Cycling industry market update from our experts
Wednesday 17th April 2024
For cycling retailers, bike sales tend to spike in the summer - especially if we get a few weeks of dry hot weather.
We’re helping cycling retailers to set the wheels in motion for a profitable peak sales season by helping them offer flexible finance options to their customers. Now is the perfect time for retailers to be having conversations with us with a view to getting onboarded in time for peak season.
Our resident cycling industry expert and Strategic Business Development Manager Sandip Patel explains more about what we’re doing to support bike retailers.
How long has Novuna Consumer Finance been working with bike retailers?
Novuna have been working with cycling retailers for over a decade, supporting retailers in offering flexible finance options to their customers.
We also partnered with the Bicycle Association (BA) in December 2022 to offer competitive, affordable finance options to their members. Since then, we’ve spoken to over 100 cycle retailers, and we now provide the finance offering for household names such as Tredz, Trek and Brink.
The relationship with the Bicycle Association has really helped Novuna to produce a market leading package for retailers and become one of the most prominent finance providers in the cycling industry.
What are the major benefits of the partnership from a retailer’s perspective?
The Bicycle Association partnership allows us to work with smaller retailers who may not otherwise meet our eligibility criteria. Retailers who are members of the BA are required to turnover a minimum of £250k a year to be able to offer finance with us.
This gives smaller retailers parity, allowing them to compete with big brand retailers when it comes to the payment options they can offer customers. We know customers expect to see flexible payment options and many will walk away from a potential sale if their preferred options aren’t on the table. In fact, 57% of customers surveyed would not have made a purchase if finance wasn’t available. Our finance solutions may well keep a customer engaged in the checkout process, preventing them from going elsewhere.
Is retail finance well-established within the sports and leisure industry?
A good proportion of the cycling sector have used finance for a decade or more. It’s quite a familiar and established payment method in the sector. As bicycles can sometimes be considered a luxury purchase, retailers have endeavoured to make the cost more accessible and affordable for a long time. Finance is a great way to do that.
That said, there is still a large number of retailers who are now looking at finance for the first time. This is due to some challenging market conditions after the pandemic.
Can you tell us a bit more about these challenges?
During covid, many retailers loaded up on stock as consumers rushed to get bikes during the lockdown periods.
Demand has naturally reduced, and now many retailers have been left with big stock reserves. This has caused a significant increase in supply in the market, leading to increased competition to sell bikes and a race to the bottom on price.
On top of all that we’re still in the midst of the cost-of-living crisis, which continues to impact consumer spending. Those who bought new bicycles during and in the aftermath of the pandemic are perhaps resisting buying a new or upgraded model, and those who haven’t get joined the bike-riding trend are unlikely to do so right now (particularly given the weather we’ve been having over the last few months). With summer coming up, hopefully bike enthusiasts will be gearing up for a new model.
Has finance grown in importance over the last few years with cost-of-living challenges impacting customers?
Absolutely. Retail finance has also become an essential way to drive sales. It allows customers to access products they want without needing to pay for it all upfront.
Instead of waiting to save up, or needing to dip into their existing savings, cyclists can pay for their bike monthly. This allows them to comfortably fit the cost of their bike into their monthly budget, helping customers to better manage their finances.
What finance products are most appealing to cycling customers?
Typically, bikes are sold using interest free credit. This gives retailers something to really shout about, as customers can ride away with a new bike and pay for it over time without incurring any additional charges.
Most retailers also offer an interest bearing option too, particularly for bikes that are on sale, so their margin isn’t eroded significantly. Our team works closely with our retailers to develop bespoke finance packages that work for customers but also make sense from a profitability viewpoint.
What are the benefits of offering finance vs promoting a Cycle to Work scheme?
The main benefit of using finance over some Cycle to Work schemes is the cost. A typical cycle to work transaction could cost the retailer more than 10% in commission fees. This is far more than most of our interest free options, let alone interest bearing credit where customers are charged interest at a fixed rate instead.
There are plenty of benefits from a customer viewpoint, too. Depending on that customer’s individual affordability, they could access a greater number of bikes or accessories when buying with finance as an employer’s Cycle to Work scheme may come with a set price limit in place. They’ll also own their bike from the get-go when they take out finance, whereas their employer would technically own the bike for the length of their Cycle to Work agreement.
How does Novuna encourage retailers to market their finance offering?
There are many ways retailers can make the most of their finance offering.
For bricks and mortar retailers, Novuna provides a wide range of marketing materials to help educate consumers including flyers, window stickers and individual product tags. We can also provide bespoke support should retailers want to produce banners to dress windows.
When it comes to online promotion, just being consistent with marketing can go a long way. This could be a banner image promoting finance on the site or a page dedicated to “bikes on finance” to help improve a retailer’s ranking on Google. Novuna can help ensure all online materials are compliant and that the messaging is being delivered in a powerful and constructive way.
Can you tell us any consumer buying trends? What are customers on the lookout for at the moment?
eBikes seem to be on everyone’s minds at the moment. They’re a versatile type of bike which makes them suitable for lots of different demographics: hobbyists, commuters, fitness fanatics and eco-conscious travellers. They’re particularly popular in the European market and this trend is catching on fast here in the UK. I can’t imagine the demand for eBikes slowing down any time soon.
We’re also seeing interest in subscription services and rental bikes increase, as consumers look for a more cost-effective alternative to bike ownership. As bike prices fall and the economy improves, we expect to see keen cyclists opt to buy a bike once they’ve had their interest piqued.
If you could change one thing about the cycling industry, what would it be?
Ultimately, for the bike boom to really take off, we need a more bike-friendly infrastructure. While towns and cities are slowly becoming more pedestrianised, as a country we still have a long way to go and there’s lots we can do to encourage and support would-be cyclists. Hopefully the Gear Change plan will really help to rectify this, as I think we do need a national effort to encourage people to ride bikes more often.
The cycle industry, and the BA in particular, is doing a great job of shouting about the benefits of cycling – we just need more people to get on board.
