Welcome to our monthly conversation with bicycle dealers across Australia which we simply start by asking, ‘How’s business?’
We always also ask a follow up question. As a recent survey of the Australian bicycle industry suggested that margins have declined, we asked everyone we called, ‘How are the margins you are getting on bike and P&A sales comparing to a year ago?’
We clarified this by saying we wanted their feedback on the ‘real world’ margins they were getting including any discounting that they were doing in response to competitive price pressures.
Brent Miller of Bike Culture, in Canberra ACT said:
Business is not too bad. We got three shops at the moment: Belconnen (ACT), O’Connor (ACT) and Albury (NSW). We’ve had Albury for a year and three months. That building is absolutely beautiful. That shop ticked along for its first year. I’m hoping to see a stronger summer for it.
It definitely opens a whole new box of challenges trying to manage people who are a three and a half hour drive away. It’s not like you can just pop across and have a chat with people and see what’s going on, on the floor. It’s a whole day or two day trip down there.
With the business partnership changing between me and George (former co-owner George Bunt who has since left), I’m taking on a lot more work. So it’s pretty hectic.
Our O’Connor store is trending more and more to being a higher end mountain bike store and high end servicing. Belconnen is more of a mid range store with lots of $600 to $3,000 bikes. Albury has a bigger spread because there’s less shops down there. It has everything from that really entry level kids bike all the way through to the occasional high end roadie and mountain bike.
We’re still strong with Trek. We do quite heavily on the Yeti front as well. We do a little bit of Niner and GT.
Road bike sales are actually down a little bit at the moment. We had a really good strong run… I think it’s that cycle. Two and a half to three years ago, we had a really strong run on road bikes. We were chewing through them really quickly. Mountain bikes were down a little bit.
I guess all the people are up to date with the fairly current road bikes so it swings back a little to the mountain bike scene. I reckon in a year or two’s time we’ll see it swing back to the road bikes.
(Margins) They’ve definitely come down. We’re pushing harder on the workshop than ever to keep our margins high. But we’re definitely seeing shrinking retail P&A and bike sale margins, that’s for sure.
We’re lucky that we’ve always been a heavily service based shop. We’re going to keep pushing along with what we do best, offering that customer service and not discount at all. And then back that up with lots of servicing. It’s the only way to do it these days.
Steve Burgess, of Manly Cycles in the northern beachside suburb of Sydney, NSW said:
At the moment, sad to say, we have fairly major construction outside our shop. In fact they’ve taken away the road and pedestrianised it. So it should be interesting to see how that affects trade down the road.
With Manly being a local shopping district as well as a hot spot for tourism, we’re used to fairly heavy traffic and tyre kickers. Hopefully it will increase the number of sales.
We did rely on the front entrance for pickup and drop off (of bikes). That is my biggest concern. Freight has been a total nightmare over the last month. We’re still waiting for Council to designate loading zones. It could have a big affect on businesses.
The work has definitely slowed traffic through the shop, but we’re a very high traffic shop and the amount of traffic doesn’t necessarily affect sales. Sales have been good.
We have been very strong in mountain bikes. The lower end has completely disappeared for us across all bike categories.
We used to be incredibly strong in the retro and cruiser bikes. Aldi has taken away a fair bit of that business. Reid has taken away some of that business, but we’re focusing on what we’re good at, which is mountain.
We now start at $599.
(Margins) We haven’t seen a big change with our main supplier. We are a Specialized Concept Store, so the majority of my purchases are from Specialized. But there are some other suppliers that have tightened things a bit.
I don’t want to point any fingers (laughs).
We’ve aligned ourselves with Specialized and I’m happy with where things sit. Look, I would always love more, but I’m aware of how bad it can be.
Changing times… just trying to adapt.
Steve Beames of Bikes and Trikes in the northern Victorian town of Swan Hill on the Murray River said:
Business is not too bad at the moment. We’re on about a par with last year, even though this month has been a little bit patchy leading into Christmas. But the last week or so we’ve been getting some good Christmas enquiries.
It’s very hot today. Up around the 40 degree mark and expecting 42 degrees tomorrow, so that may keep a few people inside. (On very hot days) We get a little bit of trade in the mornings but it gets quieter as the day goes on and the weather warms up.
Our main bike sales are family orientated, children’s bikes and that. But we’re seeing a bit of a drift into mountain biking, particularly with teenagers and younger women heading towards mountain biking.
I think it’s just the nature of the off road riding. But I think in Victoria it’s the development of the mountain bike parks at Mt Buller and the parks in the east, giving people those options to ride without having to deal with traffic.
We’re as flat as a biscuit here. We’re a bit unfortunate that we don’t have forest or national parks close to Swan Hill. Even though we’re a river town, we don’t have a lot of bushland around us, mainly agriculture.
The population of Swan Hill is just under 10,000. We’re the only bike shop but there’s a couple of sports stores and your supermarket avenues. But we’re the only repairist.
We’ve just clicked over 10 years and it’s been quite good. We’ve just done a shop refurbishment and we were lucky enough to purchase the building last September (2014).
We mainly deal with Giant and Specialized. We’re far enough away from major centres to be able to get away with it. (laughs)
(Margins) Look, they’re tight. We’ve got to hold fast. We certainly try to avoid discounting… as a last resort. We don’t have a lot of high end price point. We stick to bread and butter items and try to survive on those. Between that $500 to $750 price point.
You’ve got to sell a lot of them, but we’re in small market. This year our harvest around here hasn’t been very good and that can sometimes tighten up the purse strings a little bit.
But hopefully we’ll have a good Christmas.
Luke Wolfik of For The Riders an exclusive up market MTB store in the inner southern Brisbane suburb of Annerley said:
November has been good for us. We’ve seen a bit of an increase in sales. Definitely an increase over October for us.
