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The retail bicycle business is a competitive, low-margin industry that is rapidly changing. With these changes come a complex set of challenges and opportunities for bicycle shop owners. To run a successful local bike shop, independent dealers must be well-versed in all aspects of the industry, including bike sales, service, and culture.
This guide will cover those topics as well as industry trends, target consumers, financial considerations, and strategies that will help aspiring bike shop owners peddle down the path to starting their own small business.
Industry Summary: The U.S. Cycling Phenomenon
In the United States, around 12.4 percent of the population – nearly 50 million Americans – cycle regularly. This translates to about six billion dollars in revenue annually in bike sales and service. Independent bike shops account for more than half of that revenue. The most profitable shops deliver excellence while controlling costs. However, the bike industry is not simply a numbers game.
Bicycle enthusiasts are passionate about their sport. From competitive cyclists to weekend warriors, they wish to purchase equipment from trusted sources. That is where independent bike shops come in. These shops specialize in bicycle sales, maintenance, repairs, and parts. When shop owners are able to create and maintain a connection with local cyclists, they can begin to earn and maintain trust within the larger community.
Cycling culture is tremendously social and local shops are a vital part of that culture. It is essential for bike shop owners to stay plugged in by joining industry associations, following cycling pages on social media, and attending or hosting community events for cyclists. These practices are particularly helpful for budding entrepreneurs aiming to break into the bike business.
Industry Trends: The Bike Boom
It is prudent for new bike shop owners to examine industry trends carefully to gain a complete understanding of the breadth of goods and services consumers expect from independent retailers. Local shops must cater to the niche market of bicycle enthusiasts and stay nimble enough to adapt to the changing landscape.While sales of traditional bicycles have been somewhat soft, specialty bicycles such as mountain bikes, BMX bikes, and electronic bicycles are driving market growth. In fact, the largest growth sector is e-bikes, with global sales projected to reach 40 million units by 2023. Bike parts and accessories sales have experienced some growth in the areas of wheels, forks and suspension, and lights. Revenue from bike maintenance and repairs shows slight but steady growth.
With a full understanding of industry trends, business owners can:
- Determine which products and services to offer
- Create a strong marketing strategy
- Hire and train knowledgeable staff
- Provide specialized products and individualized service
- Differentiate themselves from big-box stores
- Effectively target consumers
Target Market: Buyer Breakdown
Many independent bike shops primarily target competitive cyclists and ignore other segments of the market. This can be a costly mistake. By maintaining a narrow consumer target, local dealers often lose customers to large department store chains and online retailers. However, when armed with data and a broadened perspective, small shops have the ability to win the business of local consumers.
To effectively identify prime target consumers, it is beneficial to first pinpoint any gaps in the market that could be filled by an independent retailer and then recognize any segments of market growth. Overall, the bike industry is relatively stable. The number of bicyclists ages 18-24 has remained steady and the number of recreational cyclists has expanded. This market stability is attributed to a number of factors including:
- More people are choosing cycling as a convenient form of exercise
- Social biking meetups have broad appeal
- More families with young children are riding bikes together
- Bicycling events such as Tour de France fuel awareness
- Bikes are a convenient and eco-friendly mode of transportation
With these factors in mind, this is a sample breakdown of a multifaceted target customer base:
- Competitive cyclists (premium road bikes)
- Competitive cyclists (premium mountain bikes)
- Recreational cyclists (hybrid and leisure bikes)
- Children/Adolescents (youth bikes)
- Parents (child carrier accessories)
- Environmentally conscious cyclists (standard road bikes)
- Adaptive athletes (special needs bikes)
Broadening the target market can only increase the potential profits for independent retailers.
Steps to Starting a Bike Shop
Independent bike shops contend with heavy competition and low margins.Endeavoring to enter the bicycling marketplace as an independent retailer is a hefty goal. However, proper preparation and keen business strategies can help offset the financial challenges and set the stage for success. Wise practices coupled with expert training and development are beneficial in the beginning stages of bicycle store ownership. Here are ten steps to complete prior to your grand opening.
- Research small business basics and create a business plan
- Select a business entity
- Register a business name
- File for an EIN
- Apply for business licenses and permits
- Select your location
- Secure financing
- Join bike industry associations and attend events
- Find a mentor
- Become a certified bike mechanic
Select your state below to find state specific requirement for starting a business.
Every state has specific requirements and regulations when starting a business. Select your state below to find the guide to starting a business in your state.
Independent bike shops have an average break-even point of 37% in an industry where bike margins are 36% or less. Owners must keep meticulous records, maintain strict budgets, and minimize spending where possible.
