A new financial study confirms a sad truth about bicycle retailing: most bike shops do not make a profit on the sale of new bicycles.
This may be old news to many, especially retailers wrestling with unruly income statements and stiff price competition, but the new report uses hard numbers to show that the failure of new bicycles to generate retail profit is much more than urban myth.
In fact, the report shows that new bicycle margins do not even cover their share of the basic operating costs of the average bike store. Overall store profitability is only possible because sales of higher margin items such as parts and accessories drive the averages up, categories now facing increasing price competition from on-line retailers.
The source is the NBDA Cost of Doing Business Survey, conducted by market research firm Industry Insights every two years since 1993. It is different from many surveys Continue reading
The average bike shop today is bigger than in the past, both in dollar volume and physical size, according to a new retail study from the NBDA conducted early this year.
The Specialty Bicycle Retail Study, published annually since 2004, reports average store sales of $997,761 in 2013, average store size of 5,562 square feet, and $179 in revenue per square foot, all record highs.
While these numbers are incrementally higher than the previous year, comparing the latest study to the one done a decade ago illustrates some of the striking changes in the bicycle retail marketplace. In the 2004 report, the average store average dollar volume was just $540,000, average store size was 4,822 square feet, and the average store produced just $111 in sales per square foot.
Clearly, the retail marketplace has changed, and mostly in good ways. The bad news? There are a lot fewer stores to enjoy the ride. There were 4,704 Continue reading
Recalls have been much in the news lately, and the bicycle industry has not been immune with recent fork recalls from Trek and Scott.
Retailers play a central role in assuring that defective products are identified and removed from use, and that consumers are protected. They also have ongoing obligations to protect the public from defective products.
As part of the NBDA’s Bicycle Mechanics Certification program development, project director Rich Kelly asked attorney Jim Moss to take a look at the mechanics of recalls, and to clarify the legal rights and obligations of the retailer. Moss specializes in legal work in the outdoor market, and is advising the NBDA on legal issues related to certification.
Here’s his overview of dealer obligations in recalls that can be applied to today’s recalls, as well as those in the future:
Product Safety and Recalls: Your Obligations as a Retailer
Retailers are a key part of the process of producing, selling Continue reading
Last week’s recall of 125,000 bicycles for defective forks was bad news for everyone involved.
But the solution has been energetic and purposeful, as bike shops nationwide leap into action to notify the public, fix the recalled bikes, and file the paperwork.
All this is necessary and even heroic, but many shop owners are expressing dismay at what they say is inadequate reimbursement being offered by the manufacturers for this huge and important effort. One compay has offered to reimburse dealers either $5 or $15 per repair, depending on the fork model ($5 for replacing skewer with washers, and $15 for fork or fork leg replacement).
Many dealers are saying their hard costs are much higher than that, and that the recall is a significant financial burden as they venture forth to solve a problem they did not cause.
The overall financial impact on an individual dealer goes way beyond the time a recalled bike spends in the repair stand, they point out. One Texas dealer estimated it takes about 45 minutes of dedicated shop time to process and repair a recalled bike needing the simpler “washer/skewer” repair, and maybe 70 minutes for fork or fork leg replacement.
Even if the time estimate is a little high or a little low, the fact remains Continue reading
In the new book Leading Out Retail (March, 2014), Donny Perry offers an energetic and creative take on the world of bike shops, their continuing efforts to survive, and their prospects for the future.
Perry has a decade of bicycle retail experience and is now global development manager of Specialized Bicycles Components University (SBCU). He is also known on the Internet as the guy who has proposed better pay for bicycle technicians.
Perry believes the future belongs to “a different kind of retailer with a different mindset.” Much of his book is aimed at describing that difference, and offering strategies for positive change.
Perry opens with an analysis of a bike shop universe in decline. He points out that the number of stores has fallen from 6,195 in 2000 to 4,055 in 2013. He writes that in the future, “the drop in the number of bike retailers is not going to be linear, it will be exponential.” He suggests a 35% loss in storefronts in 15 years, and then adds “I believe the change will be faster.”
Perry says retailers will be hit from three sides: Internet competition, consumer-direct sales by manufacturers, and bikes that are simpler to assemble, use and maintain. The result will be Continue reading
New York City bike shops were in the news last week when Bloomberg (bloomberg.com) wrote that the city’s one-year-old bike sharing program (City Bike) was hurting sales at local bike shops.
The article called bike shops “the collateral damage” of a program that has attracted more than 100,000 people to rent bikes for short-distance use, picking them up and returning them to 324 bike stations for a fee (daily, weekly or annually).
Charlie McCorkell, owner of Bicycle Habitat, was an early proponent of the bike sharing program. He was quoted as saying he supports it “philosophically.” But he has lost sales in the hundreds of units at his SoHo store, located near a bike station, while his second location farther from bike share has seen continued growth, the article said.
Other area bike shops reported declining sales as well after bike sharing was implemented, including Hub Cycles, Echelon Cycles and Landmark Bicycles.
Bloomberg concluded, “the very institutions that should be riding the success of a newly bike-friendly city are getting doored by it instead. For the neighborhood bike shop, declining sales are an unintended consequence of a program that most people seem to love.”
So is bike sharing really harming bike shops? The evidence here is certainly limited, Continue reading
Bicycle riding was down in 2013, as 35.6 million Americans ages seven and older rode a bicycle six or more days, according to new information from the National Sporting Goods Association (NSGA).
That represents a 9 percent drop from 2012, continuing a trend of flat or declining cycling participation in recent years.
There’s more to the story though. While adult cycling seems to be relatively stable, cycling continues to lose young participants at an alarming rate.
Despite an unexpected spike in adult participation in 2012 (to 28.5 million), adult cycling has remained at about 25.5 million participants since 2000. The 2013 number was exactly that: 25.5 million.
For the same period, the number of children (ages 7 to 17) declined 43%, going from 17.6 million participants in 2000 to just 10.1 million in 2013. That is the lowest participation number of the last decade at least.
The NSGA has been conducting sports research for 30 years. Its research has perhaps the longest history of any research program in the sports arena based on a consistent methodology. While we can quibble with some of the parameters Continue reading