Matt Turner does not seem too fussed about titles or self-promotion. When Bicycling Trade interviewed him a couple of months ago in Sydney he was dressed casually in a plain white T-shirt, spoke quietly, and was extremely frank and open both about successes and failures during his nine year journey since starting the first 99 Bikes shop in Brisbane.
A cynic might say that anyone could create Australia’s largest chain of specialist bicycle shops when they have the financial backing of the massive Flight Centre Group, which was co-founded and remains headed up by Matt’s father, Graham Turner.
But if you read the interview below you’ll see that along 99 Bikes’ journey from a single shop to about 28 and counting, there’s been plenty of hard work, willingness to try new ideas and perhaps most importantly, to admit when certain ideas are not working and rethink.
Bicycling Trade: You first opened your first store in 2007. Has the decade gone as you expected as far as the development of 99 Bikes?
Matt Turner: In many ways no, it hasn’t gone as expected, but at the time I wouldn’t have known what to expect.
We definitely threw out some big goals at that point. I remember early on we had an internal goal of selling 99 Bikes a day within 12 months. I think last year we sold 99 bikes a day, so it took eight years longer than we initially said.
BT: Was it your idea to start 99 Bikes?
MT: It was my idea to start 99 Bikes, a pretty simple idea just to open a bike shop. We always had thoughts that we could expand it, but to start with it was just to open a bike shop.
I also remember having a bit of a debate with Dad because I’m pretty sure it was my idea and I said, ‘I’m going to open a bike shop,’ and he said ‘That was my idea!’ He was always pretty keen on it from the start as well.
BT: Have you done much riding yourself?
MT: Less riding since I started the shops!
I’ve done a few Ironman triathlons in the last two or three years. I started off doing a lot of mountain biking but now I do a little bit of mountain biking and more road riding. I swore I’d never do another Ironman again after the last one, which was Ironman Canada.
BT: According to the website you have 12 stores in Brisbane, plus stores on the Gold Coast, Sunshine Coast, Melbourne, Sydney, Adelaide, 26 in total. Is that correct?
MT: I think there’s 28. We just opened the Adelaide store and that makes it 28.
I think we’re getting pretty good at opening the stores and finding locations that work and not making too many mistakes on locations.
We have made a lot of mistakes on the location over the years. It’s a big influence and makes it potentially impossible to make money and easy to lose a lot of money if you get the location wrong. There’s no way to guarantee your location, but I think 90% of the time the locations we’re choosing work. But that doesn’t guarantee the shop’s going to work obviously because the people in the shop are the other big risk factor.
But if you get the location wrong, you could get the best people in there and they might break even at best.
One of the big location keys for us is exposure on a main road. I would call it a numbers game, with the several keys that might be part of the mix.
What we’re looking for does come down to a fairly simple scenario of a catchment area of 150,000 people for our model, which makes it a safer bet.
150,000 people need to know where that shop is, which means they need to drive past it regularly and see it.
Then it’s just a give and take with parking, access, the general area, if the areas perceived as a retail area and you’ve got good tenants around you. The rent per square metre is also taken into account and then we weigh it all up.
BT: What rent per square metre do you think a bike shop can handle?
MT: I don’t think it’s very high because I see it as bulky goods, with the goods taking up a lot of space.
It’s not going to be one number. It’s a bit of a varied formula, but I think anything more than $400 a square metre we’d be very cautious on. We might have a couple of shops up around $500 but I think anything over $400 is starting to be a big risk factor. You have to start weighing up the risk factors.
That’s not very high rent for retail. You can’t get A grade retail spots for that. This is the debate we’d have with the Flight Centre execs because they’re used to paying over $1,000 per square metre, no problem, so it’s a very different formula as far as property and locations go.
They don’t really understand it. They think we should be looking at trying out some shopping centre locations, but I don’t agree. At best I say to them, ‘Okay maybe it’s worth a try but it’s just going to cost us a lot of money!’ They still want us to try it.
