Back in 2010, a little bike brand called Reid Cycle from Melbourne lit up on my radar. They were a young and creating a buzz among new bike buyers who wanted basic bikes that were better than supermarket bikes but more affordable than the brand-name bikes from the local bike store. Riding on the Fixie trend and looking after a budget conscious urban market they pushed into online retail at a time when few retailers or brands were selling complete bikes online.
Since they started, Reid Cycles have sold an estimated 400,000 bicycles. In major towns in Australia I would spot Reid bicycles locked up as a daily occurrence and more recently in Europe, I have started seeing Reid bikes pop up as well.
While online sales were always important, gaining a foothold into the major Australian cities saw Reid Cycles swell to eight bike shops across the most nation to then scale back down to just two stores and their online bike shop.
Having maintained regular contact with Reid founder, James Reid and his staff over many years, I was wondering what was happening. Most retailers and brands are reluctant to share details to the public so I didn’t prompt them at the time.
Last year Reid Cycles opened a new Sydney store (at the location of the ex Cheeky Transport bike shop) and this year they announced that their Adelaide store was relocating. Something was in the works so I asked James Reid if he was prepared to reveal what has been happening behind the scenes. James kindly obliged and shared a privileged insight into the highs and lows of Reid Cycles in the last few years, their plan moving forward and international expansion.
New Adelaide store for Reid Cycles
Christopher Jones: Are you able to share more details about the closing of the Reid Stores, if I recall, at one stage there were six stores across Australia.
James Reid: At one stage we had 8 stores. In our founding years we experienced fantastic growth with Reid products. So we developed a strategy of opening more stores and increasing the size of stores so we could stock a wide range of Reid and Non-Reid brand products. Effectively this shifted us from having direct to the public outlets, to being one of many retailers in the bicycle industry.
Most of the stores in the larger format were 500sq/m or higher. We found this strategy wasn’t working well for us as it significantly increased overheads and at a time when global demand in the bike industry was low, it wasn’t a place we enjoyed being.
The old Sydney retail store on Broadway was massive
Our driving aim is to be “Australia’s best value bikes”. Having higher overheads really got in the way of our aim as it made it harder to pass savings onto customers.
A pivotal moment was when our senior staff and myself had a discussion and I asked, “what are we? A brand/manufacturer or a big box retailer?” The unanimous answer was that we were a brand/manufacturer first. That’s where our passion and skills are 100%.
So as our leases came up for renewal we decided to close stores with Online, Melbourne and Adelaide remaining at that time while we assessed the market and our strategy going forward. In that process we lined up jobs for as many staff as possible with other retailers in the industry.
In October we opened our new Sydney store which is doing well. This now gives us 4 stores including online.
Christopher Jones: You have noted that you have been able to reduce overheads by 70%, are you able to provide further details? Was this from staff overheads, rent and utilities or other overheads like transport and storage?
James Reid: In the re-structuring process our aim was to return to the lean operation we once were. So a job I took on in the last 12 months has been to reduce overheads. Basically by slowing down the machine we were able to reduce or remove costs. This has come in all areas:
As we are now mainly focusing on Reid products, we have reduced our product range of Non Reid branded items. This resulted in less activity in purchasing, warehousing, marketing, IT systems, finance and retail. So reductions in staff, transport, advertising, rent, etc. was all part of it.
We have spent a lot of time ensuring staff are all multi-skilled. Renegotiating contracts with all suppliers; both local and overseas suppliers.
Less stock meant we halved our warehouse in size, reducing our rent significantly.
At our peak store count, we had close to 100 staff in retail (which included seasonal casual retail staff), head office and warehousing. Following the store restructuring and full review of all of our operational activities, we have now reduced our permanent staff number to closer to 20.
By taking an environmental approach we were able to have a win/win and reduce our electricity bill at our warehouse by 90% by installing LED globes for free under the government scheme, we then had our electrician install remote control light switches for each aisle in the warehouse. Each staff member carries a remote and turn on/off the lights as needed. So instead of all lights being on all day, each aisle now only operates for maybe 20-30 minutes.
We also looked our rubbish removal costs; I think this reduced by about 30k per year by moving to more reasonable suppliers. A big win came with our cardboard. In the past we were spending quite a bit on cardboard removal, so now we get paid around $120 per tonne. Every little bit counts I guess.
Christopher Jones: Reid reduced the outlets to two retail stores and is now expanding, what has changed? What key differences are there now that you feel that a retail store is the right approach.
James Reid: That’s correct, now we have 4 stores including online, Melbourne, Sydney and Adelaide. We firmly believe to be a national brand, we need locations to touch, feel and test ride our bikes in all major capital cities. It’s what our customers want.
With our renewed strategy of smaller footprint stores and focusing on Reid products, it means our stores are much easier and leaner to operate. I would say in terms of weekly overheads we could have 3 smaller footprint stores for the same cost as 1 of the old larger footprint stores.
Having interstate locations with a lot of staff was very difficult and costly to manage staff we found. We are very lucky that a high number of our remaining staff are very loyal, passionate and experienced, most of our managers have been with us for 4-6 years. They are the heart and soul of our business.
We have developed a modified profit share program for our store managers and strong incentive program for all staff. This is great because we are all working towards the same goal of growing the Reid brand and reputation.
We see our store managers as running their own smaller business and want them to prosper along with the brand success. We are now keeping an eye out for locations in Perth and Brisbane.
Shop staff at Reid Cycles in Adelaide
Christopher Jones: Reid Cycles is a strong online retailer – is this still the primary retail channel in Australia?
James Reid: Yes, we very much see online as a national store that enables us to reach customers in areas where we don’t have stores.
