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United Kingdom 2011: Cycling Economy Boomed

Sales & Trends

A report from the London School of Economics, published towards the end of 2011, claimed that cycling in the UK was growing and likely to grow even further in the years ahead. The 24-page report – ‘The British Cycling Economy’ – was written by Dr Alexander Grous, a productivity and innovation specialist in the Centre of Economic Performance at LSE.

United Kingdom 2011: Cycling Economy Boomed

Dr Grous said: “Cycling in the UK has undergone a renaissance over the past five years, with an increasing number of people taking to the streets of the UK by bike. Structural, economic, social and health factors have caused a ‘shift in the sand’ in the UK, spurring an expansion in the cycling market with indications that this will be a longer-term trend. This growth in cycling participation has had the knock-on effect of bringing economic and social benefits to the UK. In 2010 the result was a gross cycling contribution to the UK economy of Euro 3.75 billion (GBP 2.9 billion).”

‘Gross cycling product’ was Euro 298 (GBP 230) per cyclist, per annum’
Dr Grous set out to quantify the economic benefits generated by individual cyclists, taking into account factors including bicycle retail, and employment. He concluded that the ‘gross cycling product’ was Euro 298 (GBP 230) per cyclist, per annum. “If this trend of growth in cycling participation continues, one million additional ‘Regular Cyclists’ could contribute Euro 182 million (GBP 141 million) to the UK economy by 2013 whilst concurrently reducing absenteeism and improving the individual’s health, providing an incremental economic benefit,” said Dr Grous.

The ‘British Cycling Economy’paints a rosy picture of bicycle retail, claiming increased sales of 28 percent year on year in 2010 with sales of 3.7 million bikes generating Euro 2.1 billion (GBP 1.62 billion). The LSE academic said the annual sale of cycle accessories aounted Euro 1,104 million (GBP 853 million). Over Euro 647 million (GBP 500 million) was generated in wages and Euro 129 million (GBP 100 million) in taxes from 23,000 people employed directly in bicycle sales, distribution and the maintenance of cycling infrastructure.

‘Outlook for the UK cycling industry is positive’
Dr Grous said: “In a challenging economic period, the outlook for the UK cycling industry is positive, with indications that the sector is making a significant and growing contribution to Britain’s economy, generating an estimated Euro 3.75 billion (GBP 2.9 billion) per annum with strong signs of sustainable growth over the long term.”

According to COLIPED, bicycle sales in Britain are second only to Germany, with 3,640,000 units sold per year. The average price of a bicycle in the UK is Euro 313 (GBP 242), half the average of a bicycle sold in Germany.

UK Retail Scene

Britain’s bike shops had a good 2011, although some had better sales than others. The big retailers got bigger. Chain Reaction Cycles went from strength to strength, and Wiggle was bought, at a price that many in the industry felt was rather optimistic (not that the Wiggle founders cared about that). Halfords had an OK year, posting slight sales growth when most other high street retailers reported sales dips, and the 400+ store chain was rescued by its bicycle division: sales of car parts and car tuning accessories were as flat as the rest of the UK economy.

Chain Reaction Cycles’ (CRC) year on year turnover jumped by 41 percent from Euro 99 million (GBP 77 million) to Euro 141 million (GBP 109 million). And while its growth all came from online, the store went back to its roots in August 2011 by opening a physical store in Belfast, its home town. CRC was founded in 1985 as Ballynure Cycles.

CRC was accused of predatory pricing
37 percent of CRC’s turnover is generated outside the EU. The retailer is Royal Mail’s largest customer in Northern Ireland; with 35,000 parcels shipped each week. CRC featured in the Daily Telegraph’s ‘Top 1000’, which listed 1,000 mid sized companies that have weathered the economic storm in 2011. In February 2011, CRC was accused of predatory pricing by antichainreaction.com, a website run by Christian Tidow, owner of Spanish bike shop Promobicis of Alicante.

Another online store to do well in 2011 was Wiggle. In December it was confirmed that Bridgepoint, owner of Fat Face and other brands, had bought Wiggle in deal worth Euro 233 million (GBP 180 million).

