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December 15, 2017
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  • DangerDirte

    I’m halfway through reading this and I just want to point out the word use in this article is ridiculous. You should consider your audience while writing: this isn’t a finance or econ website. It reads like a first year trying to flex their vocabulary.

    Now that I’ve made myself look like a prick: I’m glad someone covered this and I appreciate the data you put into it.

    • DangerDirte

      Following up.

      Interesting article. I’m truly curious how this affects Wiggle and company. Lower purchasing power, but higher sales due to weak GBP? More competition as other countries have gotten into the game? Will North American bike shops breath a collective sigh of relief?

      • jules

        it depends if Wiggle (or any UK bike store) is selling in or out of the UK. if they’re selling in the UK, then a weak GBP reduces their purchasing power and effectively means charging customers more to recover that increased cost.

        but if they’re selling outside the UK, the impact is less, as the exchange rate impact is negated when onselling overseas.

        • ebbe

          Assuming additional customs duties for overseas buyers are low. I’m in the EU and have stopped buying anything directly from the US because I’m always negatively surprised by the large customs duties. That was not the case when buying from the UK, so I could by from chain reaction safely… Will it be the case in the future? That depends on article 50 negotiations, if they ever happen

          • jules

            yes, charges like import duties are set subject to trade agreements. Britain’s withdrawal from the EU may mean losing free trade terms. but there’s nothing stopping them re-negotiating those terms, as a non-EU member. whether they’d succeed in reaching such an agreement is uncertain.

            I have bought stuff from US shops and I don’t think I’ve been charged duties. I’m in Australia and we have a free trade agreement with the US I think. the main reason I don’t shop much with the US is the high postage costs.

            • ebbe

              Of course they could renegotiate and they will, but with the signals coming from EU officials it does not seem likely they’ll get a good deal form the EU. Unless GB of course concedes free movement of people etc, but that would be a betrayal of the vote. That would mean GB could have just stayed in.

              Moreover, we should also not forget that, while the pound plummeting seems nice for overseas buyers if you think like Doanld Trump, the (web)shops will have to pay more to source their stocks and will be earning their money in a currency that is currently devaluating very quickly. They may have overseas shareholders who will not be happy about that. It’s a matter of some possible plusses and some possbile minusses, and it’s nearly impossible to determine the exact results in the end.

              Anyway, we could go on for days over this ;-) …but honestly if I were a consumer living in the UK I’d be primarily worried about the effects of a likely general economic recession (even the Leave camp is now openly admitting a recession is very likely) on my purchasing power and with it my ability to buy bicycles, parts and kit at all, and less about the price changes of those bicycles, parts and kit. First reports of businesses big and small firing UK employees as a result of Brexit are already rolling in.

              • jules

                the UK was a powerhouse member of the EU. I didn’t want them to leave, although it hardly affects me, but a lot of the commentary seems to be based on the principle of karma than rational analysis. the EU comprises a lot of shakey members (Greece, etc.) and some who are propping it up (Germany). the biggest loss may not be to the UK, but to the EU. I wouldn’t take any satisfaction from that of course.

                I wonder if the real risk is to the EU itself. one reason the UK left is that the EU just keeps making more and more rules governing trade. the way the EU has handled lending etc. between its member countries has been nothing short of disastrous. the UK protected itself there by refusing the join the common currency.

                I can’t entirely blame the British for jumping ship. I’m unconvinced by the prevailing media coverage – ‘if it bleeds, it leads’ suggesting they’re all regretting the decision. But, it saddens me. I’d have liked to see the EU stick it out and grow stronger. Not my decision..

                • ebbe

                  At the heart, this all is a pissing contest between Cameron and Johnson, reaching back to their joint high school days. Cameron thought he could score points by pressuring the EU with a threat to (hold a referendum to) leave. After he renegotiated with the EU and won everything he possibly could, he never thought the people would actually vote to leave. Johnson was in the Remain camp at first, he had already written a (reportedly very good) pro-EU column for the Telegraph, but saw an opportunity to position himself by joining the leave camp. He was immediately bombarded to “leader” of the Leave camp of course, since the “best” alternative was Farage and nobody wanted that. But Johnson also didn’t expect Leave to win.

