You don’t get too much more of an upmarket shopping precinct than the intersection of Chapel Street and Toorak Road, South Yarra. This is an ‘old money’ suburb just up the hill across the Yarra River from the city centre of Melbourne where the median house price is $1.6 million and the most common cars are BMW’s and Mercedes in any shade of grey that you could wish for.
As a consequence, retail space is in demand and shop rentals are high. But on a prominent corner location, right in the heart of Toorak Road, South Yarra a bicycle shop has been going from strength to strength for a decade. We recently spoke to the founder and owner of Giant South Yarra, Craig Jansen to find out the secrets of his success.
Bicycling Trade: How long have you had this shop?
Craig Jansen: We opened 10 years ago in 2007.
BT: Did you start it from scratch?
CJ: Yes, it was started from scratch. It was a factory outlet for ski clothing when I took it over, it was an empty shell.
I was a communications engineer, working in everything from mobile phone data to internet, helping Optus roll out their internet product for homes and pay TV in the early days. Then I worked for a little bit as an electrical engineer and then I raced for a few years.
BT: You were quite a high profile mountain biker back in the day…
CJ: I raced downhill for five years on a national circuit here and four years in the US racing on the NORBA and World Cup circuits over there. So I was based here for the majority of the Australian season then I’d move over there and live in Big Bear or in an RV (recreational vehicle) one year and another year we lived in Park City for a bit and Tahoe - wherever we could find accommodation.
BT: Were you kicking around with Scott Sharples and Michael Ronning and those guys?
CJ: I shared a house with Michael, Scott, Luke Stockwell, Tony Carson at one stage, Mick Jamieson, as many Aussies as you could push into one place! Then I travelled with Josh Street for a season as well and Steve White.
It was great to have so many Aussies over there because it was pretty tough travelling around and not really knowing anyone. Pre internet days it was very hard to make introductions.
I have forged some strong bonds on a personal level and business level after that. Matt Bazzano was in the USA. He was working as a tech support for Shimano in ’94 I think it was and hearing an Aussie accent in the crowd was something special. We still catch up even in the years when I wasn’t in the bike industry, which was great.
Then injury, married life and the reality of making money to buy a house changed and settling down into a career.
BT: When you started this shop what attracted you to this area?
CJ: The location. We had actually had started negotiating a lease on a property about 5kms away and it had stalled somewhat. So we were actually driving around and a friend of mine had saw a for lease sign up and knowing that it was a bike shop previously, which was probably 10 years prior to that...
It was once Warren Cay’s, Cycle Science. We looked at it and then spoke to the landlord but it wasn’t really our ideal location because retail in this area, Chapel Street, is at such a high volume. We weren’t sure that a bike shop would work here.
There were a lot of major fashion concept stores in this area which push rents up as well. That was another challenge, trying to negotiate a rent that a bike shop could actually maintain instead of taking on the likes of Country Road and Adidas who were just around the corner.
It’s been a great decision to be here, I wouldn’t change it for the world and don’t know why I didn’t look at it to start with because it has been fantastic.
It’s 145sqm of floor space and 40sqm of mezzanine. It’s a challenging space because it doesn’t really have any square edges to it so all of our shop fit outs have had to be unique to the store to make them work just with angles and the crazy shape of the shop.
At the time we moved in this was the largest shop front window space on Toorak Road, which was the appeal.
BT: You’re putting through a lot of sales per square metre of shop space, what’s your secret?
CJ: I’m not sure if there’s a secret. We try and just have a system that works. We’ve tried to work on a system that meets our customers’ expectations. I know that that’s everyone’s chase, but to meet a customers’ expectation along with the logistical challenges that the store presents, whether that be presales or having enough stock on the floor because we really only have the space for 50 bikes on the floor at any one time.
Instead of saying. ‘It’ll be ready at one o’clock on Friday!’ and then them turning up at one and we’re still pulling it out of the box, we ensured that that was exactly the way it was, the same as if they were having a new car delivered for example.
Keeping the back end systems up and running and understanding our stock I think has been the challenge. That’s one of the biggest changes that we wanted to try and do was make sure we understood our stock holding and also our suppliers across the board to make sure that we could meet their expectation of the customer and try not to let them down.