Some common costs to consider when opening a bike shop include:
- Working capital (12 months of capital recommended)
- Operational Expenses
- Employee wages
- Marketing and promotion
- Licenses and permits
- Payroll and sales taxes
- Worker’s Compensation
- Accounting and Legal
- Office supplies
Opening a bicycle store is an ambitious endeavor, but a robust business model can lead to long-term financial success. In order to stay competitive – and profitable – bike shops must effectively meet consumer demand, anticipate their needs, and deliver outstanding service. This is the key to earning repeat business, referrals, and increasing revenue.
Average bike shop owners bring home about $50,000 per year. But the take home pay for an independent bicycle store owner depends on the size of the store and the sales volume. Owners of smaller shops with less than $300,000 in sales earn only about $35,000, while owners of stores with $2 million or more in sales earn about $72,000 per year. More sales equate to higher profits with the potential for business owners to earn more, therefore, it pays to diversify products and services to attract more buyers.
Salaries are rising with the changing industry. The current state of the bicycle business is stable with projected growth in specific areas. There are several factors that are expected to boost bike sales, including increasing environmental concerns, more focus on health and fitness, and the aforementioned growing specialty sector of the market. Average industry profitability is on the rise with the global bicycle market predicted to reach nearly $35 billion by the year 2022.This is good news for independent retailers.
Licenses and Permits
Small business owners must comply with the rules and regulations set forth by local governments, state governments, and the federal government. Before opening a retail store, an owner should familiarize him/herself with all state and local zoning rules, codes, and laws for the municipality in which the business will be located. In addition, it is the responsibility of the owner to stay abreast of changes to the laws.
Entrepreneurs should be prepared to take the following measures in order to open a legitimate business:
- Choose a legal structure. Business entity certificate filing types include sole proprietorship, limited liability company, partnership, or corporation.
- Register the company name with the Secretary of State. Business owners must first check to see whether the name is available. If the name is available, the next steps are to file the necessary forms and pay the registration fees. At that point, the business owner will receive the state charter for the business.
- File for a federal tax identification number with the IRS.
- Obtain a vendor’s license and a sales tax ID number from the state.
- For entrepreneurs with employees, they must set up a state unemployment account and a worker’s compensation account.
- Check state regulations to determine if there are other permits or licenses needed for the state in which the business is located.
Networking is an important aspect of any successful business. Keeping in step with the overall culture of cyclists, independent bike shops are a part of a close-knit community of other bicycle aficionados. Here is a list of industry resources to explore as you expand your connections and begin your journey as a bicycle shop owner.
- The National Bicycle Dealers Association
- Professional Bicycle Mechanics Association
- Bicycle Product Suppliers Association
- Cycling Industry News
Things to Consider before Opening a Bike Shop
Now that you have studied the bike market, recognized industry trends, identified your target market, compiled facts and figures, and familiarized yourself with legal regulations, you may feel ready to open your independent bicycle retail store. Before you do, there are a few other factors to consider.
Depending on the area in which you live, the bicycle business may ebb and flow as the weather changes. Harsh winters may cause an empty store if your inventory solely comprises bikes and bike accessories. Consider expanding your inventory and varying the stock with the seasons. General fitness and outdoor leisure equipment can be a secondary stream of income when bicyclists are in hibernation during the winter.
Sales vs Rentals
Dockless bicycle sharing systems have exploded on the scene. Bike shop owners can get a piece of the pie by investing in a bike selection dedicated to rental consumers.
Avoiding Common Pitfalls of Independent Bike Store Owners
Entrepreneurs new to the bike business can learn a great deal from their predecessors’ mistakes. In the past, independent cycle shops were regarded as exclusive spaces with limited bike selections targeted to elite athletes. For owners who want to attract a wider target market and lure consumers away from big-box retailers, here are a few tips:
- Be an innovator: Distinguish your store from chain department stores and online retailers by personalizing each shopper’s experience.
- Deliver an exceptional customer experience: Treat every shopper with value and respect. Meet each cyclist where they are, from recreational to elite.
- Invest in customer education: Provide customers with information and product selections that fit their skill-set and needs.
- Expand your market: Stock varying products from budget to high-end, which will serve athletes ranging from recreational to competitive.
- Know your stuff: Learn every aspect of the business and be able to perform every duty from retail sales to repair work.
Starting a business requires sacrifice which may not be immediately realized as many people opening a bike shop are avid bicyclers themselves. For some, turning a hobby or interest into a business can sometimes burn them out on their hobby. Time with family and friends will be reduced and vacations may become a thing of the past while getting your bike shop off the ground. As you aim for financial success and professional fulfilment, set realistic goals and expectations, work hard, maintain focus, and stay passionate about your livelihood.