Wiggle World's Biggest Bike Shop

Phew, Wiggle confirms that it is the Number One bike Shop

On the last blog post, we asked whether Chain Reaction Cycles had returned back to the top place as the worlds number one bike shop after their 2014 turnover was released and the term largest bike store used by media as well as themself. 

You never doubted that Wiggle would lose their lead, and their financial data is out – according to Bicycle Retailer (US trade publication), Wiggle has £179 million in sales in 2014 compared with £153 million for Chain Reaction Cycles (CRC). The most important metric is turnover, so Wiggle retains the claim of being the world’s biggest bike shop.

We reported that Wiggle list 12,000 products which is based on their inventory which is available to Smart Cyclist. This is just a fraction of the 66,000 products from CRC. Bicycle Retailer however reports that Wiggle have 50,000 SKUs – which are Stock Keeping Units, but again this doesn’t provide enough information to accurately use and compare because of product variations such as colour and size. For example, if Wiggle have 12,000 products and with variations there are 50,000 units, CRC have 66,000 products – but are these the ‘units’ and variations or are there four times the number of SKUs? This is not clarified.

While information for public release is generally carefully considered, and thus tends to be scarce, the report does however provide insights into sales in different territories.

…sales were up 26 percent in the U.K. and 20 percent in Europe over the period, but down 13.1 percent in the rest of the world.

Certainly currency exchange has a role, but also competition from the growing number of online retailers now servicing local markets (who can be competitive and offer even faster delivery).

What is interesting is the growth, CRC had 6% growth while Wiggle recorded 12% growth which is certainly a reflection on their continuing commitment to brand promotion and awareness.

Local Bike Shop Online Store

Can a local bike shop make it big online?

This is a loaded question, most of the worlds biggest online retailers started out as local bike store who did the right thing at the right time in the right place. Local bike shops have made it big and many others are trying.

The real question is, “why do some bike shops make it and others fail?” If the successful online shops did the right thing and the right time in the right place, what are the wrong things?

 

Lack of Genuine Committment

There is a different between trying to be successful online, and actually committing to online retail. The common scenario is that the local bike shop decides it wants to go online – pays a web design company $10,000 to create a shop and struggles to get sales. When they do get sales, fulfilling orders is messy and in no time the online inventory is out of date, along with the software and it discarded as an expensive failure…. because ‘the internet doesn’t work’.

The web design agency play a role in the demise for failing to educate the bike shop and showing them the big picture. And the cost conscious bike shop all too easily ignores or overlooks key parts of online retailing. As noted in an earlier article, If you build it, they won’t necessarily come.

Part of genuine committment is a vision to look beyond the word of the one-dimensional web design company and take the initiative to understand the building blocks. Also to question information, to analyze, to research and make smarter decisions.

The building blocks for successful online retail

A brief and incomplete list of some of the key building blocks:

Marketing: whether big or small, you have to invest in marketing. You have to spend money and the smart retailers also discover the best channels and keep trying new approaches.

Fulfillment: A massive topic, and for the sake of simplicity includes logistics. This is ensuring that the inventory is current, that delivery projections are up-to-date through to processing the order, packing, dispatching, delivery and tracking. All along keeping the customer informed and happy.

Customer Service: As with traditional retailers, customer service can make or break you. Of course the customer service requirements for online sale is different, but customers want immediate satisfaction and immediate answers. Word of mouth is just as important for online retailers and negative customer experiences are amplified even further in the internet.

Technology: From responsive websites to cater to smart phone and tablets to effective order process as well as clever technical integration and Search Engine Optimisation (SEO) and Search Engine Marketing (SEM). You need an expert at your side who knows technology.

Price: The internet makes it inherently easier to compare prices, as long as the retailer is trusted the the lowest price wins. Why pay more for the same product (an online retailer can hardly sell their ‘customer service’)?

 

The Visionary

Any bike shop can set-up online, but a visionary does more. They understand the potential of online to their business, they understand the change or adaption required. They invest and continue to drive, often employing specialists which push their online retail abilities beyond others.

