Home News How’s Business How’s Business? October 2019

How’s Business? October 2019

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Welcome back to what was regularly the most popular item in my former trade newsletter.

I simply ask bike shop owners and managers ‘How’s Business?’ I also ask a follow up question. Given that it has been a break of just over two years since my previous trade newsletter, this month I asked each person, ‘What are the biggest changes you’ve seen in your shop over the past two years?’

One other key addition that eagle-eyed observers will notice… for the first time I’ve included a shop from New Zealand, which I’ll continue to do every month going forward. Because of our ever-shrinking world and more overlap in distribution and products, The Latz Report will also be shared with all New Zealand trade members.

New Zealand

Colin Williams, owner Hub Cycles in Christchurch, New Zealand said:

Business is good. It’s just coming into the busy season as the weather starts to warm up. We’ve got a big women’s event that’s coming up in a fortnight and that creates its own workload, especially for the workshop, which has been really busy.

It’s one of the biggest events in the country. I don’t know the actual numbers, but in the thousands. A lot of them are not women that do a lot of riding, but it gets them into it.

We cover all types of cycling. We don’t have any particular allegiance to a bike brand. We sell three major brands but we also sell other brands as well. We look at what we think is the best value at the time and that’s what we purchase.

We have a big range of bikes. Customers say, ‘Wow, you have a big choice!’ That’s something we do on purpose in all areas. For example, we still hold a big road selection whereas other shops have moved out of road or gone a lot smaller.

Biggest changes in past two years:

I see two main changes. The increase in ebikes, not necessarily numbers but the clientele has moved from being the middle aged, older generation through to now being the whole cycling fraternity. In particular the mountain biking fraternity are buying ebikes.

The other area, that we’re only seeing the tip of so far, is the growth in gravel bikes or cyclocross bikes.

Western Australia

Wayne Evans of Cyclemania in North Perth, WA said:

Business is very testing. Retail is testing throughout every industry I guess, but particularly in our bicycle retail industry. We seem to be getting beaten up on many different corners of the ring.

You’ve got the internet… contrary to what the government says about slapping a GST charge on every inbound good, that’s a load of rubbish. I’ve seen people buying lots of product online and not getting charged a single cent in GST. I know that’s happening. You can say all you like to government departments. They say it’s not happening. But I say it is happening, because I’m the one at the end of the day witnessing it at the end of the spectrum.

So that’s one thing, then the economy in Western Australia has been down for quite a while. New bike sales are probably as tough as they’ve been ever. People are keeping ‘old faithful’ on the road a bit longer instead of buying a new one.

But the internet is a major issue for us. How can you compete? It’s a testing environment.

As a store, you question yourself, ‘What do you carry?’ In the old days you’d carry all the nice stuff but nowadays you can’t afford to that because you know people are going to come in, test, try on a size or whatever and then go online.

So you have to be very frugal and discerning in the sense of what you chose to stock and carry for the purpose of trying to run a business that has a stock turn of an average of 30 days as opposed to just sitting there for someone else to use as their trial situation before they go and buy somewhere else.

I speak highly of people like Echelon Sports. They really do support their IBD’s. Giant tries to support their IBD’s… a lot of the wholesalers are trying to mitigate the negative impact that an online presence can have in an Australian retail environment. We’ve seen Shimano this year introduce a geographical protection policy where the sales go through that region as opposed to losing it to the UK or USA. So there are certain processes that have been put in place, but I feel that the vast majority have either given up or it has taken them too long to really stop the rot.

It’s an interesting world.

For us, we’ve got two really good mechanics in the store in Jayden and Barry. We’re always pushing that hard in the sense of promotion into the marketplace, ‘Get your bike serviced and maintained here!’ 

Our workshop is always quite busy. Even at this time of year we’re four to six days booked out in advance, so we have lots of customers that are willing to wait for that quality of service.

Historically I’ve been a really strong road shop, but I must say that mountain bikes have been quite buoyant in our store recently. And a lot of gravel bikes. A lot of people who have been road riders are saying, ‘You know what, getting abused by motorists on the road is wearing a bit thin.’ So they’re getting a gravel bike and going on the trails and going on the farm roads of the south west and up in the hills regions near Perth. We’ve had a really strong growth in gravel bikes in the past year.

