Chronicle Journal: Finance

How can cycling companies turn around successfully in the face of the epidemic?

The year 2020 is destined to be a remarkable one. The new COVID-19 ravaged the global economy and set back the real sector, from food service to foreign trade to manufacturing, which was hit hard. Our familiar bike industry was also hit. – Explained by Mayo Zhang, CEO of

Rinasclta Bike

Epidemic gloom hits industry chain

China’s economy grew at -6.8% in the first quarter, the first time since China began publishing quarterly GDP in negative territory.

For the bike industry, exports were affected in the first quarter as a result of the shutdown and late resumption of production and the failure to run production lines at full capacity, and by March when the epidemic spread abroad. Daxing CEO Han De Wei said Daxing’s potential economic loss was between RMB10 million and RMB15 million. For its part, Xinlong’s delivery schedule was affected by delays in resuming work and the impact of the epidemic on overseas transportation.

The situation abroad is not good either, with GoPro’s global distribution network being hit, laying off over 20% of its workforce and firing over 200 employees. Also due to the suspension of major events, some brand branches in the US have taken measures to reduce staff.

The consumer side of the business is much worse than before due to the national home to fight the epidemic, the traffic of bike shops has dropped sharply and turnover remains low. According to my understanding, in the first two months of the first quarter, there are bike shops selling

road bike frame

in single digits per month, after deducting costs, they also have to pay back rent and staff wages.

External sales have stagnated and domestic sales have recovered

Although the domestic market has also been affected, there are signs of recovery. The early onset of the epidemic in China before the Lunar New Year, coupled with effective anti-epidemic measures, has seen a general return to normal life in all provinces and cities. Indicators for the month of March show that the manufacturing index, imports and exports, and consumer spending have all improved significantly over the previous two months. In addition, in order to counter the impact of the epidemic and stimulate consumption to pick up, more than 30 cities nationwide have issued billions of yuan in consumption vouchers. It is basically believed that the next phase of China’s economy is expected to continue the momentum of rebound and improvement, with the overall economic growth showing a “V” shape.

According to the current international economic situation and the impact of the epidemic, the Chinese market still has the potential for development, in the case of the downward spiral of external sales, domestic sales will be a breakthrough point with more opportunities. In addition, bike companies that were previously dominated by external sales and weak in domestic sales can also take this opportunity to focus their efforts on the domestic market for the time being and seek a breakthrough.

Three constraints to watch out for in the domestic market

At present, the domestic market is recovering, the businessman timely switch track also need to pay attention to the three constraints of the situation.

The first is the intensification of competitive pressure.

Domestic market capacity is limited, and the epidemic has not yet receded, many manufacturers in the case of foreign sales blocked, most of them will be in the domestic market; international brands are also likely to seek to enter the Chinese market or expand the promotion efforts in the Chinese market, the increase in the entry of brands will intensify the competitive pressure.

Secondly, there will be “retaliatory savings”.

As a result of the epidemic, China’s economy has been “forcibly suspended”, some small and medium-sized enterprises (SMEs) have either laid off staff and reduced salaries or gone bankrupt, unemployment has risen in the short term, people have less disposable funds at hand and their sense of worry has increased, so retaliatory spending has not yet arrived, but retaliatory saving has. This year, “cash is king” and “side hustle” have become buzzwords, and consumers are making more conservative predictions about the economic situation and cutting back on spending. The original bike replacement parts upgrade bike enthusiasts or will cancel the plan, which has a greater impact on the high customer unit price of high profit brands and bike shops.

Third, most of the hot-selling products are entry-level products with low profit margins.

In the first quarter, the domestic market was dominated by low-priced entry-level bikes, while mid- and high-end models did not sell. However, the profit margin for low unit price products is relatively small, so it is critical for businesses to ensure profit margins.

Another perspective on the positive factors for the domestic market

There are both “risks” and “opportunities”. The epidemic has increased awareness of sports among the population and the health sector is in the spotlight.

After the end of SARS, the sports industry was at its peak, but indoor sports, which are crowded and enclosed, were at a low point. It is understood that in the two to three years following SARS in 2003, gymnasiums such as badminton and basketball courts in Taiwan experienced a wave of closures.

In contrast cycling has a natural environmental and economic gene, cycling helps to maintain the proper body distance both transportation function, exercise intensity is flexible and controllable, coupled with the support of cycling stations, virtual cycling software, etc., activity scenes are freely switchable and will be very popular next.

According to a set of figures shared by Mr. Liao Wu Xiong, the Asian bike God, after the end of SARS, the revenue of Merida’s Shenzhen factory in April 2003 increased by 9.95% year-on-year, and the total revenue from January to April increased by 33.76% year-on-year; Jet (China) sold more than 90,000 complete bikes domestically in April 2003, an increase of 6% year-on-year. This shows that the recovery of the bike industry after SARS has been relatively rapid.

A similar history is repeating itself at home and abroad.

US bike shops saw a wave of sales during the outbreak. Some shops saw a rapid increase in sales in March, with bike World in New Orleans showing a 20% increase in sales in March compared to previous years.

