If this headline and article look familiar to you, that’s because we ran an abbreviated version in our Dec/Jan/Feb print edition of Bicycling Trade.
We didn’t have space for the full interview in that issue, and said we’d run in our December online edition, so here’s the full story! If you’ve already read the print version, you’ll see a note half way through which denotes where the extra content begins.
Advance Traders may not be one of the largest three Australian bike wholesalers just yet, but they’re certainly a hard nosed, well funded and highly focused company that is growing fast.
I recently visited the national headquarters of Advance Traders where I interviewed General Manager, Andrew Garnsworthy and Sales Manager Ged Collins.
There I got the distinct impression that this is a company that knows exactly what goals it wants to achieve and what strategy it has set to achieve its goals.
The key word that came up over and over again was ‘partnership’. Advance wants their retail dealers to become close business partners. Every strategy they’re undertaking, from expanding their brand range through to their new Bicycle Centre program is working towards this goal.
I started by interviewing Andrew, who was later joined by Ged to speak more specifically about their new Bicycle Centres.
Bicycling Trade: How can you possibly manage so many different bike brands? You’ve got DK, Merida, and Indi, Centurion…
Andrew Garnsworthy: Centurion we are discontinuing and we are replacing that with Indi Bikes just to provide an entry level offering below where Norco and Merida want to go from a price point perspective.
BT: You’ve also got Lapierre, Norco and Free Agent, so even taking out Centurion, you’ve still got six bike brands. Most of your larger competitors have just one.
AG: What we’ve done is effectively restructured our business to ensure that it’s brand focused. We’ve got one brand manager dedicated to each particular brand.
We’ve also made sure that the brands are complimentary. They work together from a retail prospective. So shops that will have three, four or five different brands, the brands sit pretty well together. From a Merida perspective being probably a slightly sportier option compared to Norco a little bit more recreational/urban in parts as well as having a strong strength in mountain biking. Merida’s road side is going from strength to strength as well particularly on the back of the new Lampre Merida team. It is a juggling act.
Lapierre’s been interesting in terms of having a strength with the Francaise Des Jeux team over the last 10 years. I think it’s the longest standing Pro Tour team and I was expecting a strength from a road perspective. In all honesty it’s probably been about 50/50 in terms of road versus mountain and the bikes probably sit at maybe a 10% to 15% (price) premium to Merida.
Lapierre see their main competition as more like a Cannondale or Scott. Not ultra premium but just something with a little bit more attention to detail around the finish.
Whereas Merida have a very, very strong quality and value component supported by Merida who I think is still the second largest quality manufacturer globally.
BT: You have comparatively narrow range of P & A. Box Components for BMX, Met helmets, Promax, Axiom.
AG: I guess we’ve been conscious that we want to have continuity of supply. It’s a very important factor for not only for our accessory offerings but our bike offerings so our partners can sell our products with confidence knowing that we’ve got the stock.
In terms of applying that same logic to what we have ranged from an accessory perspective, we’ve really narrowed it down to core products that our customers sell lots of and making sure that we’re strong in those components rather than trying to spread ourselves too thin.
BT: What was your career background before joining Advance Traders?
AG: Before Advance Traders I had five years at Flight Centre. I was actually Chief Financial Officer of the Flight Centre’s Queensland business, which is mainly a retail travel and corporate travel business.
My background has been in commercial finance prior to Advance Traders. I guess before Flight Centre I had about 15 years working initially in a chartered accounting firm, Price Waterhouse, post university and spent about seven or eight years overseas in various commercial roles from investment banking in London and Frankfurt and Tokyo to the US with a Telecom company for a couple of years before returning to Australia in the early 2000’s and I’ve been at Flight Centre or Advance Traders for the last 10 years.
BT: How do you find the bike industry compared to the big corporate accounting world?
AG: It’s a breath of fresh air in terms of combining a sport that I’m passionate about personally, an industry that I love in terms of helping people get healthy and maintain their fitness or improve their fitness with a growing, dynamic small business. It’s a perfect combination for me.
BT: How closely is the culture of Advance Traders related to Flight Centre both in terms of business logistics and in terms of actual culture?
AG: The culture is probably similar in terms of our sales team being very focused, very driven. We have tapped in from a marketing perspective and a business support perspective to the Flight Centre IP (intellectual property) and Flight Centre training skills and academies that are available to make sure that internally our team and externally our dealers have opportunities to tap into the scale of the business that Flight Centre offers.
BT: How does the relationship between Advance Traders and 99 Bikes work on a day to day business basis?
