Nibletz Staff
For most people, biking is one of those sports that’s a little bit under the radar. You’re either in the world of push-bikes, or you’re outside of it and have literally no idea what’s going on. It’s hard for people who have grown up in a world where the most expensive bike you could buy was $250 from Target to understand how anybody could fork out $6,000 – more than you’d pay for most motorbikes.
But the bicycle industry is a big one, and it continues to grow, thanks to the amazing innovations being made in the space. A good example of this progress in action is to compare a Specialized Stumpjumper from 1998 to the same make and model in 2016. There is simply no comparison. Not only does the 2016 variety look better, but it’s also wildly more capable, allowing even moderately skilled riders to bomb down some of the most treacherous mountain tracks.
Cycle consumers themselves tend to be a very loyal bunch. They all have their favorite bike manufacturers, whether it’s Cannondale with their infamous Lefty fork, Marin, Giant or Specialized. So breaking into the market as an entrepreneur seems like it would be difficult. The cool thing about the market, though, is that the community itself is very engaged. It’s a lot like the video-game market or the digital camera market: it’s a place where people actually want to spend their money, so they spend a lot of time researching the products and getting excited about new releases. There are all sorts of opportunities here, therefore, to build a brand and make a dent in this $6 billion-a-year market.
Pure Fix Cycles
One of the best examples of success in the sector was the experience of Pure Fix Cycles. The company started out back in 2012 as a group of four friends with a passion for bicycles. The company managed to attract more than $4 million in investment capital, and within a couple of years, it had expanded to over 300 bike shops and was selling more than 2,000 bicycles a month through its online and retail outlets.
The fascinating thing about the company was the fact that the people behind it started designing bikes for it in-between their college classes. Back in 2010, two of the men behind, Michael Fishman and Austin Stoffers, went shopping for bicycles near the University of Wisconsin where they were studying. They were looking for a great bike with good wheels that did the job for under $1,000. But soon they bumped up against a problem. Despite the fact that Madison was an area with a thriving cycling community, they couldn’t find any bikes that fit the bill. Either bikes were so cheap that they would fall apart after a year of heavy use, or they were so expensive that they couldn’t justify the purchase. Nothing was in that sub-$1,000 sweet spot that would make the purchase worthwhile.
The pair went away and thought about why the market didn’t seem to be able to come up with a bike that had great wheels, was sturdy and robust, and would suffice for life at college. They discovered that it had a lot to do with the componentry around the gears. Adding up to 30 gears to a bike was costly, even if bikes were using cheap kit.
They decided, therefore, to start a bike company that offered bikers single-speed bicycles, with only one sprocket at the back and one chain ring at the front. At first, the pair worried that they wouldn’t find a niche for their product because of the fact that single speed bikes make it difficult to ride uphill. But then they realized that there is a whole community of hipsters out there who crave simplicity and novelty and would rather have a high-quality bike without gears than a low-quality bike with gears.
The pair then contacted a manufacturer with the facilities to build the bike and powder coating ovens to paint it with their branding. They also brought in a couple of their friends, one a computer whiz, and the other an expert in branding. The four then made their first order of 165 bikes, priced at more than $325 each. They planned to sell them over the course of their first year, but they proved so popular that they ended up selling them over the course of the winter break.
Soon the company was going from strength to strength, and the bike company was making significant profits. They entered a university competition to win some cash, won it and then walked away with another $7,000 in cash which they put towards a second, larger order of bicycles. Every time they sold the bikes, they doubled their order from the manufacturer, but no matter how many they ordered, they still never seemed to have enough bikes.
Once they’d left university, the four grads paired up with a former senior executive from Priceline. They then set up their own national distribution service which allowed them to sell bikes nationwide. Because their focus was on providing bikes cheaply, they wanted to differentiate themselves from the rest of the industry. Under the regular setup, big national distributors bought bikes from manufacturers and then sold them on to bike shops, taking a cut for themselves. Pure Fix decided that they would act as their own distributor to reduce costs and get bikes to their customers as cheaply as possible.
Reasons For Success
So what can entrepreneurs learn from all of this? The first important thing to note is that Pure Fix isn’t a company based on marketing gimmicks – it’s based on a product. The company fulfills a real need out there in the marketplace for a cost-effective bike that allows students on a budget to buy something that is both high-quality and cheap, without any of the unnecessary components that add so much cost to the sticker price.
There’s also the fact that the company operates off a new business model, made possible thanks to the internet and their direct relationship with manufacturers. They’re able to build bikes for a fraction of the cost of the more established players, all thanks to the fact that they manage their own distribution.
The company also cites the fact that it is full of young people. Unlike at a larger company, there aren’t a bunch of gatekeepers who keep a lid on innovation. Instead, getting somebody to say “yes” to a new idea in their company is relatively straightforward. All a person has to do is go to them with an idea and see whether it makes a material impact.
Then finally, there’s the fact that Pure Fix is a startup. They’re lean, ambitious and able to change rapidly with the times. Because of their small size, they’re able to innovate faster and come out with new products quickly. Since creating their single-speed commuter bike, they’ve expanded into other areas like, like trick bikes and kids’ bikes.
Become A Bike Distributor
For entrepreneurs, there is a whole host of ways to get into this business. One way is through the same model as that adopted by Pure Fix. Take Canyon for instance. Canyon decided that it was fed up with the fact that the biggest bike makers in the world charged such high prices for their premium and high-end bikes. The reason for the high prices was the enormous overhead of running a fleet of branded shops, rather like Specialized does. Instead, Canyon, a German company, decided it was going to distribute its bikes direct to customers over the internet. Today, it’s the fastest growing bicycle company in the world, and its prices are anywhere for 25 to 40 percent lower than what you’d see from major vendors.
Canyon makes bikes to order from customers in its assembly plant, and then uses its network of distributors to send bikes directly to people’s homes. Their costs are low, so bang for the buck is high.
Become A Component Designer
Another way into the market is to manufacture and design your own components. Perhaps the best example of a success story in this area comes from British component manufacturer, Hope. Hope, based in Lancashire, England, realized that most mountain bikes weren’t designed to withstand the British weather. American and Japanese manufacturers didn’t seem to understand that not all mountain bikes were ridden along dusty singletracks in the Rockies. Some, especially in the UK, were being taken through feet of mud and getting completely caked in the process. Conditions were so bad that bikes regularly needed replacement parts, especially for things that contained bearings, like headsets and bottom brackets.
Hope decided that there was a market for high-quality, water and mud resistant bearings and bottom brackets. And so it began designing components that would suit this niche market. Now Hope is known all over the world as being a manufacturer of the highest quality and most durable bicycle components out there. If you make a habit of going riding in the highlands of Scotland, you make sure that your bicycle has Hope parts.