It means that online retail is not for all, traditional businesses certainly shouldn’t ignore online retail (they need to adapt to remain competitive) but if a retailer isn’t truely dedicated to opening up online retail, they are often better off investing in their core business.

But their are plenty of sales out there, and just because one retailer is popular, it doesn’t mean they can maintain. Management and profit orientated decisions can taint a retailer leaving gaps for young online retailers who can do it better.

 

photo: © ubray

Has Wiggle just beaten Chain Reaction Cycles to the top spot?

Cycling Weekly reports that Wiggles yearly sales have soared 19% in 2013 which increases their turnover from £141 million in 2012 to £168 million.

In our early reports on the turnover of Wiggle and Chain Reaction Cycles we noted that CRC reports a 2012 turnover of £170 million and while their 2013 profits have risen, their turnover has dropped 6% to £145 million.

Wiggle Chain Reaction Cycles

CRC turnover discrepency in reports
The BBC article also note sa CRC 2012 turnover of £156 million, lower than we have originally reported, but confirmed by other media such as bikebiz. Our original source for the reported £170 million is a 3rd party service provider called Export Technologies who reported in a Chain Reaction Cycles Case Study:

From 2008 to 2012, Chain Reaction Cycles tripled its online revenue, finally reaching over £170m in annual turnover by the end of 2012. Roughly two thirds of these sales came from outside the UK.

Wiggle is now the number 1

But the good news for Chain Reaction Cycles is that it has increased on it’s 2012 profit £861,000 with a healthier 2013 pre-tax profit of £4.8 million which the company attribute to “improved sales margins and ‘significant overhead cost savings'”.

The 2013 profit for Wiggle is not yet available however in 2012 they recorded a pre-tax profit of £12.3 million and have noted that they have strong investments (costs) as the Team Wiggle Honda sponsor and overseas investment such as their first overseas office in Sydney, Australia.

Who is the biggest online bike store?

Easy, Chain Reaction Cycles which is based in Northern Island (United Kingdom) is the world’s biggest bike store  and reported a 2012 turnover of £170 million and are a top 10 UK online retailer. They are followed by Wiggle who have a smaller but enviable 2012 recorded turnover of £140 million.

In 2011 Chain Reaction Cycles reports sales outside of the European Union at 39% which is £66 million. For more information, a case study by a supplier provided more historical and financial information: Export Technologies: Chain Reaction Cycles Case Study

The leading bike shop shares their formular for success:
Traffic x Conversion Rate x Average Order Value = SALES
*Turnover values vary from source to source, some values provided are much lower however Chain Reaction Cycles leads.

How do online bike shops sell the same products for less?

When the online sales boom started, one of the biggest effects was the online businesses could significantly reduce the traditional overheads; high street’ retail premises, skilled floor staff and many of the costs involved in running a bricks and mortar business. When bicycle parts and accessories have mark-ups up to 100% (of the wholesale purchase price), eliminating the expensive shop costs has a big impact on profit margins.

Selling online is cut-throat and in Feburary 2013 Wiggle posted a 2012 turnover of 140 million pounds. But after costs and overheads the retained profits were just under 9 million pounds. The constant  discounting by online shops means that they are reaping obscene fortunes.

But big online bike shops have a few tricks up their sleeves to remain competitive and consistently undercut smaller shops on price. The approach will vary from shop to shop, but here are a few in brief:

• Bulk Buying: large volume purchases give big online retailers  power to negotiate on prices.

• Old Season Stock: brands with old and hard-to-sell stock can offload to online shops who buy cheaply and can quickly sell.

• OEM Equiptment: accessories that are officially purchased for assembly on complete bike, but are never assembled (or even disassembled) and then sold seperately.

• Grey Market Sales: bikes, parts and accessories which are purchased via unofficial agents or routes. Also making wavailable to customers in countries that are otherwise served by official distribution partners and dealers.

• Tax Breaks: Online shops may locate to countries, regions or districts with low taxes and exemptions.

• Wheeling and Dealing: using loopholes, unsanctioned or even dubious channels to acquire cheap stock.

Some brands actively try to manage their distribution, and explains why they are hard to find with the big name shops, but many have traditional distribution agreements which fuel price discrepencies between distributers and online retailers.