Bird Cycleworks is developing a range of mountain bikes to exploit the growing direct sales model. In recent years, the cost of purchasing a bike has risen sharply, well over inflation, driving consumers to brands offering direct to customer sales, without retail shops in the distribution chain, reducing the costs to the consumer, allowing their money to go much farther.
We think this has been exploited by only one company to any significant degree; Canyon. They have seen huge growth in the last 5 years as more consumers turn their backs on the high street model and go direct. You only need to visit a trail centre or bike race to see just how many Canyons there are in the UK now.
We believe that this model is the growth sector of the market; companies like Giant and Specialized simply cannot capitalise due to distribution infrastructure and heavy reliance on retailers. We intend to become the UK's largest direct complete bike manufacturer, in a valuable and as yet relatively untapped market.
Right now, a bike buyer in the UK has 3 options:
- Buy a bike from a mainstream brand at a premium through a high street retailer.
- Buy a bike direct from the manufacturer at a far reduced cost, but without trying it first.
- Build a bike from components for themselves. A challenging exercise for anyone but an experienced mechanic.
Our model would create a fourth choice:
- To get the benefit of buying direct from the manufacturer, but with UK based customer support, service and demonstration days where they can try out our products.
Our model will allow our customers to benefit from many of the aspects that a retailer offers, including bike testing, UK based service and delivery, customer support and 48hr delivery. Even more importantly, our unique customisation system would allow the customer to tailor the bikes components for fit and usage style without impacting the cost or lead times. A feat even the high street retailers cannot match.
We're not building a boutique brand, Bird Cycleworks is looking to sell over 10,000 units in our 5th year of trading, which makes us a significant player in the UK and European market. We plan to deliver a broad range of bikes that offer a blend of value and performance unmatched on the high street.
Combine that with our passion for the sport, and the ability to deliver seamless online integration of retail, customer service and marketing, and Bird Cycleworks would become a potent force in the cycle market.
We plan to become the first port of call for any off-road cyclist looking for high performance at an affordable price.
Substantial accomplishments to date
Since our formation in April of this year, we have:
- Developed our first line of bikes, the Bird Zero range, with prototypes arriving soon, and manufacturing of our initial models scheduled to complete in December ready for consumer launch.
- Established accounts with major OEM suppliers.
- Designed and built prototype wheel sets for our bikes, ready for production in time to distribute with our bikes and standalone.
- Established an online sales platform, currently being populated with our products.
- Modelled the full cost of manufacture and distribution for our 2013-2014 lines down to the last nut and bolt.
- Scouted for potential manufacturing facilities.
- Established an active online community via Facebook and Twitter that provides us a starting market for our sales activities, as well as a means to survey our potential customer base in order we make the best informed decisions we can. Something we have been very active in doing.
Our business model is simple - we are a manufacturing business with product manufacture that is planned to provide a 30%+ profit margin on every item we sell.
Unlike traditional bike manufacture, our supply chain would be extremely short:
Traditional Bike Manufacturing Model -
Factory > Assembly Agent > Brand Owner > Wholesaler > Retailer > Consumer
Our Manufacturing Model -
Factory > Bird Cycleworks >Consumer
For more information on ODM/OEM manufacture and the various sales models, this blog is an excellent read: http://cyclingiq.com/2011/11/08/vertical-limit-.
We plan to source all components for our bikes as close to the point of manufacture as possible. This means dealing direct with factories for major components such as frames and wheels (produced under the Bird brand to our specifications), while finishing components such as gears/handlebars etc. would be provided OEM to us by major brand owners, such as Shimano, RockShox etc. The components would be brought into the UK for assembly by us.
Our customisation model requires this to enable us to tailor each sale to the customer's requirements. However, we plan to limit the amount of customisation to ensure that our cost of assembly remains manageable. Further, the variation in import duty for parts versus complete bikes (4.7% against 14%) should help us to maintain a UK manufacturing base without suffering disproportionately high costs.
Each model is specified by us to suit the current market trends and preferences, and then priced in order to generate our desired margin. We have already established pricing for the first models which demonstrates a significant benefit to the customer in terms of bicycle specification at the same price point. We expect to be able to improve this specification over time as our purchasing power increases.
Use of proceeds
All the proceeds of our fund raise will go into establishing the production run of our first model, and paying for assembly related costs going forward.
