How’s Business? – March 2023

Welcome to our monthly chat with bicycle store owners and managers across Australia and New Zealand.

We’ve been hearing reports of very large discounts being initiated nationwide by multiple bike brands as the industry faces a perfect storm of over-stock, demand returning to pre-Covid levels and consumers struggling from increased cost of living pressures.

So this month our follow-up question was, “How do you think the current level of discounting compares to this time of year in pre-Covid years?”

Tim Hunter from Hunter Cycles in the town of Kerikeri, the northernmost bicycle shop in New Zealand said:

At the moment, business is good. For the past three weeks, the weather has been good, which has brought a lot of people out cycling. Prior to that the weather has been pretty bad. We’ve had the wettest winter and summer on record up here. It has been incredibly wet. Then we’ve had an overall slight downturn in cycle sales, so it has been an interesting one.

There’s only about 10,000 people in Kerikeri but we serve up to 100,000 in the district. This week is our 15th year in business. I started off with Giant. Then Specialized came along and that seemed to work quite well together. Then I had an old colleague come along from Australia. He came back to New Zealand and he worked for Trek – Kerry Bartel. He actually worked in Clarence Street Cyclery. He asked if we could squeeze Trek in as well.

It’s because we’re in the middle of nowhere. Until a couple of months ago, there was no-one in Whangarei, the next biggest city who sold Trek; so we had no real competition.

There’s no other bicycle shop within 80 kilometres of us. The closest is in Whangarei. We’re the furthest north bicycle shop in New Zealand. Bay of Islands (a popular tourist destination near Hunter Cycles) is amazing. We do a huge amount of repairs on tourist bikes. We cater a lot to the bikepacking community.

Discounting now compared to pre-Covid years?

“Discounting at the moment, it’s horrific … what it does do in the long run is it really does devalue the product.”

It’s a very good question. It’s the same if not a tad worse, because the wholesalers here have just got so much stock.

Evo Cycles, Torpedo 7 (two of the biggest retail chains), they’re completely overstocked and they’re obviously trying to get some capital back. They’re discounting bikes that they’ll only make $50 on a $1,000 bike. They’ll reduce it to $599. They’re probably not even making the build; just get their money back on the stock. That really affects us small guys because we rely on every single sale. It’s important to us.

But the discounting at the moment, it’s horrific, led by those bigger boys. I know they’ve got to make a business and turn over their stock just like everyone else, but what it does do in the long run is it really does devalue the product.

These bike brands put out a good product, only for these guys to turn around and discount them the way they do – they’re devaluing their product – not giving it worth. I think it’s important to give that product worth – (it should be) RRP and chuck in a free service… it’s tough yards at the moment.

It’s hard to say how long this will go for. Are people still getting into cycling post Covid? We think so. We sell more electric bikes now than normal bikes. But it could be some time. It could be a couple of years.

Charly McMillan from Comet Cycles in the Riverina regional city of Albury, NSW said:

Business is pretty solid, to be honest, for us. We’ve been going pretty well. The best we have for three or four years, which I think surprises a lot of people, considering the times we’re in.

There are factors to that, but I think a lot of it is just that we’ve improved our own internal workings and having better staff members as well.

One store in town has temporarily closed (The Full Cycle, a large, long-established store just around the corner from Comet Cycles). We’ve been getting business from them, which has helped us. But our way of running the store has been beneficial to a lot of people in the community. Everything is nice and simple and I think people like the way we do things.

We started up just before Covid, so we had all that time to figure out what was standard and what was not standard. We’re starting to figure out now what is normal and what isn’t normal.

After Covid, we expected a bit of a drop, which it has been. We’re not doing Covid numbers, which were just easy sales and big transactions. But our workshop has picked up and we’re still doing really good sales on a lot of the bikes as well. It’s not as bad, not as drastic, as we expected it to be after Covid.

For 2023, we’ve pretty much gone back to Trek only. Before, we worked alongside the other brands, but for a smaller-sized store we found it too hard to stock everything. Trek in this region is strong and we just want to return the favour, pretty much.

For us they’re a very easy brand to deal with and work with. It’s an easier relationship behind the scenes, working with Trek, than with some other brands out there.

Discounting now compared to pre-Covid years?