Ebikes are coming on strong. Again to be expected, across Australia and across the world. I think that’s a nice genre of bikes. People coming in that arena are usually from a different era and are not so used to shopping online and more interested in getting some consultative advice too. They haven’t necessarily been road bike riders, mountain bike riders or any type of rider. They might just be over 50’s who are looking to keep fit and they need an ebike to do that safely and not to be too intimidated to ride around the river without collapsing half way around.

Biggest changes in past two years:

I definitely see the online presence as a major, noticeable impact on our business. To put it lightly, it’s the single biggest hurdle I’ve ever had to overcome. I’ve been here 15 years and I cannot see anybody saying that there’s any bigger hurdle in our industry than that.

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NSW

Andrew ‘Macca’ McLean, workshop manager at Ashfield Cycles in inner western Sydney said:

Business has been ok. Repairs are good. Bike sales are still a little slow, but it’s been ok. We’ve just had two days of rain, which makes it quiet in terms of people coming in the door. No-one wants to go out in the rain. It’s good for me though. I can keep tapping along and get my workshop work done! Even though it’s bad that no-one is coming in and spending money.

John (Michell, owner) started doing Specialized here about eight years ago. We’re also doing Avanti.

Biggest changes in past two years:

Probably selling ebikes. They’re becoming quite popular. We’ve been selling predominantly the Specialized Turbo range. Everything from mountain bike dual suspension through to the urban bikes and the cruiser bikes. We’re not selling one particular model. We’ve got their range covered. The average sale is around $3,500 to $4,000. We’ve got one on the floor from each category. If the customer comes in and that bike fits them, awesome. If not, we’re happy to order the right size.

Victoria

Stuart Armstrong of Velo Cycles (which comprises three sections, Brompton Junction, Velo Folding & Electric and Velo Cycles), in Melbourne’s inner northern suburbs said:

I’m undergoing renovations right now, so personally, I’m always very busy. The shop has been flat over the past few months, but you’d expect that through winter. We’re slightly up on trading from last year. Bike sales have been relatively flat but our workshop has been busy.

We’re gearing up for a relaunch of the electric side of the business with renovations, new employees and hoping to kick that off to become what we really should be.

Overall it’s certainly not doom and gloom. Let’s put it that way.

Back in December 2018 we split the electric and folding shop in half. We turned half of it into a Brompton Junction (concept store) and business in that is up, as you’d expect, but the other side of the business is flat. Right now the Brompton half of the shop looks fancy and the other half looks crap. But the renovation should be completed in the next month.

Now that I’ve done Brompton and that’s kicking on, I spent the winter working on our website and that’s now starting to pay off. We sell online.

Biggest changes in past two years:

My workshop has grown a lot. I’m getting more and more people who are buying bikes elsewhere but getting them serviced by us. Whereas previously it was mainly people who bought bikes from us getting serviced by us.

We’ve also been encouraging e-commerce. I’m not planning to be a Wiggle, online behemoth. But Brompton is a product that we can sell online. It’s small, it folds up and people want accessories. The other side of the business, there’s not a lot that people can buy online but I still want a strong online presence to force people into the shop.

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South Australia

Peter Giessauf of International Cycles in the inner eastern suburbs of Adelaide said:

Business has been very slow but is gaining momentum now that the warmer weather is kicking in. It has been really tough in Adelaide. There have been a couple of bike shops in my area that have recently closed down.

At least 75% to 80% of our business is repair business for me. I mainly do servicing, washing the bikes down, replacing chains, cassettes, brake pads, handlebar tape, those types of services. I am a Fuji and Felt dealer and Apollo for recreational bikes.

Biggest changes in past two years:

Internet sales. People come in with wheels and groupsets for me to put onto their frames now. There has been a huge drop in people buying good quality road bikes. They also seem to be buying the parts on the internet and getting the shops to put them on their bikes.

We’re happy to do that because it leads to more business. If they break something or need something else they’ll come back to me because I haven’t told them to nick off! 

Early on some other shops were doing that for sure. But you’ve got to work with the internet, you can’t work against it. 

I’ve also been doing more retro bikes for customers who might have a 1980’s classic frame and they want me to source the parts and restore the bike for them.

