Punctured sales for bike retailers

Motivated by green consciousness and health concerns, more people seem to be riding to work than ever before; thousands of MAMILs (middle-aged men in lycra) work up a sweat on expensive road bikes every weekend; and inner city hipsters on “fixies” clog the streets of Fitzroy and Newtown. By all appearances, the bicycle retail sector should be booming.

There’s also the little fact that the sport of cycling has its highest profile ever in Australia, courtesy of Cadel Evans’ 2011 Tour de France win (though no such luck this year).

But the hard figures and the stories of business collapses in the bike retail sector tell a very different story.

An IBISWorld report from April 2012 shows a sector engaged in a tough mountain climb rather than basking in champagne on a winner’s podium.

“The number of Australians riding bicycles has surged in recent years. However, businesses selling, manufacturing, repairing and servicing bikes fared poorly, with industry revenue contracting by an estimated 1.4% per annum over the five years through 2011-12,” the April 2012 report says.

To dampen sentiment even further, and partly contradict IBISWorld’s findings, a recent study by Sydney University health researcher Professor Chris Rissel has actually found that, on a per capita basis, fewer Australians are riding bikes now than they were 30 years ago. His research blames mandatory bike helmet laws for much of that per capita decrease.

A highly fragmented industry made up of varied segments and niches, nearly 45% of bikes and accessories are sold through independent and specialist bicycle retailers, according to the IBISWorld report.

As with the majority of Australian retailers, bicycle retailers are dealing with the challenges of an online retail environment, with the entry of overseas online retailers into the marketplace especially eating into the bike accessories (helmets, safety gear, modifications, etc) that used to earn retailers a little more gravy on top of the low-margin sale of standard bikes. Indeed, a Productivity Commission report from last year into the retail industry recognised bike parts as one of the “smaller, non-perishable and easily shipped goods” that lent itself to online retail.

“These guys often have nothing better to do with their insomnia…”

They come into Andrew Jones’ shop in the leafy Melbourne suburb of Gardenvale armed with a list of techs and specs that would make a trainspotter blush.

These people are serious about their cycling. Jones’ shop Cyclespeed caters mainly to the triathlete market – another little niche within the wider world of pedal pushing retail.

“We’re in an enthusiast’s market and these people are very educated,” Jones, co-owner of the shop, says about his customers.

“I love it. You have to respect your customer because these guys often have nothing better to do with their insomnia than research this stuff on the internet and come in and tell me about it.

“They’ll come in here and teach me about the products!”

Cyclespeed started about six years ago, more as a mechanical workshop than a retail outlet. The retail aspect of the business has grown but the business still places a strong emphasis on its service offering.

“We started because no one else was doing it this way. We could see that guys paying decent money for a bike didn’t necessarily want a 15-year-old kid with a monkey wrench mucking about on their bike.

“Obviously we are also selling stuff, but we are trying to focus on the stuff you can’t get online.

“We’re more of a service company that also sells products.”

The products that do roll out the door at Cyclespeed include road bikes that sell for between $5,000 and $8,000 – with even pricier options for the especially well-heeled fitness freak.

Cyclespeed’s emphasis on service is not unusual and many retailers are starting to see the benefits in providing quality customer and after-sales service.