BT: Even though no one else has ever really made it work in the bike industry?
MT: Yes. That’s what they like about it!
I’ve got half an agreement with them that, ‘Okay maybe we should test it out and I’ll show you how much money it costs us.’ But then it’s also just a distraction we don’t need as well.
BT: When looking for a new location, do you take into account the location of other established bike shops? Do you prefer to be near a cluster of bike shops or further away on your own?
MT: In general we don’t take it into account at all because there’s too many other important things to worry about like finding the location that works, the rent’s reasonable and all the other things that I talked about.
Adding in where other bike shops are would be too complicated and I think fairly unnecessary. There’s some pros and cons. If you’ve got a bike shop next door it might help, it might hurt. If you’ve got no bike shops around you there might be a reason for it.
It’s just not a big factor for us. We’ve never seen any results really be affected by either having lots of bikes nearby or no shops nearby. We’ve never seen any patterns showing whether it’s good or bad.
You could pick a spot because there’s no bike shops around and then within three years three have opened up. You can’t really control it. We can control what rent we’re paying, the sites we sign up for as far as rent, signage, access, parking… they’re all things we can control.
BT: Do you have a specialist site person running around looking at sites or is that part of your responsibility?
MT: About a year ago we put someone on to that role. I used to call it my ‘day job’, finding sites and managing the fit outs, but I don’t do that anymore.
BT: So if you’ve got someone full time in that role now, there must be more sites planned?
MT: As long as we continue to be operating well, we’re trying to continue to roll stores out. We’re a bit behind right now, but we’ve got a full time person on it.
BT: How many more stores do you think you’ll have in the next year or two?
MT: We’re trying to do about six a year. We were saying eight a year, but now we’re just pushing a bit more to slightly bigger sites. Our model is looking a little bit better on maybe the 500 square metre sites instead of the 300 square metre sites.
BT: What sort of turnover do you look for per site?
MT: It varies. It would need to be around $2 million at a minimum. Some of our shops might be able to make money at around $1.7 million, but below that they’re losing money. Three million would be brilliant.
BT: Do you have any that do over three?
MT: I think a handful of the bigger shops do around three.
BT: How much of a challenge is it for you to find suitably qualified staff?
MT: It’s the biggest challenge, but that’s the business that we’re in.
It’s all about the people.
But it’s half about finding them and half about developing them and both are just as important. If we’re slightly off the mark in that at the moment it hurts us seriously down the track. It’s a lead indicator in a way for our business. We have two full time recruiters and if they’re off the mark for a little while and not really on the ball for whatever reason it really hurts results over the next six to twelve months.
BT: Is there a typical staff profile? A demographic or type of person or background that seems to work best?
MT: It’s a tricky one. It’s a tough job for the recruiters. I don’t think there’s too much typical. The best recruiters are looking for a balance. There’s lots of different types of people who might be able to work, but recruiters will often go wrong by having a bias.
The most common thing that normally relates to is hiring people like them. They like to recruit people like them and that’s often where they go wrong.
For example, if they’re a really keen cyclist they’ll end up biasing the fact that, ‘This guy is a really keen cyclist, we should get him in.’
They need to be quite neutral, or at least acknowledge that they have those biases. Because there’s not one thing that makes a person good and if you try and narrow it down and say ‘we just hire great cyclists’ or ‘we just hire people that are really keen on bikes’ then that’s going to be an issue.
It’s more about the attitude and the ability of the person than the experience or knowledge. It’s trying to avoid getting too biased by their knowledge or their experience and more trying to find out what their attitude and ability is. That’s the tricky part. I think experience and knowledge is a plus, but it can completely be outweighed if they don’t have the right attitude and ability.
MT: I think it’s going pretty well. We’re not breaking any records. It’s still quite a small operation, but we’re maybe getting 10 or 15 people through a month. It’s always slowly growing. It’s not big numbers and not having a massive impact on the business as a whole by any means, but it’s doing well enough for us to want to continue with it.
