How’s Business – February 2023

Welcome to our monthly round up across Australia and New Zealand, where we talk to independent bicycle dealers to ask them “How’s Business?”.

The entire global bike supply chain has gone from famine to feast in most, but not all, bike categories, with manufacturers, wholesalers and retailers all struggling with high inventory levels. With that in mind, this month’s follow up question was: “Are you currently trying to reduce your stock levels? If so, how is that going for you?”

I would like to add a couple of comments that apply not just to this month’s How’s Business column but to all future ones and past ones that I’ve been doing for decades now in the Latz Report and in Bicycling Trade magazine prior to that.

Sometimes readers complain to me that the How’s Business respondents are painting an overly optimistic picture about whatever the situation is at that moment in time. In response, I usually make three points.

Firstly, there is some self-selection that goes on. Sometimes if I call a store owner who’s been doing it particularly tough, they’ll decline to be interviewed for How’s Business. This is not common, but happens occasionally and there was one case this month. There are some notable exceptions and I’m very happy when a dealer has the courage to speak frankly about their challenges.

Secondly, apart from deleting some ‘ums’ and ‘ers’ and other minor grammatical tidying, which dealers often ask me to do, I write as accurately as possible whatever each dealer says. I’m careful not to ask any leading questions and read out the follow-up question verbatim as it appears in the article so that everyone is answering exactly the same question. What you’re reading is exactly what they’re saying.

Finally, although I always select a mix of both city and country stores and a mix of dealerships and store types, from an academic point of view, a survey with only six respondents is not a statistically valid sample, so it’s not a good idea to draw strong conclusions about how the whole dealer network is going on the basis of one How’s Business article.

Kate McBain from Giant Hobart (previously McBain Cycles) in Tasmania said:

We’re going okay. Obviously there has been a drop in trade. I think that was expected after the past few years of massive increases. So perhaps you would describe it as a correction more than anything going bad, so to speak.

We must be heading into four years as Giant Hobart since we changed from McBains. We had been focusing on Giant as our main brand for quite a few years before becoming the Giant flagship Hobart store. Any other brands were far secondary, so we just did that little extra push – leap across.

Giant is a brand that McBain Cycles has been dealing with since the 1970s. I think we were the first bike shop to put Giant in store in Australia, so we have a long history with them.

We’ve been quite lucky really. I think the spread over all bike categories is fairly equal.

E-bikes are still growing. We anticipated that. Within e-bikes, probably e-mountain is strongest for us, although the spread is pretty good. Hobart is pretty hilly.

I’ve noticed there’s a little less interest in non ‘e’ dual suspension MTB, but still ticking over.

Road bikes are ticking over nicely. There was a bit of a drop over Christmas in that family market, but after the explosion of how many people bought those bikes during Covid, it’s not altogether surprising that would dip down from those numbers.

I think everything that’s happening is quite explainable and expected.

Trying to reduce stock?

We started reducing our stock levels some months ago. It certainly wasn’t something we’ve only just decided to do.

I think most stores found themselves overstocked at some point in time, because you were just so unsure whether you would get stock so you probably bought more than you would have under normal circumstances.

But quite a few months ago we started to pull back on reordering massive numbers and were just moving stock out. It’s been working quite well. We’re fine. We’re happy with our stock levels at this time.

Brad Steigenberger from Bendigo Bicycle Centre, in central Victoria said:

It’s pretty good actually. It’s still pretty strong. It has slowed a little bit but it’s still better than pre-Covid. I’ve been hearing that it’s quiet, and we’ve noticed a downturn, for sure, but we haven’t gone back to pre-Covid levels. We’re still tracking better than what we were then.

We’re in the country, so we chip away at everything. Probably our commuter category would be down. But our e-bike category and gravel, road and mountain are pretty strong.

Merida and Norco are our main brands.

Trying to reduce stock?

We’ve certainly got plenty of stock and we are trying to reduce it, definitely we are. We’ve got more than enough on the shop floor at the moment. But we can’t afford to reduce it by too many because we’re starting to have certain stock problems again. In some brands, we can’t get some stuff.

We’re certainly not reducing by having specials. We’re not in the market for specials really – it’s just not a good business model that one! Margins aren’t what they used to be.

We just base it all on our customer service.

Simone Annis from Switched on Cycles in Canberra, ACT said:

Business is okay – that’s what I’d say. We’re busy on the repair, workshop front. We’ve always got people ringing up asking us to fix their cruddy electric bikes that they’ve bought elsewhere. Where we think we can, we fix them. Obviously, there are a lot of bikes out there which aren’t great and where our parts are just not compatible.

But if we’ve got compatible parts, we’ll vet people and see what we can fix reasonably easily and what we can’t.

If they’re our bikes, we’ll fix them no problems at all.

We only sell the one brand which is the brand that we get made for us – our Switched On Cycles bikes. That’s what we’ve done all along.

We’re a small business and we concentrate on the local area. We’ve been doing that since 2008. We’ve always been e-bikes. TEBCO started before us but we’d be close to the first.

But in honesty, it’s getting harder. At first, we were responding to there being very little electric bikes being sold in Australia. Whereas now everyone sells electric bikes!

We always thought that day would come.

It’s been harder for us since the pandemic because we used to go to China to get our bikes made. But I haven’t been able to go to China since the pandemic. And we wouldn’t bring in a bike that we haven’t actually worked on or looked at ourselves – made changes to…

We wouldn’t bring in any new frames without having gone and looked.

