How’s Business? – July 2024

By Phil Latz | 25th July 2024 |

Welcome to How’s Business, brought to you by our sponsor Dirt Works Australia, where right now, you can get Sunringle wheelsets for HALF PRICE.

We’ve been hearing stories of tough times from several different bike industry members, so for this month’s follow up question we asked, “How tough has this winter season been compared to previous winters?”

Mike Edwards, from Broome Cycles in the remote, sub tropical town of Broome in far north west Western Australia said:

Business is good. We hire bikes out through the store and that’s definitely pumping at this time of year.

In way of sales, it’s steady. The workshop is pumping.

Broome is very busy at the moment. It’s the peak of our tourist season and everything is flowing nicely.

We hire about 15 bikes per day. It’s about 50/50 between basic mountain bikes and fat tyre bikes. A lot of the times they ride on the beach and the other bikes are for cruising around town and checking out the hot spots.

The do definitely pick up salt and sand riding on the beach. With the fat tyre bikes we only hire them out for 24 hours. When they come back we have to give them some attention straight away. We’re replacing bearings every six months with the fat tyre bikes.

At the moment we’re selling a lot of kids’ bikes – anywhere from 12 inch to 24 inch. In the adult bikes range we’re selling a lot more mountain bikes, just because the wider tyres we can reinforce because there’s a lot of stuff around that causes punctures. It’s a little bit harder with hybrid bikes with 700 x 35 tyres.

E-bikes are definitely catching up. We’re selling a lot more of them now. Our main brand is TEBCO. We’ve been selling quite a few of them.

It’s very flat in Broome. The only hill is next to the shop here, called Kennedy Hill.

Winter Season?

Steady. Actually, not too bad at all. We haven’t had much rain this year. It’s been nice. It took me a while to find my hoodies. Mornings and night times and nice and chilled – the season we have now is dry season. We call it cold. Getting down to about 17 degrees in the night time – it’s cold for us! During the day it still gets to about 26 or 27 degrees, but it drops down real quick when the sun goes down.

Graham Blackman from Blackman Bicycles in Parramatta and Blacktown in the western suburbs of Sydney said:

Business is very, very quiet… as it is across the board with the whole economic cycle.
Mechanical repairs are pretty good. P&A is down because of the internet effect. People come in and want to look at what product they need. They want to take photos of it and with this new Google software, once they have a photo, they can find out exactly what it is and Google gives them the best price.

So we’re now not allowing photos to be taken in our shop without our permission and a lot of retail stores around the country have been doing that in the past few months. You can see the ad on television where they say, “Take a photo – we can tell you what brand it is, where it is, best price…”

So now if a person comes in and says, “I’d like to come and see what I need for my bike.” Then we ask, “Are you interested in purchasing it?” And if they say, “No, I’m just doing my research,” we say, “Well, when you’re ready, come back and see us.”

I’m not here to provide free research. You can’t go to your GP to find out what medication to take without paying a professional fee. You can’t ask your carpenter to show you how to build your deck.

Complete bicycle sales across the three categories of recreational, children’s and commuting are all down significantly.

The culture in our major cities has changed. Some people no longer appreciate that they get what they pay for. They come in and want to know what size they need and get all the advice. Then they want to buy the cheapest one on the market, even if it comes to them in a box.

Most of them don’t have the mechanical aptitude to assemble a bike, but how do you say this in a way that’s politically correct?

The ethos of society has changed greatly. When I was a young man, out of respect, I would never have gone into a shoe shop to try on some shoes unless I was going there intentionally to buy a pair of shoes. Now it seems ethically alright to go into a shop and say, “I’d like to try some shoes on.” Our standard reply today would be, “Do you wish to buy some sir?”

“Oh no – I just need to know what size I am.” Some are even brazen enough to say, “Oh no – I buy all of my stuff online. I don’t go to shops. You’re too expensive.”

If you say to them, “Well we have work to do and you want to take up our time and not pay us for our expertise.” Then they go away and write these dreadful reviews that are totally not associated with their real experience writing things like, “They’re disgusting, they’re unethical…”

I ask my team, “Have we had and altercations with anyone in the past few days?” “No…”

We have people come into the shop and say, “If you don’t give me the best price, I’m going to give you a bad review.” This is becoming a cultural norm. It’s not across the board. Most people are still honest.

Winter season?

It’s the worst winter season I’ve experienced in 49 years in retailing. You’re probably aware that I closed my Penrith shop down at the end of May.

The environment up there with the number of bike shops, poor market situation, inability to get competent workers. I tried for several months to find good people to work for me, but was unsuccessful. They come in wanting large salaries, but with virtually no experience.

If you’re not educated in an area and we have to educate you then you’re not very productive for the first few months because 60% of the time you’re working alongside another person, learning how to do things.

