When it comes to the manufacture of high quality bikes and components, bike brands turn to Taiwan first rather than mainland China. The average export value of a Made-In-China bicycle is $56 (USD) whereas a Made-In-Taiwan bicycle averages $426 (USD)1. We have all seen the “Chinarellos” and the $400 generic open mould carbon fibre frames online, so it’s no wonder that Chinese made bicycles and gear suffers the stigma of being copies, counterfeit, and/or simply inferior.
When a new bike brand from China contacted BNA, I first thought “here we go again”, but this time it was different. Falco Bikes actively promote being different from the “cheap” Chinese bike companies you find selling through eBay and Alibaba. The first hint is their pricing, which definitely puts them into a different category, as their cheapest carbon fibre frame is $1599 (USD) and their Procella wheelset is $1299 (USD).
Falco Bikes equate themselves to well known European brands with the same time spent on R&D, quality control, and testing, as well as production and materials, but without the same advertising expenses, pro-team sponsorships, and distribution and retailer costs and margins. The results are top quality and performing frames and wheels, but at a fraction of the cost for customers.
This all sounds great, but we live in a world of marketing hype so I asked for an interview with the boss to find out more about their history and the approach that Falco take, but also to ask some of the tricky and revealing questions.
Company co-founder, known by the name Binny, was happy to be interviewed and was quite candid in answering, so we are rewarded with a revealing insight into Falco Bikes and the Chinese/Taiwanese manufacturing world.
BNA: How long has Falco bikes been around and how did the company start?
Binny: The company was formed in July 2011 by a group of cycling enthusiasts who would like to finally make many great accumulated bike ideas into reality.
BNA: China and Taiwan dominate the globe for bicycle and bicycle parts construction. Both Giant and Merida originated in Taiwan and are among the World’s biggest bike brands. Is there room for more Asian brands?
Binny: Well, let’s face it, China/Taiwan has dominated the manufacturing aspect of the bicycle industry but is still way behind on innovation and design. Even Giant and Merida have not been particular strong in innovation and design. They have come a long way compared to other Chinese brands, but still are not exactly cutting edge. Of course, their execution, cost control, economy of scale are probably way ahead of western competitors, and that’s why many western brands use them as OE suppliers.
We are different however, as in our minds, innovation is not a means to an end, but rather an end itself, as we have all personally owned Pinarellos, BMCs, and Times, and we would not be making bikes unless we can make better ones.
Falco Peregrine road bike… in hot pink and Mad Fibre Wheels
BNA: Customers who buy a well known brand are also buying a sense of security. How do you show your customers that you are a reliable brand with good quality control?
Binny: Yes we are fully aware of that. We first started thinking about forming a company to make bikes back in early 2010. However, it was critical to find the right factory for the job. There were many factories that work for big western brands, whereas there were more of them that churn out $390 eBay frames that were eager to get a new client, and some that even did a bit of both. It took us 18 months of due diligence to finally settle on the facility we were happy with, which is well documented in our weightweenies thread. This factory currently has contracts with a significant number of western brands including one named after a former world champion and a couple others that have been ridden by former world champions. This is as much as we can disclose for contractual confidentiality reasons.
During the selection process, we focused tremendously on testing. Since we started manufacturing, we have consistently placed a huge emphasis on QC and testing as well. Even in the design process, there were times we consciously overbuilt a frame or parts at the expense of pushing weight thresholds. Some of our team members have been with preeminent international companies including top Wall Street investment banks, and it is only natural that they have carried over their customary demand for absolute perfection.
BNA: Is your quality control and product comparable to other well known international brands such as Specialized, Scott and Giant?
Binny: Yes, absolutely. First and foremost, we are huge about product safety, everything in our design and manufacturing process is centered around making safe products to use. Beyond that, we are keen to make beautiful and properly executed products. This road of course has not been easy. Most of the OE industry in China applies a lower standard when it comes to domestic brands, and it was nothing short of torture to deal with that during our early days. Both sides were extremely frustrated as we, a mere domestic brand, demanded highest quality and made their lives “difficult”.
