How’s Business – October 2023

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Even though it’s one of the first things dealers talk to me about, it has been six months since we last specifically asked our How’s Business participants about the ‘d’ word … discounting.

So for this month’s follow-up question, we asked, “What proportion of the bikes in your store right now are for sale at full retail price?” As you will see, there could hardly have been a bigger contrast in the answers different store owners gave.

Brent Miller and Caroline Muldoon from Bike Culture, that has two ACT locations in Belconnen and Gungahlin, said:

It’s pretty solid. It’s picked up. We had a more traditional Canberra winter – wet and quiet. Interest rates have played a part. They’ve frightened people a little bit and they weren’t doing that extra spend. But the sun came out, the weather warmed up and it’s all firing!

Mountain biking in Canberra is very strong – trail, e-trail, that sort of stuff – is continuing to grow at the moment. It’s our biggest market, from getting kids onto a mountain bike, all the way through to mum and dad.

“…who doesn’t want to protect their kids? If they’ve spent $10,000 on braces for their teeth, they’re going to spend a few hundred dollars on a full-face helmet!”

The amount of kids now participating in lessons out at Stromlo (Canberra’s leading MTB park) is huge. And the amount of kids we’re now putting on good quality dual suspension … last weekend there were 44 Under 13s in the Rocky Trail event at Stromlo. There were close to 100 Under 15s. The biggest categories were the kids’ categories.

It’s very positive for the future. Going along with that … accessories. With mountain biking in particular, when you’ve got kids doing that type of enduro riding, that means you’re selling more full-face helmets, you’re selling protective gear. We’re selling a lot of body protection.
It’s an expensive thing, but who doesn’t want to protect their kids? If they’ve spent $10,000 on braces for their teeth, they’re going to spend a few hundred dollars on a full-face helmet.

Mechanical servicing is super strong. Actually, servicing stayed strong the whole way through winter, even for Canberra.

We’re in our 22nd year at Bike Culture. We’ve seen the ups and the downs.

What proportion of your bikes at full retail?

That’s a fantastic question and we’re laughing – 90% of the stuff is on sale. It’s driven by the brands we sell. We’re not putting those bikes on sale. For instance, we have Specialized and Trek here – when they go on sale, we go on sale.

The independent doesn’t really have the independence anymore to choose what price you run. An independent is driven completely by whatever the supplier dictates online.

We have never had a strong history of being discounters as a bike store but now, everything’s on sale. That said, we understand the reason it’s on sale, because of oversupply. We’re also using that as a tool, saying to customers, “You won’t see this kind of reduction in bike prices again.” I firmly believe that. Once we clear this excess Covid stock and things return to whatever we call normal in the bike industry, then the “40% off a bike!” – it will only be if it’s a failure of a bike and no-one wants it.

There are some beautiful bikes available right now at stupid prices. Sometimes we’ve won and other times we’ve lost big time on margin.

But some brands have cleared backlogs and prices are back to normal – it’s not so much brands as categories. All brands have got stuff at full price. It’s mainly older models they’re clearing out the door.

Darryn Giles of Chain Reaction in Christchurch, NZ said:

Business in the past six weeks has been excellent. Our main supplier, Specialized, went on sale with significant savings. One of their e-bikes which had a substantial sale on it has really driven sales to the point that they’ve almost sold out of that model, which was the 2020 Levo SL. Because they’ve released the new Levo SL with the Gen2 motor.

Unfortunately, the bikes on sale were predominantly in large and extra-large sizes, but that’s okay. We sold good numbers on those.

We’re 90% Specialized. We do another brand, Sinch, that is genuinely New Zealand designed.

Because we’re mid-way down the South Island, we find that in winter, the older generation stop riding and we saw the sales of those bikes plummet over the winter period. But if you look back to pre-Covid times, that was normal. Now that we’ve had a bit of sun, we’re seeing those riders walking through our door again.

The riders that we’re not seeing is the Ma and Pa with kids. They’ve got a mortgage. They’ve got their wallet squeezed fairly hard at the moment through fuel costs, mortgage costs and cost of living increases.

We all know that during the first period of Covid, kids’ bike sales were through the roof. We’ve notice in the most recent 18 months that they’ve been very slow. Kids’ bike sales have a three-year product cycle. I believe that Covid absorbed three years’ worth of sales, but those kids are now starting to grow out of those bikes.