Many years ago, I wrote the syllabus for TAFE when we were introducing bicycle traineeships. That only ran for three years before the NSW government closed it down. The whole idea was that young employees could go along in the evenings or one day per week to TAFE, but after three years the government shut it down, not through lack of attendance but cutting the budget back.

Michael Slater of Giant Adelaide, located in the city centre of Adelaide, SA said:

It’s starting to pick up again. The service side of things, I can’t jam another bike in here. Workshop really is the backbone through this quiet period. We’re typically booked out a week in advance.

New bikes – coming up in August it will be a year since I bought the business. We’re just over half-way through 2024 and we’re only a few units off matching what Pushys had done in a whole year prior to me buying it.

I think part of that is due to what Giant has done with the new Revolt, the new TCR. Everyone’s been wanting integrated cables from Giant for some time and that has swayed some people to go to other brands. But with the new builds and updates with integrated cables… The punters do a lot more research now and I think the value for money, the quality of the carbon in the bike… it’s really starting to show through.

When I took over, we were already leading into that tougher period that we’re in now. We did have a lot of $2,500 and under on the floor. But now the majority of our stock is $4,500 and up. I think this has slightly insulated us from the pricing war and 99 Bikes for lower end hard tails and commuter bikes.

We still sell lower end bikes. That’s one of the reasons we went into a Giant store. From your toddler’s pre-bike, through your 12 to 16 inch all the way through to the top end, they’ve got everything.

The $2,500 market is still quite solid for us. But it’s not the same as when Pushys owned the shop. They really “racked and stacked” and dumped a lot of those lower end bikes. But there wasn’t as much pricing competition then with 99 Bikes and other brands in that market space.

Foreseeing some of that and thanks to reading the Latz Report and seeing how things are changing and what other stores interstate are doing… like look at Bike Gallery (in Melbourne) at the moment – they’ve just gone to a model where the doors are locked. You’ve got to make an appointment to buy one of their bikes. It seems crazy given the market we’re in, but it’s obviously working and they can see that niche for it.

We’ve looked a stuff like that. Yeah, we’re in Adelaide. Only 1.5 million residents in the whole state.

But being in the centre of the CBD, having Rapha, repositioning the bikes at $4,500 and up, I think it’s helped us. But at the same time, we’ve still got the full offering of the Giant fleet at hand so we can sell off the floor.

Rapha has been awesome. There was a point where we were at least selling one Rapha item every single day. Admittedly in the beginning they were smaller token items and more accessory driven.

Now we might go days without selling a Rapha item but when we do sell it’s more like combinations of jerseys, knicks, rain jackets. More regular bigger purchases. We’d get sales very close to $1,000. People come in and say, “Right, I’m here to buy a new bike. I’ve made the decision that I’m out of my entry level bike. I want electronic gears, I want to go from rim brakes to disc brakes. I want a new helmet, new kit.” They might be $800 and up minimum in their kit purchase, so that’s been really good.

Rapha have been an amazing support to us. We had to wear that Trek has done a global deal with Rapha for all of their Trek concept stores to have Rapha stuff in there. But for us that seems to have helped more than hindered at the moment. Just because they (Bicycle Express which is not a Trek concept store, but the biggest Adelaide Trek dealer and has stocked Rapha) only offer a few lines, whereas we’ve got the complete range. But I’d be lying if I said I wasn’t concerned about it.

It comes down to the people within your business. You can have the best product in the world, but if you don’t have the staff that take the time to care and the dedication to engage with the customer… Products, for all their quality and worldwide advertising, don’t sell themselves. You still need to embrace that product and display it well and when someone askes about it, have that knowledge and passion to give them confidence in the product.

Winter season?

I think this winter has been slightly better in weather terms, but tougher in an economic sense in terms of cost of living.

More of our regular customers that would typically go to Zwift (indoor cycling) in winter or shut down are still out there riding. That flows on to them thinking, “We might get another piece of kit.” Or they get a bit more servicing done or they need another light.

One difference is that we’ve not done one ‘tax return bike’. Go back two years when I started here under Pushys – that 2022 tax return season we probably had eight bike orders before people had even lodged their tax returns and another five or six after.

Last year there was talk of it, but never one across the line. And this year, not even talk of it.

Mocha Ishay from Bicycle Centre Fitzroy, in the inner northern suburbs of Melbourne, Victoria said:

Business is almost ok – very different from what we know. You have to juggle to get bikes, customers, to do a lot online.

There are customers that abuse you. They think everything is negotiable and they ask for more and more discount until you’re almost giving it away and they still ask for more.

There are shops that will do under cost, or something like that. But, I think I’m ok.

