you a good idea of what it’s like in Melbourne! (laughs) I don’t know about the rest of Australia, but it’s pretty tough here. I think that’s a total of seven now in Melbourne that have closed.

Level of bike discounting now?

I find that a hard question to answer because this year I’m carrying almost an entirely different range of bikes to what I had previously.

But the days of being able to get away with just giving a 5% discount are not here at the moment. You’re generally between 10% and 30% depending upon the product and depending upon how much is out there.

A lot of businesses, if they go down this path of wanting to be the retailer and the wholesaler, make it hard for us.

Because if you buy a bike, say for $599 and you’re selling it normally for $899 and the others who are going direct decide, “We’ve got too many of this bike, we’re going to sell it for $700.” But you’ve paid $599 for yours. They’re still making a margin because they’re the wholesaler as well. You can’t compete with that. So it’s the Specialized’s and Trek’s of the world and Advance Traders who own 99 Bikes, their discounting makes it really hard because they go bigger on their discounts and you haven’t got the margin to do that.

It’s not like they say, “We’re going to give you some money back because now we’re going to discount that bike.” They only way you can compete is if you mark it down yourself and make very little on it.

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