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Retailer group proposes new tax to fund marketing campaign, other advocacy

Published April 13, 2016

MONTEREY, Calif. (BRAIN) — The 20Collective held a meeting after lunch Wednesday during the Bicycle Leadership Conference to discuss a proposal for an excise tax on bicycle products. The tax would fund a mainstream marketing campaign and other efforts to grow awareness of cycling in the U.S.

The 20Collective is a group of 20 dealers that formed earlier this year and represent 5 percent of North American IBD sales. The group is seeking support for an industry advancement fund modeled after similar organizations in the fishing, beef and RV industries.

"The initial response has been, 'How will you fund this?' " said Ian Christie, owner of Summit Bicycles, and president of the 20Collective, about its idea for an industrywide marketing campaign.

The other two retailers at the meeting were Alex Obriecht, 20Collective's vice president and owner of five-store Race Pace Bicycles in the Baltimore area, and Scott Helvie, treasurer of the 20Collective and chief operating officer of Bicycle Garage Indy, with three stores in the Indianapolis area.

Christie said the 20Collective doesn't want this effort to compete with other advocacy groups or organizations for funding, and they also wanted to come up with a way to eliminate the "free rider" effect, or benefits to companies or retailers who don't participate in advocacy. That's how the idea for a tax — that would impact all the industry — was hatched.

The excise tax would be established through a bill that stipulates which products be taxed and that funds collected go toward industry advancement. The group is proposing a 0.5 percent tax on products, and estimates that it would raise about $30 million per year based on the industry's average selling price. The tax would mean that the average bike product would go up 99 cents at retail, Christie said.

"But it would be a game changer," he said, adding that it would quadruple PeopleForBikes Coalition's annual $3 million budget. "It's been done in other industries. The industry advancement organization would make decisions on how to spend the money."

The proposed name for the industry advancement group is BikePep. And the 20Collective plans to work with existing industry and advocacy organizations to form the board, including BPSA, NBDA, PeopleForBikes, IMBA and representatives from mass, outdoor specialty, and U.S. online retail channels.

Whether the tax would apply to both bicycles and accessories has not been determined, but the idea would be for it to be inclusive so likely it would be across a broad range of products. While it would be a federal tax, the government wouldn't have a say in how that money is spent; that would be determined by BikePep.

BGI's Helvie said the dealer group felt they needed to take action because BPSA statistics show no growth in units sold through the IBD over the past decade. "What are we doing about that? What change is the industry working on?" Helvie said. "How do we protect ourselves as an industry to move things forward?"

"Our end goal is to put more people on bicycles and to talk to 99 percent of the population that doesn't buy a bike at specialty retail," Helvie added.

Among the concerns voiced by attendees at the meeting were how this effort could potentially reduce existing federal funding for bike infrastructure, which totals $800 million a year, and how to pay for lobbying work to get an excise tax passed through Congress. Also, how much could this type of campaign actually grow cycling participation and sales, and would that be measurable?

Still, the turnout was high with several folks standing as seats ran out.

"If it costs the government $30 million, they could want $30 million back," said Tim Blumenthal, president of PeopleForBikes, about transportation funding. "It's a legitimate concern, but for right now, we have to stay big picture. I like the idea. It's really, really big and daunting. But if we collect $10 million, it would be amazing.

"We also know it's more complicated than a 'Got Milk' campaign," Blumenthal added. "That [alone] won't boost participation or sales, particularly at the level of money we'll raise."

For now, 20Collective is asking the industry for support through its website, 20collective.org, and is looking for ideas and people who want to be part of the group.

"We are looking for eight to 10 minds from the industry and this group, we would come up with plan to move the industry forward," said Obriecht.

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