On painting alone, we have switched facilities 3 times during the first year, which was extremely expensive, before finally settling at the current one, while insisting on the “Japan Standard” for everything we make, because ironically Japan, albeit also Asian, is known to be very demanding on QC. Our current QC person has former experience working on Orbea and Wilier’s QC processes.
BNA: Market data reveals that the average price of a Chinese produced bike is much lower that a Taiwanese produced bike1. How does this relate to Falco?
Binny: Again, it’s all about QC. Based on our knowledge, more than 90% of Taiwanese companies have factories in mainland China, so all that matters is you have someone with the kind of QC mindset. Basically, the Chinese factories can give you top notch quality as well as crap, depending on how you stay on top of them. And the Taiwanese folks are able to sell such products at higher prices due to this extra layer of added value. In terms of where the products are physically made, though, it’s more and more prevalent that they are made in mainland China today. Hence, given our struggle with the factory for top quality as described above, we tend to pay more for our manufacturing. In addition, as we invest tremendously in R&D, our costs are indeed higher in that department. However, as we have adopted a fairly lean team structure and business model (no multiple layer distributors, no tier 1 team sponsorships), we are able to offer our products at reasonably modest margins.
BNA: Falco do appear to have a different approach than the ‘cheap’ Chinese manufacturers. In which ways, for both your products and for your customer communication, are you able to present this difference?
Binny: Well, we tell it as it is. We love bikes; we are the kind of people who would get up at 2am to tweak our saddle position by 2mm and see how it looks. We are the kind of people that keep our new bike at bed side, so we can wake up in the morning to see it first. We are also the kind of people whose hearts almost pop out when opening box of our newly arrived THM Claviculas and LW Obermayers. We also love innovation and we have won innovation awards and filed for US patent, and our new tri bike has gotten so much attention at Interbike which made all those late nights worthwhile in the end.
BNA: Is ‘selling direct’ to the customer a strong trend for bicycle and part manufacturers?
Binny: Yes, there is definitely a stronger trend in this direction. However it’s a really tough question as brick and mortar bike shops still serve important purposes in serving customers and promoting the sport. To imagine a world with only Wiggle and nobody else is a rather disconcerting idea, although you do save $300 on your next Dura Ace group. On that front, we are working extremely hard to hopefully incorporate both selectively targeted LBS and broad online sales.
BNA: Many Chinese and Taiwanese brands who try to sell direct have a language and communication barrier. Can you describe what Falco Bikes do to ensure that communication with western customers works well?
Binny: Our overseas customer service will be handled by close to native-level English speakers and when required, I can look after communication. With my doctorate degree from the US, I am pretty confident to say that there isn’t any language barrier.
BNA: Is there a big difference in “western thinking” and the ways that overseas customers want to communicate and buy compared with a local Chinese customer?
Binny: Western buyers tend to be a bit more pragmatic and straightforward than a typical Chinese customer, who is often driven by peer pressure and status considerations. However, I feel the western buyer needs more education to understand both sides of the story instead of polarizing into the big name camp and the Chinarello camp.
Binny is an accomplished journalist for Chinese cycling media and interviews Bradley Wiggins
BNA: Which marketing / sales approaches have you tried? Which work the best?
Binny: Financially we don’t invest a lot into marketing, partially to offset our heavy R&D spending, and partially because we don’t believe in spending tens of millions of dollars on mega sponsorships. Frankly, we have not found a most effective market approach yet. So far all the attention in our products is purely by virtual of the designs they are. However, starting in late 2013 we are exploring ways to economically expand our influence while supporting the sport. In late 2013, we started to sponsor a UCI registered continental team with mostly French, Australian and Chinese riders (China Wuxi Jilun Cycling Team). A great group of young guys who are willing to endure the hardships of a professional cyclist on fairly modest means. In addition, we have beefed up our social media presence a little bit. We are hoping these will give us a push sales wise.
BNA: How do new customers find out about you?
Binny: Online forums and social media seems to be the main channels. Pictures of our beautifully done titanium bikes and tri bike have been resent many times and that is how many of our customers found out about us.
BNA: What are the problems you encounter selling overseas?
Binny: On a macro level, it is rather onerous to carry the traditional stigma associated with Chinese manufacturing, and it does not get easier as many fellow Chinese companies continue to crank out crap for pennies. On a more practical level, shipping and after-sales service won’t be as convenient as through a local dealer.
