Global online cycling marketplace Bike Exchange's (ASX: BEX) shares have been cruising in the month since the company pedalled onto the ASX, but with further international expansion on the cards the company could soon be king of the mountain.
For newcomers, amateur professionals and pros alike, buying a bike is a personal process.
Making sure the seat and handlebar positioning are just right, all the while ensuring the weight, style and aesthetic of the frame are fit for purpose, usually requires physical inspection and a test ride.
So how does one of the world's largest global cycling marketplaces run its online business with such success?
According to CEO Mark Watkin (pictured right), a marketing executive with 20 years' experience under his seat, it's all about maintaining exemplary relationships with physical cycling retailers and generating leads for those business customers.
Founded in 2007 by Sam Salter (pictured left) and Jason Wyatt, the company has rapidly spread its gospel around the world and now operates in eight countries across four continents.
The business grew to such an extent that in early February Bike Exchange listed on the ASX after raising $20 million with a market capitalisation of $76 million.
In one month BEX shared have hardly budged, and at the time of writing still sit at the IPO price of $0.26 per share.
However, further international expansion is underway, especially in Latin America.
This is going to be driven by a partnership struck between BEX and Colombian motorbike retailer Auteco Mobility, the latter of which participated in the Bike Exchange raise to buy 10 million shares.
"Latin America is our puppy, it's the youngest of all four regions," Watkin said.
"Auteco is a very established business that has been going for 80 years in the combustion engine as well as electric vehicle space, with a dealer network of around 600, and they've obviously got huge knowledge on the region.
"They've got three businesses, one of which is a point of sale (POS) business which is interesting as there's been legislation introduced in Colombia now that all retailers have to have a POS system. They've been following our business for a couple of years so they did an investment through the ASX on listing."
From cycling classifieds to global e-tailer
In the space of 14 years BEX has gone from a classifieds business for the cycling sector to a global e-commerce player, selling bikes and accessories worldwide.
In many ways, the business is a hybrid of a carsales.com with the online e-commerce teeth of an Amazon - with customers able to check out a bike online and be directed to a store, or simply able to purchase a new bike, helmet, or a set of riding gloves with a click.
To date, Watkin says BEX has done international expansion on a capital light basis, "which makes it a little bit harder, but it keeps you honest".
"And it is a replicable model around the world, but you can't just go in and switch the lights on," says Watkin.
The company's model sees business clients sign up to the platform to sell and showcase their bikes and cycling products, meaning a bunch of the business' revenue is generated from getting those leads to these clients.
However, Watkin says BEX's big opportunity is in converting these leads to on-site transactions.
"We generate, based on the half year figures we just put out, $1.5 billion worth of sales leads in value," says Watkin.
"Historically we've always driven sales leads and inquiries into stores. So our opportunity is to convert more of those inquiries onto the site. It's a conversion strategy as opposed to an acquisition strategy, which is actually a cheaper exercise."
Despite that strategy being rolled out, BEX has no intention of ditching its retailer base - it's what helps them stand out from the pure-players.
"We're absolutely about supporting the retailer base, which is an important point of difference when we come up against a pure-play online e-commerce site," says Watkin.
"We're about supporting that omni-channel aspect."
COVID accelerates sales
With international travel off the cards, and many choosing to spend money on things at home, BEX saw strong growth during the pandemic period.
That trend has continued into 2021, with BEX's first half results detailing "strong growth" in e-commerce transactions in the two months of the second half.
According to Watkin, the way we're living now has built on trends seen prior to the pandemic, with people interested in softening their carbon footprint, and with governments prioritising cycling lanes in cities.
"When you've got those macro trends around environment, infrastructure, convenience and the way we're living and working now, they've all come together and accelerated in the COVID period," says Watkin.
"We saw very good growth across all metrics, and e-commerce accelerated for us.
"We got a lot of things right before COVID. We've done a lot of work with our product, the quality of retailers, and a lot of work as well on just the experience on site."
Had the foundations not been in place pre-COVID, BEX might be in a very different position than it is today according to Watkin.
"But the trends have continued for us now. So traffic is still well up on a half year basis, up 80 per cent on the previous year. E-commerce is up 154 per cent on the previous period," he says.
"So we're very confident that that's continuing."
The e-bike revolution
Sales in all categories were up during the pandemic period globally for BEX, but one emerging type stood out.
E-bikes have emerged as a standout in recent years; they're electric, meaning they're good for the environment and easy on the legs - perfect for a morning commute.
Not only are they becoming the urbanite's bike of choice, but with three categories (urban, comfort, and mountain), they're taking over the entire sector as consumers become accustomed to them.
"The mystification of e-bikes is being broken down," Watkin said.
"In Australia and the US interestingly we're a bit slower on the e-bike uptake, whereas in European countries, because of cultural acceptance and infrastructure, they're ahead of the curve."
It helps too that bike-share companies in Australia like Ofo and oBike have introduced many Australians to the concept of e-bikes.
But does the prevalence of these relatively affordable bike-share programs threaten BEX's long-term viability? Not at all, says Watkin.
"Anything in the category is good for us generally," he says.
"We don't try to compete. They enable the industry. I think at the end of the day, the ownership of a bike is a good thing. There's definitely a place for a share bike. I use share bikes, because it's convenient.
"But the business as we stand today is a marketplace. The richness of what we see from data and insights on the industry and behaviours sets us up for quite a lot. Moving forward as at platform, we couldn't rule a lot of areas out - a subscription service for bikes could quite easily live on Bike Exchange."
The CEO says this growing category has plenty more room to boom too, with city planners and infrastructure developers focusing on giving bikes more room on our roads.
"The bike has got a big, big part to play in the future," he says.
"When you look at all the urban planning and infrastructure discussions, there's some really interesting stats if you look at a typical road. It's like five or six per cent of the real estate on that streetscape is given to a pedestrian and a bike - the rest is a road for the car. It's out of whack.
"It's going to be fascinating to watch in the next two decades - and we have to do something from an environmental perspective."
Photo credit: Craig Maclean
Business News Australia
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