Wiggle was part owned by Isis Equity Partners

Bridgepoint partner Vince Gwilliam said: “Wiggle is benefitting from strong structural market drivers such as the shift to online retailing combined with the trend towards fitness and health living and the increasing popularity of cycling as a pastime. In addition, it has had a strong track record of profitable organic growth.” Halfords and other retailers had a rough start to 2011 because of snow and ice that seemed to arrive in December 2010 and stay until the end of February 2011.

Smaller, independent bicycle retailers also had a rough start to 2011. Trade services company ActSmart said that cycle retailer sales grew by 15.9 per cent in January 2011 but then fell by 7.4 per cent in February. A statement from ActSmart said: “This unsettled performance underlines that there is no consistent demand in the market place. We are increasingly dependent upon a core of committed cyclists, whilst the ‘considered purchasers’ ebb and flow.”

Cycle sales grew 8.7 per cent
Later in the year, sales recovered at Halfords (and at independents). Cycle sales grew 8.7 per cent like-for-like first quarter of 2011. Online sales grew significantly, by 52 per cent, reaching 9.3 per cent of retail sales. In November, Halfords revealed that revenue was down 0.1 per cent in its half year financials, but that cycling remained relatively buoyant, seeing a rise in sales.

In the 26 weeks to September 30th 2011, leisure sales, incorporating cycling, were up 3.9 per cent like-for-like. Car maintenance was down 3.1 per cent in the same period, while car enhancement also dropped, by 9.8 per cent. London’s riots in the summer of 2011 made news around the world. Some bike shops were targeted by looters. Micycle of Islington, Evans of Camden and a number of Halfords stores were targeted by yobs.

Cycle to work scheme

The UK’s salary-sacrificing bike buying scheme continued to power the UK retail scene in 2011, although there were blips along the way as sales tax and taxation rule changes modified the way the way the scheme was run, making the money-saving scheme slightly less attractive to consumers. Companies involved in the Cycle to Work scheme created an umbrella, lobbying organisation, the Cycle to Work Alliance.

Research for the Alliance carried out in 2011 found that 61 percent of people did not cycle to work before they signed up to the Cycle to Work scheme. 76 percent of participants said they would not have bought their bicycles if they had not been offered through the Cycle to Work scheme. In March 2011, the Cycle to Work scheme got a welcome boost from the independent Office of Tax Simplification. It recommended the continuation of the Cycle to Work tax relief scheme. The Office of Tax Simplification presented its findings to the Chancellor of the Exchequer and fears that the scheme would be chopped in the 2011 Budget came to naught.

Road overtakes MTB

Mintel, the market report specialist, highlighted the fact that growth in the UK’s cycle market was fuelled by MAMILs: middle aged men in Lycra. And most of these men are now buying, and riding, road bikes and not mountain bikes. This market volte face was apparent in February 2011 when Future Publishing’s Cycling Plus, a road race title, sold more copies than MBUK, a mountain bike title. Future Publishing’s group publisher for sports titles, Katherine Raderecht, said this was an “indication that the surge of interest in road cycling.”

Having managed 11 solid years of circulation growth, Cycling Plus sold 44,683 copies per issue by February 2011, according to the Audit Bureau of Circulations. MBUK fell from an average of 41,772 per issue to 38,482. Folding bikes also continued to be a growth sector in the UK in 2011. Brompton, in particular, couldn’t make enough bicycles to satisfy demand. The company is also now a go-to company for politicians seeking to cosy up to a niche and successful manufacturer. In July, the London company was visited by George Osborne, the UK’s Chancellor of the Exchequer. He used the Brompton factory as a backdrop to a release of economy growth figures from the Office for National Statistics.

Brompton Bicycle is now the UK’s largest bicycle manufacturer

Brompton’s sales and Marketing director Emerson Roberts said: “We are pleased that our work here in West London attracts a lot of positive attention. These are tough times for the global economy, but companies like Brompton show that it is possible to exploit opportunities in any climate, in our case by focusing on quality and by addressing imaginatively the needs of consumers.”

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