Analysis: Will the Froome factor boost flagging cycle sales?

For Halfords, Evans et al, Froome’s yellow jersey could jumpstart a much needed purple patch for the sector.

The bike retail market has been strong in recent years, growing 25% since 2010 to reach £1bn in sales last year. However, growth has begun to stall.

Market leader Halfords reported a 4% drop in cycling like-for-likes in its last quarter to July 1, as poor weather hit sales.

Meanwhile, specialist retailer Evans Cycles is understood to be in talks with its banks to overhaul its lending following a slowdown in UK bike sales.

Get on your bikes

So will Froome’s formidable performance entice more Brits to get on their bike?

Yes, says Stefan Barden, chief executive of etail bikes and triathlon group WiggleCRC.

“The magnificent third victory for Chris Froome and Team Sky in the Tour de France should reinforce existing strong consumer demand for cycling. And for those who watched Chris run up the Ventoux mountain, following a crash, perhaps jogging shoes too,” he says.

Jon Owen, chief executive of etail biking brand Ribble Cycles, says it is already benefitting from the Froome effect.

The online retailer’s sales over the last two weeks were up 25% on a month-on-month basis, with bike sales and accessories the star performers.

“As with many sporting events, the Tour de France has a significant impact on the cycling industry, largely and unsurprisingly because it encourages more people to get out there on a bike and give it a go,” says Owen.

Ribble is hoping the good run will continue as cycling remains in the spotlight during the Rio Olympics.

However, Mintel senior leisure and media analyst Michael Oliver believes the industry needs a helping hand from Mother Nature if it is to reap the benefits of British cycling success.

“The industry needs good weather in the key summer months to entice people onto their bikes and particularly to encourage them to buy a new one,” he says.

“The weather this year has not been terribly helpful, something Halfords alluded to in their Q1 trading statement.”

Who stands to benefit?

Oliver suggests the premium end of the market will benefit from the Tour de France triumph as amateurs inspired by the likes of Froome seek top-of-the-range models.

“For many of the people coming into the sport now it is important to have the ‘right’ bike. There is a phrase in the sport, ‘all the gear, no idea’, but retailers love these sorts of customers,” says Oliver.

Specialists such as Evans and independent bike shops that Oliver says “do high-end very well” should benefit.

However, he points out that they are coming under increasing pressure from Halfords.

The retailer, which achieved “good sales growth” in high-end bikes during its latest quarter despite a fall in wider cycling like-for-likes, has improved its premium business in recent years.

It acquired upmarket brand Boardman Bikes in 2014, having stocked the range exclusively since the brand’s incepetion in 2007, and bought premium business Tredz and online bike specialist Wheelies in May. Halfords also revived the Cycle Republic fascia in 2014 to target a more affluent urban customer.

Oliver says stores owned by bike brands such as Giant and Specialized should do well, as should direct players such as Planet X and Ribble, which was acquired by private equity firm True Capital in November last year. 

“They are providing stiff opposition for retailers in the premium sector, and are particularly popular among club riders and those who race,” Oliver adds.

Proper planning wins customers

Matt Truman, co-founder of private equity firm True Capital, says the retailers that emerge victorious after the Tour de France boom will be those who planned effectively.

“This event for cycling brands such as Ribble is akin to Christmas for a gifting retailer and as such all retailers need to ensure their systems and operations are geared up for increased volume,” he says.

“Promotions need to be in place with suppliers, with full stock availability, and increased marketing spend in the right channels.

“It’s a huge chance to acquire new customers that only comes once a year. As such, there is a need to find a way to do this efficiently and find a point of differentiation so there is repeat trade,” he says.

What next for cycling?

Mintel puts the recent jitters in the cycling market down to poor weather rather than participation in the sport reaching its peak.

The past two summers have brought indifferent weather that might have hindered people getting on their bikes, but Mintel believes the market will continue to grow in the medium term.

It expects it to jump from £1bn sales last year to £1.2bn by 2020, driven by continued growth in average selling prices and modest growth in volume sales.

Oliver believes that female cyclists could be key to this growth. “Our research shows that cycling participation levels and frequency of cycling among women are quite a bit lower than men but they are growing fast,” he says.

Halfords is gearing up to capitalise by launching a range of women’s bikes with double London 2012 winner Laura Trott, who is hoping to add to her tally in the Rio Olympics next month.

Halfords - and its rivals - will be hoping a Trott victory will give its cycling sales a much-needed kick and will entice the next wave of female cyclists to its stores.