MOSCOW, Russian Federation - The biggest market shift in 2007 was the growing influence of hypermarkets. Every big store could sell some 10 to 15 thousand bikes per season. And that is becoming a significant trend.
A year ago most low-cost bicycles were selling at the gas stations or food-and-clothes markets. Not any more - you still see bike racks there especially in smaller towns, but the share of those vendors is decreasing.
We estimate that the total number of bicycles sold in Russia in 2007 approached four million units, representing growth of some 15% over 2006. More than half of these units were locally produced. We were right to predict a year ago that "old school" factories would lose their grip on the market as stylish Chinese kit-bikes gained in popularity.
The Russian economy is developing rapidly. An ambitious program by President Vladimir Putin to double GDP in ten years has been helped by soaring oil and gas prices. The money shower is changing the habits of Russian consumers.
Forget about thousands of food markets spread through the country - malls with hypermarkets for a weekend shopping spree have appeared on every highway leading out of the cities. And they sell bicycles among thousands of other goods. Fussier customers may want to visit a sports chain-store like Sportmaster or Decathlon, which now has two superstores in Moscow. Consumers also turn to bike shops when looking for a particular brand.
If someone in Russia tells you that he or she bought a bike, don't bet it was made in China. It is fair to assume that for most basic bicycles, parts come mostly from China, but a lot of assembly is done locally. We should distinguish two types of bike factories. The most common type is assembling basic models out of imported kits, sometimes with an operation making wheels or saddles. The products are own-brand bicycles that usually receive no respect from serious bikers. These products are sold in the millions. And we consider enterprises that use this production model to be a "new school" of Russian bike manufacturers.
On the other hand, if you take the challenge of buying a bicycle for 50 euros, you will surely be a customer of traditional factories. These are "old school" - most components are made in-house, the bicycle's construction has been proven over decades, the brand is known to three or four generations in Russian families. The choice is poor - a 28"-wheel single-speed rigid road bike with a fence-high one-size-fits-all steel frame, or a 20"-wheel foldable model.
Under heavy market pressure, traditional manufacturers have started making some “experimental” bicycles with 26" wheels and Nexus internal gear hubs, but these account for just a few percent of output because of prices. But there are also advanced cyclists and sportsmen, customers with a special attitude to the bicycle or money to burn. So a vast array of world brands is also offered on the market. To tell the truth, you are likely to see a bike with a known brand in the Moscow streets while in the country there are lots of bicycles with a lower price tag and without a noble name.
The biggest traditional bicycle factory is located not in Russia itself, but in neighbouring Belarus Republic. Minsk Motovelo company is an enterprise established in 1945 as a bicycle factory. It was successful until recent years, when consumers became interested in different models. In 2007 production dropped 19% to 366,000 units, according to the Ministry of Statistics and Analysis. Problems are compounded by the lack of bicycle sales in Russia and Belarus during the winter, and stocks are approaching a level equivalent to six months of production.
A chance to survive for Motovelo came via Austrian investor ATEC Holding GmbH. Industry sources point to its affiliation with Russian business. The changes came in August with not only a new logo for Aist bikes is modern and catchy, paintwork is more attractive and knowledgeable staff were present at the Velo Park exhibition.
A few other traditional manufacturers try to survive on the remnants of a Soviet era industry, each of them making tens of thousands of bikes. We may make a generous estimate of 500,000 bikes made this way. But each year less and less of those bicycles actually make their way through to the end customer due to increasing competition and high transportation costs.
Assembly factories are more progressive in terms of design, marketing and sales. The biggest one is Velomotors company near Moscow. About 1.2 Million Stels branded bikes are made annually. Mostly they are distributed in the European part of Russia.
To meet the demand in the Asian part of the country is a strategic task of Stefy-Velo, a company operating in the town of Perm by the Ural mountains. It presented its Forward brand at both spring exhibitions in Moscow and its higher end Format brand, used for export. A good range of bikes for all kinds of riding and a prototype original carbon fiber product make a stunning contrast with traditional factories' efforts to start making aluminum frames at last. All the other companies make a limited impact on the regional markets producing up to 100,000 bicycles of different kinds out of Chinese parts. Some of them use old Soviet brands, some promote their own ones.
Assembled bike imports make up more than one third of total sales. 1.5 million are imported low-cost no-name bikes and about 300,000 are branded bikes. The former are still sold in the food-and-clothes markets and the latter in local bike shops.
P&A sales are the most difficult part of the bike business in Russia. Sometimes it is hard to find specific spares even in a specialty shop. Some spares have to be ordered and delivery can take several months. However, most basic components are widely available and there is no shortage of chains, tyres, spokes or braking pads, for example.
Bike service workshops are hard to find and repairs can take a long time during the summer season. Clothes and accessories are not a "must have" for the average bike owner. Some basic tools and a pump is all they usually ask for. More safety-conscious people buy helmets and tail-lights, often for children.
Looking at the prospects for the 2008 season we see the most prominent trend is the growing importance of hypermarkets as a place to buy a bike. Demand is increasing for better quality bicycles, and the average price is rising by about 20% from year to year due to rising incomes. Some positive impact has been felt from the very warm winters of the past few years. Warm weather is starting a month earlier and ending two weeks later, giving more time for cycling.