It will be interesting to see when that market does return to normal and I would predict that it will be within the next six months.

I believe in training our retail staff to be the best they can possibly be and to give our customers the best experience they can get. For example, when we do a handover to a customer on a nice e-bike, we will generally spend an hour with them because they’re new riders. They don’t understand. And if we can give them all the answers up front, it stops a lot of the questions and customer doubts later on. Some of those riders don’t know how to lube a chain, they don’t know what tyre pressures to run.

Our industry is really bad in not giving the consumer that information and not telling the customers they need to get their bikes serviced correctly. I’m talking about suspension that needs to be serviced to a high standard. Education is important.

What proportion of your bikes at full retail?

Not a lot actually! If it’s 2022 model, it’s on sale. There are some very desperate distributors out there, I think. And it’s reflecting in the offers you see in the market price, whether it’s 99 Bikes or other retail chains.

We’re starting to see 99 Bikes close a couple of stores on the North Island in Wellington and Rotorua.

Phil Stan-Bishop from Impulse Cycles in the WA city of Albany, 420 km south-east of Perth, said:

Not too bad. Workshop-wise we’ve been very busy. But retail-wise has been quiet. We suffer a pretty cold winter where we are. We often find ourselves very low for selling bikes in winter, but all the usual repair stuff carries on.

E-bikes are still driving most of our primary revenue. Road is almost non-existent. Gravel has completely replaced the road market for us, possibly due to our geographic location. A good 60% to 80% of the roads in our district would be gravel. Most of the guys who would like to ride road … we’ve found that traffic has either been busier or certainly less friendly than it was 10 years ago. There’s been a step back in road culture in that regards.

It means that everyone who can get off the bitumen and onto a gravel road, out of the way, has done so. The road cycling club here, half of their events are gravel now.

Go back 10 years and I would have sold 20 road bikes a year. Go back the last year and I would have sold two. Everybody else has bought a gravel bike – probably 30 in the past year.

We try to be mainly a Trek dealer but, I’ve got to be honest, they’re making it harder. Having their own stores … they won’t admit to this but having their own stores that suck up stock that we won’t get makes it very hard to be a retailer of a brand you can’t supply.

I only know my little piece, so I don’t know about city stores that exist alongside corporate stores. I’ve had the conversation with my rep a couple of times about why I go to order a bike. Our mainstream hardtail mountain bike from Trek. They released a new model run of those a couple of weeks back. We logged in at 9.30am our time the day they were released and we had January delivery dates.

Come October-November, Christmas shopping season, we’re going to be saying (to our customers), “Sorry, we’re not going to get any”. And you’re going to be able to drive to a brand-owned store and they’ll say, “Yes, we have every size and every colour”.

It’s not a huge complaint but it does make it more difficult.

Gravel bike-wise, we do a lot of Treks but we also do Focus and Orbea gravel bikes.

On the MTB side … Trek, Orbea. E-mountain bike, especially dual-suspension high-end stuff has been Orbea almost exclusively. We’ve probably sold about 15 of these in the past year, almost all of them lightweight e-MTBs and only three or four full power ones in that mix.

What proportion of your bikes at full retail?

That’s a good question. I’d say probably 90% at full retail still. I think it (being a country shop) gives us a little more position for sure. Obviously when brands are running promotions, we have to follow that.

Given that we’re still holding onto the quietness of winter, I’m probably prepared to look at shifting some of our stuff at a promotion, but it’s not like it would be half the store or anything like that.

Wayne Chapman from My Ride Hobart, Tasmania said:

Business is reasonable. We had a pretty aggressive sale through the month of August. We cleared a lot of stock, so we’re in pretty reasonable shape. Business has tracked along above pre-Covid levels in the limited period since.

August timing just works seasonally for us, with new stock becoming available. We thought it was a good time to move earlier rather than later.

We’ve had a progressive shift towards e-bikes. That portion of our market is progressively moving up. Mountain has always been our biggest segment. And it’s been off-road e-bikes that have been the largest part of our e-bike business.

Of our high-end mountain bikes, by number of bikes, it’s skewed towards e-bikes say 60-40 compared to conventional bikes – bikes that are above say six or seven grand.