We see our revised strategy in opening smaller locations as an extension of online. It allows customers to check out the bikes online and then come and see the bikes in the flesh. Brands that are sold only online are at a disadvantage in this area I feel.
We have spent a lot of time trying to improve our customer’s online shopping experience and digital communication. This has led to a 25% increase in our conversion rate compared with last year, which leads us to believe that our customers are responding well to our latest changes and online approach.
Products / Brands & Quality
Christopher Jones: Reid has a large inventory of Reid branded accessories but also sells other brands. Is this approach continuing or will there be a shift to include more brands or focus mainly on Reid parts and accessories?
James Reid: We have dramatically reduced our non-Reid brand parts and accessories (P&A). We feel for P&A, there are very good options out there especially with the large online retailers.
Our core lines like Helmets, lights, locks, pumps, etc. will remain a staple in the Reid range. With our aim of “more bums on bikes” these items are essential.
We still stock essential Non Reid items like tubes, tyres, pannier racks, baby seats etc.
Christopher Jones: Reid has been a stronger player for ‘affordable bikes’ – are you able to share which segments are the most popular, for example women’s city bikes, vintage bikes or men’s road bikes.
James Reid: It really fluctuates from year to year with different trends coming in. We have always been strong in lifestyle bikes like fixies and vintage bikes. We are very strong in our affordable bikes under $300 as normal bike shops struggle to match our pricing due to the many links in the usual distribution chain.
We are now seeing a more even spread across MTB and commuter bikes. We are seeing growth in our 27+ MTB’s as well as our E-bike and Gravel bike categories.
Our road bikes flattened off as we had a legacy problem with an overstocked issue so we didn’t order many road bikes while we got that issue under control. We now have our new Falco Elite and Osprey back in stock and they are doing quite well.
We have dramatically improved our manufacturing capabilities and as a result higher-level bikes in the $700-$2000 are doing quite well.
Some people will always prefer one of the big brands at this price point. We feel our designs are world class, so for people that do their research on specs, our bikes always punch well above their weight.
Christopher Jones: The challenge of quality control is omnipresent for all retailers and brands competing in the lower price segments and providing value but also achieving the right margins. It is no secret that many of the retailers and brands, including Reid, have faced quality control issues, both in the manufacture as well as local assembly. In previous conversations, there were staff with Reid who were solely charged with Quality Assurance. Has this made a difference and is this a ‘resolved’ aspect, does it require ongoing management or is there still room for improvement?
James Reid: Quality control is not a set and forget issue. It’s a daily task that must be taken very seriously and consistently managed. At the factory side, we have tried many methods to achieve a high level of quality.
First is the choice of suppliers you work with. Some factories/suppliers simply don’t have the capability to produce a consistent, high level of quality. Even good factories have issues.
We feel it’s very important that every production has someone representing Reid to oversee QC. In the past we worked with trading companies that did this for us. This caused us a lot of headaches. What we found was they started off well then after a while the quality dropped as they were busy trying to get new business.
The affordable Reid Cycles Single Speed Cyclocross bike was reviewed by BNA (SS CX)
In 2016 we employed a full time QC person based in China. He has 20 years experience in QC working with international brands so really understands the quality level we require, we are seeing a great improvement in the consistency of our quality. This results in less issues/warranties and happier customers. Currently our genuine warranties sit at about 1-2% of bikes sold.
Also it’s great having someone on our side based in Asia as sometimes what the factories tell you, isn’t 100% the situation. On top of this, I visit China/Taiwan about 6 times per year to oversee our productions/product development and discuss issues with our factories.
International Expansion
Christopher Jones: Are you able to share information on the size of your international business (e.g. as a percentage compared to Australia)
James Reid: The international side of our business is doing very well. Currently we are sold in 20 countries. Just last week we exhibited at Cabda, which is a Chicago based bike show that was a great success.
We have 4 staff that run the international division in Bournemouth, England. This is headed up by Rob Akam who is the managing director. Our team in the UK do a fantastic job. Our Australia and UK divisions work well together sharing a lot of resources in terms of product design, marketing, etc.
The UK Reid Cycles Team
Currently international is selling a slightly higher number of bikes. Next year both divisions are expecting growth. Having a balanced split was a conscious effort. As we buy in USD, in Australia we saw how volatile the USD/AUD can be so we felt it was important to have a natural hedge as our international sales are all done in USD.
I think in the long term our international department will overtake Australia significantly in terms of volume. Internationally we obviously distribute Reid bikes. We also work with other brands in a few different countries that leverage our design/manufacturing experience and contacts.
Christopher Jones: For international growth you have distributors in Europe, North and South America and in Asia. Is there a preferred approach such as primarily online sales or primarily distribution to bike shops (or is this up to the distributer)?
James Reid: Yes we do have a mix, some of our customers are traditional distributors, and others are multi store retailers with an online presence.
It’s really a case-by-case situation. We find if a retailer really gets behind the brand such as Evolution Cycles in NZ or Loris Concepts in Switzerland, together we can achieve a great result, similar with Reid in Australia with great awareness through a smaller number of stores.
In USA we have 4 distributors in different parts of the country. The benefit here is distribution potential due to the number of stores they work with is very high.
The challenge is getting retailers to really get behind the brand as many carry sometimes more than 10 brands. So that’s a challenge for our marketing team.
Christopher Jones: Thank you very much James for sharing this rare insight with readers on Bicycles Network Australia.
More about Reid Cycles and their shop locations: Reid Cycles
Disclosure: Reid Cycles occasionally advertises on Bicycles Network Australia. The interview was requested by BNA following news of the new store opening in Adelaide and is not a paid article nor connected is with advertising.