Japanese bike shops also saw a boom in business. Many commuters gave up public transport to commute to work and chose to cycle instead, with sales of bikes soaring. ASAHI’s shop sales from 21 February to 20 March were up 18.5% year-on-year.

Entry-level models, strollers and folding bikes from domestic brands such as Trinidad, UCC and Eurasian Horse were hot sellers, with strollers selling like hotcakes and out of stock in many shops nationwide, with 16″ and 20″ suitable for preschoolers aged 3-7 being the most popular. Industry insiders expect the domestic market for entry-level models to explode next.

In addition to spontaneous consumer choice, the country is also promoting cycling in many ways and through many channels during the epidemic. The World Health Organisation (WHO) has recently issued a guidance document for residents to encourage more cycling during the epidemic, which can be used for exercise while meeting the most basic travel requirements.

Against this backdrop, it is expected that the cycling population will grow. The fact that the existing cycling population will take the sport more seriously and continue to invest in it is certainly good news for the industry.

How can we seize this opportunity?

So how do cycling companies seize this opportunity? Because making the right choice at the right time can be a matter of life and death. We suggest the following areas for consideration.

Firstly, continue to expand online.

There is a consensus that online is the way to go, and now it’s all about how big a pie you want to make. Plus the epidemic has pushed online trading to the top and people have long been used to this convenient way of placing orders. Also, during the home quarantine, riding the platform at home became a major form of entertainment. In the second half of March, indoor cycling Garmin users increased by 63% compared to the same period in 2019.

Demand catalyzed sales, with multiple brands selling briskly online. The Big Line business saw substantial growth in March, with online sales growing at over 50%. Layoffs for winter GoPro’s premium European market revenue for 2019 is over 20% from official website sales and the US market is approaching 20% of official website sales. in Q1 2020, GoPro’s official website sales share climbed further.

Continuing to increase investment in online channels is perhaps the most cost-effective approach at the moment. In the future, not knowing the Internet will become the illiteracy of the times.

However, when the cost of acquiring customers online is not low, and the cost of operating traditional Taobao, Tmall and Jingdong shops has also risen, it is not a bad idea to enter new platforms or open live streaming models.

Second, adjust the marketing model appropriately.

The cycling industry has always favoured offline services, and marketing and promotion has mostly been based on sponsoring large events or shops. But this year, large domestic and international competitive events such as the Giro d’Italia, the Giro d’Italia, the Tour de France and the Tokyo Olympics have been postponed, with some events cancelled outright, ushering in an overall cooling off period for cycling activities. In addition, many sponsors have cut back on their sponsorship of teams, which has resulted in poor team operations and less exposure for brands in the industry.

Therefore, it is imperative to adjust marketing and promotion methods, especially at this time when live streaming is in vogue, and more consideration should be given to increasing online marketing investment.

Especially when VIA live sold the first single in the history of e-commerce – 40 million rockets, helping Xue Zhaofeng sell 65,000 books in seconds, the energy of live e-commerce is really convincing. I also found that from February, one after another bike brand launched live, the industry’s net red has likewise helped some brands to do live with goods.

In addition, the industry’s media companies have fused live-streaming to showcase a new media marketing paradigm. For example, the US cycling linkage brand to carry out live streaming, the average number of people watching a single scene online is up to tens of thousands, and the number of people online at the same time is nearly 1,000, the effect is remarkable, the single scene order volume is amazing, the long tail effect is obvious, directly driving sales, the cooperation brand feedback is very good.

As the industry has not yet hatched a super Netflix with a huge fan base, most brands are not good at new media operations, especially some small and medium-sized brands do not have a dedicated marketing department. Rather than spending time and energy to do the powder to do the number, it is better to leverage the media company, without short-term investment to expand the team, to find the right project, small iterations, rapid trial and error, when the time is ripe to run through the new model, and then consider gradually build the team to start. bike companies can also focus more on product research and development, after all, blowing up to the sky also need to pass the product, the consumer to buy a single.

Third, continue to support dealers.

Dealers are still a major part of the brand’s connection to consumers, and with the epidemic, shops are having a hard time and brands are suffering. More support can make dealers feel more secure.

For example, JET USA has always put the interests of its dealers first, and during the epidemic it has actively helped some of its shops to alleviate their immediate needs by upgrading its online system, which was previously used to sell in-stock products, to help dealers who are out of stock and short of goods, “with 100 per cent of the profits going to the dealers”, and by subsidising service fees to encourage dealers to deliver to consumers.

Of course, more warm-hearted actions need to be taken by the bike companies to dig more into the pain points and needs of the shops, to send charcoal in the snow to the hearts of the people.

Conclusion

The only constant is continuous change. 2020 is a tough start, the current crisis, the first thing that each bike company should ensure is to survive and stay alive, followed by not just focus on the immediate acre of land, or should put a long-term vision, to cultivate brand value, strengthen the brand influence, and jointly promote cycling culture, to make a bigger market cake. Please believe that although the winter is bitterly cold, spring will be late but not late, listen to the hustle and bustle of the road and the roar of the machines in the factory, you will know that we are only one step away from spring.

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