How’s Business – September 2023

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Welcome to How’s Business, brought to you by Knog – Australian designed and lighting up the world.

Every month after asking “How’s Business?” we also ask a follow-up question. This month we asked: “Do you consider your workshop to be a profit centre in its own right, or a just a cost that you have to bear in order to build and sell bikes?”

Richard Bruce from Over the Edge Cycles in the tiny SA tourist town of Melrose, which is a mountain biking and rail trail centre, said:

Business is pretty good. It was a little bit flat through August but that’s pretty traditional. We had a really good July school holidays up here. It felt like the numbers were down in terms of foot traffic through the door, but when we looked at our figures, we were up about seven percent. That’s comparing it to the Covid years, which were really good for us as well.

There’s only two or three hundred people who live in Melrose. It’s not much! We’ve always tried to push out a fair bit of (branded promotional) merchandise, that’s a good part of our business. We’ve also got the café attached to the bike shop as well. That equates to about 30% of our business. Then we do rental bikes, which are pretty unique to a destination type of store. But we still make a good chunk of our money from bike sales.

(Discussing major new MTB trails that are about to open in nearby Mt Remarkable National Park) I think it’s going to be pretty considerable and it’s really good timing for us. Most of the bike industry was fortunate through Covid. Being a destination, a lot of people discovered Melrose.

As we transition out of that, the investment the previous SA Government and the previous Federal Government made into Melrose will really help us to have a soft landing through the next couple of years.

The figure that I’ve heard anecdotally is that they believe the new trails will see an 80% increase in visitation once it opens, which means 110 extra people per day. Weekends are our busiest times, Saturday being the busiest, followed by Sundays.

Workshop, profit centre or cost?

Our mechanics side of things is probably a little different to a lot of others in that we try to punch out that work as quickly as we can when the customer comes in. You get a distressed customer with a mechanical issue and we try to get them back on the trails so they can still have a good experience while they’re visiting Melrose.

It’s definitely profitable. The staff we have, we’re all multi-tasking, salespeople and mechanics. The past couple of years, we had more dedicated mechanics, and certainly needed them. This year we haven’t got the quality of mechanics there, but also the way the year’s panned out, we haven’t needed them either.

Because we’re so remote, we have to be flexible. For example, “Are our current mechanics able to build wheels?” If we’ve got a good quality mechanic, then obviously they are. And if we don’t, then we’re just not building wheels. We’re either getting that work done elsewhere or we’re just buying in fully built wheels and selling them as they are.

Alex Jones from For the Riders, an MTB specialist in the inner Brisbane suburb of Woolloongabba, said:

It’s interesting. The high-end side of things is going well. Purchasing of Santa Cruz, now that they’re being distributed by Pon Performance, they’re bringing in a lot more for a better price. Customers are getting excited, so we’ve sold heaps of those.

Forbidden is still doing really well for us as well.

It’s the mid to lower-end stuff that’s dropped off a little. A lot of people are probably holding out buying anything new while interest rates are high. But people who can afford to buy high-end stuff might not have a mortgage to service.

We just sell mountain bikes but we service all types of bikes. We specialise in boutique, mid to high-end mountain bikes.

In the past, we had some hardtails for around $1,000 but we haven’t done a lot of that lately. Mid-range, $4,000 up to about $7,000, haven’t been moving much.

We still mainly do acoustic. We sell a few e-mountain bikes. Our customer base, because we’ve been around for so long, most of them have tended to stick with acoustic bikes. It’s probably an area where we could do better… the e-bike side of things, because I know a lot of shops that predominantly sell e-bikes.

It could be the way people view our shop as well. Some people might be worried about coming in here for an e-bike thinking that we’re all snobs against it! (laughs) But a lot of us actually ride e-bikes ourselves.

We move locations last year. We’re now at Woolloongabba, not too far from Planet Cycles. We downsized a bit, focusing more on custom builds and higher-end stuff. We moved away from clothing. I think a lot of shops are struggling with clothes, trying to compete with online. So we don’t need as much room now. We’re focusing more on our workshop and our bread and butter … what we’ve always done.

Workshop, profit centre or cost?

Ah, I’d say it’s a profit centre. We’ve got good mechanics who’ve been in the industry for so long that people come and seek us out for that reason.

We do servicing for around the $1,000 mark as well – our Platinum Service is $900, which includes the suspension.

It’s a bit of both. In the quieter period, they’re there to help us sell bikes, in terms of building them and that sort of thing. But we do see a lot of work come through our workshop and people spending a lot of money … simply because dual suspension mountain bikes – they take a lot of time to service and a lot more work.

