As we wrote about in Shop Talk in our May edition of Bicycling Trade, Sydney City Motorcycles has created a new division called Sydney City Cycles and recently launched their first bicycle store.
It’s not just any store, but a large, state of the art Specialized concept store in the south western regional centre of Campbelltown.
Since then we’ve interviewed David Baines, Managing Director of the Sydney City Motorcycle Group, to learn more about why this major motorcycle retailer is getting into bicycles and how it’s been going for them so far.
“The company (Sydney City Motorcycle Group) was established in 1993,” David began. “I bought into the business in 2005 and left the corporate world. I have the responsibility of running the business and my partner works outside the business.
“In 2005 we expanded from a two large operations (in Kogarah and Lane Cove) to three operations with purpose built premises out at Campbelltown. The building was a little over 3,500 square metres. We have also got a purpose built smash repair centre at Clyde (in Western Sydney) that specialises only in motorcycle repairs after accidents. It was built for the insurance industry.
“We would be the largest operation for motorcycles in NSW. Currently the motorcycle business employs 85 staff.”
So with such a large, long established motorcycle business, why expand into bicycles?
“We saw it as an opportunity, as an extension of our existing motorcycle business,” David explained. “Many of our customers who are motorcycle owners are also bicycle owners. Both activities are principally a leisure activity both products are a ‘want’ as opposed to a ‘need’.
“We have a large customer base and when we did some surveys of those customers looking at how they spend their money beyond their motorcycling world, right at the very top was the amount involved in bicycling. So we saw the value that the Sydney City Motorcycle brand had and thought, ‘How we can extend that within our customer base by filling another need that they’ve identified?’
“Jumping back one step, we also have a lawn and garden care business. We went in that probably five or six years ago when Honda said, ‘You’re already selling Honda motorcycles, why not extent that out to customers who would like to buy a Honda lawnmower or Honda brush cutter?’ So we went down that path. It was successful and we found all of our customers were already existing customers, so we saw that being able to be overlaid within the bicycle market.
“Obviously the bicycle market is substantially larger than the motorcycle market (for Australia). That’s the reality. I don’t know what the dollar amount is for bicycles but I know there is over a million new bicycles sold a year. Motorcycles, you’re talking about 120,000 to 130,000 units a year.
“A typical unit value of the motorcycle today would probably be around $8,500, very different to what it was say in 2009. Pre GFC (Global Financial Crisis) it was probably around $12,500 to $14,000 mark.
“The Australian motorcycle market was probably 95% leisure and 5% transport. We were very much like the US market where it was all for leisure and none for practical purposes. Since the GFC there’s been a development of a base commuter market. We never used to be able to sell a brand new motorcycle prior to 2009 for under about $7,000 or $8,000 in the commuter market. Nowadays we can put somebody on a brand new Honda for $2,500.
“For $2,500 you’d get a 125cc very, very basic motorcycle, but it allows you to commute in the city traffic. It’s not something you’d want to be riding from Sydney to Canberra but certainly it’s fine to commute within the Sydney traffic. It’s opened up the market to people who have never ridden motorcycles previously.”
Specialized Concept Store
After researching the bicycle market and talking to the Australian distributors of various major brands, David opted to go with Specialized. He said it was because the liked the way Specialized saw their partner model with dealers.
“They’re heavily investing in dealers who are providing an experience through brick and mortar to the customer,” David said. “They saw that need for a relationship between the customer and the retailer and are prepared to support it. We found as a bricks and mortar retailer, someone who is prepared to support that as opposed to the internet where you buy your bike on the internet and hope you get the right product and you hope you get the right experience. Specialized best fitted our direction of offering a service, an experience and a relationship with the customer.
Their new store had only been open for just over a month when Bicycling Trade spoke to David, but he was keeping a close eye on bicycle sales.
“So far we’ve been pleasantly surprised with the amount of kids bikes we’ve sold. We had an expectation that Specialized has a position in the market place at the top end of the market. We expected the ‘brand loyals’ to be very supportive, but we’ve been blown away with the amount of kids bikes where price… to be honest, you can buy a cheaper kids bike than a Specialized. The customer traffic is building, obviously we’ve opened in probably the toughest time you could in economic and weather conditions, but we’re very happy with the way it’s progressing.
“We’ve sold adult bikes as well. I think the dearest bike we’ve sold so far is an S-Works at $9,999. We’ve only sold one S-Works so far and we’ve sold two $6,000 price point bikes. We’ve been open four weeks and about 60% of the volume has been sub $1,000. Half of that 60% has been kids bikes up to $499. We didn’t have any expectation at all to be selling kids bikes in those sort of numbers.
“It makes me feel very confident in the numbers that we did for the breakeven of the business, we should be more than capable of covering the sort of numbers that Specialized have indicated would be available in that sort of market.”
David said that they will also be stocking Specialized’s high end Turbo ebike but that Specialized and quickly sold out their first shipment, so none were available at the moment.
It will be interesting to see if and when Sydney City Cycles opens stores at their other two motorcycle sales locations, which are both closer to the city centre, where retail space is at a premium.
