How’s Business? – June 2022

Welcome to our monthly chat with dealers across Australia and NZ.

COVID continues to be a consistent theme in the day-to-day operations of bike stores, as its impacts enter their next phase and retailers discuss their current challenges and forecasts.

A hangover from the heady, COVID-driven sales highs of the past two years appears to be having vastly different impacts depending on who you talk to. Some talk of substantial over-supplies, with analyses ranging from industry-crippling market saturation to a case of short –term discounting to restore balance.

Other stores are reporting negligible downturn in business, while enjoying improved supply enabling them to catch up with demand.

While COVID remains a hot topic, politics is certainly not. With governments around the world implementing initiatives to encourage active transport and support the cycling industry at an unprecedented scale, and with Australia’s conservative side of politics typically portraying themselves as allies to business, our follow-up question to this month’s selected retailers was whether last month’s Federal election result was likely to have much impact on their business and the nation’s bike industry as a whole.

The manager at Darwin’s Blue Cycles, Kyle Boeyen, said:

Overall, things are all progressing in a really positive way. Just like virtually every bike shop, COVID was mental for us, probably the biggest figures we’ve ever seen through the bike shop. Straight after that it’s declined a little bit but we’ve remained really steady and continued to grow the business. We’re getting more staff and expanding our shop in the next couple of months, doubling our floor size. Even with the all the current hardships around, in term of stock and availability, and all the rest I’m sure you’re hearing very frequently, we’re managing it really well.

We’ve purchased the shop right next to us and we’re knocking down the big dividing wall.

It’s our 10-year anniversary in July and all our hard work is really starting to pay off.

This time last year there were five cycling stores in Darwin and now there’s three. I think all the other shops are just doing what they’ve done for the last 20 years, whereas we’re really pushing the limits. If we can’t source stuff through Australia, we’re the doorstep to Asia, so why not source things internationally, which we’ve started doing for bikes, P&A, everything.

Up here, we’re just about to enter our dry season – much cooler air and a much better time to go riding, so our workshop is just pumping at the moment. We just can’t get enough staff at the moment to keep up with demand.

Like all shops, we’re having the same issues with stock supplies but I think that’s something we’ve managed really well. Other stores here are going months without bikes on the floor but we’ve never hit that point during COVID. Right now, we’re sitting on two warehouses full and three 40-foot containers full of bikes. We’re sitting on hundreds of bikes at the moment.

Our main brands are Specialized – which is going really well – Focus and Cervelo. We do a lot of Avanti products as well and Sunpeed bikes, which we’re sourcing internationally.

Is the Federal election result likely to bring much change for your business and the Australian bike industry?

I’m sure it will. Personally, I don’t follow politics too much.

Chris Riley, who has owned Ken Self Cycles in central Hobart for 20 years, said:

It’s steady as it goes really. We’ve had a really cold, wet start to winter, which has slowed the foot traffic into the store. But on the whole, things are okay. There still seems to be plenty of repairs.

It’s going to be a pre-COVID winter, getting back to some normality. We had some very busy winters through COVID. If you thought things were going to remain that way, you weren’t thinking realistically. But if you planned for it, you got on pretty well.

Supply is getting better in some areas. It’s still hard to get road bikes but mountain bikes and dual suspension we’re starting to see stock coming through and fulfilling back orders for people.

Trek is our main brand and we’ve been able to work with a backorder system with them to secure bikes. People have been prepared to wait to get a bike.

We’ve been lucky. We do everything – road, mountain bike, kids – and there’s always been something of interest to someone. We’ve rolled with it. Last winter we had a lot of spare floor space and we were filling it up as best we could.

This year we certainly don’t have any spare floor space. We’ve got a full shop and some bikes in boxes and more bikes on the way with Trek. Plus we’ve taken on a couple of other brands, Apollo and Orbea, and we’ve always done Bianchi. There’s stock floating around we can get from them, so on the whole we can’t complain.

During COVID, Tasmanians were sort of locked in and other people were locked out. We had our own little community in Tassie, with people being very supportive over a couple of years.

