BikeExchange Purchase Set to Deliver Massive Growth for Kitzuma

North Carolina, US

BikeExchange Limited’s recent purchase of US-based ready-to-ride bike delivery and logistics business Kitzuma is set to bring fast and substantial growth for both organisations, according to executives from the two parties. Melbourne-headquartered BikeExchange is listed on the Australian Stock Exchange under the code BEX.

The US$3.375 million ($A4.75 million) purchase, announced on December 23rd, would “unlock a lot of the points that are within the BikeExchange business,” BikeExchange Global CEO Mark Watkin told an online media event.

“Kitzuma’s purpose-built logistics platform, which allows bikes to be transported box-free and fully-built, will eliminate a significant barrier for many customers purchasing a bike online – having to unpack and assemble it. Kitzuma will be a compelling white-glove service for retailers and brands using the BikeExchange marketplace and broader.”

Mark said one of the big obstacles to people completing an online bike purchase is the shipping and logistics component.

Much of that “friction” would be removed – facilitating a greater conversion rate for sales – through BikeExchange’s 100% purchase of Kitzuma, a rapidly growing business operating in 35 key US regions and servicing more than 30 North American retailers and brands.

“Kitzuma’s purpose-built logistics platform … will eliminate a significant barrier for many customers purchasing a bike online”

Kitzuma’s proprietary logistics systems, including a unique racking system within its trucks, streamlines the journey for sellers and customers buying bikes online and in-store. It removes the need to have the bikes shipped in boxes and delivers them ready to ride, including fitting and other customer services at the point of delivery.

He said it brought a major value-add for BikeExchange in the US – which is its key focus at the moment – and could be easily replicated in other markets such as Europe and Australia.

Global Expansion

“The Kitzuma logistics model and technology platform is globally scalable and can be replicated by market. The primary ambition is to roll out the service across the other BikeExchange existing regions,” Mark said.

“We have been talking with the business for a few months and following the business and from the start, the chemistry, alignment and strategic outlook of the two businesses was very, very clear.

“We have a big global market opportunity and the market for Kitzuma and BikeExchange mirror each other. We have the same bullseye.

“There are some really simple things we will be doing to help the growth rate of Kitzuma.”

He said the three founders of the North Carolina-based company – Taylor Essick, Chris Cosgrove and Tony Eggers – had done a terrific job developing and rapidly growing a business with a strong point of difference.

All three will remain with the business and “play pivotal roles in the continued growth of Kitzuma and integration with BikeExchange”.

Taylor told the media event the three partners were exciting by the prospect of rapidly growing Kitzuma as part of the BikeExchange operation.

Launched in December 2020, Kitzuma has swiftly grown to annualised shipments exceeding 6,200 – based on October 2021 figures.

“Our model depends on volume and right now that’s what we’re interested in,” he said.

“We want to get to 1,000 bikes a week as soon as possible and then 10,000 bikes a week.”

Based on the service’s US$200 (A$277) per bike delivery fee and projected business growth, including new services being launched in the coming months, Kitzuma is on track to start operating at a profit during 2023.

Taylor said the Kitzuma-BikeExchange end-to-end solution is very compelling for client businesses and end consumers.

Kitzuma offered a unique hub and spoke logistics model tailored to the ready-to-ride bike industry – underpinned by intellectual property informed by many years of experience in bike shipping – when many bigger logistics organisations were trying to figure out how it could be done.

He said the model, combined with the growing number of people looking to buy bikes online, promises to significantly challenge the market dominance of the bike brands.

“The bike industry has been traditionally dominated by big brands and their model of selling through retailers,” Taylor said.

“We are in a really good position to facilitate e-commerce in a new world for the bike industry.”

New Bike Tourism Service

Taylor and Mark announced Kitzuma is preparing to launch a new consumer service targeting cycle tourism and travelling with bikes.

The service would enable customers to drop off their bikes at a ‘travel hub’, such as a local bike store, and have it delivered to another hub or event.

Taylor said Kitzuma already had a schedule of 50 events it will be attending during 2022.

The service would be launched during the US spring, in March or April, and would reach its “high water mark” during the summer months of June and July.

Mark said the new service would “very much value-add beyond the initial purchase of a bike” and encourage an ongoing relationship between BikeExchange, Kitzuma and customers.

Cycle tourism was growing rapidly prior to the COVID outbreak and that trajectory would no doubt recover and continue in the future.

However, travelling with bicycles is “fraught with friction and we have a real opportunity with Kitzuma to help that area of the market”.

“It’s a huge opportunity, not only in North America but in all our regions,” he said.