Thursday , 3 December 2020

 

SA BICYCLE INDUSTRY FACES UNPRECEDENTED CHALLENGE

Covid-19 gave the South African bicycle industry it best winter ever, with a number of bicycle stores surpassing peak December sales in normally quiet months as demand for bicycles soared. But bicycle retailers are heading into a traditionally busy spring period facing an unprecedented, formidable challenge.

By Sean Badenhorst

When the lockdowns in different countries were implemented, the global bicycle industry was preparing for the worst. Instead, the Coronavirus Pandemic – and the reaction to it – has changed mindsets and priorities and given bicycle riding the biggest, most unexpected boost imaginable.

Before the pandemic, the South African bicycle industry was generally under significant strain due to an unusually quiet summer and a Black Friday frenzy disrupting the usual Christmas peak. This, combined with the sinking of the country deeper into an economic recession that saw some retailers reluctantly slashing already lean margins in price-matching battles just to stay in business. The 2020/2021 forecasts were generally fairly bleak.

Even during the five-week Level-5 hard lockdown, cycle retailers that could, traded online, unable to deliver, but reducing prices significantly just to move stock and retain some cashflow. But in a surprising twist, stock on hand when doors closed for the lockdown turned to golden opportunities as South Africa’s LSM 6-10 citizens took lifestyle stock and decided cycling looked like a fun way to get fit and stay healthy.

Level 4 was declared and from 1 June 2020 the South African cycling market became infected with the viral boom that had overwhelmed the UK, USA, parts of Europe and Australia. Learning to ride a bicycle as a small child is your first taste of freedom. Five weeks of forced home containment saw a mass embrace of freedom as former cyclists inflated tyres of almost forgotten bikes and bicycle retailers across the board experienced abnormal sales of entry level bikes (mostly mountain bikes) to eager newbies, as well as eBikes.

Some stores sold out existing stock fast and endured the frustration of losing potential business as they waited impatiently for new orders to arrive. Wholesalers felt like they’d hit the jackpot, clearing warehouse stock in record time, but also realised they weren’t prepared for the unexpected demand going into winter…

Bicycle and bicycle component factories are almost entirely based in the Far East, so were the first to experience the lockdown effects, with some factories, including those of component giants SRAM and Shimano, closing temporarily and others working on limited staff to comply with Covid-19 regulations. The disruption of regular work output, combined with the significantly increased global demand, has led to massive delays in new-bike delivery, especially for smaller or independent brands, which tend to move to the back of the queue behind the more established global brands.

“It’s been absolute mayhem for us! Initially, there was widespread global concern that factories, brands, distributors and retailers would not survive. Within weeks of the virus spreading, all factories experienced massive order cancellations and forecasts were reduced. Factories were nervous to accept orders even, unsure those clients would be able to pay!” explained Robbie Luis, Managing Director of South African bicycle brand, Titan Racing.

“What then happened was basically the opposite and it was totally unexpected from all bicycle industry sectors! New bike sales went through the roof in the USA, Europe and Australia, especially in the low-end category. We ended up having our busiest winter period with Titan Racing.

“We sold more bikes in six winter weeks than what we sold in any of our biggest months in peak season last year. Unfortunately, due to the Rand’s collapse, we held our pricing to assist the retailers with sales margin but we suffered large foreign exchange losses. So, while we moved lots of bikes, we suffered.

“Unfortunately, increased global demand, combined with the slow revival of manufacturing capacity after shutdowns (many factories only opened up with 20% operating capacity), lead times for bikes have moved out to as much as eight months later than planned. So while we are excited about the boom, we are unable to be a part of it for a while as we are sold out in most of our lines. We are, however, looking forward to expanding our Titan Racing distribution to Australia and the UK next year,” added Luis.

“I was fortunate to be in touch with family in Ireland and my business colleagues in Europe very early on in the pandemic, so I knew South Africa was likely to follow a similar lockdown strategy and planned accordingly with orders,” said Bobby Behan, Managing Director of Specialized South Africa.

“During Lockdown Level 5 we held an unprecedented sale – all online of course – with all the Specialized retailers, which helped clear a lot of old inventory or soon-to-be-old inventory. We took a big hit as a brand, but the retailers kept their margin, which was important for their viability. While boosting cashflow, this also made space for the incoming new inventory, which coincided with newly launched models such as the Levo SL, Epic, Epic Evo, Diverge, Rockhopper and the Tarmac SL7.

