Local charities partner with online retailers but face industry fall-out

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The local bike shop (LBS) vs online retailers debate isn’t new. It’s been common knowledge for years that consumers can get cycling-related products much cheaper online than in store, but local retailers often claim that overseas retailers have an unfair advantage and that they are killing the local cycling industry.

While retailers have had to accept that the internet isn’t going away and they’ve adapted their businesses accordingly, this doesn’t mean the likes of Wiggle and Chain Reaction Cycles have been welcomed. In recent developments, an Australian distributor has withdrawn their support for the Amy Gillett Foundation due to the charity’s partnership with Wiggle.

The issue of LBS vs online retailers is more complex than it might seem on the surface. It’s easy to see it as a case of the LBS vs overseas (online) retailers, but the lines are beginning to blur.

Brands such as Wiggle and Chain Reaction are now hosting local sportifs, sponsoring events and partnering with charities such as the Amy Gillett Foundation (AGF) and Bicycle Network. Wiggle also offers “Service Points” providing local businesses with new business opportunities. The bottom line is that the internet retailers are now well and truly part of the local industry and cycling ecosystem.

But not everyone is welcoming of this development and there are many examples of local pushback.

CyclingTips was recently sent a press release from FE Sports, an Australian distributor of many popular brands including Garmin, Stages, Wahoo, Hincapie, Bolle, Bonk Breaker and Skratch Labs. The email was addressed to the Amy Gillett Foundation and publicly stated that FE Sports would no longer consider supporting the AGF in their upcoming budget because of the AGF’s decision to partner with Wiggle.

The AGF and Bicycle Network have both partnered with Wiggle recently, leading to a significant financial contribution to their respective causes. Depending on who you ask, this could be seen as a positive move by Wiggle — they are supporting the local community and giving back to cycling in Australia. However, it’s evident many in the industry don’t see it this way.

I asked David Mohr, Brand Manager from FE Sports why they will no longer consider supporting the AGF (note that FE Sports has not made a financial contribution to the AGF in the past).

The email stated, “Our business is 100% aligned to Australian retailers and we support them completely. We regret what has happened and that the AGF doesn’t seem to support Australian jobs, retailers or tax income for the Australian people.”

“Wiggle basically takes jobs from Australians (unless you work for Australia Post). They don’t pay tax in Australia (any!!). If we import even oneT-shirt we pay duty and GST. They don’t do anything towards the Australian economy by employing people, paying tax, taking on staff, developing careers (unless you’re in the UK) or getting people on bikes.”

On the other side of the coin, David Lee, Head of Partnerships & Fundraising at the AGF, says that the foundation’s agreement with Wiggle is a positive step towards their goal of improving cycling safety.

“Consumer demand is what drives the marketplace and our view is that the more that is done to help consumers feel safer when riding their bikes, or compelled to purchase a bike for those that don’t ride currently because they don’t think it’s safe, the better it is for the entire industry. The bigger the overall pie is, the more everyone wins.”

But as we see, this altruistic goal doesn’t come without a minefield of politics and pushback. Bicycle Network’s partnership with Wiggle has attracted similar criticism, as Max Goonan, GM of Corporate Relations from Bicycle Network told CyclingTips:

“We have been criticised [for partnering with Wiggle] — like the Amy Gillett Foundation – but we have been open and honest with all of our local partners and let them know about our Wiggle deal. We work with all retailers across the industry and will continue to do so. We support all people who support bike riding and will continue with our mission to get more people on to bikes.”

“As a not-for-profit (bike/health promotion charity) we’re always looking high and low for support from all types of industries. There is only so much money government has so we need to find partners who are passionate about the same things we are. We realise everyone doesn’t agree with us – but that won’t stop us from getting more people riding bikes – which has to be a win-win for us and the local bike industry who sell the bikes and accessories riders need.”

David Lee echoed a similar sentiment, saying that the AGF had to look beyond the local industry to fund its growth.

“Outside of the organisations that have been supporters of the AGF for some time, the reality is that over many years the tangible support the AGF has received from the broader Australian retail industry has been minimal and certainly has not contributed to the growth we have been able to achieve through other means.”

CyclingTips approached Wiggle to comment on their perspectives of the Australian market and why they chose to support Bicycle Network and the Amy Gillett Foundation. Adam Johnson, Australian Brand Ambassador for Wiggle said:

“Like many companies that make a living from cycling, we are always looking at ways to give something back. This is why Wiggle actively supports various initiatives throughout the world that promote improved safety or participation. We got involved with the AGF because it is an exceptional organisation doing exceptional work to reduce cycling fatalities, which is very much needed given the number of cyclists killed on Australian roads doubled last year.

“It’s a great shame if others in the industry feel they can’t give AGF the backing it deserves simply because we are also supporting it. We will continue to actively support cycle safety through the AGF and other great organisations like Bicycle Network and we look forward to letting more people in Australia know about AGF and Bicycle Network and their fantastic work.”