                  When Leave did win, Cameron passed the poisoned chalice to Johnson in a heartbeat, setting Johnson up with an impossible task of either betraying the vote of the people, or sending the UK off an economic cliff. As a result, Leave is now backtracking on their campaign promises in record speed, trying to kicking the can down the road, and making more vague promises in the process. It’s all exactly the kind of big f’in mess you expect when people start playing out their personal rivalries on such a big stage ;-)

                  • jules

                    you’re probably right! Boris obviously loves the spotlight and he does give the impression of someone who’s opportunistic in hitching his wagon to a popular cause. people often vote for the tangible stuff though and immigrants are more tangible than economic policies and trade terms. the irony is that destabilising the EU will probably put more pressure on immigration, not less..

                    • ebbe

                      True. Sadly, very true.

                • Dave

                  Did you know that:

                  1. the UK is one of the most active members of the EU in promoting regulations to standardise markets?

                  2. if the UK wants to stay in the single market after leaving the EU, they will be subject to exactly the same regulations, including allowing people to freely move across national borders?

                  Thankfully for those who voted leave before checking the facts and have been frantically googling “what is the EU?” over the last three days (for real – http://fortune.com/2016/06/24/brexit-google-trends/ ) there’s a get out. The UK has not actually left the EU yet, and this referendum (really just a glorified opinion poll) doesn’t force them to.

      • bigdo

        lol… Britain does something historically foolish, and tanks their own currency, perhaps leading into a new recession and harsh economic realities and the first thing us cyclists think of is … Will shit cost more on Wiggle because of this? LMAO..

      • Dave

        Perhaps Wiggle could get that winning feeling by relocating their business to Iceland?

    • Hyun-ji Song

      What’s wrong with it? Are we all supposed to not understand what he’s writing? I thought the majority of readers were fairly educated or had the maturity to grasp these concepts.

    • Cycling iQ

      Thanks for the feedback. I don’t think you look like a prick at all – I’m comfortable knowing that my style of writing won’t appeal to everyone.

      On the question of Wiggle: in 2014, 75% of the company’s costs were in GBP while 52% of turnover was in GBP. A weak GBP would generally boost Wiggle’s margins and profitability as it converts foreign currencies back into Pounds. I doubt North American bike shops are in for an easier ride as a result – the US has its own headwinds, not least of which are the upcoming Presidential elections.

      • Wily_Quixote

        The first thing I thought of when the pond dropped was ‘does this mean wiggle’s prices will drop’?

        Alas, not yet.

      • Dave

        The Australian dollar prices on Wiggle and CRC have generally stayed pretty steady over the last few years despite the AUD steadily dropping in value compared to the GBP from March 2013 to September 2015.

        If they have smart people handling their accounts, they won’t have a problem in the near term and may have even made a bit of money off it already if they were lucky.

        In the long term, Wiggle and CRC are big enough that they may benefit from relocating some/all of their business to mainland Europe if the UK looks like actually leaving the EU (I don’t think this is likely, let alone certain) and not retaining EEA membership afterwards.

        I agree that Brexit is nowhere near the biggest issue for the US cycling goods market.

        • Michael McGowan

          Given the AUD prices have remained the same on Wiggle, PBK etc.. Has anyone had experience in purchasing products in GBP to save some money using an international credit card without fees? Given the improvement in AUD to GBP.

          • Dave

            The local prices of Wiggle etc in the UK would be different to their prices for each overseas market, and never a direct conversion except by coincidence when the currency rates cross over.

            At least four things would be at play there:

            1. An international credit card without fees will usually have the fees built in, but via giving you a worse exchange rate than the “official” currency exchange rate.

            2. Amount of overheads built into each price.

            3. UK VAT vs Australian GST.

            4. How aggressively they are competing with the rest of the market in Australia. Why charge a competitive UK price which undercuts the Australian retail price gouging by 20% when you can undercut it by 10%, still win market share and pocket the difference as pure profit?
            4 (a). How aggressively certain brands will let them compete in Australia before stepping in to protect their Australian distributors.

    • Cam writes like he speaks, and it doesn’t come off as you suggest. Sometimes a bit over my head but I always come away with something new.

      • Dave

        And people can always look up stuff they don’t understand.

        Imagine how annoying it would be if a bike race commentator was constantly stopping to explain the same stuff for novice viewers multiple times during every stage? Oh wait, we unfortunately don’t have to imagine Phil Liggett.

        • Sean

          Or like Paul explaining in detail how a rider should not touch their brakes or they’ll fall back a billionty places in the pelobunch.

          • Dave

            Have you heard him in a race where he doesn’t also have Phil? He’s not too bad.