We didn’t start with a floor full of Dura Ace bikes that sits in front of us today. It was with family orientated bikes, doing home deliveries to families. If we didn’t have a 16” bike on the floor we made sure we drove it there so they were never inconvenienced by the fact that we couldn’t get our act together. I’d rather lose money than lose face.
BT: It’s a very high end shop now.
CJ: Sometimes it looks that way. But I think we still have a really strong family market here. The demographic here is still quite family orientated, so we try and have a really good blend. For the holiday season we have more family bikes and more road bikes towards the tail end of the cycling season in to winter, with transition into mountain bikes as they come in. Just try and have a good healthy blend and also that we hold stock outside of here or upstairs to make sure that if it’s not on the floor we can still supply it.
BT: With this tight space and so much throughput, you’d have to have an offsite warehouse somewhere?
CJ: We do. We have one out near home. But nothing at home, my wife would kill me!
We spend a fair bit of time driving out to wholesalers to ensure that delivery time frames are met and not lost by couriers.
BT: You actually drive to the wholesalers and pick up stock?
CJ: Yes I do. I’m pretty lucky in the fact that a few of the bigger wholesalers are Melbourne based, which means we can cut down the delivery timeframes, courier loss and those sorts of things by just making it part of our routine.
BT: How many staff do you have here?
CJ: Including myself we’ve got seven.
BT: Your workshop is upstairs?
CJ: Yes workshop upstairs, two mechanics upstairs, two to three on the floor at any one time downstairs and then part time and casual mixing in for the weekends. We’re seven days a week here, so staff is everyone’s biggest challenge. To have a seven day a week staffed store where we have a consistency for our customers that they can walk in on a Monday or a Sunday or a Thursday to make sure they get the same knowledge and expertise has been a real challenge but probably a testament to the people we have put on and some of the wholesalers enabling us to train our staff to have enough knowledge to service the products we have.
BT: We just visited a nearby Giant dealer where 2017 bikes already had quite substantial discounts marked on their price tags. Is getting tougher to hold margin? What’s your strategy to do that?
CJ: Unfortunately it has become tougher because some stores don’t see the worth in the products that we have, or they’re maybe not as engaged or in tune with being a cyclist. For me I’ve been doing this for a long time riding bikes, and for me although it’s a business I want to make sure that people get the right product and the right expertise and that we’re not selling them something they don’t want or the wrong sized bike.
We’ve tried to go the other way and actually sell our expertise, and our product knowledge. We’ve invested pretty heavily in the Guru fit machine to give the consumer a fit that’s exactly right for where they’re at at the time they sit on the machine. We use our expertise in the fact that we do have a really strong presence in triathlon and road in Melbourne so a lot of people will see the athletes we look after.
Everyone can sell on price. Tor me it doesn’t achieve anything and in a competitive market we have chosen to do it that different way, sell off the expertise of what we have.
BT: When you do the Guru fit do you charge for that as a service or when they’re buying a bike is it part of a package?
CJ: It depends on the sale because certain bikes dictate that’s part of the product and we’re happy to bundle that into the sale. I think anyone who buys a performance based product deserves to have a fit.
It’s about how much pleasure they can get out of it while not causing them any discomfort so that they hate cycling and they never choose to buy another bike down the track.
BT: Sounds like you spend a fair bit of money on rider sponsorship?
CJ: Yep. We’ve used sponsorship in a couple of different ways. We have our athletes and we also have our ambassadors as well and they can be from all walks of life. It can be from the corporate sector, from sporting backgrounds outside of cycling, so we have a lot of AFL athletes and retired AFL athletes who can’t run anymore for example they really want to do some different things, Wallabies and different sporting backgrounds. So we do put a lot of emphasis on that because it tells a bigger story about the relationship we have with not just the consumer but the fact that our ambassadors are selling the same message and we try and make sure they’re all in unison.
BT: You’re a one brand shop? You’re not doing any niche brands on the side?
CJ: No. We changed five years ago to be a single brand. We have sold other brands in the store over the journey, but we’ve chosen to just go with Giant.
BT: What’s your thoughts behind that?
CJ: We felt that we could tell a better story if we invested more into a single product and that instead of trying to sell five products averagely let’s try and sell one product really well.
At the same time some of the larger brands were looking for similar opportunities and we had a great relationship with Giant from the ‘get go’. For me it was a no brainer to go across to someone that we’ve worked really hard with who like myself had invested in technology to also help sell their product which is something I was interested in.