On the whole, things are pretty good.

Is the Federal election result likely to bring much change for your business and the Australian bike industry?

I think people feel positive in general about the election result, there will be a positive flow-on effect. If there’s any negativity, that will affect business.

Robert Thompson, owner of Bicycles Plus in Campbelltown on the south-western outskirts of Sydney, said:

It’s all gloom and doom here. COVID gave us all the best two years the bike industry has ever seen and now it’s about to give us the worst two. The market has been flooded with brought-forward sales because of COVID, meaning birthdays, mother’s days, father’s days and Christmases will come and go without the need for a bicycle. Combine that with the glut of barely-ridden second hand bikes flooding the market and the outlook is very grim indeed for the foreseeable future. At the current sell rate, we’re sitting on up to five years’ worth of stock in many categories. There’s certainly carnage ahead for retailers and wholesalers alike.

Bike stores were run off their feet for six to nine months, with people lined up outside stores. They used the analogy that bikes were the new toilet paper and they very much were, as people just wanted to get out and exercise. People saw bikes as a ticket to leave the house. Maybe 10% of those people were converts to continue cycling but the majority of them would have gone out, got a sore bum and thought bugger this. They didn’t tell me this in the instruction manual.

I 100% percent predicted it within the first couple of months of COVID. I was very sensible with the windfalls that came from that period. I bought a commercial, bulky goods premises as a storage unit and filled it with stock, which is still full. I’ve got a shop bursting at the seams with stock and a newly bought premise bursting at the seams. I know I’m not alone because I speak to many others and the vast number have bought the vast majority of retailers I know of are in a similar position.

I’ve been here for 17 years, and I’ve just had my worst May in all that time.

I’m located in Cambelltown, in Sydney’s Macarthur region. For the first time in 50 years, I’m the only bike store in Campbelltown. About three weeks ago, the only other remaining store in the area upped stumps. Right through COVID there was only two of us.

At any time during the past 50 years, there has generally been anywhere between three and five stores in this area. All the smaller ones have all disappeared.

Our population in this area has boomed but and the shops have still disappeared. Online sales have obviously had a significant impact.

Due to the downturn and being the only shop in the area, we’ve shortened our hours to 10am-4pm seven days, as opposed to what was 9-5.30 and 9-7.

Is the Federal election result likely to bring much change for your business and the Australian bike industry?

Regardless of the outcome of the election, I see an ongoing decline in the economy for many years to come.

The Bike Place is located in Baldivis, a semi-rural residential suburb 46km south of Perth. It’s co-owner Callum Henderson said:

We have a lot of stock to move and we’ve been utilising our sales to drive volume at low margin. The market has turned back towards the discounting it was three years ago. With the election, with the war and the price of fuel, it’s definitely slowed business. Late May was okay, so hopefully it continues to come back a bit.

With COVID, we’re lagging a few months over here, with the virus coming in later than over east. By September hopefully it’ll back to the old normal. Most of us will have dumped our excess stock by the end of June, so hopefully the sales mentality ends with this financial year and we can get back to just trying to survive.

We’re are growing online, that’s the biggest thing. We’ve been doing that for just over a year now. It’s basically a way to clear excess stock. We don’t sell anything on line that makes much margin on but it’s a medium for us to move stuff. We’ve had a click and collect location but we’re retiring that soon.

Our main brands are Trek, Cannondale, GT, Mongoose, Jamis, and all the Advance Traders brands, so Merida, Norco and BMC.

Trek, we love. It’s definitely a premium brand for us. We’ve had supplies issues with some brands and we’ve oversupplied with some of the others.

What we’ve noticed, there’s really a shift in what consumers are expecting. We go pretty hard with events and our culture around cycling and a lot of shops have definitely upped their game, which is a bonus for the end consumer.

There’s a lot of offers out there and the buzz is lifting and lifting – you just have to keep above it.

Gravel is continuing to grow but it’s a strange category. We like to call ourselves the home of gravel but it’s hard to sell gravel bikes for a full margin. It’s one of those things everyone wants to ride but no one wants to commit to – it’s another expense when they’ve already got a road bike. But once more people get on them, I think they will become an ‘everything bike’ for a lot of people and they’ll just have two sets of wheels.

