Cycle shops weather economic storm
Posted on 14 Jan 2009
Specialist local cycle shops have witnessed like for like sales growth of 5% since the severe economic downturn in September, making cycling as popular as food and drink.
Latest figures from ACT / ActSmart show that whilst most retailers - apart from the supermarkets - report declining sales, the last 4 months of 2008 remained buoyant for the specialist cycle retail sector.
This result has been achieved without significant discounting and margin erosion, unlike leading high street retailers. In fact independent cycle retailers have been forced to increase prices over the past several months as the costs of raw materials and deteriorating exchange rates have impacted upon bicycle imports.
Fact File:
- Specialist retail sector core sales excluding Retail Finance and Cycle to Work Schemes
- September core business increased like for like 25% vs. 2007
- October sales decreased by (5.5%)
- November sales decreased by (7.3%)
- December sales increased by 0.9%
- September - December core business increased like for like 3.6%
- Total annual specialist cycle retail sales growth for 2008 is estimated at 6.8%
- Retail Finance (0% interest) sales increased by more than 26% during Sept - Dec
- Cycle to Work scheme sales increased by in excess of 100% in 2008
Although the bicycle sadly no longer features as a leading Christmas gift, having given way to computer games and other ‘stay in doors' activities, specialist cycle retail sales uplifted by 30% in December vs. November, but the real test will be the resilience of cyclists to keep out of cars in the cold early months of 2009.
Over half of specialist cycle retailers reported a turnover increase in December vs. 2007, with an overall core sales growth of 23.2%. This compares with just 37% of retailers reporting growth in November 2008. The widening of market expansion, particularly beyond the congestion charge benefits in London, is critical to the development of cycling as a whole.
So why is specialist cycle retailing so buoyant? Much has been made of recent Olympic success, petrol prices and Government initiatives, but the main reason for expansion of the specialist retail market is that the sector, both in terms of supply chain and consumers is still maturing.
The bicycle, in some form may have been around for nearly 200 years, but in business terms the cycle sector still has a long way to go. One of the key benefits of this gradual development has been the level of partnership that exists between speciality product suppliers and independent cycle retailers.
Over the past 15 years leading suppliers have largely avoided the short term attraction of selling out to corporate retail and have instead directed their supply chain investment into speciality retail. The retailers and suppliers can now benefit from this partnership in harder times, as will consumer choice.
Much of the recent sales growth is attributable to continuity of custom on parts, accessories, service and repair with the committed cyclist customer base. And with more people cycling regularly this customer base is growing.
Of course this would not be possible without the passion and commitment of retailers and their staff.
Local specialists beating the corporate big boys
The performance of smaller local cycle shops is in contrast to that of Halfords, the UK's leading mass merchant cycle retailer, which has reported a like for like sales decrease of 7.8% for September to December.
Despite initial proposals to roll out up to 50 standalone bicycle shops in the UK progress has been slow and all indications are that the specialist cycle market is proving to be a real challenge for them. Halfords are currently trialling a new store format in York and Norwich, but management are being very cautious about any further expansion of ‘Cycle Republic'.
What's happening in the USA?
Industry expert Jay Townley has told us that U.S. bike shops, on average, were ahead of 2007 in total revenue through the third quarter of 2008, but some had a slow to bad fourth quarter that reduced their overall revenue for the year to either slightly ahead of 2007 or about the same as last year.
This summary is very similar to what happened here in the UK, where retailers reported that October and November were poor months.
Cycle retailers have witnessed similar increases in service work and sales of parts and accessories as their UK counterparts, and these were the primary drivers of the increased revenue in 2008, and some of this should repeat in 2009.
Jay commented that unemployment is now over 7%, and will continue to increase through the first quarter of 2009 the US industry is predicting that most bike shops will be even with 2008, or slightly down, depending on local economies.
New bike sales in the US will probably be off, but service work and sales of parts and accessories are forecast to be robust enough to keep most bike shops on a solid financial footing through the year. However, this recession is unlike any that the US bicycle business (or any other) has experienced, so it will be a case of taking it a quarter at a time.
Jay added that the poor cycling infrastructure in the USA would not help cycle retailers in the short term, and he felt that here in the UK retailers benefited from both improved infrastructure and support / promotion of cycling on a broader basis. This could prove important during tough as well as good times.
Looking ahead
Consumers are maturing with the market and cycling is becoming a lifestyle rather than a consumable. What the specialist sector really needs now is Government investment, in cycling and independent retail. Exposure on the high street drives consumer demand, but small business requires financial and strategic support to provide longevity and expansion.