I’m seeing a lot of really cheap deals on non-disc braked road bikes. I don’t think you’ll be able to even buy a new non-disc braked road bike soon. Also wheels… I saw some Lightweight rim brake model wheels the other day advertised for $1,500 that were normally $6,000.

But not everyone likes the discs. They can be a pain to adjust when the pads are rubbing, and so on.

Tasmania

Chris Riley of Ken Self Cycles in downtown Hobart said:

Overall it’s going along quite nicely. We’re getting some good sales with ebikes and mountain bikes. Being in Tassie we’ve got a lot of interest in good quality mountain bikes.

We’ve got a lot of trails locally where there’s accessible trails within a five minute drive or a short ride from our shop centre of Hobart. There are lovely trails at the base of Mt Wellington and at the Meehan Range (just east of Hobart across the Derwent River).

We’re always busy in our workshop. Being in the CBD we have a lot of repairs of all bikes. Whether it’s a high quality bike or a basic commuter, we don’t turn anything away. We work with commuters and turn their bikes around quickly. Where it’s a more recreational cyclist and they’re happy to wait a day or two, we’ll take that opportunity to take that time.

We’re the main Trek dealer here. I can’t complain about Trek. Our relationship goes back nearly 20 years and they’ve been fantastic to me.

These days the major brands are having more of a say in your store. They’re doing more of the marketing and driving people to your store.

I’m actually after a new staff member so if there’s someone on the mainland looking for a sea change to Hobart… qualified that is, not just a hippie with bare feet! (laughs)

In our store you need to be able to do a bit of everything. Be able to sell, talk to customers and be happy to, not begrudgingly. They need to be able to assemble a bike, not necessarily a fully qualified mechanic. They need to have a passion for bikes.

Biggest changes in past two years:

There’s a lot of things that have changed but the ebike is one of the main ones. It’s gone from a fringe thing to a main ticket item in the store. Road bikes have slowed – just sort of plateaued, and the mountain bikes have really come on.

Queensland

Ben Bishop of Giant Lutwyche (previously Tom Wallace Cycles) in the northern suburbs of Brisbane said:

I’m finding it pretty good, actually. We’re quite busy. We’re going better than last year and last year we didn’t have a bad year, so I can’t complain really.

I couldn’t put my finger on one reason, it would be a number of things. I think that the product we’re selling is good. I have very good people working for me and we work very hard. We’re going quite well with ebikes too, which is giving us growth.

I reckon that while the people buying ebikes have been bike riders at some stage, I’m not sure they would have been attracted back to buy another bike if they didn’t have some sort of assistance with it. My feeling is that people are buying these bikes because they want to enjoy cycling again and the enjoyment was going out of it. I don’t think they would have bought another ordinary bike, so I’m considering them new sales.

The big dual suspension stuff was the big seller first and it’s still a strong point. They’re at $6,500 and upwards. But we’re finding now more of the recreational stuff is starting to come through, more of your commuter ebike and so on. So if I was going to say what’s the average sale, you’d have to say it was $5,000. Those sort of figures give you good growth. If you’re selling an extra three or four of them per month, away you go! The margins are about the same. (compared to a non-ebike of the same price point).

We’re 100% Giant. It suits me. I’m not a precious road cyclist and I still enjoy riding my bike. We still sell lots of kids bikes and lots of commuter bikes to people who are actually using their bikes. The brand suits what I’m doing.

I’ve got four part time staff (in addition to full timers). It makes it easier for them too. It’s simpler, rather than trying to get your head around three or four different brands all the time. That’s just my personal opinion. It might not work for other people, but it’s worked for me.

Biggest changes in past two years:

People will look at their iPhone right in front of you while they’re looking at a particular bike to see what price it is somewhere else. People are certainly a lot more educated when they walk into the store these days.

It puts the emphasis back on myself and the people that work for me to make sure that we know our stuff, that we’re on top of our game.

Disclaimer

How’s Business is a record of recorded phone interviews with a wide range of bike shop owners and managers. All opinions expressed within How’s Business are solely those of the interviewees and not the opinions of The Latz Report. Any data shared by interviewees including, but not restricted to, dates, prices, volumes etc is taken at face value and in most cases not independently verified.

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