How’s Business – May 2023

Welcome to our monthly conversation with bicycle shop owners across Australia and New Zealand.

In last month’s How’s Business column, Leighton Thomas from Geraldton Bikes commented that he was spending a lot of time on warranty claims on new bikes that had various faults. He suggested that we ask other dealers if they were also having the same experience.

So for this month our follow up question was, “Have you noticed any change in the number of new bikes you receive that need warranty claims?”

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Michael Kamahl from Woolys Wheels of Oxford Street, in the inner eastern Sydney suburb of Paddington, said:

We had a surprisingly good March, which was like, “Oh, that’s the first month that has actually turned around.”

April, without looking at the exact figures, was about 20% behind last April. I think we’re heading back to pre-Covid figures. I don’t think any worse. March was surprising because we were slightly ahead of March 2022, which was like, “Oh really! How did we do that?”

I think with high interest rates, people are feeling pretty flat. I remember way back to the ‘recession we had to have’ (then treasurer Paul Keating’s comment in 1990), we were the first to be hit because we were the ‘luxury’ market. They didn’t give up the second car to buy a bike instead, they just stopped buying bikes.

This time it feels a little better, not so depressing. But I’ve got a lot of stock. Everybody’s got a lot of stock. A couple of months ago, more so, but we’ve been chipping away at it. I’m resisting giving big discounts because I can see from the language of other retailers that they really want to get rid of stock so they’re discounting madly.

I’m old school – I like making a profit! (laughs) I’ve only in the past couple of weeks joined the Giant factory sale, which I’ve never been part of. It has created more store traffic, but getting rid of a bike that I paid full price for to meet the discounted prices … I mean there’s some bikes discounted $1,500 and that’s $1,500 I’m not getting because I paid the full price for that bike. But it’s shifting it. I figured I shouldn’t just hang on…

Everyone’s got so much stock, but it’s good stock and there’s not much stock coming in, but there’s still lots of stock in the low end.

I’ve hung on thinking, “It’s all good stock”. And some of it is, because suppliers are rolling 2022 into 2023 – they’re not changing the bikes.

Specialized did some sales. A customer comes in says, “Will you match it?” and I’ve said “No”. We’ve actually told them, “Just buy it online from Specialized and have it delivered to us”. We almost make more money because we get some of the profit … but we’ve still got our bike in stock.

I’m judging how I go because some bikes … if it’s $2,000 less on a $10,000 bike, to me it didn’t make sense.

Low-end mountain bikes are slow and now there’s an abundance of stock. What happened to all those people who were buying them? They all stopped at the same time.

Road bikes are still in shortage. Customers can’t understand why there’s no road bikes.

We’ve all got too many kids’ bikes.

Any change in warranty claims?

Not anything we’ve noticed. Some of them have changed factories and there’s more assembly to do. We’re getting bikes with internal cables that weren’t routed through the frame. That has added an extra hour to the bike assembly. That’s from shifting factories to Vietnam or Cambodia.

There’s occasionally bad packing, but they’re not coming back for warranty, they’re just taking longer to put together.

Ben Bishop of Giant Lutwyche in the northern suburbs of Brisbane said:

It’s certainly a lot tougher than it was during Covid. I mean, that’s a given. In saying that, I think there’s a lot more people on bikes, so I’m actually finding it not too bad.

We’re working harder, that’s for sure, to get the sales. Margins are getting smashed a bit, but generally speaking I’d say I’ve got to be pretty happy with it, really, in context of overstocking and all of that sort of stuff.

Our workshop is extremely busy. We’re always booked about a week out but we’re close to two weeks at the moment. And people are happy to book it in. They’ll say, “We’ll wait”. And I’ve got 2.5 mechanics, so we’re working.

I am overstocked. As you know, I’m a Giant man. They’ve got a factory-backed sale going on at the moment. That’s getting some traction, but we’re having to order bikes in because they get sold, then we don’t have that particular size or something. I reckon it will be the end of the year before that is cleared up.

Gravel is strong and we’re having a good run with road. Dual suspension mountain bikes, we hit a hole there for a while but that seems to have picked up. We’ve found that category quite slow, but in saying that e-mountain bikes might have been taking over a bit.