A bit of return to the higher end Yeti’s and Santa Cruz’s that we like to sell. There’s been some new models come out which has helped things out in the last three or four weeks.
There’s good demand for the new Santa Cruz Bronsons. We’ve just sold three or four of those. There’s been people waiting for that to be released.
In the past three to four weeks there have been people getting into the new Giant 2016 models as well. And we’re selling lots of Yeti’s and Santa Cruz’s in particular. High end customised bikes.
We’re still 100% mountain bikes.
With Giant, which is our ‘big box’ brand, our typical sale is around that $4,000 to $5,000 mark. In your Santa Cruz and Yeti, it’s more around that $8,000 to $9,000 mark.
It’s good. We’re seeing a return to that $8,000 to $9,000 price point in the past three to four weeks. It’s what we specialise in.
We keep a lot of bikes on the floor at that price point, ready to go. We also keep a lot of frames that we can custom build in that price point. It’s our advantage, having those bikes (in stock) and having mechanics that can custom build them for people, a bit more unique.
They’re mainly recreational, enthusiast customers. They’re not hard core racer types. They’re 30 to 50 year age group who just want something a bit different to a Specialized, Trek or that sort of thing. They have a bit more disposable income… riding with their friends on the weekends predominantly.
They’re not super serious, but they want something that’s really good quality, really nice.
I guess it’s the same as if they were buying a car, they’d chose something of similar quality. We’re seeing those sort of customers really.
We kind of keep it really cool. Pure mountain biking, so no fat bikes whatsoever and no ebikes whatsoever. Really just a niche market of higher end mountain bikes, more in the gravity enduro, trail markets. Not so much cross country and not so much downhill.
Even more specific, 130 mm to 160 mm travel dual suspension bikes. So very specific, but there’s a big market for that sort of gravity enduro racing and just trail riding.
It’s coming on the back of what governments are doing building trails that suit that sort of bikes. Also promoters running events with those sort of bikes in mind that are pretty accessible.
(Margins) It’s been a bit less. Just with a bit of catch-up with the Aussie dollar, having to adjust retail and balance things out.
Obviously the dollar is significantly lower than what it was maybe this time last year, so probably we’re making a bit less, but hopefully we should catch up now.
Wholesale has gone up, retail prices have gone up. It should be maintaining a similar margin.
Geoff Todd of Malaga Cycles in the northern suburbs of Perth, WA said:
For the time of the year it’s a little quieter than normal. It seems as though people haven’t realised it’s only five weeks to Christmas. But we are starting to see a bit of a pick up, that’s for sure.
But certainly in overall labour, probably substantially down on previous years. There’s not that level of urgency out there in the market at the moment. People are coming to terms with an increase in pricing over the range of models that we carry.
Malaga is largely an industrial estate. However it’s bordered by a number of very family oriented communities. Some quite mixed demographics. To the south there’s some fairly high socio-economic neighbourhoods. Then directly to the east a bit lower income families.
Our business is very family orientated and we have a fairly strong following in that mountain bike trail area as well. We’re probably a 30 minute drive from the hills (mtb trails). An hour and a half on bike, so it’s a decent way. It’s an equal distance from the hills as it is to the coast.
Our key brands are Giant, GT, Merida and Norco for bread and butter and better quality mountain bikes. For boutique road, Cannondale.
We generally deal with three companies for bikes: Advance Traders, Monza and Giant.
We’ve seen a bit of an increase in path and trail. That’s a strong area for us. The area that has dropped off a bit is road.
(Margins) We’ve actually had a quite considerable improvement. We’ve found that by going to some alternate brands our margins have improved, where there may not be the same level of competition. Pricing pressure doesn’t seem to be as intense over the range of brands we’re doing.
Noel McCarthy of The Bike Station in the south western Adelaide seaside suburb of Hove said:
Business is very good. There’s been a huge pick up in the past couple of weeks. More than likely it’s because the weather has got so much better. More people are out on their bikes. And there’s probably a little bit more advertising about the Tour Down Under. That always drums up a bit of interest. People start thinking to themselves, ‘We’d better start getting a little bit fit so that we can enjoy the Mutual Community Ride,’ (the mass participation stage) and those kind of things.
Business is up a little on last year, which is good. We’d be predominantly road bike. Our road bike stuff would be 90% to 95% of what we do. We do a little bit in commuters and a little bit in mountain bikes. Although this year we’ve done a little bit more mountain bike, particularly in dual suspension mountain bikes, but we’re still predominantly roadies, around $4,500.
Don’t get me wrong, we still sell a lot of the $2,000 to $2,500 bikes to people just getting into it.
We just do two brands, Focus and Colnago, but we’re very much predominantly Focus.
We’re the biggest Focus dealer in Australia for the past five years. We won this award again this year.
When they combine all the Derby Cycle brands, Cervelo and the Kalkhoff electric bikes, we still come out on top.
We are a bit of a one brand shop, but we just find that they do it so well. The quality is so good and they’ve got bikes that hit on every price points. We do cyclocross, which would be a reasonably good side of it. We carry the full range, which is important too, so people can come down and see them in the flesh.
(Margins) They’re down. No question, and down by 3% to 4%. Although our sales are driven by complete bicycles, we’re losing out a little bit on P&A. We can see the amount of transactions we do. I always track the amount of transactions we do every month. Even though our sales are up, our transactions are slightly down (due to more bikes, less P&A).
Our workshop is very busy. We’re always booked a couple of weeks ahead, so we don’t have any worries there.
Having said that, we’ll shift it around to cater for a customer, but we’re constantly two to three weeks’ work on the go. We have two mechanics. That’s by choice because they’re two very good guys so we don’t get any repeats, you know what I mean. Once they’ve done it it’s done and it’s out, end of story.