            It could be worse though. I received a most unpleasant shock last weekend when I tuned in to the Le Mans 24 Hours and was immediately assaulted with the moronic utterances of one Carlton Kirby. If Maria Sharapova gets let off her doping suspension, I will petition Eurosport to shift CK to covering women’s tennis so as to consolidate the reasons to use the mute button into fewer events.

        • Laurens

          Yes, that constant explaining is driving me nuts too! But we should count our blessings, they don’t explain the working of the chain, or the fact that there is air in the tyres.
          Can’t wait for those two to retire and let Matt and Robbie do their thing. “And now for the finale we hand over the commentary from the knowledgeable fun guys to the broken P&P record”

  • Robert Merkel

    Geez, if you were Wiggle,you’d be thinking about moving your global export operations out of the UK.

    A nice little case study of what Brexit’s going to do to the UK economy, really…sad.

    • jules

      reportedly a or the major reason voters opted to leave was xenopobic views on immigrants and EU’s soft policies on them. I don’t share those views but I’ll watch with interest the economic impacts on Britain. a lot of people are projecting doom and gloom but I’m not so sure. one reason being, I don’t really understand it.. but the other being that the EU has a lot of protectionist policies that countries like Australia dropped long ago. there are obviously arguments for and against those, but in raw $$$ terms there’s potential upsides of Britain abandoning them.

      • Dave

        It’s a lot more complex than a simple leave/remain decision.

        It all depends on what comes after EU membership for the UK if they do end up leaving – and that’s a big if, as I doubt Johnson wants to have anything more in common with Yeltsin than the same name. Thankfully for his hopes of not going down in history as the PM who broke up the UK, there’s plenty of wiggle room for him as a referendum in the UK has no legal status so the inconclusive vote last week (52-48 sounds a lot like 50-50 to me) following a very dirty campaign hasn’t locked in anything.

        44% of the UK’s exports go to the 27 other EU nations, and businesses operating in the UK will no doubt be very interested in protecting that by either the UK maintaining access to the European market after leaving the EU (i.e. swap EU membership for EEA membership, keeping the same policies on freedom of movement etc) or by shifting their operations to the mainland. No other EU nation has any more than 7% of their exports going to the UK, and a good portion of that could be exported to other nations which currently import the same stuff from the UK.

        The EEA membership option will have most of the same obligations as EU membership – paying a good amount of money for access, freedom of movement (this will be a shock to those who voted out on the immigration issue!) and compliance with European regulations – but with no part to play in the decision making process which leads to those policies.

        • jules

          from what I gather, Boris has been campaigning based on joining the EEA. I agree that it looks a lot like full EU membership. I don’t understand all the details though. apparently, neither do a lot of people, including the decision makers!

          it’s easy to jump on the Remain bandwagon. I don’t see the compelling reason for Britain to Leave, so I’d most likely have voted to Remain. but it’s only fair to look at the issue objectively. the EU is not in a very healthy state. the smartest thing that Britain did was refuse to join the EU common currency. can you imagine if they did? good for Greece and the other debt-ridden member states, but would have left Britain in a much weaker position.

      • Laurens

        I also heard a discussion about whether GB would now become more involved in the Commonwealth. But that was a problem because you can’t just open your borders to countries like Pakistan, it was said.
        It’s alright to be a super power, occupy them and rob them blind. But please don’t expect us to welcome them after that, when they’re all poor and stuff.
        (disclaimer: I am a Dutch citizen living in Australia and my birth country does not have a better track record in that area)

    • Dave

      Wiggle will have plenty of time to work out a solution as four things will affect it:

      1. The interpretation of the referendum result by the Parliament. The 52/48 result was a win by the simplistic 50%+1 standard, a loss by the Swiss/Australian system which requires an absolute majority plus a majority of regions (interestingly, the Swiss system was adopted by the British authorities who were writing the Australian Constitution!) and in the context of a non-binding referendum without compulsory voting is best interpreted as an inconclusive draw.

      2. Whether the UK will actually leave the EU. Even if the referendum does get interpreted as a decisive win, there is now a sudden lack of bravado from the Leave leaders (Boris, Gove etc) who are now urging caution. A cynical person might suggest all they ever wanted was a way into Number 10, and not to be faced with the choice of ignoring the referendum or going down in history as the PM who broke up the UK. By resigning without triggering Article 50 proceedings with the EU, Cameron will be handing his successor a nuclear bomb which will only work if it is under the PM’s desk.