Bike Zone is our website. It’s my brand that I created in the past. I sell more online than in the shop. I would say 60% to 70% of my sales are online, and if they’re not online, they come into the shop because I am online.

Fitzroy has changed. Now we have more issues. Homeless people coming in. We had a broken shop window just two months ago and they destroyed everything that was in the window.

They couldn’t steal the stock because it was locked but they broke everything that they could reach. They damaged it with a hammer. They couldn’t reach much… this has never happened to me in 15 years that I’ve been here.

The commuters have gone from here. The fixies do not exist anymore. The gravel is down, who knows why. But road bikes and mountain bikes always go.

Winter season?

It’s very cold today. But I don’t think it’s any different to previous winters, just colder. Our figures are very similar to last winter, maybe even slightly better.

Ross Keeley, from Rev Bikes in Nelson, a regional city in the South Island of New Zealand said:

Overall it’s fairly haphazard. There’s no consistency in terms week in, week out. You have your good weeks and bad weeks or good days and bad days.

We’re still selling bikes, albeit at nowhere near the level before. Customers are definitely shopping around. Even if no other shop but you have the same bike, customers are expecting a discount or a further reduction on the discounted price.

More often than not we say, “No, it’s already discounted. Our margin has already been eroded.” At the end of the day, we need to maintain a business and we cannot afford to keep discounting.

It’s quite a bit of haggle. Very few bikes are going out at the retail price, so as a consequence of that, our margin has been eroded.

Month on month, we’re very similar in terms of bike numbers, to last year, but well down on numbers from two years ago.

Fortunately for our business we don’t carry a lot of debt. It’s quite modest, I imagine, compared to other bike shops. So it’s not as though there’s a gun to our head where we have to sell the bike to get the cash.

We’re 99% electric bikes. We target the 50 years and above demographic. We have a range of hub drive and mid drive. The majority of bikes we sell are hub drive, aimed at people who are looking for leisure, commuting and gentle trails.

We import a range of bikes, but we also source bikes from other New Zealand distributors. We are somewhat unique in that we have both a retail outlet and another facility where we manage test rides.

Ninety plus percent of the sales we make follow a test ride from our other location, because our main shop is right in the city and it’s not really ideal for the cohort that we sell to, with cars and trucks right out on the street. But at our other location they go straight onto a cycle trail.

We have a workshop and storage, office and showroom at our second location.

Winter season?

Relative to last year, it’s probably on a par. But it’s very tough compared to where it was two years ago.

I think what helps us to some extent… and I’m not bosting… but it’s important which demographic you’re targeting. We’re not into children’s bikes. We’re not into high spec mountain bikes. Our mountain bikes are for city/leisure/trail and the majority of bikes we sell are to people over 50. We do sell to young mums and others, but the majority are in that older group.

They’re not necessarily all mortgage free, but they don’t have anywhere near the debt burden that younger families have. So their discretionary income is somewhat up on others.

Matt Birks from The Bike Shop, in Logan, south-east Queensland said:

It’s pretty good. Our workshop is the main part of the shop at the moment. We’re booked solid, generally a week ahead.

July is normally pretty quiet, so the sales floor has dropped off a little bit. But still some customers are steadily coming through the doors.

We are predominantly a mountain bike shop. We’re located just north of the Logan Hyperdome (large shopping centre), half-way between Brisbane and the Gold Coast.

From a location point of view we are pretty lucky in that we’ve got five major trail networks within 15 to 20 kilometres of the shop, the closest being Cornubia, which is only two minutes from here to their main carpark and Daisy Hill is only seven minutes from here to their main carpark. The trail networks were here before the shop.

Our business turned four in March so it’s relatively new. I started in the bike industry in 2004 when I was 13 and I’ve been in the industry ever since. I’ve worked in quite a few different shops.

The shop is owned by Ian and Rebecca Harwood who are also the owners of Event Management Solutions. They run the Brisbane to Bay ride, the Brisbane to Gold Coast ride, they’ve just taken on the Reef to Reef. They also ran Crankworx this year up in Cairns.

The bike shop is basically a product of covid. When all of the restrictions set in, they couldn’t run their events anymore, so they thought, “What could we do next?”

They always wanted to do a bike shop. Within weeks they had 50 or 60 bikes in their old warehouse. They quickly scaled up so had to move to the bigger location where we are now.

We mainly sell mountain bikes, again a by-product of covid where with the road cycling side of things – there was a shortage. With Ian having a background in downhill mountain biking it felt like mountain bikes was the way to go, especially given our location, as well.

We are slowly building the gravel and road side of things, but that’s mainly special order for us. We have full access to Specialized, Cannondale and Trek. In store stock we’ve got Santa Cruz, Juliana, Specialized, Norco and Cannondale and then we’ve got access to quite a few others including Trek, Mondraker, Transition and others.