Is the UK bike market in danger of being undervalued?

The worth of the UK cycle industry is in danger of being undervalued according to leading industry sources.

Reports of the cycle industry bucking the recession, growing numbers of cyclists and companies within the trade increasing their sales have led to a widening interest in the sector.

With the Cycle to Work Guarantee issued by the Government at the end of last month, the forthcoming 2012 Olympics in London and a number of other pro-cycling factors, the spotlight seems set to remain on the cycle industry for the foreseeable future – along with demand for data to back up the message that the cycle trade is flourishing.

But differing opinions are arguably hampering the perception of the cycle trade – with sections of the business finding it hard to reach consensus on the value of the market and prompting calls for collated, official sales data. This year, national bicycle retailer Halfords estimated that the UK cycle market is worth approximately £350 million, a figure that parts of the industry say is undervaluing the market.

The Association of Cycle Traders (ACT/ActSmart) told BikeBiz that the value of the market is more than double that, while the Bicycle Association also estimated the market to be far in excess of £350 million.

In contrast, market research firm Mintel believes the value of the cycle market in 2009 to be below that. It has forecast (based on 2007 figures) that the UK cycle market is worth an estimated £282 million, with 2.4 million units sold in 2009.

However, the ACT/ActSmart’s Mark Brown said: “We place the retail value of the market between £750m and £1bn. Approximately three million to three and a half million bikes are sold each year, although the first half of 2009 saw imports down nearly 30 per cent.”

Brown added: “Our market size figures include Halfords and over 2,000 IBDs. We estimate IBD market share to be around 40 to 45 per cent and Halfords to be similar and think Halfords has always undervalued the market’s size. Also included in this value estimate are the mail order and online players, as well as sports stores, catalogue retailers, and so on. The market size in pounds will be slightly inflated this year given price inflation. Core IBD sales have grown at approximately four per cent, while Halfords is up just over one per cent in 2009.”

Figures from the Bicycle Association also placed the value of the market closer to the ACT’s valuation. BA deputy president Phillip Darnton told BikeBiz: “The UK industry is extremely difficult to measure – since none of its members are willing to part with their own figures.

“The best estimate that we can make is defined from the Revenue and Customs import statistics since few bikes (about 30,000 per annum) are made in the UK. That’s a fair guide to what ultimately gets sold through retailers.

“The 2008 figures suggest a market of about 3.6m units with an estimated retail value of £690 million. These figures compare with 2007 when about 3.77 million units were sold with a value of about £600 million.

“The first half of 2009 suggests that the market is quite significantly down in imported units versus last year, but also 5.4 per cent up in value. This reflects a down-stocking by importers and a hardening of market prices, as well as price increases from the Far East.”

Darnton added that the figures don’t take P&A, clothing or bike repairs into consideration. The BA values the P&A and clothing market at a minimum of £250 million per annum.

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