Is the Federal election result likely to bring much change for your business and the Australian bike industry?

We already have the Labor government over here, so not much will change.

Hub Cycles is a family-owned business established in Christchurch, NZ 16 years ago. Manager Peter Williams said:

It’s winter now so things are beginning to slow down. But for early June, we’re still trading quite well. Summer was mad – very, very busy. A lot of that comes down to the rise in e-bikes – which seems to be an ever-growing market – and restrictions on international travel. There seems to be more money to burn in pockets. Money not spent on holidays is going into recreational stuff, like bikes.

There’s still an element of COVID boom but it’s certainly beginning to return to normal. It’s still very different at this stage. Sales of standard bikes would be similar to three or so years ago, but e-bikes are still very elevated proportionately. Value wise, it’s now a 50-50 split.

High-end electric stuff is where it’s really starting to noticeably move. There’s also a lot of P&A related to that, in the way of panier bags, racks, all that type of stuff.

Our e-bike sales are a good mix of urban, mountain and commuter, with some general recreation bikes. We’re seeing more and more interest in cargo-style bikes. It’s still a relatively small part of it but it’s definitely growing.

We do a reasonable range of bikes – Trek, Giant, Focus, a bit of Norco and Merida. On the road side of things, there’s some BMC among all of that.

The workshop is constantly busy and that’s pretty much year round.

Complete normal will probably be about two years away, by the time supply catches up. Probably this time next year, it won’t be too, too far wrong.

Mark Turvey, who owns Strathpine Bicycle Centre and Redcliffe Cycles in northern Brisbane, said:

I feel really positive about everything. I have two stores and business continues to show good potential. There has been a downturn during the past four to six weeks. There’s just a slight readjust to occur and stores will have to work a bit harder for their businesses.

Potentially maybe the next 18 months will be a little challenging because there might be a medium amount of saturation with supply of bikes to consumers.

I bit off an awful lot and I’m chewing hard at the moment to force it all through but in six weeks’ time, we’ll be nice and buoyant again. Decent-sized retailers had to buy up larger than normal amounts because there was that fear of not being able to access product in six months’ time, so they tried to protect themselves but now have to burn through that stock.

But with our stores, I’ve never felt so good about how things are travelling.

This is traditionally a quiet time of year for bike shops and where we’re at is where we used to be three years ago, after being spoilt for two and a half years.

For guys getting into the trade, I think business is guaranteed for the next 10 to 15 years, just with servicing and selling bits and pieces. Still bike shops have to market themselves. For the amount of people you see out riding on the roads and on the trails, bike stores shouldn’t be closing down at the rate they are.

The Strathpine store was my brother’s and was allowed to run down a bit as he neared retirement. We’ve done a lot of work to build it up again. It’s a funny little area without a lot of new housing and there’s not many little cafés. There’s a big university hopefully still going ahead not that far away from the store. That may bring in business as overseas students are looking for a bike.

We have some bush tracks and that used to be the demographic but now you have to sell everything or you go broke.

Redcliff is going fantastically. If the locals don’t have to leave the peninsula, they’re happy. It’s flat so all the group rides on a weekend buzz through there so their Strava looks great. There are fantastic coffee shops. It’s a bit of retiree area, so there’s money. The council has been super proactive and the bike paths are wonderful on the foreshore.

We’re in the top 10% of Giant dealers up here, so we have some good rare bikes that people are looking for. I don’t think we will go through a slump as such, this is just what it would normally be this time of year.

Road bikes have been an unreal market, although it’s pretty well stopped at the moment. The road market is just extremely price competitive, or sensitive. Down south, groups are very much aligned with stores, whereas up here it doesn’t feel the same. Sales have pulled back quickly but for two and half years, it’s been unreal.

Is the Federal election result likely to bring much change for your business and the Australian bike industry?

The change of government is a sideline issue for our industry but I don’t see it as anything significant.

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