Also the fact that the secret was out. 15 years ago no one believed that brands like Giant made bikes for other companies. I think that as the internet began to dispel the rumours people started to realise that some of the bikes they had didn’t work. For example I had a European brand that was made in a factory that was of lesser quality to the bikes we sell today. My view was I already sell a premium Asian brand, why would I want a second tier one and lie to a customer about the fact that it’s a premier Italian made product when it wasn’t.
It was the best thing I’ve done in the ten years I’ve been here, choosing to align myself with Giant’s brand.
To be honest, I don’t tend to focus on what any other dealer does. If I do, it’s not then following the rest of the model we’ve done. My model is to work on what my customers want and if my customer is standing in front of me talking to me about a bike it doesn’t bother me what another store does and what prices they have or where they are.
Most of the time people are usually talking about stuff they don’t have or they’re price matching bikes that aren’t on the floor at other stores. I think that’s the key, inventory control and understanding who has got what.
BT: Between here and the river are some of the dearest houses in Melbourne…
CJ: Yes, up the hill in Toorak, the next suburb is. The misconception about the demographic for South Yarra is there is a lot of high density and I suppose the numbers of doctors, lawyers and accountants is fairly high, but what the numbers don’t show is the fact that a lot of them are probably just out of uni and have massive HECS debts. So although their income is high or relatively high compared to the median, their actual cash is lower so that then creates a bigger challenge, you’ve got someone who’s intelligent and knows what they want but usually can’t afford it.
There’s always the facade of this area, but not necessarily always the truth.
It took two years for people from Toorak to actually want to come into South Yarra or buy from here because they didn’t think we were going to stay here, because the store had been a transient style store for the 10 years in between the two bike shops. After they realised that we were here to stay they would start to come down and realise that we could offer them the level of service that they were used to in the style of purchasing they did.
We always get asked even from people who travel from far and wide, do they pay more because they’ve come into South Yarra? We run off recommended retail so anyone can see, whether they’re coming from Currumbarra or Leongatha, to come and buy a bike or to be fitted, they know they’re going to pay exactly the same prices as they would have at the other 12 stores they’ve passed on the way to get here. So there must be something else about the appeal.
BT: People really do come all the way from Leongatha? (over 100 km)
CJ: We have people fly in from interstate. We have people drive in from country Victoria. We have our country markets outside of where there’s key retailers. We’re amazed sometimes that people do travel to get here. They usually travel for a specific reason. It’s the product and/or the fit, that’s one of the big things we find people from country Victoria. I’m amazed that people will drive past 10 or 15 stores to come to us. Sometimes that’s a network style thing as well. We understand because their buddy might have got it here or they might have had someone else they know. I’m amazed. We’ve got multiple customers living in Singapore for example and they come here and we send stuff to them.
BT: Do you have an online store as well?
CJ: No. We have a very small online presence with Bike Exchange, but it’s more for consumable items. It’s not really a focus of ours to try and compete with online. I think it dilutes from the experience we’ve had for people who’ve come in here. I don’t want to send a message out for an online style and an instore model so I think having consistency has always been what we’ve tried to look for.
BT: Has the mix of the bikes changed at all in the 10 years, as in the proportion of different bikes that you sell?
CJ: Yes, definitely. Early days we were a lot more recreation to mid road and now we’re probably still with the recreational market but I think the diversity of the bikes changing from a stereotypical hybrid bike now has enabled us to have more unique models. Our customers might be on their second or third bike and now instead of coming to buy a hybrid they’re coming to buy a road bike. So it definitely has changed. Our road and triathlon market has grown massively and we try to cater for that, that’s probably been the biggest change.
Although, my passion has always been mountain bikes that’s the one thing about an inner city store. I’d like to do more of, but people around here just don’t have the space to keep a mountain bike, a tri bike and a road bike.
BT: How many of the ebikes have you sold?
CJ: We’ve sold a few. I think it’s an emerging market.
I think it’s a great concept to add a new style of cyclist. I think that’s the difference. The traditional cyclist doesn’t understand them but the easiest way I sum it up to anyone who asks, why ebike? I went for a ride with my 71 year old mum over Christmas. I haven’t done that since I was a kid. I think that’s the market we don’t understand. It’s the market that aren’t cyclists and I think the appeal for that is going to be huge. I think the way that they’ve gone with the pedal assist model is the perfect mix.