AG: 99 Bikes is run as a completely separate business under the direction of Matt Turner. From a business perspective, 99 Bikes is another customer in the Advance Traders dealer network and with day to day operations there’s similar contact that we have with all of our dealers. Done at an arm’s length on a normal commercial term basis where we work with them just as we work with independents to help their business, help drive sales, help add value to their overall business.
BT: Do you get any push back from independent dealers about the common ownership of 99 Bikes and Advance Traders?
AG: We did probably about four or five years ago and there’s still, from time to time, questions about that. We’ve been very conscious that as we grow and 99 Bikes grows that that’s a complimentary strategy from an overall group perspective in terms of working together on where sites make sense and where they don’t make sense. Where current dealers have an existing territory. An example of that is on the south side of Brisbane, Advance Traders didn’t have a dealer from South Brisbane to the Gold Coast and 99 Bikes will be opening a shop in MacGregor, which is a good location for them and a great location for us.
BT: How did the Pedal Group (99 Bikes and Advance Traders) perform financially over the financial year to 30th June 2013? (In our December 2012 online edition, we interviewed CEO Graham Turner, who said that the Pedal Group had profits of $620,000 (before interest and tax) on sales of $19.4 million for the six months to 31st December 2012. Flight Centre’s 2012/13 financial year Annual Report has been published, but it does not appear to include figures broken out for the Pedal Group.)
AG: For that financial year (2012/13) there was a significant profit improvement as well as sales growth across the Pedal Group of about 25%.
BT: If you visit 99 Bikes’ head office and this head office they’re both very ‘no frills’. You’re clearly tight on your operating expenses. There are other Australian bike companies in much grander, more corporate style headquarters if you like. Is that a conscious decision of yours?
AG: We’ve probably got a very practical application of a work space. Our area here in Albion is split between the showroom, warehousing for accessories, an open plan office space and a little section for a gym out the back behind the Lapierre area. So for where our business size is at for the moment and the brands that we’ve got on board, this is very practical and achieves all the objectives that we’ve got in having a very open style of communication across the business.
We do have a basketball ring out the front where we shoot a few hoops most days to mix it up and give everyone a bit of a break. We don’t need to be in a corporate head office kind of structure. This probably suits the culture of our team, our business and probably relates to our customers.
BT: How many staff do you have in total now?
AG: We’ve got 22 across Australia, which is broadly split in terms of half sales roles, which are based in the respective states and then the team here. That is a combination of brand manager roles, customers service, internal sales roles, a couple of finance roles and marketing sales operations.
BT: How many dealers do you have?
AG: On our books we’ve got about 250 dealers that buy from us. In terms of committed dealers, we’d probably have about 150.
BT: Would they all be Merida dealers, is that the primary brand still?
AG: They would primarily be Merida dealers. Although we’ve seen from the 2014 launch that the attraction from Norco, Lapierre and Met in particular has been very strong. There’s lots of shops that are looking for a multi brand offering as their customers are looking for a choice and also to simplify their business from the number of wholesalers that they’re dealing with. Hence the addition of an extra BMX brand with Free Agent, plus Axiom accessories and Met helmets to provide more of a one stop shop.
BT: Are you already in or looking to get into the e-bike market and if so through which of your existing bike brands?
AG: The answer is yes. However Merida have an e-bike program that’s powered by Bosch, which is a German electronics business that only services Europe at the moment. There is plans for that to change and we’ve been talking to Merida for about two years around when that will actually be, so we’ve got a cost effective and reliable product offering to launch it properly. Lapierre are in almost the same boat, they do have an e-bike offering but under the Accell Group which is their parent company, which is very large and we realise it’s a growing area in the Australian market.
(This is where the print edition interview finished.)
BT: What’s your outlook for the broader bicycle market and industry in Australia?
AG: My view is that the market will continue to grow as facilities are improved across all the states and as there continues to be a higher awareness of the value of health and wellness and the impact of fitness on people’s lifestyles.
We’re very positive about the overall market and overall direction and the passion of being involved in an industry that we love. We’re positive about the future and also the ability for retailers to be successful in this market in terms of ensuring there is alignment with wholesalers who are looking to partner with them. It’s an easy word to use in terms of making sure we’re delivering all the commitments to partner with the retailers to really add value to their business. It’s been a key theme in what we’ve built up over the last five years and will continue to build up over the next five to ten years.
We did a survey back in July to get some feedback on our performance and what were the most important components that we could help the respective retail businesses and the feedback was quite clear and compelling and really broke it into four areas. The first one was continuity of supply, ensuring that retailers never lose a sale and we built a business guarantee around that component.