E-Bikes are a growing part of our market. It’s great for the bike industry. Giant did have a discount on their Momentum bikes but I didn’t actually go into that category. That’s not our market per se – that line of bike anyway. We have a couple here but I didn’t go into them.

Any change in warranty claims?

No. I can’t say I’m having any more or less warranties than I would normally have. To me it’s much the same over the past 10 years or so. Product is getting better but it’s also getting more complicated and technical. It’s also getting lighter, so people’s expectations as higher as well.

But generally speaking, bikes get better, so they’re up to people’s expectations.

Justin Shaw from Propel Cycles in central Auckland, NZ said:

In general, since the start of the year it has been pretty average. We had a terrible summer with weather, so that really affected our January and February sales. We saw a pick-up in March, then a drop off in April. Now for some bizarre reason, we’ve just had the busiest week we’ve had for a long time, this week. It’s a bit of an anomaly.

It’s pouring with rain in Auckland today and has been all week. In general, we’re looking at a 30% decline over the previous year.

We’ve been open for 18 months. We’ve only done one full year, last year. We were meant to open and went straight into one of Auckland’s lockdowns that went for six weeks. When we finally did get open, it was October (2021). The December (2021) sales were pretty good, seeing there weren’t many people around in Auckland CBD because there were lots of people working from home – we’re centrally located.

Our sales were better than expected but we had a lot of stock issues, as I think everyone did, so we were really struggling to get the bikes people wanted.

Specialized is our main brand and we do Focus and Tern. We only do e-bikes. When we started, we told the brands we would only be doing their e-bikes and they were happy with that.

I was thinking about names of shops and names of stores that I knew in NZ. I didn’t want a shop name that had ‘e-bike’ in it. I wanted ‘going forward’ and ‘propelling’ somebody forward.

Any change in warranty claims?

No. We’ve had very few issues with any kind of warranties. Since we only do Specialized and Bosch (drive system) bikes, our warranties are very rare, close to non-existent. We haven’t seen any increase.

When Covid was at its peak and it was hard to get bikes, we did see some unusual specs where you’d get bikes coming through with different saddles or different dropper posts etc. It looked like the factory was struggling to get supply. But that seems to have stopped as well, now they’re probably getting good supply.

Darren Symons of ACT Bike Superstore in Mitchell, a northern suburb of Canberra, said:

Well, it’s a bit up and down. It’s pretty quiet in the sales department. There’s no one coming in just looking and we can convert them. Everyone is a bit tight with money and we have an oversupply of bikes. There’s a bit of pain there.

We stocked up when we could and prices have come down, so we’re copping a hit because the margin is less. If we try to stick with recommended retail … we have to drop it down a bit, which is not good.

Our stock levels are pretty good. There’s some categories, road bikes for instance, which is still choosing to be a bit of a pain to get. I don’t know what’s going on with Shimano. The parts supply from them is terrible at the minute. That’s a problem.

But most stuff is around. I think the suppliers are pretty stocked up. But if someone is wanting something fancy, especially road, it’s just not around.

I’m a bit overstocked. I’ve taken bikes that that I wouldn’t have taken normally and they’re not moving. So there’s a bit of pain. Cashflow has tightened up.

It’s just a shame. We had our opportunity to make some good money and we couldn’t get bikes and then… it was like, 12 months too late. But you know, what do you do?

Our workshop is not too bad. That’s probably keeping us going. But when Covid hit and we sold everything, those customers were not regular cyclists and they just bought a bike for the hell of it. That bike, we haven’t seen come back. It never came back for its first service, we haven’t seen that customer again. So that bike is probably sitting in the shed not being used or it’s been sold second hand, which is a shame.

You would have thought we would have made some new customers from all that Covid stuff, but they were never coming back. It was just a thing because the gyms were closed.

Any change in warranty claims?

I wouldn’t say anything sticks out about that, to be honest. They’re generally pretty good. We sell good brands. I think their quality is pretty good. We’ve had the odd one, but nothing crazy. It might have been a Friday build in the factory and they wanted to get home quick so they just jammed it all together! (laughs) They might have cross threaded a few things, but you know … they’re not too bad mate.