“Because we are a wholly owned subsidiary, it’s easier for us to make a plan, so I don’t believe Specialized are perhaps as affected by the stock shortage but no doubt we are impacted” added Behan.

“It’s been unbelievable! We could never have predicted such demand for new bikes. As a national retailer with five megastores and two online stores, we carry a lot of stock at any time. We are desperately low on entry-level and even mid-range bikes now,” said Andrew McLean, founder and director of Cycle Lab and Chris Willemse Cycles.

“Normally winter is the quieter time in the bicycle industry, but this winter has seen us hit some record months! While’s it’s great to grow the cycling pie with so many newcomers, we are in for a challenge over the next few months with the global bicycle shortage of entry- and mid-range bikes. We already offer trade-ins and finance on bikes and are about to start a campaign where we are offering to buy bicycles from the public so that we at least have options for those keen to start riding,” added McLean.

“With Cannondale, GT and Mongoose, we represent bikes in both the premium and entry-level sections of the market. Like others, we saw a huge rush in sales on the likes of our GT bikes after lockdown (or when exercise was permitted again). We are currently basically out of stock on entry-level bikes and we expect there to be a market shortage of these bikes for a while still,” said Nick Barr, Omnico National Marketing Manager.

“This shortage is due to global demand for both bikes and parts which is seeing manufacturers struggling to keep up with this increased demand. Because of this, orders that we had placed prior to lockdown, which should have been stock top-ups for us, have been delayed – as is the case with many other brands out there. The top end of the market, like Cannondale for example, has seen good sales but, given that the new Scalpel arrived just as we came out of lockdown, we are still relatively okay on stock levels on premium bikes,” added Barr.

“With regard to the bicycle shortage in South Africa, we have already pre-sold every single bicycle arriving before 31 December 2020! If we had to open orders until March 2021 they would pre-sell out too,” said Brandon Els, CEO of Rush Sports, which owns the Signal brand and distributes premium brand, Santa Cruz.

“We were able to switch some of the components specced on certain Signal models from Shimano to LTWOO, which enabled us to not only maintain our planned momentum, but increase the number of price points, which will no doubt boost the brand’s broad appeal even more,” added Els.

“The hard lockdown was a challenge, with only our website to sell from, but we temporarily changed our model from set pricing to price bidding, which was both novel and good for cashflow,” said Alex Bramley, co-founder and co-owner of Bike Market, South Africa’s largest second-hand bike retailer.

“Since regular trade resumed though we have been really busy! We haven’t been able to refurbish bikes coming in quick enough to resupply the demand. We don’t really focus on the sub R10 000 category, but we have a lot of activity around the R20 000 price point, which is more mid-range in the used-bike sector. And our workshop has been exceptionally busy as we now also service bikes like regular retail stores too,” added Bramley.

We have been really lucky to have a fully stocked warehouse until recently, but it’s starting to get a bit low. It’s not ideal but it’s not unique to us,” said Ian Walker, owner of Mello Velo Cycles and co-director of the Cycles United Group.

“We have had good stock of all the bike brands we sell, with a lot of Norco, the brand we import. We are receiving dribs and drabs of 2021 stock slowly, but the entry-level bikes in particular are seeing the biggest delays. And these are what we need most right now. It looks like the bulk of the stock will only arrive in November” added Walker.

Nobody could ever have predicted most entry- and mid-level bikes would be sold out in the winter of 2020! But that’s the reality and not necessarily the worst problem to have for the now-buoyant South African bicycle industry. It came out of nowhere like a magic spell. The Covid-19-inspired cycling boom has revived many a struggling retailer and lifted the spirits of jaded wholesalers.

While many industries are either on their knees or life support, cruelly crushed by one of the world’s harshest lockdowns, the South African bicycle retail industry, with over 200 retailers and more than 300 brands, has never looked so healthy. Is it going to last? Nobody really knows. But what we do know is that when you fall in love with riding bicycles, it’s usually a long-term relationship. And with thousands of new relationships with cycling having just begun, the prospects are looking good.

SA BICYCLE INDUSTRY FACES UNPRECEDENTED CHALLENGE Reviewed by on . Covid-19 gave the South African bicycle industry it best winter ever, with a number of bicycle stores surpassing peak December sales in normally quiet months as Covid-19 gave the South African bicycle industry it best winter ever, with a number of bicycle stores surpassing peak December sales in normally quiet months as Rating: 0

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