The second one was strong feedback around our team having a passion to help. We really want to make it easy to work with and resolve any issues quickly.
There was also a theme around shops looking for more from less suppliers, just to simplify their overall supply chain.
There were various shops looking for customised business support and that might be areas of marketing, website, merchandising, in store displays, various training programs that we are deploying in each of the states to help upskill the shop staff and shop owners on how to make the product an easier sell. We also implemented a sales tablet this year to make products easier to sell. It’s a simple, easy to use tablet that’s got all our products and all our brands on it that has selling benefits of particular models or products.
BT: For the dealer to hold and use or to hand to the customer?
AG: Either or. Primarily for the dealer to hold and use and be able to very simply and quickly narrow down the best option or best couple of options for a customer and then being able to articulate the actual selling benefits of that particular product for the customers need rather than just ‘tech and spec’. They’ve been some of the key areas for 2014 as well as an extensive test bike program.
We also launched a platinum program which is focused on three main areas. One is helping a shop from a finance perspective. The second one is helping a shop in terms of various skills, be it sales training, mechanic training, product training. The third being assistance from a marketing perspective in terms of really sitting down and helping the dealer look at their marketing program and look at other ways to help it be more successful in a cost effective style.
At this point Andrew was joined by Ged Collins their national Sales Manager. He’s also tasked with rolling out Bicycle Centres which are similar to the concept stores being deployed by some other wholesalers.
BT: How many Bicycle Centres have you got on the ground right now?
Ged Collins: There’s about six right now.
BT: Do you have specific goals to how many you want and what type of shop you want?
GC: No specific goals. Obviously to get the economies of scale across marketing, the more the better. There’s no secret there, but we don’t have a number we’ve got to get. It’s more the stores come to us and as opportunities come up, we make a decision.
Basically at a high level you’re joining a network of stores. They’re all called Bicycle Centre. They’ve all generally got the same look and feel. There is an attraction for many shops to be part of a larger group.
Then there’s the nuts and bolts of it around signage and fit out, web, inventory support. Then the other sort of back end things like training around finance and marketing and just building out more of an all-encompassing support model than just shipping people a bike with an invoice attached to it.
BT: So what are you’re basing your model on? ‘Commit x percentage of your floor space for our product’ or ‘x percentage of your turnover’, or a minimum turnover threshold to be part of it?
GC: It’s a bit of a balanced model. We are actively asking the store, ‘How much do you think you can sell?’ We want to work with them on it around that number. Then depending upon the size of the store that they have, that relates to how much we’re willing to spend on the fit out. We’re not going to walk in and spend an exorbitant amount of money on a store that is in a low area in terms of population and can’t physically sell the bikes.
Yes, there is a commitment around floor space. It’s 85%. Legally we can’t say it’s got to be 100%. That’s okay with us. Over the last five years we’ve never said to a shop you can’t sell XYZ brand. That’s not the way we work.
BT: Let’s say it’s a good, larger shop in a good area. What sort of dollars are you prepared to spend on signage and fit out in that shop?
GC: For the sake of the argument, let’s just say someone says, ‘I’m going to spend wholesale dollars 500k a year’. They’re singing three to five year agreements with us. We look at it over the long period of three years and that might be in this instance $1.5 million and then we look at a percentage of that. In that instance that might be $60k to $80k in fit out. Which what we’ve managed to develop with our partner, goes a fair way.
Our strategy is not to own shops. We want to work with the stores.
BT: So far Victoria and Queensland only?
GC: Yes, but we do have more coming. We’re talking to shops in Sydney and Canberra, one shop in each and they’re advanced discussions.
I think the key thing to remember is that we’re actually talking to stores that are existing stores. We’re not rolling out a new network of stores that are going to pop up and compete with our existing customers or encroach on anyone’s territories. This is actually developed as a business support model for people that we’re already working with. I don’t think there’s any need for anyone to think that we’re either looking to own stores or create x number of new shops.
BT: Are you going to do overall Bicycle Centre marketing?
GC: There definitely will be overall marketing. That’s part of the logic behind it.
AG: We believe that the days when the wholesaler had a confined role and the retailer had a confined roll… those two divided roles are not going to be sustainable. They aren’t the best model moving forward with changes in the industry. We’re working much more closely with shops now. We’re assisting them with all sorts of business needs. They’re working more closely with us around, as an example, rolling out of new stores. How do we assist them in finding sites, putting a package together to get that store off the ground?
That’s why we’ve called this document our Partner Program for the first time, and not our Dealer Book. It’s a big difference.
