While cycling has, to a large extent, avoided the casualties seen in other industries during the global recession – unlike the financial, retail and housing sectors – the trade has, in some territories, suffered more than others. Notably, the US cycle market has taken something of a beating from tighter purse strings, seeing imports at their lowest since 2002 at the start of 2010.
Happily though, the Canadian cycle market is, according to industry statistics, one of the territories that has bucked the credit crunch, with figures from the Bicycle Trade Association of Canada (BTAC) revealing that the IBD marketplace for bicycles grew by almost $30million at retail in 2009.
Generally Canada has not felt the recession as keenly as other territories, which has been to the benefit of the country’s cycle industry, says the BTAC’s executive director Janet O’Connell. She tells BikeBiz: “We didn't face the same economic downturn as most other major economies [in Canada]. People held off on major purchases – like cars, but were buying smaller items – like bikes.”
O’Connell adds: “Cycling in Canada benefits from a stronger economic climate, an awareness of the environment and also of health and fitness issues. There is also an increasing awareness of the importance of cycling at local levels of government. The growth in awareness makes bikes an attractive option.”
Kona founder Jacob Heilbron has a slightly more guarded outlook on the current state of the Canadian cycle trade, however, warning that the market has challenges to overcome.
Heilbron tells BikeBiz: “BTAC’s extrapolated statistics reports represent less than 75 per cent of all suppliers [ED: There’s more on the BTAC figures below], so I don’t believe the situation is as rosy as some believe. While retailers and suppliers are relatively stable, there was a significant oversupply of bikes into the Canadian market in 2009. The inventory levels are finally retreating to normal levels.”
Heilbron also points to the need to drive consumer demand for higher quality, and more expensive bikes. He says: “The strong Canadian dollar is keeping prices low for consumers here. At the same time, demand hasn’t increased considerably, while the costs of operating in Canada continue to go up every year. The challenge for retailers and suppliers is to direct their customers into better quality, higher priced bicycles.
“The federal government went into deficit during the last couple of years after 15 years of surplus, so the tax structure will once again become more onerous. The provinces of Ontario and British Columbia have been sales tax exempt for bicycles but are bringing in a harmonised sales tax (HST) which will drive up the cost to the consumer by seven per cent after July 1st.”
O’Connell sees increased competition and changing local communities as a challenge for the Canadian cycle trade: “Big box moving to higher priced models to compete more with IBDs, also MEC (Mountain Equipment Co-op), youth obesity and continuing battle to get more bike-friendly communities.” And there are other even more familiar challenges that will strike a chord with the UK trade. Rocky Mountain Bicycle’s general manager, marketing and sales Charles J Russell elaborates: “The main challenge for a manufacturer/distributor is the same as it is for the bicycle shop: margin. Like most consumer goods there is always downward pressure on pricing. The other area that is challenging is inventory. We want to make sure we provide the right amount of inventory to support the demand in the marketplace.”
Russell adds that aside from local challenges, the market close at hand has been a boon for a company like Rocky Mountain: “We are a domestic supplier to the marketplace. Rocky Mountain Bicycles started in Vancouver, building mountain bikes almost 30 years ago and we get fantastic support from our dealers across Canada. This support has allowed us to grow our brand outside Canada to a point where sales are almost the same as they are domestically.”
While Canada is well known for its mountain bike market, the growing industry has seen a shift in popularity, with other sectors currently providing the most growth, says Janet O’Connell: “Hybrid and Road are showing the most growth. The mountain bike sector continues to be static and is seeing a decline in lower priced models.”
For a company that specialises in mountain bikes, that shift is clearly something that has to be responded to, as Rocky Mountain’s Russell notes: “The area that is growing most rapidly is the urban or commuting sector. We are predominantly a mountain bike brand, but we have responded and continue to respond with our own approach to this growing sector.”
The apparent strength of the Canadian market is, the industry naturally hopes, a solid foundation for future growth while the globe recovers from its economic woes. However, Kona’s Jake Heilbron has some reservations about the local market’s short term future: “Canada has traditionally been two to three years behind the times when it comes to our economy. The last few years say our country has a solid financial outlook. History says we’re due for a fall. The only reasonably accurate prediction I would make is that Canada's soccer team won't move higher in the world rankings than our current #63.”
But while some industry voices are nervous about the future, and also about making predictions, others have a more positive outlook. One such respected industry voice is that of the BTAC exec director Janet O’Connell. She concludes: “As the global economy continues to improve, Canada should be at the forefront.
“Since bikes are part of discretionary spending, an improving economy bodes well for our industry and our surveys of IBDs show strong optimism for the industry.”
CANADA ESSENTIAL FACTS:
34,130,000 (2010 estimate)
GDP: (per capita) $38,668
Figures collected by the BTAC reveal that while bicycle unit sales dropped slightly for Canadian IBDs in 2009 (by 7.55 per cent), values increased with dollar sales up 13.77 per cent. Average Unit Prices (AUPs) were up in almost every category and sub-category, with a 23.07 per cent increase for 2009.
According to the results, the road sector posted year-on-year growth in units of 14.83 per cent in 2009, with the hybrid sector growing 2.63 per cent in units and the youth bike market flat at -0.84 per cent. Value comparisons were hugely positive, however, with road up a huge 32.96 per cent, and significant gains for hybrids (up 15.41 per cent), and the youth sector (up 10.25 per cent).
Consumer confidence BTAC exec director Janet O’Connell says of the results and their impact on the trade: “Our data collection programme shows a trend by consumers toward higher quality bikes, which is very positive for the IBD sector.”
The BTAC estimates that its figures come from data from 90 per cent of IBD bicycle suppliers. Inventory was significantly higher than in 2008, but dropped through Q4 2009, affecting Average Unit Prices and probably represents end-of-year clear outs. The organisation notes, however, that inventory figures are taken from some suppliers only, and may not represent an accurate picture of the entire Canadian marketplace.
Statistics reproduced with the kind permission of the BTAC.
Janet O’Connell, executive director, BTAC
Jacob ‘Jake’ Heilbron, founder and COB, Kona
Charles J Russell, general manager, marketing and sales, Rocky Mountain Bicycles