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<b>Norway 2006:</b> Bike Margins Still Under Pressure

Sales & Trends

OSLO, Norway – Climatic conditions on the Scandinavian Peninsula don’t make biking very attractive for the public in general. The long dark winters can be extremely cold, often with plenty of show. Moreover, the coast stretched along the Atlantic gets a lot of rain. Bike/sport market in Norway Company Turn-over in 2006 G-Sport € 260m […]

<b>Norway 2006:</b> Bike Margins Still Under Pressure

OSLO, Norway – Climatic conditions on the Scandinavian Peninsula don’t make biking very attractive for the public in general. The long dark winters can be extremely cold, often with plenty of show. Moreover, the coast stretched along the Atlantic gets a lot of rain.

Bike/sport market in Norway

Company
Turn-over in 2006
G-Sport
€ 260m
Sport
€ 164m
Intersport
€ 148m
Others/Free stores
€ 111m
MX-Sport
€ 82m
XXL
€ 76m
Stadion
€ 66m
Coop / Obs!
€ 54m
Sportshuset
€ 36m
Anton Sport
€ 7m

Source: Dagens Næringsliv/Sportsbransjen

As a result, bicycle sales in the Norwegian market have a limited sales season. In this short period the 4.4 million outdoor-minded Norwegians still bought an estimated 336,118 bicycles this year, some 9.6% less compared with 2006.

Domination Far East

The Norwegian market is characterized by the domination of supplies from the Far Eastern countries, imports by three major players and final distribution via a handful of sporting goods chain stores.

The best selling segment is the 26-inch MTB, responsible for 60% of the market sales. The trekking bike is the main growth segment, slowly grabbing market share from the MTB. In addition, more and more MTB riders are buying themselves an extra road race bike to ride in the summer.

Retail Prices Decline

Norway is not a member of the EU so the European anti-dumping duties are not applicable for imported bicycles. Neither does Norway levy any import tax on bicycles. As a result, the market situation is completely different from neighboring Sweden and Denmark, both EU member states.

Over the past few years Norway has seen a huge decrease in the price of bicycles. Although the average price in the period January until July 2007 was € 5 more than in 2006, it was only € 140. Advocates of anti-dumping duties often point to this price development as what would happen in the future after lifting ‘protectionist” anti-dumping duties.

After the latest closure of a Norwegian bicycle maker, DBS in 2000, the market has been dominated by Far Eastern imports. This year some 93% of the market will consist of bicycles assembled in China, Taiwan, Vietnam, Indonesia or Thailand. In 2006 these four countries supplied 91% of the Norwegian market. In the same period the market share of Chinese producers reduced from 51% to 38% while Taiwan’s market share grew from 23% to 33%. Vietnam’s market share went up from 9% to 12%, Indonesia went down from 8% to 4% and Thailand grew rapidly from 1% to 6%.

Market Share Sweden

The imported value of the Taiwan produced bicycles is about double the average price than those from China, Vietnam and Indonesia. The only non-Far Eastern country which supplies more than 1% of the market in Norway is Sweden. This year they will supply some 3% of the Norwegian market with bikes which are only € 27 above the average retail price.

With the import dominated by Far Eastern imports, three major importers have divided the local market. Gresvig/Intersport with the brands Diamant and Nakamura, Stians Sport AS with Merida/Specialized and Cycleurope with DBS/Bianchi are selling about 60% of the bicycles in Norway, although there are no official sales statistics.

The other important brands active on the market are Scott, imported by Ramo AS, the American brands Trek, Klein and Gary Fischer handled by Foss Sykler AS, Hard Rocx by Hard Rocx AS, American Eagle by Sportpartner AS, the brands of Pacific Cycles by Beach Mountain AS, Fuji by Birk Sport AS and Giant by Horten Sykkersport AS.

Distribution via Retail Chains

Bicycles in Norway are sold in about 1,000 stores, most of the time in combination with other sports products. Only 10% of them can be regarded as IBDs and this makes it hard to find a bike repair shop in Norway, let alone somebody with a wide range of spare parts. The remaining outlets belong to a chain of buying group. Just a few IBDs can really make a living from bicycles, most of them also sell skis and are general sport stores with a wide range of products. The average turnover per shop is € 875,000.

The retail market is dominated by a small group of retail chains and buying groups. There are no turnover figures available for the bicycle market specifically but the overall sales statistics for the sports retail chains have been published. The largest of them is G-Sport taking 25.8% of the market. In second and third place come Sport 1 and Intersport.

The Big Three

The market share of the big three has been declining slowly in the past four years, but they still control nearly 60% of the market. This leaves just a small place for the remaining organizations like MX-Sport, XXL, Stadion, Coop/Obs, Sportshuset and Anton Sport. The keen competition between the retail chains is putting margins under heavy pressure.

The Dagens Naeringsliv, Norway’s leading business newspaper, reported that “the six sporting goods chains have increased their revenues by 33% in the last five years. In the same period the operating margin has increased by only 0.3 points to 5.3%.” This is a price battle giving the IBDs a very hard time.

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