BT: Is it a profit centre in its own right, as students have to pay a few thousand dollars if they want to do the full course?
MT: It’s a loss centre! (laughs) We lose money on the actual training. It costs us a lot more money to do than we get income, but hopefully we can make that back by getting a few new mechanics to work at 99 Bikes.
We’ve increased our number of mechanics significantly in the last year. On a per store basis, labour income (charges for mechanical services) is up 16%. As a whole the company on a per store basis is up 1 to 2% (on sales) and labour is up 16% (due to more mechanics and a higher proportion of mechanical work being done) so that is quite significant.
BT: You have a unique staff incentive program. Can you talk briefly about that?
MT: It tries to align and educate people with the business. That is one of the keys to it.
One of the unique things is we give people a breakeven line per person. We show them and educate them that, ‘If you can do this many sales or this many workshop jobs, at this point you breakeven for the company.’ That includes their wage, electricity, rent, everything broken down. It’s an estimate, but it educates them.
They get a small portion of everything they bring in from the first dollar, but once they get over that breakeven point they get significantly more back. So it means that what people can earn escalates pretty quickly once they’re over the breakeven point, so hopefully it aligns them with the business. They do get a base wage to give them some security because that’s what people need. They can’t take the same amount of risk as the business can take, but it means that some of our higher performers can earn extremely well.
BT: What can a high performer earn compared to your base wage?
MT: I’m not 100% sure on the exact current numbers, but our base is around $35,000 depending on a few things. Our average is around about $50,000 or a bit more but our top earner on the front line is probably around $85,000 or $90,000. Then it scales back, so there might be quite a lot of people over $65,000.
BT: Is that just for sales staff or is it for mechanics as well?
MT: The sales staff and mechanics are on a very similar structure. The mechanics on average earn more just through the way it’s set up. You could say it’s biased towards the mechanics, but also they bring expertise.
BT: What are your keys for attracting and retaining customers?
MT: Having a good website and getting people to our website, from a marketing perspective I think that’s one of the keys.
The reasoning is that for bikes, it’s a purchase that people don’t make that often. For our customers especially, it’s a purchase they’re not that educated on. So the first thing they do is research online. Anecdotally you ask our customer in store, ‘Have you visited our website yet?’ and pretty much they all have.
But I would also say the big thing is repeat and referral by customers. That comes back to our staff. Everyone likes to look for the quick win and how you get more customers in the door, but I think the best way from our business perspective comes back to our staff and what sort of job they’re doing.
It gets pretty obvious. Over the years we’ve seen stores go up and down in performance, some very dramatically, based on the people and the team that are in there. You can see the teams that are following procedures and are motivated with a good attitude, more customers are walking in the door. It takes years to build that up but only months for it to drop back down. So that is still the number one driver.
BT: Do you attract a different demographic of customer to independently owned bike shops or are you competing head to head for the same people?
MT: I think we’re head to head for most customers. We don’t attract or focus on the high end customer. The way we explain it internally is that if a customer is brand orientated, if they know about brands, if they’re keen on specific brands and are specific on the brand they are looking for, that’s a good differentiation point. We’re not going to chase them and they’re not going to come to us. But any customer who’s open to any brand, who doesn’t really know too many brands and isn’t too brand orientated, we would see them as our customer.
BT: What’s your average bike sale retail price point?
MT: About $600 is our average.
BT: How many Club 99 members do you have?
MT: About 150,000. It’s slowly growing. We sign up a lot every month and a lot leave every month, not actually leave, just drop out. It’s a bit of a no brainer to join. It’s a $5 join up fee and then they get the club discount, up to 10%. It’s what you call a no risk offer.
BT: Who do you see as your biggest competitors?
MT: Our toughest competitors are people who own their own shop and work in their shop.
That’s hard for us to compete against because those guys are passionate about it and they’re probably working really hard… harder than our store managers, put it that way.
BT: Frank but true. No one works as hard as a business owner!
