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<b>Canada 2008:</b> Despite Crisis Imports & Sales Continue to Grow

Sales & Trends

In March of this year this trade journal made an enquiry into the impact of the global financial crisis on the world bicycle industry. The result of the survey indicated that the year would be a matter of survival.

<b>Canada 2008:</b> Despite Crisis Imports & Sales Continue to Grow

MANITOBA, Canada – In March of this year this trade journal made an enquiry into the impact of the global financial crisis on the world bicycle industry. The result of the survey indicated that the year would be a matter of survival.

The well established bicycle companies realized that it was not going to be a great time for the industry, but at the same time there was a view of optimism as the last quarter of 2008 still saw some growth in bike sales. That optimism was confirmed with first quarter import figures showing that growth continuing in 2009!   

Canada was experiencing one of the longest, coldest winters on record. The Ontario automotive industry was trying to reorganize and recover from huge financial losses; the worldwide price of oil dropped and production of oil from the Canadian, Alberta tar sands became uneconomical; and as the housing construction industry shrank, the demand for lumber from Canadian forests came to a virtual standstill.
The media reported on the growing unemployment and bankruptcies in the business world.

Canadian consumers were not in the mood to spend money on other than the basic necessities. The Government announced various initiatives to stimulate the economy, money was to be released for infrastructure renewal, roads and bridges were to be repaired or replaced, new power dams were to be constructed, and in the cities the needs of an environmentally sound transportation system was studied.

In Vancouver, Toronto and Montreal new bicycle routes were announced, and the smaller cities followed their example. We must keep our citizens healthy and fit, and persuade them to travel downtown by bicycle in safety. The Canadian urban planners were finally realizing that the European approach to cycling in the cities, and keeping the cars and trucks away from certain areas was not only a good idea, but a vital necessity.

Imports up!

At the end of April ‘Statscan’, the government bureau involved in reporting all kinds of statistics, including details of imports and exports, released the import figures for the first quarter of 2009. Imports of all kinds of bicycles showed an almost twenty percent increase over the first quarter of 2008! Adult bicycles alone had a fifteen percent increase over last year’s first quarter!

The Bicycle Trade Association of Canada (BTAC) reported that during the last quarter of 2008 sales from bike suppliers to dealers rose 2.2% compared to 2007. In the same period sales in the US from bike suppliers to dealers fell 13%! This reflects the big differences between the actual situation on the US and Canadian bike markets. Next to that it makes clear (which is also reported widely by the financial press) that the Canadian economy is the least affected by the financial problems compared to any other country in the world.

Volume

The Canadian bicycle market of over 1.3 million units is dominated by the mass retailers with over 75% of unit sales being made through stores such as Canadian Tire Corp, Wal-Mart, Zellers, and a variety of sporting goods chains. Their philosophy is to bring in a large selection of inexpensive bicycles, sell them throughout the summer often at special prices to attract customers into their stores, and then to sell off the remaining stock at the end of the season to clear space for winter goods including skates, and hockey sticks.

Bicycles with names such as Schwinn and Mongoose supplied by Dorel Industries in Montreal are prominent with the mass retailers. Toys-R-Us carries a large stock of children’s bicycles mainly with 12” and 20” wheels, which often bear the names of well known children’s cartoon characters.

Dealers

There are about 2,000 IBDs varying from small one man operations, to large sophisticated stores with a gleaming array of high priced racing and touring machines, a fully equipped repair workshop, and a separate area for clothing complete with mirrors and changing rooms. One of these independents is Olympia Cycle and Ski located in Winnipeg. The owner Scot Miller talked with Bike Europe about the different aspects which help keep him ahead of the mass merchants.

“We do not see the big stores as competition, but as a starting point for our customers, they will often have bought their first bicycle from the mass retailers, but once they want to move on to a better bicycle they come to us. A few years ago we were the typical bike shop with a selection of ten speed sports bikes, three speed touring machines, and a few children’s bikes. Today each sector has become more specialized and we have to carry more stock to meet our customer’s requirements.

“We have noticed the change from the time when a bicycle was looked at as a toy or a pleasant means of getting a little exercise on the weekend. More people have discovered the pleasure of commuting by bicycle, in spite of the very hard winter, there has been a very noticeable increase in bicycles being ridden in the city year round. There was a time when anyone riding a bicycle in February in Winnipeg was considered to be completely crazy, but today we have well wrapped up cyclists arriving at their workplace in some very cold weather. The bigger section tires and improved clothing has made this possible, and driving a car in the wintertime is not so much fun either.

“Another very noticeable trend is for the older person to rediscover the fun of cycling. Now that she had retired from work she wanted something to get her out for fun and fitness. We are selling more and more to this age group. There is a group of retired people calling themselves “The Greyhairs”, who regularly meet in the city for a bike ride together.