At this stage, none of the founders will take any salary, and David and Ben will continue to undertake part-time consultancy work in addition to their responsibilities to Bird Cycleworks. It is expected that the eventually all the founders will move to work full time and salaried as the business grows.
- Stock order from our suppliers; in order to get beneficial volume pricing, 100 unit purchases are common, a significant capital outlay.
- Assembly premises & tools; at this time, and until sales justify otherwise, assembly will be undertaken at the premises of the founders, however, that will only be viable for a short period of time. We will require a storage and assembly facility in early 2014.
- Marketing/Brand costs. At this time we have a web presence, as well as a comprehensive online sales and stock management system in development. However these will both need brand 'skins' applied prior to launch, something we will require a third party for.
Are target market is every single mountain biker in the UK and EU. We believe we're offering the most compelling combination of state of the art design, value and customisation available.
Our bikes are not niche, we plan to make bikes with broad market appeal, covering the most popular types of off road cycling. We've planned out a comprehensive 6 model range over the next two years, that covers every type of off road mountain biking.
Our customers will be those who want something unique to them, but at an affordable price. Already the market is moving faster towards direct to consumer sales, and Bird will drive that shift faster than ever before. Already the UK consumer is moving online in the cycling world at a very rapid rate. 2 of the most popular online retailers in the UK are cycling focussed; Chain Reaction Cycles (CRC) and Wiggle. CRC even features in the latest PayPal television advert such is the popularity of cycling and more importantly online shopping for cyclists.
Our planned models reach a wide demographic, from serious competitive riding through to the most casual 'weekend warrior'. Each will be offered at attractive prices and with fantastic customer service to drive loyalty and sales.
Characteristics of target market
Our target market will be the mid-level enthusiasts market. Our customers are interested primarily in two key factors when considering which bike to purchase:
- Recommendations from their peers and the press.
- Component quality and specification.
In both these areas we believe our business model allows us to be very successful in addressing these two factors.
Mintel forecasts the bicycle UK market will grow 23 per cent in the next 5 years, reaching £800m by 2016, from £700m in 2012.
M Oliver, Senior Leisure Analyst at Mintel, said: “Overall, perhaps the most surprising aspect is the lack of importance attached to brand, with price, specification and styling, colour or décor being seen as more important than whether a bicycle is a brand that the potential buyer is familiar with. It also provides encouragement for new brands because it demonstrates that a well-priced, well-specified, well-designed bicycle will always sell, regardless of whether it is a brand people have heard of. "
All sales will be via our on-line retail system. It allows us to offer a comprehensive customer service for the customisation of the bike, arrangement of payment and delivery. Additionally to this we will be offering a test ride facility, which we expect to expand as demand grows. This facility addresses one of the commonly stated negative factors for online purchasing; the ability to test.
In order to eliminate another problematic element of unseen purchasing, we offer a significant amount of customisation available on each model. This customisation, done as part of the manufacture process, would allow the customer to be specific on the size, shape and fit of certain components which might be considered the most 'personal' such as saddles, grips, bars and stems. In order to allow the customer a degree of certainty with regards to the purchasing of these components, we have chosen to go with main brands rather than the more common in-house brand options other manufacturers would opt for. By using main and recognised aftermarket names such as RaceFace and Charge for these components, who have very strong brands and customer loyalty, we plan to eliminate the uncertainty faced by our potential customer as to whether they will like these most important of elements on the bike.
The key to our success is not just great products, it's much more than that. It's about being out there with our customers, sharing their experiences, engaging with them and understanding what they want. We're firm believers in gaining feedback from our customers and using that to stay ahead of the curve.
We're going to be ensuring we do this by:
- Hosting 'demo' days on a monthly basis at the UK's most popular trail centers, allowing people to try (and buy) our bikes in person. Something we don't think our competition is doing in any meaningful way.
- Allowing people to come and visit our factory, in order that they can feel part of the Bird Experience.
- Having fanatical customer support, in order that we deal with enquiries and issues faster than anyone else. You would be surprised how poor the experience can be right now.
- Developing a network of warranty and service centers with independent service shops (like our friends at www.velolife.co.uk) where Bird customers can go when they have an issue, rather than sending a bike to Germany!
- Developing better boxes and packaging, to complete the Bird experience.
- We're not planning to follow the normal 12 month manufacturing cycle, in order that our ranges remain fresh, updating as and when the product requires and new components become available, something the big manufacturers struggle with.