Trying to reduce stock?

At the moment we’ve got plenty of our low step-through bikes and they just keep selling. We’ve had a lot of success selling commuter bikes generally and we don’t have as many of those, and a little bit of reluctance to get more at this stage. I would like to upgrade them and get something a bit newer or do something a little bit different. But we can’t really do that without going to China.

What we have done – with the pandemic we had to pivot a little bit – so we helped establish the Canberra Electric Bike Library. We were one of the finalists in the We Ride Australia Cycling Luminary Awards.

We’ve always been about getting people on bikes – all kinds of people, encouraging them to ride. We felt one of the best ways of doing that was to help make sure the bike library was successful and sharing our knowledge so that they had a very fast start-up.

We’ve run trials for people and a lot of information just to make it much faster for them to get up and running and to get electric cargo bikes more in people’s minds in Canberra.

The library has done over 500 loans. It’s got a three-month waiting list for a lot of the bikes. It’s got a fleet of about 20 bikes. It’s going pretty well!

Max Nielsen from Bicycles Mt Barker in the hills south-east of Adelaide SA said:

Not too bad. A bit of a slow Christmas compared to the past few years. By the sounds of it, overall everyone is a bit down but it seems to be levelling off a bit at the moment, which is nice.

At the moment, gravel is fairly popular, but the bulk of it is still your bread and butter stuff. Your entry to mid-level hard tails, your kids’ bikes. Being up in the hills, we don’t sell too many cruisers but I assume that would be something that’s popular at the moment.

For us it’s pretty much entry-level mountain bikes plus gravel bikes that have been the big ones.

We haven’t really advertised too much for any back to school but we’ve been helping out families trying to get their kids on new bikes. There’s been plenty of it but we haven’t formally advertised.

We took over the shop (previously owned by John Bishop) in September 2021. Initially it was pretty much what we were expecting. We still had a bit of a boom. But everything dropped, it was probably a little bit less (than expected), but still enough. It’s not anywhere near danger levels.

I suppose it’s around about meeting expectations.

Trying to reduce stock?

We’re not trying to reduce. We’re just trying to sustain at the moment. One of the mistakes we might have made last year was having too much stock after Christmas. If we’re in the same position, we definitely would be (overstocked) but this year we were on it, and we’ve got stock levels to a good point.

Martin Vermonden from Pedal Project in Wellington, NZ said:

Business has been good. We notice that it’s a lot of e-bikes now and gravel bikes are definitely selling. We definitely notice that it’s not as booming as during Covid and when the economic situation was a little better.

It’s noticeable that people don’t just come in and say, ‘Hey, I’ve made a lot of money on the stock market or in crypto, I’m coming here to buy a 10 grand bike!’

But it’s still slow and steady, especially with the higher-end bikes.

For us, the lower end has definitely slowed down. We focus more on high-end bikes and that definitely helps us. Most bikes we sell are above NZ$5,000 (A$4,550). Some of the gravel bikes are in the NZ$3,000 price range (A$2,730). Anything around NZ$2,000 (A$1,820) is not really selling at the moment.

Trek and Focus would be our two main brands. We also do Norco, which had a few stock issues, but that seems to be coming right now. We do a bit of Ridley. Cervélo is definitely a big brand for our high-end road bike sales. Lately we’ve been been building up a couple of Pinarellos again as well.

Our workshop is going steady. We are happy that overseas people are able to come here again. We just hired a new Dutch mechanic, so there’s going to be two Dutchies in our shop. (laughs).

It was really a struggle finding good mechanics and hopefully that’s going to slowly disappear again.

Trying to reduce stock?

Yes. We are definitely … first up, we’re just happy that our wholesalers have stock again, so you don’t need to have every size in stock. Our plan going forward is to have a select range, then if something needs a different build kit or a specific model, we can at least fit the customer with something we have on the floor, then order their bike from the wholesaler’s stock. That’s something we want to go towards.

It means we’re not pre-ordering a full size range in a certain model. That’s the main thing we’re trying to work on.

At the moment, our store is pretty full of bikes, so we’ve halted most of our pre-orders. But we’re still having to pre-order into the future some high-end bikes like Cervélos and things like that.

Dave Richardson from Giant Penrith (previously Panther Cycles), west of Sydney NSW said:

I suppose we’re coming out the other side of both a challenging and successful period.

Over last Christmas it was getting back to a normal Christmas. We had to work hard on our salesforce. We’re really making sure that we’re getting good sales but also that we’re restocking with quality stock – having products that we want to sell and not just filling up to have things in your store.

An element of caution – we’ve been in this now for over 30 years, steadying the ship after the period that we’ve had. We’re really working on making sure we’re looking after our staff, to make sure they’re ready for the next phase of trade and the next challenges.

You have to look back (at pre-Covid figures). You can’t go by what’s gone through Covid. We can learn from it. But we can’t look at those last two years of figures as far as where we’re going.

Looking back at pre-Covid, we’re in a strong position. We’re up on pre-Covid.

Our mid to high-end e-mountain bike market has been very strong. In your recreational low-end market, that market is flooded at the moment so there’s plenty of choice for everybody and the margins have decreased.

Trying to reduce stock?

Yes we are. We’re being selective in the categories in which we want to reduce our stock levels. For example, in our workshop, our spare parts section is very important to us, so we want to make sure we carry good levels of stock for our workshop. I think our workshop really drives our business.

Our soft goods and P&A, that’s probably where we’re being more selective about what we’re re-stocking and putting back in.

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