“The rider more interested in performance will have a good choice of Trek bicycles, either one of the sports hybrids, or a regular racing bike. Another brand which is really doing well for us is the Cannondale, supplied by Dorel Industries; they have really done a great job of producing well thought out sports and racing bicycles at good value for money prices. We also carry Masi bicycles; they produce an interesting range of bikes for commuting, and single speed fixies, which are enjoying a good reputation for city riding. We also have a few children’s bikes made by Trek, they are not cheap compared to the mass retailers offerings, but they are very well built and will stand up to vigorous use by more than one member of the family! Recently we have taken on the Dahon range of folding bicycles and expect to do well with these.”

According to a recent report of the BTAC suppliers shipped 236,000 bikes to dealers in 2008; an increase of 6.5% over 2007. The BTAC estimates the 236,000 cover 65% of the total shipments made by all bike suppliers in Canada, as not all present their figures to the BTAC. Calculating to a 100% figure for sales at IBDs the number stands at 363,000 bikes in 2008.

The BTAC divides the 236,000 shipped bikes into five categories. Of those Hybrid bikes posted the biggest increase in shipments; up 16.6% on the 2007 figures; roadracing bikes upped 11.4%. 26-inch bikes are the largest category they make up about 50% of the total dealer market.

Manufacturing

Bicycle manufacturing in Canada is now in the hands of Raleigh Canada who still maintain their factory in Quebec, and their corporate office in Ontario. Raleigh president Farid Vaiya, reports that the IBDs did not place pre-season orders in the same numbers as last year, but that sales were coming in now. He is not expecting it to be great year for bicycle sales due to the unemployment situation and general lack of confidence in the economy. He notes that there has been a noticeable increase in sales of bikes for children.

Jim Harmon of Norco, the bicycle and parts supplier in British Columbia predicts a steady sales season. It has started slowly, but sales are picking up as the weather has improved. He finds that the uncertainty of the economy and the unpredictable exchange rates which have plagued the Canadian dollar is making good planning more difficult, but the obviously growing interest in cycling in all sectors of the community looks good for the industry. Norco has recently added Continental tires, and Top Peak products to their range of parts.

Canadian Retail Chain Raises Ire of Bike Trade Association

Canadian outdoor equipment retailer Mountain Equipment Co-op (MEC) has decided to expand its product line-up by selling its own house brand line of bicycles and offering bike repairs and servicing (they currently only offer bike parts, accessories, and clothing). The move doesn’t sit well with the Bicycle Trade Association of Canada.

“What MEC engages in is a very predatory retail practice,” says Pete Lilly, the president of BTAC. “They’ve dominated and basically decimated the outdoor industry in Canada and I think the bike industry needs to be aware that with them coming into our sandbox, we risk going down the same path.” The co-operative, however, expects good things from this expansion of their role in the Canadian bike industry. “I think the question is how come it’s taken so long for MEC to get into bikes,” remarks Tim Southam, the co-op’s public affairs manager.

“That’s the question I hear from people. They say, ‘It’s surprising you haven’t done it till now.’” One of the chief criticisms levelled at MEC by other retailers, concerns their non-profit status. The organization was formed in 1971 to supply mountaineering and climbing gear to the outdoor enthusiasts who couldn’t get the gear they needed to tackle Canadian mountains.

The company has grown from this niche market to boast store sales of CAN$247.7 million in 2008 and 3 million members, selling a range of goods from canoes to clothing, with twelve stores across the country and online shopping. Despite its growth into a major retailer, it remains non-profit. This allows MEC to keep large cash reserves, due to Canadian tax laws, which give special status to co-operative businesses, in recognition of the difficulties they face in raising capital. Canadian financial columnist Don Cayo has been following the issue since he first raised questions about the tax benefits in a 2006 article. He thinks the move by MEC will drive some independent bike stores out of business.

"I personally would be astonished if it (MEC) grows the market enough to compensate for the market share it will take," says Cayo. MEC does draw enough customers to its stores that many bike shops acknowledge a location nearby the big retailer can be a blessing, however mixed. Paul Bogaert, owner of two Bike Doctor stores in Vancouver, British Columbia has been in the bike business for a couple of decades. Both his first bike shop, and current Vancouver store, need only look across the street to see one of MEC’s flagship locations.

"We don’t really drop our prices, so much as we avoid selling the same things," says Bogaert. "Now it’s getting harder, as they start selling more and more bike products." But going national with a bike brand in Canada is no easy feat. Ed Luciano, another bike store owner (Mighty Riders) living in MEC’s shadow, notes that there’s no been shortage of attempts to go national in the past. “Essentially they’re starting a brand, but how many Sekines, how many BRCs (now-defunct Canadian bike brands) are there going to be, that only last seven or eight years? I would not want to be the person in charge of that program,” says Luciano. “That’s a lot of work.”

At stake are not only the dollars flowing from both traditional cycling customers, but also the growing market made up of Canadians choosing to incorporate bikes into their transportation options. The fact that MEC hasn’t until now offered complete bikes for sale, or specialized services such as repairs, has been a crucial niche for the independent bike shops. The new challenge for them will be to find another gap in the mountainous range of products in MEC’s line-up, and hope it’s wide enough for most to emerge on the other side.

 

 

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