We only have two mechanics.

I’ve worked in other shops where the workshop is more of just a cost that you have to have as a shop.

Will van Rooyen from Wild Ride Cycles, in the small northern Tasmanian town of Latrobe, said:

It’s going good. It’s finally picking back up again after our Tassie cold, gross winter. After it’s all been wet, things are slowly picking up again.

People are bringing more bikes in for servicing, getting them ready for the warmer weather. Christmas laybys are starting to pick up as well.

Throughout the winter it hasn’t been quiet, I wouldn’t say, but it has dropped off a little bit.

We mainly sell mountain bikes. We do Trek, Norco and Mondraker. The Treks and the Norcos are our most popular.

Latrobe seems to flood pretty badly every two or three years, but we’re up at the top end of the main street. We’re uphill just a little bit so we weren’t affected.

Workshop, profit centre or cost?

I reckon the workshop is certainly a profit centre within itself. I mean, it doesn’t bring in the money that a bike sale does, but there’s certainly profit that comes out of the workshop.

We do pretty well … anything from a basic bike service to servicing suspension, fitting new drivetrains, building wheels… pretty well anything that needs doing.

Theo Boyle of Nowra Cycle Centre on the south coast of NSW said:

It’s all over the shop. You get a couple of good days and a couple of crap days. There’s no consistency in it. It’s been like that for probably the past 18 months.

Our workshop’s busy. New sales are hit and miss. A lot of people are buying on the internet and then finding they’ve bought a piece of rubbish. Then they come in here to try to get them fixed.

That’s right across the board from kids’ bikes to e-bikes. Especially e-bikes. The cheap ones are more trouble than they’re worth. You can’t get parts or backup service.

If it’s a half decent brand, we’ll have a go at fixing it. But if the customer has an attitude or they’ve been in before to look at what e-bikes we’ve got, then bought online elsewhere, then we just say, “Well get it fixed on the internet!”

I’ve been in the bike game since 1969 and I’ve had a bike shop for 44 years. I’ve seen clowns come and go. All the wholesalers who were going to set the world on fire, all the bike shops that were going to set the world on fire with coffee shops, pool tables and all this sort of stuff. I do my own thing. I sell reputable brands and I do the right thing by the customer.

If they like the product, they buy it and if they want to go elsewhere, well, I’m here to pick up the pieces if I feel like I want to do it.

The industry has definitely changed over the past 40 odd years. The internet is still here and here to stay. But it will change, because you’re seeing a lot of these internet shops are closing up now anyway because we’re getting back to normal supply of products.

Workshop, profit centre or cost?

Oh, no, I’ve always made sure … my background is a fitter and turner. That was my original trade when I left school. I was in the bike shop for five years and then left, did an apprenticeship and came back. It gave me the idea of how to fix things properly. Fifty years ago there were no courses for bike mechanics like they have now.

I pride myself on having all of the tools to do it properly. We don’t have all the latest electronic stuff. That changes too quickly. If I have a drama with an electric motor, I’ll just ring the supplier and they’ll talk me through it or I can send the motor back and they’ll fix it.

In my workshop, just in the hydraulic brake section there’s probably about $8,000 worth of springs and ball bearings and all sorts of parts from the early days of brakes when we used to buy all the bits and fix them. It’s all just accumulating dust, but I don’t throw it out because someone might need it to do a retro bike. Nowadays you get two or three years out of a set of hydraulic brakes and just throw them away and put a new set on.

But the workshop is an important part of the business. You’ve got to put the bikes together properly before you sell them. If you don’t, when they break down, your customers are not going to come back.

I was talking to one of my ex-offsiders the other day who was down from Queensland and I asked, “What do you charge for trueing a wheel? Putting a couple of spokes in a disc brake rear wheel?”

He said, “About $30 or $35 bucks.” I said, “Well you need to put your prices up, because I charge $65. To do that work you’ve got about $1,200 in wheel jigs and $300 in tools and they’re wearing out all the time.”

I said, “Your tools are worth money and so is your nous to know how to do it!”

If it’s a Johnny off the street that comes in with an internet bike, then he’s going to pay an internet price for repairs.

Steve Rukavina from Ride Advice in the city centre of Perth, WA said:

Business is surprisingly good. For us, being predominantly a road store, the mid to high-end road stuff has been doing exceptionally well.

We had a really tough Covid time, being based in the city centre. The CBD now has really started to pick up and we’ve also moved our store. We’re on Hay Street now (which is the main shopping street in the Perth CBD). The foot traffic is more than double from where we were, (only about 200 metres away around the corner) so overall, I can’t complain.

