Are Bike Shops Losing Customers To Online Retailers?
- by Christopher Jones
- Published: 9 October 2013
The short answer is “yes”; the longer answer is “yes, … but”. In recent years there have been bike shop closures in Australia; depending on who you are listening to, these closures are either due to customers buying online, or to poor financial practices and business management. Despite shop closures, many existing shops are operating successfully, new bike shops are opening, and new brands have made a place for themselves in the Australian market. So, are bike shops really losing customers to online retailers?
Exact figures for the size of the online market are hard to come by, but a picture can be pieced together from a variety of sources. Bicycling Industry Australia reports that overseas online sales accounted for 16% of the total cycling equipment sales in the $1 billion dollar Australian market, though this figure was based solely on credit card sales information. Calculations by industry insider website, Cycling IQ, however reveal more conservative spending – based on the annual reports of the worlds biggest online cycling retailers in 2011, the total online sales was around $38.8 million.
A mid-range value, closer to 7% of the market, can be calculated from previous annual reports of Wiggle, Chain Reaction Cycles and Torpedo7, and then compared against statistics on total overseas purchases by the 775 participants in the Bicycles Network Australia survey from 2013.
Regardless of what the actual numbers are, local bike shops still handle the bulk of bike and cycling equipment sales, but the volume of online sales is increasing yearly.
It will come as no surprise that accessories and lower cost items are easier for customers to purchase online; there is less risk. But, with an increase in online sales, cyclists seem more ready to purchase big ticket items, such as complete bikes.
One of the biggest criticisms from local businesses, and the organisations representing traders, is that the $1000 import threshold creates a significant disadvantage for local business. Items imported into Australia, including private purchases, with a total product and shipping value below $1000 incur no GST or customs duty charges. BNA’s online shopping survey, as well as an informal survey conducted in the Australian Cycling Forums, shows that eliminating this threshold (so imports of any value incur a GST and customs levy) would only have a marginal effect on customer spending habits.
Some retailers also complain that, for some products, their wholesale purchase price is close to the overseas online retail price! If a customer is purchasing on price alone, additional GST and customs duty would still not make the bricks and mortar retailer more competitive on price. It puts the onus on the wholesaler, but more so on the brands themselves, to take more effectively responsibility for their international distribution practices and prices. Leveraging brands for more competitive local pricing is a difficult proposition with the comparatively small Australian market.
While retailers should maintain a healthy overview of their business with an eye to the future, obtaining a complete picture of the marketplace is challenging and expensive. The Australian Online Cycling Marketplace Report 2013 has recently been published and provides statistics and insights into the purchasing trends of Australian cyclists, including changes in different cycling equipment segments. The report also analyses the motivations to purchase and outlines strategies for bricks and mortar retailers to remain competitive as online shopping trends increase. Find out how to get the Australian Online Cycling Marketplace Report.