I’ve worked in bike shops for 10 years. We’re more sceptical about discounting now. I think a lot of shops that do get that… a lot of those big discount retailers, from what I understand, are struggling. But I do also know that there’s some excessive stock in the market regarding bikes after Covid.

You didn’t have discounting during Covid but it is returning. But we’re not seeing it as it used to be (pre-Covid) where you’d have every second customer asking for something off the bike.

Covid helped with a realisation that things are worth what they’re worth, to an extent.

Jason Larsson from Giant Ipswich and Giant Indooroopilly in Brisbane, Qld said:

It’s tougher than Covid days! (laughs) We’ve had a bit of a lull.

I’ve got two shops, Giant Indooroopilly and the new shop is Giant Ipswich. Giant Indooroopilly has started to pick up again and is going okay. The workshop there is consistent.

My new shop, Giant Ipswich, is still getting off the ground and fairly quiet. We’re breaking into a new market.

There’s a few more competitors there and we have to do a few discounts to be more competitive.

At Indooroopilly I’m next to a 99 Bikes shop and they’ve got a sale every week at the moment, so we’re having to do a bit of price matching – but still able to pump a few good bikes out the door.

The old Giant Ipswich shop was shut down for a couple of years. I opened a new one in December 2022.

We only sell Giant. I’m a concept Giant store for both.

Our workshop is fairly good. I’m actually sending some extra jobs out to my Ipswich store from Indooroopilly to boost it. Obviously, I’m paying people to be out there and it’s quiet, so to get some more out of that shop.

(Indooroopilly is about five kilometres southwest of the Brisbane CBD and Ipswich is about 30km further out in the same direction.)

Indooroopilly is still going strong in the workshop. Once again, not quite at Covid levels. During Covid we were booked out weeks in advance at one point and I had people at home building bikes. I think we were all a bit like that.

But the workshop is solid. It’s keeping a couple of mechanics going all the time and I can send some jobs out to the other shop to keep the wait times down for customers and keep someone gainfully employed.

Discounting now compared to pre-Covid years?

I think there’s no easy answer. There’s areas where we’ve all got a lot of stock – your kid’s market, cheap mountain bikes, even dual-suspension mountain bikes to a degree, where the discounting is probably more.

But the road scene, there’s not a huge amount of stuff around still. We do have some good road bikes and I’m not having to discount the road stock as much.

E-Bikes are not too bad. Giant are running a campaign at the moment of up to 50% off the Momentum brand, so obviously trying to move some Momentum stock on, which is their entry level e-bikes.

But your high-end dual-suspension e-mountain bikes for example, not so much. There are okay stock levels but it’s not flooded. No more than 10% discount for these.

Dennis Lightfoot from Glen Parker Cycles in the affluent Perth suburb of Nedlands, WA said:

Business has been good, very good actually. No complaints. We’re selling all sorts from kids’ bikes to high-end race bikes and lots of accessories.

The only bit that’s not pulling its weight … dual-suspension electric MTBs have gone right off, and some of the higher-end electric commuter bikes.

We do everything and we always have, but what makes us different is that you can walk into here and buy a $200 kids’ bike or you can buy a $25,000 Pinarello. I’ve still got more road racing bikes on the floor than any other bike shop in Perth, I’m pretty sure.

We’ve evolved in the fact that we’ve got more stock of everything. We’ve got, I don’t know, 25 pairs of carbon wheels hanging up, pretty much all of the tyre brands you can buy – I think we’re a one-stop shop. And we try to keep our prices as reasonable as we can.

For us it’s all about having choices. We’re lucky that we’re not stuck with one brand. We do Pinarello, Cervélo, Willier, Enve, DeRosa and we dabble with Merida. It’s all nice stuff in the racing bikes. We get people coming in here just to have a look at the nice new stuff.

It’s still the same. You still walk in here and smack your head on a $5,000 pair of wheels or a $6,000 frame! (laughs) I’m in the showroom now. We’re full but we’re ‘good full’. I haven’t got loads of bikes out the back or anything like that.

I bought Hilton (McMurdo, former business partner) out two years ago. We seem to be okay.

I know a lot of shops have been stuck with too much stock, or not been able to get certain stock, but we just diversified over Covid. I never thought I’d be selling $10,000 dual-suspension e-mountain bikes! (laughs) But I was selling quite a few of them when you couldn’t get anything else.