It’s worth putting Wiggle’s size and influence into perspective. Last year when I looked at a Nielsen Report on sporting websites within Australia, Wiggle had significantly more web traffic than any other cycling website (media included, not only retail) and were in the top 50 mainstream sporting media websites in terms of visitors. They reportedly made £140.8 million in revenue in 2013 — a growth of around 70% on their 2011 figures. They’ve been growing at roughly the same rate since 2007.

Read the interview with former Wiggle CEO here.

Is the internet ruining the local cycling industry?

According to David Mohr from FE Sports, the growth of brands like Wiggle and Chain Reaction has served to kill off local Australian brands and retailers.

“The Wiggles of this world are on a short timeframe. Brands are now realising that if they supply to them, they become their worldwide distributor and end up ruining brands, not developing them.

“Brands into the future will be either internet or retail. Retailers give new brands and models credibility. Products that are internet only don’t get traction. If there is a new item, stores show the product, understand the features, the benefits and they market it. Internet guys just get stuff and flog it — [there’s] no added value.

“This is why stores are selling more and more non-internet product. [The danger is that ] they introduce consumers to [a product], then help the customer to fit it, understand it and even ride with them. Then [the customers] internet shop it as they have [lower] costs. This is why the really big guys such as Trek and Specialized develop their own product and its not available online. They need to make margin to develop products, and there isn’t a viable long-term existence dealing with the UK (mainly) internet guys.”

But according to Adam Johnson, Wiggle says they are helping to develop local Australian brands and extend their reach.

“It should also be noted that Wiggle is supporting the global growth of some fantastic Australian brands such as 2XU and Knog by promoting and selling their products online into global markets. And one of our key goals is to add more Australian products to our ever increasing global range.”

The costs of doing business

CyclingTips spoke to Peter Bourke, the General Manager of Bicycling Industries Australia, to get the organisation’s take. He said:

“We are concerned with the current uneven playing field created by the current Australian tax scheme and the ‘free kick’ it provides to the offshore retailers.”

Peter told CyclingTips that there are a number of government-imposed costs that Australian importers incur when bringing products into Australia for sale. These include a State Employment Tax, a Super Guarantee Levy, Import duties of up to 10%, import processing fees, and a GST of 10%, to name just a few. Offshore retailers aren’t required to pay any of these if the products imported are valued at less than <$1,000. Only some of the taxes apply beyond that threshold (See here for more information).

There’s also a huge wage disparity between Australia, the US and the UK with minimum wages being AU$16.37, AU$7.82, and AU$11.49 per hour respectively. Lower minimum wages means more money that can be saved by overseas retailers. These savings can then be passed on to consumers.

There are also mandatory Australian Standards fees for the import of goods such as bikes, helmets, lights, baby seats, trailers, electric bikes and glasses. If you look on the internet, you’ll be hard pressed to find one item that meets Australian Standards requirements.

The graph shows the growth of online sales of bicycle-related products in Australia and offshore, via research completed by Quantium Group
The graph shows the growth of online sales of bicycle-related products in Australia and offshore, via research completed by Quantium Group

How is the local cycling industry adapting?

According to David Mohr from FE Sports, the local cycling industry is adapting to the rise of online retailers by playing to its strengths.

“Retailers have to offer a retail experience. Many new cyclists are in the 28-50 age bracket and have come from golf and fishing. They expect the store experience to be like a pro shop, not a grotty hole. If we don’t cater to this, these people will go back to golf!

How many retail golf stores do you see on the main road now? Basically none as internet and no-change retailers caused their own demise, yet pro shops do very well. I’ve dealt with them and they’re very well organised. Stores that have or are adapting — such as The Freedom Machine in Melbourne, Planet Cycles in Brisbane, Cycles Galleria in Melbourne and Bike Society in Adelaide — know and are doing this: adapt or die!

The “good old days” of [bike shops] with stuff jammed in boxes and hanging everywhere from the roof are disappearing. How many Toyota or Ferrari dealers are grotty holes and how many are well-appointed retail experiences with knowledgeable staff?

But as mentioned earlier, it should be noted that Wiggle provides revenue-generating opportunities for participating local bike shops with their Service Points with servicing and component fitting for Wiggle-bought parts. No longer do you need to go into a shop feeling guilty about where you bought your product.

Final thoughts

Here at CyclingTips we don’t see the LBS vs online retailers debate as being black and white. We are supported by the local industry as well as online retailers. You might say that we have a foot in both camps (which is true) but we’ve also had to adapt and this is the only way we can survive.

Online retailers have been accepted by the local industry as something they need to live with and businesses have had to adapt accordingly. But we’re still a long way off overseas retailers being welcomed as part of the industry, if indeed they ever are.

Disclosure statement: CyclingTips receives advertising from Bicycle Network and the Amy Gillett Foundation. Wiggle has also been a longtime supporter of CyclingTips and we receive advertising revenue from them as well and also Chain Reaction Cycles.

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