Con Mavrodakis of Hampton Cycles, in the affluent bayside suburbs of Melbourne, said:

Business is going okay, since the last 12 months that I’ve taken it over. We worked hard on the service side of things and that’s paying some dividends. We carry Specialized and Cannondale.

We have Rapha clothing as well, which is unique for a bike store. So that definitely draws some people in, in this bayside area. Bayside in Melbourne is an area that has a lot of road cyclists and with the gravel scene coming on, we’ve noticed that a lot of people are coming in and buying their second or third bike and making it a gravel. The road groups around here are getting into gravel.

We do a little bit of mountain but it’s more that XC / back country mountain type of stuff. We sell the odd e-bike here and there. That’s going quite well in this area. We’re right near Beach Road and the bike paths.

Business is actually going pretty well considering what I hear and read from other retailers. There’s a lot of discounting going on from some major brands who are obviously overstocked and they’re just trying to get rid of what they have and they’ve got more stock coming, so it doesn’t stop and I totally get it.

But business is okay at the moment. I do think it will be a couple of tough months coming up, but we’re prepared for that. We’re not overstocked.

Discounting pressure comes more from the consumer to a point, with the online market and everything at your fingertips. When the major brands are on sale – Advance Traders and Merida and all those brands through 99 Bikes, you tend to lose the odd sale here and there. But when someone really wants a Specialized, they know they need to pay a premium for it. They’re not in the same market as Merida and Norco and all those other brands.

I don’t feel we compete too much with that market. Specialized have a unique following, custom builds and things like that – that customer is never really considering a Merida.

We’ve got a Giant store up the road a hundred metres away. They’re great people. We help each other and complement each other. Ivanhoe Cycles own that store. They’re a big discounter but there’s still room for both of us. We do two different things.

Our supply is okay now. We get looked after pretty well from PSI (Cannondale distributor) and Specialized, given that we’re road specialists. They know to give us some road bikes and not to give them to the guys who specialise in mountain bikes. Their distribution is done quite well in that sense.

And the mountain bike stores don’t really want road bikes, so it works out quite well.

Any change in warranty claims?

No, actually. I don’t deal with a lot of cheap-end stuff. Specialized quality control … I’ve had a whole bunch of S-Works and road bikes and mountain bikes turn up… we haven’t had any quality control issues really. I can understand that they might have been trying to rush things through, so we thought we may see that, but no, we haven’t.

Brian Dallo of Deadly Treadly in central Darwin, NT said:

Business is steady without being spectacular. In the Darwin city area now, scooters have taken over, which is a bit of a pain. (Darwin was one of the first Australian cities to open up to two bike and scooter share companies).

The reason I started the shop was to get more people onto bikes, but with this recent scooter revolution I think I’m just about banging my head against a brick wall.

I’ve got no intention of going into scooter repairs and maintenance. I could, but I’ve elected not to.

They’re a mixture of both (privately owned and share scheme scooters). It’s a very confusing situation because some of the share scheme scooters are speed regulated, whilst others aren’t and of course the private ones aren’t speed regulated at all.

Our biggest sellers used to be mountain bikes but it’s moved over to hybrid bikes now. We used to do Cell Bikes but they’ve stopped operating, so I get a few up from Global Fitness & Leisure in Melbourne – Progear and XDS. They’re budget bikes but still better than mass market quality. I’m not a gung-ho, lycra sort of a man, you know.

Repairs are my main business. It’s still reasonable. The dry season has just arrived, so it’s a bit busier than normal right now. (Darwin gets a massive 1,800 mm of rain through the summer months and virtually nothing through winter).

People pull their bikes out of storage and out from under their houses, where they’ve all rusted up, and they want them freed up again! (laughs)

I’ll be surprised if I’m still around in business this time next year. Not through lack of business. But I’ve been doing it for over 20 years now and I’m getting a bit sick of fixing flat tyres every day of the week! (laughs) (Brian is approaching 70 years of age).

If someone wants to see me about taking over, they can come and see me any time.

Any change in warranty claims?

No. I don’t think I’ve had a warranty claim in years, actually.