MT: Then as far as specific companies, I think Reid Cycles we see as a competitor. I know they have different focuses to us.
I’m interested to see how they go in retail but I’m not sure it’s really their strength. They’ve got great product and price, so on these things they’re definitely a competitor we’d worry about. We have changed the products we stock and the price we sell them at to compete. We’ve definitely gone lower in price point and lower in margin to try and compete with them.
We look at competitors in the online space like Pushys and Bike Bug because they’re a fair way ahead of us in online. So we probably give them a little more focus because we’re still looking at how we can compete with them for online transactional sales.
BT: How much product are you selling online and shipping direct to customers at the moment?
MT: I think it’s maybe two and a half million turnover a year.
BT: Is that coming out of your Fortitude Valley head office or some central spot?
MT: We’ve just changed that to have our own stock for online sales. We’ve got a warehouse in Melbourne where we’re sending out online. It’s still in early stages of whether that’s the right decision or not. We’re hoping it will be. It’s a third party warehouse.
BT: Are you doing click and collect for bicycles in particular?
MT: Yes we do click and collect for bikes and that’s going quite well.
I think we’re doing about 300 bikes a month, so that might be 10 bikes per store. It’s starting to get significant.
If you include click and collect growth, then online is up on last year and it looks pretty good. If you take out the click and collect growth, we’re down. But it’s mainly that we haven’t done a good job operationally. I don’t think demand is down or anything like that. We’ve done the move to the warehouse, that hasn’t really paid off yet and we’ve got a fair bit to learn on that.
BT: Are you doing anything in the ebike space or planning to?
MT: Yes, we’re selling ebikes. We’ve done a lot of training of the staff. I don’t think it’s too significant yet, but hopefully.
BT: You’re the exclusive retailer for Cube in Australia. How’s that brand going for you?
MT: It’s been in place around about a year. It’s a great brand. We find it might be a bit of overkill for us as far as how many brands we have now.
BT: What are your biggest selling brands?
MT: Merida and Norco.
BT: What’s your day to day role now and your title?
MT: I’ve handed over 99 Bikes to Lin Pih who’s been working with me for eight years. She’s been the General Manager of 99 Bikes since this March. I’m still Managing Director. My role is to support her and still have input into the general direction into long term. Officially I’m part time, 20 hours per week, although I probably do more than that.
I think it’s good for the business to have some different influences and give Lin an opportunity to do her own thing and develop as a business leader and set us up to be able to grow over the next three or four years.
BT: You look too young to have been running a business for 9 years. If you don’t mind me asking how old are you?
MT: I’m 35 next week.
BT: Did you do any formal business training along the way?
MT: I did Flight Centre team leader training, and that was quite influential. Apart from that, I’m pretty curious and I read a lot of books and been to a lot of short courses, seminars and those sorts of things. Sometimes too much technical training, while it’s probably more often than not helpful, you want to think through the problems yourself as well.
BT: You strike me as being a very analytical thinker, not boxed in by pre conceived ideas.
MT: I think that’s my natural personality.
BT: What did you do prior to 99 Bikes?
MT: I worked as a physiotherapist for two years. That’s what I studied at university. Then 99 Bikes. That’s all I’ve ever done.
BT: You’re starting an interesting charity program. Please tell us about it.
MT: This is the first year. The company gives 1% of each staff member’s earnings for the year on top of what they’ve earned. We give it to them for them to give away.
We’ve done ad hoc charities and support, but this is trying to formalise it and give it a bit more direction and involve every staff member in that decision.
For the average person it might be $600 and they choose where that goes. We’ve chosen four initial partners for the program. They’ve all got something to do with bikes.
The four charities are Qhubeka in South Africa, Traction in Capalaba, Good Cycles in Melbourne and Bikes for Life based out of Sydney. We educate the staff on what they all do, but the staff can also pick any other charity in the world, so that’s a fifth option. Only about 15% have chosen their own charity.
We’ve also got the website www.pedalgroup.com.au that really focuses on that whole program.