Inside Australia’s Largest New Bike Shop

Lilydale, Victoria

The Latz Report recently wrote about Yarra Valley Cycles purchasing a 1,500 square metre premises to be transformed into one of Australia’s largest bike shops.

On 13th September, we had the chance to visit the almost completed store to take photos and interview co-owner Ash Swann.

Lilydale is 42km east of the Melbourne city centre. It was a country town for more than a century but now suburbia stretches all the way there and slightly beyond. Close to the store is the end of the line for one of Melbourne’s electric commuter rail lines.

Lilydale is one of the main urban centres in the Yarra Ranges Shire, that has a fast-growing population which measured 158,173 in 2018.

Most importantly, this area has some of the best rail trails and mountain bike parks in Australia.

As mentioned in our previous article, the store has moved from a two-level premises that was just over one third the size of the new premises. Having more stock on a single level was a prime motivation for the move.

“At some points during Covid, we had in excess of 1,600 bikes in stock,” Ash recalled.

“It was probably even unsafe at times, trying to drag e-bikes upstairs, which was a challenge with narrow staircases.

“We invested everything we owned into purchasing the building, then fitting it out. (brother) Alex and I own the business and the building. Dad’s on the books as an employee.

“Our front door entry area will be a café called Pedal Pedal. It will be more of a coffee shop than a sit down full café.”

The land area of 2,385 square metres also accommodates 32 car spaces behind the store, entered via a side road.

A quick search of RP Data’s real estate database showed the property was purchased on 2nd October 2023 for $3,600,000.

With interest rates on the rise, that’s a serious investment for any bicycle retailer but Ash is taking a long-term perspective.

“It’s costing around about $100,000 per year more than what the rent at the old shop was,” he said. “But we’ll be at parity within two or three years and then the costs start coming down dramatically as we chip away at the loan repayments. One of the nicest things to see is that every time you make a payment against your loan, the loan amount comes down.

“With rent, we were about to engage in a new rental period with a minimum increase set in our agreement of 5%. I know that they signed a new lease on that place for quite a bit more than what we were paying.”

The main store area needed an entire new roof and ceiling, plus a complete fit-out, which they did as “owner builders”, both to save costs and have more direct control.

Clearly, the Swann family believes in the future of brick-and-mortar bicycle retail.

“Definitely. It’s the only way forward,” Ash predicted. “If we didn’t have to be online, I wouldn’t be online. I’d much prefer to just have people walking through the door. But people shop all day. They research on their phones when they wake up. They find what they want. They look at your trading hours.

“We’re online. We’ve got our connected point of sale with a Shopify account and whatever else, but I would love to not have the effort of constantly updating and changing things online.”

Meanwhile, the Swann family is still developing a second premises it had previously purchased in the main shopping street at Warburton, which is at the other end of the highly popular Lilydale to Warburton rail trail. In addition, the Yarra Ranges council is preparing to construct a Warburton MTB Destination, which it hopes will be one of the world’s best mountain bike parks.

Its long-running and highly-publicised planning and approvals process is nearly completion.

A Passion for Families and Kids’ Riding

Ash is determined to stock a full range of bikes for every age group.

“We’re predominantly mountain bikes,” he reported. “We also do pretty well with BMX and sell heaps of kids’ bikes. We’ve always tried to be an end-to-end store. We don’t only focus on the high end. We do all the way from a $300 to $400 bike, through to your e-bikes.

“Nearly 50% of our bike sales is e-bikes. They’ve been taking over the market, big time.

“It’s a large customer base looking for e-bikes now. It’s not about old people or unfit people. It’s about people wanting fun. Now there’s lots of parents buying their kids e-bikes, because it gives access to more trails, rather than using shuttles and things like that.”

Unlike some independently owned stores that have hitched their wagon to a single brand or bike wholesaler, Yarra Valley Cycles had at least a dozen or more bike brands on display when I visited.

“I’m happy that we have a lot of brands,” Ash summarised. “It gives us good choice. We did pretty well during Covid because we weren’t a single brand store. We had bikes the whole way through. We spent in excess of $2.6 million per year for two years in a row, just with Advance Traders alone,” he explained.

The Yarra Valley Cycles workshop employs five full-time mechanics but its notional charge-out rate is surprisingly low at about $90 to $100 per hour.

However, they mainly steer customers towards Bronze, Silver and Gold services which, from Ash’s recollection, cost $149, $349 and $700 respectively, plus parts. Gold services include a fork and rear shock service.

Ash is keen to keep the store’s workshop prices relatively low.

“The last thing you want to do is make owning a bike not feasible,” he said. “I want my customers to keep riding!”

Another important aspect of their overall business is Ride Time Bikes, which currently hires out a fleet of 100 bikes. The fleet comprises about 50 e-bikes, including around 30 dual suspension e-MTBs.

I asked if they thought the hire business was like a gateway drug to entice customers to then buy a bike?

“It’s a bit of both,” Ash said. “It’s way more labour intensive than we ever expected at the start. Your cost base is high. The wear and tear is high. So you have to have a price that’s reflective of that. We charge $160 for one day or $220 for two days.

“Processing is the thing. Single-day hires are never going to be that efficient. You’ve got to book it in, set the person up on the bike, get them out. Then bring the bikes back in, wash them check them over for any damage.”

He said they needed a large fleet of bikes so they could cater for group hires. Multi-day group hires were a sweet spot in term of profitability.

Ash also thinks P&A is hugely important to them running a profitable bike shop.

“Fifty percent of our stock on hand, by dollar value, is non-bike stock,” he said. “There’s $1.3 million worth of P&A. If you don’t have it in stock, you’re not going to sell it. We have a huge floor space where we can display it well.

“For example, we have in excess of 300 full-face helmets in stock. You’ll have people driving out from everywhere to try them on, to get the right thing. Areas that we know sell well for us, we can invest heavily in.

“For example, we’re never going to have a lot of road knicks. We might have $5,000 to $10,000 of three-pocket jerseys and road knicks in total. That just ticks over. But our orders of Fox, Troy Lee Designs and Dharco can be in the order of $50 to $100 grand.

“We get some price assistance because of that and maybe some payment terms.

“You shouldn’t be giving anyone an opportunity to go online. If you’ve got a good shop in your local area, why would people need to go and find that thing elsewhere?”

Future Growth Potential

Having invested so heavily, clearly Ash and his family think there’s future growth potential, but what growth areas are they specifically looking at?

“For us, juniors, big time,” Ash responded. “We want to make sure that our efforts are towards building the sport, not just flogging bikes.

“We’ll be at every downhill race in Victoria with a tent setup, stock, support. We want to make sure every kid that bought a dually during Covid has an avenue to ride them.

“Then obviously everyone’s getting older, so make sure you carry lots of electric bikes, including that hybrid range!”