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It’s no secret that many local bike shops in Australia are struggling to make ends meet. Last month one of Sydney’s largest bike shops closed their doors owing half a million dollars to creditors. On the opposite end of the spectrum, brothers Frank and Rocky Fortuna have built their BikeBug brand to be a success story in this rapidly changing industry.
Just yesterday BikeBug held their Grand Opening for their new Melbourne location. BikeBug took over the old À Bloc premises after a short year of not being able to make things work for one reason or another. It was a noble effort for trying to do something different in a difficult market, but as we’ve seen again and again, it rarely succeeds.
Frank and Rocky Fortuna began with a courier business (FRF Couriers) in 1989 which they still run today. They had a passion for cycling, did some racing themselves, and began their labour of love with cycling in around 2003 when they began sponsoring the NSWIS (NSW Institute of Sport) cycling team. This moved on to supporting the FRF Couriers-Caravello team which was Australia’s first domestic registered Continental team. They had difficulties getting support from the industry to help sponsor the team, so they took matters into their own hands and began importing cycling goods through their new business in 2005 – FRF Sports.
Since 2005, the cycling industry has changed significantly. “When we founded FRF Sports we ended up with a shop by default called Bike Barn which we later changed to Bike Bug.” Frank Fortuna explained. Instead of looking at the rapidly growing online retailers as a threat, the brothers saw it as an opportunity.
“We started the online business [two years ago] because we were getting such an attack from the online businesses in the UK. We thought the only way to do this rather than sit there complaining about the online businesses, was to try and replicate what some of the UK guys were doing. We thought they were doing a great job. Obviously getting a lot of support with their consumers, we thought we’d have a crack at it,” said Frank.
But as any small business owner knows, being cut off from supply is what can ultimately kill you. And if you understand the tangled web of the bike industry, you’ll understand that BikeBug had to get creative about sourcing their product.
“We work with a lot of Australian suppliers. There are some suppliers in Australia that won’t work with us, either because they won’t supply us or because the prices aren’t competitive. Mostly we do deal with Australian suppliers. We’ve got a very good relationship with them and we’ve come up with some really good deals” said Frank.
Bricks and Mortar – a step backwards?
As mentioned, when I spoke with Frank Fortuna it was at their Grand Opening of their Melbourne location which took over a bike shop that had recently shut its doors. This begs the question, does it make sense to open a physical space anymore when BikeBug has had such success online? Why take on the effort and risk of this seemingly backwards step?
Frank explained to me, “It’s a good question because the bricks and mortar shop is a support for the web. Our biggest market is Melbourne and we thought we should commit more to this market. Sydney is our second largest market and we have a fair commitment in Sydney. So the web is not there to support the shop, the shop is there to support the web presence. So we’ve taken a reverse approach on that. It’s to give the consumer confidence. It’s a click and collect model.”
Even with an innovative business model that has survived the test of time, it’s not easy. When I asked what keeps the Fortunas awake at night, Frank said:
“I’d have to say margins. To be able to be successful in the bike business at the moment you have to work with tight margins. Coming from a transport background, we’re used to tight margins its a very competitive industry, working with tight margins. So with the right systems, the right people, the right processes we’ve been able to work with tight margins.”