      3. What will happen after the UK leaves the EU. The UK depends on other EU nations buying 44% of the nation’s exports but no other EU nation has any more than 7% exposure to the UK, so the UK will have to try and gain EEA membership (most of the obligations of the EU including freedom of movement, but no control over deciding the rules) to guarantee access to the single market afterwards. Negotiating that will not be a quick job, so allowing plenty of time for Wiggle/CRC to shift some of their operations to the mainland during that period.

      4. If (3) does not result in the UK having EEA membership, the different trade deals that other markets have with the UK and EU will affect how Wiggle UK and Wiggle EU deal with the rest of the world.

      • jules

        from what I’ve read, they are leaving. ignoring a democratic mandate is a particularly dangerous thing for any politician to do. despite the loud complaining by remain-voters (with whom I tend to sympathise) over the past few days, there are an awful of Leave voters who expect their govt to implement the decision. to refuse to do that would be, in the words of Sir Humphrey, a very courageous decision. very courageous indeed.

        • Dave

          52-48 after a very ugly campaign is far from conclusive (Nigel Farage said so himself) and definitely not a democratic mandate. That sort of situation is exactly why we have supermajority rules for our referenda in Australia (absolute majority + an absolute majority in the majority of states) which do actually have legal status.

          Nicola Sturgeon may be able to completely block an attempt by the UK Parliament to actually leave the EU, because the consent of the Scottish Parliament will be required. As every single area of Scotland voted with a majority for Remain, she would be well within her rights to tell the SNP members to honour the wishes of their constituents and vote down the move. The UK Government would have to pass an Act of Parliament to withdraw powers from the Scottish Parliament if they wanted to get it through, but what is more likely is that they would use that as a convenient excuse to say “our hands are tied, we can’t leave.”

          Aside from the inconclusive result, there’s also the factor that none of the contenders for the PM’s job who campaigned for Leave appear at all interested in pulling the trigger. Boris was only ever interested in elbowing his way to the front of the queue for Cameron’s job, he never expected the Leave campaign to actually win.

          It all looks very much up in the air to me, and I’d be very surprised if the UK has actually left the EU by the end of 2020. But in the meantime, what is real is that businesses (including those dealing with bike stuff) will be hurt by the ongoing uncertainty until there’s a strong conclusion either way.

  • jules

    a 48% import tax on Chinese bikes? wow. a cursory look at what similar tarriffs on imported cars in Australia used to do shows why it’s such a bad idea. who wants to pay $30k for the equivalent of a Hyundai Getz again?

    I’m sorry the Brits left the EU but they were subjected to some pretty questionable policies. if I were a British cycling business, I’d be more excited about the cheaper Chinese imports than trading with EU countries.

  • Dave

    I’m going to go out on a limb and suggest three major possibilities for the cycling world:

    1. This may force Wiggle to shelve their plans to buy out CRC. For the next year or so, the biggest economic fallout from the referendum vote will be a massive loss of confidence in the business world, which often leads to companies getting cold feet over planned investments.

    2 (a). Team Sky and One Pro Cycling may be cornered into shifting their business registration to a mainland EU country the next time they need to renew their licence. This shouldn’t affect Sky’s British nationality for UCI purposes, so long as they still have a main sponsor which markets a product/service in the UK (i.e. Sky). One Pro Cycling won’t have that option, as they don’t have a main sponsor, let alone one which markets a product/service in the UK.
    2 (b). Wiggle-High5 and Matrix can be registered businesses anywhere they want (Wiggle-High5 is registered in Australia) and still keep their UK nationality with the UCI simply by having more UK riders on the team than any other nation.

    3. This may put the Tour of Yorkshire in some jeopardy if the UK does actually end up leaving the EU in a few years.

  • George Darroch

    I thought this article was easy to understand and highly informative.

    The Tour de France and other major tours are also unlikely to start in the UK again in the next few years.

    • Dave

      The Tour is already unlikely to go there again soon, after Boris Johnson withdrew London’s bid for 2017 after getting it into a front running position. The Tour is too dependant on the goodwill of the French government for ASO to try that again while the UK is causing such mayhem in Europe.

      If the UK does actually leave (I wouldn’t bet on it) then ASO might find it difficult to run the Tour of Yorkshire.

  • Timiji

    Average unit price of US$281? That’s a department store bike price, not a specialty store bike price? Or were you off by an order of magnitude? Or currency?

    • Cycling iQ

      USD281 is the ex-factory price paid by the importer. Add freight, insurance, import duties, value added taxes and sales markup/s to get consumer (retail) price – a bike that costs USD281 ex-factory could potentially reach a retail price between USD800-1000.

December 15, 2017
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