Discounting now compared to pre-Covid years?

For this time of year, it’s always been bad, but there’s bargains to be had … like crazy bargains. It had to come. We’ve not been able to get a decent deal on a bike for a couple of year.

I’ve never seen … some of the prices on offer now. I’ve never seen that before, not in 32 years. I’ve never seen some of the discounts that are being offered.

High-end road bikes – nothing, because they’re hard to get hold of. But mid-range stuff and the electric bikes … I’m glad we just didn’t get stock heavy. I didn’t panic too much. As long as you’re not too loaded up with stock, it’s a fantastic time to own a bike shop! (laughs)

I mean, the customers are winning. And the wholesalers, for those who could get stock, they’ve had a pretty good bloody run for a few years. You know, some of them deserve what they’re getting now as well – not all of them. Some of the companies put prices up when they knew they could – I’ve got a good memory for that sort of stuff. (laughs)

Byron Wallis from Roll Cycles in the city centre of Hobart, Tasmania said:

It’s up and down. Certainly, we’ve seen a bit of a drop over the past few months – well, probably the past six months really. But we’re still getting a few bikes out, it’s just a bit more unpredictable than what it was last year and the year before.

We’ve got a lot of stock. From my understanding, a lot of stores have a lot of stock at the moment. That chaos associated with trying to get bikes isn’t there as much, as it was the past couple of years, but it’s still going strong. A lot of people are out riding.

We’re kind of lucky down here because we have the two (MTB) Enduro World Series events on consecutive weekends, so that’s moving things along a lot. We’re getting teams coming in to purchase spare parts. They’re obviously not buying bikes but they’re buying a lot of parts and getting a bit of work done, where we can help.

Maydena (near Hobart) is on 25th and 26th March and up in Derby is 1st and 2nd April, so back-to-back weekends of huge events. We also have a Launceston store, so we get to participate in both rounds.

Discounting now compared to pre-Covid years?

There’s definitely a lot more. Not only are stores holding onto a lot of stock, but suppliers are as well, so a lot of the discounts are coming from the suppliers. They’re reducing their recommended retail prices on certain models and they also have sale prices on bikes for a limited time.

But as far as in-store discounting, we don’t discount on top of a sale price or anything like that.

Specialized are definitely more active in that space than some of the smaller brands that we have.

We also stock Kona in Launceston and Rocky Mountain in Hobart. There’s other dealer agreements so we can’t get Kona down here and vice versa.

At the moment, Specialized have Levos (high-end e-MTBs) on sale at a substantial reduction in price, but you also get a free 700 watt-hour battery as well. Not only is the price awesome on the bike, but you get the battery which is another $1,800 (rrp) on top for free.

So they’re pushing that as a way to get Levos moving and obviously the battery stock. The past six months have flipped that switch. (between under supply of Levos and over supply)

Purely because we’ve got a lot of stock, we still have some sitting on the floor, but we are seeing an increased sell-through since the special started. There’s obviously a bit of nervousness out there because of the cost of living, interest rates and things like that. That’s affecting things a little bit. We’ve seen a slowdown, partly because of that, but partly because all of the manufacturers have now got stock, so there’s a lot more competition out there to get the sale.

Gary Neiwand from Beasley Cycles in the inner-west Melbourne suburb of Footscray, Victoria said:

It’s not the same as every other summer, but repairs are keeping us afloat.

Stock levels for bikes are increasing (supply from wholesalers), which is good and looking positive for the future, along with the repairs.

Discounting now compared to pre-Covid years?

I think everyone’s desperate for a sale and discounts are pretty much the new norm in the way we’re progressing at the moment. Prices are tumbling at the moment. You’ve got to discount to stay in the game.

We follow suit with what Specialized put out there (in terms of supplier-initiated specials) and then we treat each individual sale … you know, it’s all individual as to what we can do to help customers.

Specialized is still our number one brand but we also stock Scott. We’ve got Avanti and some XDS, so we’ve got a variety of brands. When we first started off with Specialized for the contract period, we were happy to stay with the one brand. We’ve also had other brands for five, six, seven years now.

It’s not easy but we’re still functioning and everything’s good for the time being.

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