Still a Market for Framesets Only, Says Chapter2 Founder

Adelaide, SA

Back in the olden days, that this author well remembers, it was virtually impossible to buy a complete high-end bike off the shelf.

You would have the frame made by a local hand builder, buy the components through a bike shop and either build it yourself or have your preferred bike shop piece it together.

Mike Pryde, founder of Chapter2, hasn’t quite gone back that far. His frames are not custom made and carbon fibre has replaced steel as the frame material of choice – but they’re made in small runs, with edgy paint designs that frequently change.

Most importantly, he only sells framesets, not complete bikes. And it’s mainly through dealers, not direct to the public, because he thinks there’s still a profitable niche market to be had for dealers prepared to custom build individual bikes to their customers’ specifications.

Mike founded Chapter2 in 2017. Based in Auckland, NZ’s largest city, he oversees a small team spread around the globe. We met Mike at the Tour Down Under, where Chapter2 was launching its latest gravel bike frameset.

“We felt that the Asia-Pacific region would be the best markets to build the business upon in its infancy,” Mike explained.

“We built Japan really quickly. That’s our number one market. We sell quite a few hundred frames per year in Japan and we have a manager there.

“Australia is now our number two market. Here in Australia, we’ve had a couple of starts and stops. We started with a local dealer in Melbourne that was our exclusive dealer for all of Australia. They were also supposed to sell to dealers in other parts of the country, but as a dealer it was very difficult for them to do it.

“More recently we started a relationship with CTN Imports – Matt Whitmore and John Tsekouras – and they’re now our distributor in Australia.

“Our third largest market is Indonesia.”

Mike said Chapter2 has been slowly chipping away at the North American market, including Canada, for the past two years during Covid, and it is now the company’s fourth largest market.

“One thing that’s unique about Chapter2 is that we are a frameset-only business. Our core business is developing, designing and offering carbon fibre road and gravel framesets. There are a couple of reasons for doing that,” he said.

“The primary reason is that as a boutique player, we want to stand out amongst the crowd. We spend a lot of time, effort and investment in not only designing the physical frame, but also the paintwork. We run our business almost like a fashion business.

“For each model frame we have, we launch a new colour every three to four months. That positions the brand in that boutique space – fast moving fashion, but still a high-performance product.

“The second reason is it allows us to focus and invest our time and effort into our core product, which is the frameset. One of the unique things about the bike business is that when you sell a complete bike, you’re investing a huge amount of money in components that actually belong to someone else. You’re putting money into Shimano, SRAM, Fulcrum wheels. But as a boutique brand with relatively small resources compared to the big companies, to have complete bikes ties up a huge amount of capital.

“If I have a million dollars of framesets in my warehouse and those were converted to complete bikes, which means you have Dura Ace group sets, nice wheels, that one million dollars suddenly becomes three million dollars. So the amount of capital you have tied up in inventory becomes a prohibitive thing to growing the market, marketing and things like that.

“From a consumer point of view, we’ve found that people who seek boutique brands love that experience of buying a frame set, sitting down with their dealers and looking at the specifications – ‘What groupset do you want on it? What wheelset?’

“When you buy a Chapter2, we see it like a journey – it’s like a project. It’s not a case of ‘I buy now and go and ride it tomorrow’.”

Mike has no doubt that selling through dealers is the best way to grow his frameset-only business model.

“Our dealers are so passionate about the frames they buy and the components they put on them,” he explained. “In Australia, we sell almost all our frames through dealers.

“In this modern world, everybody thinks everything should be direct to consumer. But the reality is you’re selling an expensive product. People want to see it, touch it and the fact that we sell a frameset only, it’s quite a difficult process for a consumer.

“If they were to buy a frame directly from us, they would still need a dealer to build it. They might as well go to a dealer first, where they have support on technical stuff, bike fitting, getting the right components, compatibility and all those other things.”

Mike and his Australian distributors used the Tour Down Under to launch the new Kaha gravel bike frame.

“With the Tour Down Under taking place, we recognised there was an opportunity to put a new product in front of a very large audience of very passionate cyclists,” he said.

“The Kaha is a racing gravel frame we’ve been working on for about 18 months.

“Each new product we do typically takes around 18 months from the initial idea, developing the brief, developing the design, creating the moulds and production.

“We launched the AO, our first gravel bike, at the 2019 Sea Otter Classic in California. But the gravel market has evolved quite a lot. Back in 2018/19 when we designed the AO, gravel was just starting to boom. People didn’t really know what it was.

“Initially, there were those people who wanted to go camping, adventure riding, cross country. But then we quickly saw a swing, even during Covid, where there were a lot more events for gravel racing.”

Mike explained very fine technical details about the Kaha’s frame geometry, suspension fork compatibility, tyre clearances, new gravel groupset compatibility, cable routings, padded in-frame cargo compartment, dropper seat post compatibility and other features. These details are beyond the scope of this overview article, but emphasised the importance of getting the finer points right if you want to win over discerning customers who will often be paying more than $10,000 for a fully built bike, depending upon the level of components they specify.

Within that amount will be a good margin for dealers who are prepared to go down this more labour intensive, dare I say old-fashioned, way of building and selling unique high-end bikes to their customers.

This business model certainly won’t suit every dealer. However, even in this age of big global brands offering a wide range of top-end complete bikes ‘off the shelf’, it appears the traditional, dealer-assembled method still maintains a viable niche.