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Specialty Sales Rebound From Recession Lows

Published July 5, 2011

By Nicole Formosa

The retail bicycle market returned to flat in 2010 signaling signs of a recovery from the economic hardships of 2009.

“It’s clear to me it was a comeback year from 2009, which was a poor year,” noted Fred
Clements,
executive di-rector of the National Bicycle Dealers Association. “We still have a ways to go to get the market to a bigger size.”

Industry revenue rose to $5.94 billion in 2010, up from $5.68 billion the year before, an increase of 4.6 percent and a return to 2008 revenue levels, according to the 2011 U.S. Specialty Bicycle Retail Study compiled by Jay Townley of the Gluskin Townley Group.

The study takes into account results from 392 retailers out of 2,146 polled. Sales in the specialty retail channel accounted for about $3.62 billion of that number, up from $3.12 billion the year before, a jump of 18 percent, and the highest figure since Gluskin Townley started the study in 2004.

The number of specialty retail storefronts decreased by 78, or 1.5 percent, bringing the number of retailers to 4,256, and marking a continuation of the last decade’s steady erosion of storefronts. From January 2001 to January 2010, a total of 1,327 shops have closed in the U.S., a contraction of 24 percent.

Some of that is due to retail consolidation with multi-store chains closing one or two locations, Townley said. Most of
the closures occurred in communities with 150,000 to 200,000 residents.

“We continue to see specialty bike retailer trade pulling away from smaller markets that obviously aren’t supporting the retailer,” he added.

Another factor in shop shutdowns was financial hardships, such as balloon payments coming due on loans that retailers couldn’t pay or increased difficulty in obtaining business loans.

Townley said that while he doesn’t believe the number of retailers in the U.S. from a decade ago—more than 6,200—is healthy, the point the market is at now is toeing the line of being unhealthy.

“We need to look very carefully at where the shops are. My concern is they’re concentrated in the 120 to 200 top metro areas. We are leaving open these mid- to small-size markets,” he said.

Even with a slide in the number of retailers, average gross revenue shot up 20 percent to $866,817, up from $722,826 in 2009, a combination of a rise in repair work and more sales of higher margin P&A items; retailers becoming smarter about pricing and inventory turns; and a result of supplier price increases passing through to the end consumer.

Townley also believes 2010 price increases and inflation in China affected the average unit retail value at specialty, which rose from $500 in 2009 to $525 last year, according to his compilation of data.

At specialty, sales of 700c road bikes surged, representing 23 percent of all bike sales, according to retailers surveyed, surpassing mountain bikes, which accounted for 22 percent. Hybrid bikes made up another 20 percent, comfort 13 percent, youth 12 percent, and cruiser 5.8 percent. Sales of recumbent, electric, folding and tandem bikes were scant, making up less than 3 percent combined.

There was little shift in the top brands retailers reported selling with Trek, Specialized, Giant, Haro and Electra leading the pack. Specialized moved into the No. 2 position from fifth last year and Raleigh slipped to the sixth position. Electra took a surprising leap from 10 in 2009 to 5 this year, most likely due to the expansion of its line beyond the beach cruiser to a flat bar 700c commuter-style bike, Townley said.

Unit imports into the mass channel climbed to 14.9 million, up from 10.8 million units in 2009, according to Townley’s study. Retail dollars rose to $1.8 billion, representing 31 percent share of retail dollars.

Imports show that mass-market retailers brought in many more 20-inch wheel and smaller bikes last year, potentially in an attempt to replenish low inventory from the latter part of 2009, Townley said.

With 2010 on the books as a recovery year, 2011 could turn out to be a year of growth. Of the retailers surveyed by Townley, 64 percent said they expected revenue to rise this year and 30 percent said they expected sales to stay about the same. Considering those results, Townley predicts 5 percent revenue growth in specialty retail sales with estimated year-end revenue of $3.8 billion.

The NBDA’s Clements said it’s understandable that retailers would be optimistic about this year, particularly six months ago when they were polled, but now that the year is half over, the more realistic prediction is likely for another flat year.

“The economy’s not that strong. We’ve had horrible weather in some parts of the country, which means a late start to the season,” he said.

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