We had a really good opportunity to move to Hay Street. It’s a slightly smaller store, but it’s worked out really well. You can just see that there’s a lot more people in the city now. During Covid it was pretty scary! (laughs – referring to how empty the CBD was of its usual workers)

We were getting customers who were coming back to work in the city (after Covid) saying, “You must have killed it over Covid! I saw on the TV how the bike shops were selling out.”

I said, “Not us. The suburban stores did. There was no-one here.” And they said, “Oh yeah. I didn’t even think about that.”

I was reading up on your predictions on what was going to happen. During Covid I was talking to all the suppliers saying, “How do you guys honestly think you can maintain the e-bike sales and imports that you guys are doing now? This has to slow down.”

Do you know that not one of them said that? They go, “Nup, we’ve got orders in at our warehouse until 2024/2025.” This is back a couple of years ago mind you. And I thought, “We can’t sustain this. We’ve only got 25 million people in this country!”

And sure enough, exactly what I said and what your predictions were, that things were going to slow down. And now you see every supplier just absolutely discounting everything.

And the downside to that is, I honestly thought Covid had taught retailers that they didn’t need to discount. But they’re actually discounting worse now. A lot of it may be that they’re overstocked and they’ve got stock they paid a premium for and they’ve just got to move it.

That’s probably our only saving grace. We were very cautious in ordering during Covid, because we just didn’t have the customer base coming through. So now we’re able to pick up all of those massive discounts the suppliers are doing, so it’s certainly benefited us in that respect.

Predominantly we do Specialized. We do a couple of boutique brands too. We do Chapter2, which is a New Zealand brand, which has worked out really well for us, and a couple of other little brands as well, but Specialized is still our number one brand for sure.

It was interesting, when we took on Chapter2, there was no-one else in Perth doing it. All of a sudden we started to get a bit of traction with it, selling a fair few of their frames and then they expanded their dealer network in Perth now, so yeah … I know that every business has to do that, it’s just… talking to the dealers and communicating with them so that we don’t have an overlap of stores as can sometimes happen. Some things are out of my control …

Workshop, profit centre or cost?

From day one from when I opened the store, I always said the workshop had to hold its own and we have built up a very good reputation for our repairs and custom building.

To be honest, that probably saved us during Covid, being in the city centre, still being able to do repairs. Without that, I don’t know where we would be.

Richard Hale from Cycling Mythology in Mildura, a regional city in far northwest Victoria, said:

It’s pretty quiet. Its normally quiet here in winter time, I guess like most bike shops around the country. But we have had a little bit of nice weather and normally I’d expect things to start to pick up, but it hasn’t happened.

My guess is that interest rates and inflation are biting home to a lot of people, so they’re not spending money! That’s certainly what I’m experiencing here.

Our workshop is reasonably steady. But walk-in trade, phone call enquiries, they’ve really dropped right off.

Even things like tube sales are right down. Whereas normally, being Mildura with ‘Three Corner Jacks’ everywhere and people getting punctures all the time, tubes are usually a pretty steady turnover, but sales of tubes have dropped right off too.

Our name, Cycling Mythology, came about because there is a lot of mythology and legends in cycling and bike racing. I’ve been here for 8½ years now. It’s a small shop – a bit of a hole in the wall really. Originally, I was set up to service the road bike market and CX bikes (cyclocross) … selling new bikes and servicing them as well.

Initially, I didn’t have any mountain bikes here but the shop has gradually evolved into being effectively just mountain bikes. Road bike sales have almost disappeared over the past few years to the point where I’d be lucky to sell half a dozen road bikes per year.

It’s all mountain bikes. Anywhere from your entry level at $900 through to a higher-end e-mountain bike up around $12,000 or $13,000 or more. If someone wants a road bike, we will certainly order it in, no problem, but we’re at the point now where I don’t bother keeping road bikes in the shop at all.

Trek is our exclusive brand. Pretty much everything we do now is Trek. We used to do Focus, Cervélo and Trek but we just found the Treks were easier to get hold of and the product quality is excellent and that’s what people were coming in and looking for.

Workshop, profit centre or cost?

It’s certainly a profit centre in its own right. I wouldn’t survive without it, to be honest. The business is just me. I’m the sole person here, so I do everything from building to selling to servicing bikes. It’s the mainstay of the business without a doubt. It’s what keeps us going.

Getting bike sales is great. But it’s the workshop that keeps the revenue turning over.

Join the Conversation
Do you consider your workshop to be a profit centre in its own right, or a just a cost that you have to bear in order to build and sell bikes?

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