BNA: What are the advantages of direct-to-customer sales?
Binny: Pricing; we can usually sell it much cheaper than other companies for the same spec. We’re not saying that it’s better value for money, because for some people the after-sales support is important. But for those that maintain their own bikes and know their perfect position, we feel they’ll appreciate the savings.
BNA: Lets look at your products. How are Falco bikes and wheelsets better or different that competitors products? How and where do you differentiate?
Binny: We have adopted a low marketing budget philosophy, and want to pass the savings to our customers. However, we are huge on R&D. The ratio of R&D spending to marketing budget is many times more than the average big name brand in the industry, knowing full well that it may not be the most logical business practice. If each company gets $10 to spend, many would spend $3 on R&D and $7 on marketing ($5 out of such $7 will be spent talking about the $3 R&D). We on the other hand, would spend $9 on R&D and $1 on marketing.
Falco Computational Fluid Dynamics (CFD) for wheelsets
Computer Aided Design for the new Falco V Time Trial Bike.
The key reason is that we are actually cyclists and would love to get ourselves the best gear we can make. This is indeed inconsistent with the fundamental corporate goal of maximize shareholder value. If we were an exchange listed company, this would present corporate governance issues, but as we are a private company, it’s OK. As a result our products are on par in pretty much every front as most of the big names. This has been confirmed by the UCI continental team riders we are sponsoring, who used to ride Trek Madones. If you take a closer look at the product features on our website, you can see a lot of painstaking designs and features that help make the bike faster and more comfortable to ride.
BNA: Falco make both Titanium and Carbon Fibre bikes – is is possible to be very good at the same time with both technologies?
Binny: Sure, the question is not whether it’s possible to be good at both, but how hard are you trying. We can do it, as long as we figure out how to leverage the existing craftsmanship and technology we have access to. The titanium facility has over 22 years of experience building Ti bikes for leading western brands. This is the very reason that UCI chose us as the industry highlight for the Tour of Beijing promotional campaign.
Editor: Binny refers to two videos that profile Falco Bikes as part of the UCI Worldtour 2013 Tour of Beijing.
[Edit 02.12.13 – Embedded Video and link to second video have removed as they are no longer available]
We currently have 3 titanium models that took us around 600 hours to develop. That’s about 12 weeks of R&D. The rest is QC and craftsmanship.
On carbon, we work with engineers who have well over a decade of experience working with carbon and for over a dozen western brands. In the case of our recently launched new tri bike, we were able to mobilise scholars from several internationally prestigious universities and took advantage of state-of-the-art facility normally used for designing stealth jet fighters. We still have a lot of respect for craftsman that have been fillet brazing steel frames for the past 40+ years, however, our approach is simply different. Given our previous background out of the bicycle industry, we are able to bring a fresh mind into what we do, yet as experienced cyclists and enthusiasts, we manage to avoid making novice mistakes.
So these vast wealths of knowledge started accumulating years ago when guys were making for Western brands. Now we get to tap into all that without having to spend another 20 years.
The Falco Titanium frame rely on genuine craftmanship
BNA: Do you have any data to show the lifespan of your carbon fibre bikes – do you know how often and how long the bikes can be ridden in normal circumstance before it would fail? i.e. how long will it last and under what conditions?
Binny: We strictly follow the (often criticized as too stringent) EN standard, and in fact in many cases, we add a cushion on top just to get a bit extra comfort. We also offer industry standard warranties for our different products. We can’t tell you for a fact our bikes have been used for 10+ years because we have not been around that long. But we already known our factories have made good and durable products for many western brands over 2 decades. Therefore it’s fairly reasonable for us to predict the lifespan of our products will be on par with the likes of Giant, Trek, Specialized, etc.
Binny, thank you kindly for taken the time to share these insights with Bicycles Network Australia – I look forward to seeing Falco Bikes grow and also pave the way for other Chinese manufacturers.
To see the range and find out more about Falco Bikes, visit: www.falcobike.com
The new Falco V time trial (TT) bike with futurist Tron-like design
1. Bike Taiwan 2012 Profile of the Chinese Bicycle Market (PDF) ↩