I think the technology is good now. Five years ago, things were pretty clunky. What’s available now works, it’s smooth and you can sell it.

Across the board, anyone in retail is in unknown space at the moment, just because of the way the economy is. We’re pretty lucky in the market we’ve got here in Hobart and the opportunities there are for people.

What proportion of your bikes at full retail?

I would think at the minute 95% are at full price. We’ve only got a handful that we didn’t clear in our August sale. We cleared the decks from any hangover.

Tim Cant from Toukley World of Bikes & Mobility on the Central Coast of NSW said:

It’s picked up a little bit. There have been a few kids around. I’m doing a lot of repair work. I’ve sold a couple of bikes this week so far. The past couple of weeks have been an improvement on the previous weeks.

August was a pretty quiet month for everyone – other local businesses I’ve been talking to. The weather’s warming up, so hopefully things will get a bit better.

I’m also a mobility store. We sell mobility scooters, mobility aids … the market around here at Toukley is a pretty low-income area. There’s a lot of rental-assist properties and a lot of elderly people.

I don’t have expensive bikes, more mid-range stuff. That’s what people want around here. My bikes are more around the mid $500 to mid $600 range. That’s my average sale of an adult bike.

I’ve been here nearly four years. The shop has been going since the late 1980s. I was made redundant. I’m a fitter by trade, always fixing stuff. Once I got a few bikes, I got the hang of it. There are still people I ring up who give me a hand.

It’s keeping me going. There’s always something to do, building bikes, fixing bikes, fixing scooters.

The electric scooter parts are a pain in the backside. I know a lot of other shops won’t touch them. I’ll have a go at anything, but you just have to be careful sometimes because those scooters are still illegal (in NSW for road use).

I sell electric bikes from TEBCO and Shogun. I keep a couple of each in stock. People want to pay $1,000 for an electric bike, but you can’t buy one from a bike shop for that price.

What proportion of your bikes at full retail?

Everything! I’ve pretty well stuck to full retail all the way through. I haven’t got a lot of overstock. I keep it down. You don’t need a lot of overstock today.

There’s still spare parts that are on back order, a variety of parts.

Jaaron Poad from Giant Brisbane, located in the Brisbane CBD, said:

It’s still pretty good. We had to learn how to sell bikes again! (laughs) That’s been the biggest curve. We actually have to chase the consumers to sell it. We got used to people just saying, “I’ll take it”.

It has been challenging with the overstock, but you can’t have two years of boom without a year of pain I suppose.

Giant as a brand is still super strong. It’s probably getting stronger, which means we’re still selling lots of bikes. It keeps us busy.

Road is still going great – high-end road, mid-end road. E-bikes … still strong. We’re having to do deals but they’re churning through the shop. Commuter e-bikes are still pretty slow. People are still working from home. That’s one market area that we thought would pick up but didn’t. It’s a bit frustrating.

We’re selling entry level e-mountain bikes and higher end e-mountain bikes.

Our workshop ticks away. We’re not flat out. I haven’t put our labour rates up for about 10 years – we’re about to. Every month I think, “I’ve got to do it”. And then it slows off again and I think, “Maybe I shouldn’t.” But I think we will from 1 January. Our current rate is $100 per hour.

We’re trying to educate the consumer. We have a $99 service which is really a safety check to make sure everything is working correctly, but people are finding it hard financially, so they just book it in for the basic service and think that they’re going to get their bike fixed completely for that! (laughs) That’s an educational problem.

I was servicing a $10,000 Cervélo before for a $99 service and they expect you to check every part and do it all.

Our next level is $149, which is the same service plus a wash and degrease. We’re probably going to put that up to $199 and put more in – then call the $99 service a safety check.

Giant consumers are still price conscious. $10,000 bikes are not the norm. We might be servicing a $600 bike or a $6,000 bike.

There’s only two mechanics and two sales guys. More is not better, man! (laughs) I could get more people to work here but I don’t know if they could do the work. That’s the skills issue at the moment.

What proportion of your bikes at full retail?

I would say 10% max. It would just be the gravel bikes and the new models that are coming through. Everything else is fair game. I would say 10% at full price and 90% on special.

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