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Wholesale Bicycle Distributor Business Plan

Market Analysis Summary

The retail bicycle market can be broken down into two segments, the independent bicycle shops and the chain bicycle shops.  Most bike shops are independent, however, there is a growing trend of bicycle shops being part of a chain.

4.1 Market Segmentation

The two segments that Wheelie Deals will be targeting are:

  • Independent bicycle shop. The large majority of bicycle retailers are independently owned sole proprietorships.  They are usually owned by one person and range from three to 10 employees, depending on the season.
  • Chain bicycle shops. Although chains are not the predominant business form, most large cities (over 200,000 people) have at least one chain serving the community.  Sometimes the chains are franchises with different owners, other times they are same owners with multiple stores.

The majority of sales will be to the independent bicycle shops, the reason being most of the chains have a very uniformed product offering that does not deviate for specials and closeouts.  The chains tend to value consistency of product offerings at the expense of profit margins.

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Independant bicycle shops 9% 12,458 13,579 14,801 16,133 17,585 9.00%
Chain bicycle shops 8% 8,045 8,689 9,384 10,135 10,946 8.00%
Other 0% 0 0 0 0 0 0.00%
Total 8.61% 20,503 22,268 24,185 26,268 28,531 8.61%

4.2 Target Market Segment Strategy

Wheelie Deals will target the retail bicycle shops through three means:

  • Trade shows. Wheelie Deals will be visible at the two major industry trade shows.  75% of the retail bicycle shops attend at least one trade show a year.  The shows provide retailers an opportunity to view upcoming products and chat with a spokesman from the company, as well place pre-season orders.
  • Advertisements. Wheelie Deals will be advertising in Bicycle Retailer, the industry magazine.  90% of the bicycle shops in America receive a copy of Bicycle Retailer making the advertising opportunities especially valuable.
  • Website. Wheelie Deals will develop a website that includes a current catalog of their offerings.  This will be the most up-to-date source of product information and availability.  All advertising activities and trade show presence will highlight the website as an indispensable source of information.

4.3 Industry Analysis

Currently the industry is served by 10-15 different wholesalers.  Each wholesaler has their own niche to some degree, but generally they have a fairly wide product offering. Some or most of the wholesalers have a sale or closeout section, but this typically makes up a small percentage of their business.  It is well known that the margins in the retail bicycle industry are small;  30% for bicycles, 75% for components, and 100% for clothing.  Closeouts are a great way to increase store traffic and significantly helps out the shop's bottom line with higher margins.

4.3.1 Competition and Buying Patterns

The major competitors are:

  • Seattle Bike Supply: this is a national distributor with several warehouses spread out across the country.  Seattle sells closeout products, but they make up a small portion of their business.
  • Quality Bicycle Products: this is a relatively high-end bicycle component distributor that operates on a national scale, however, they only have one warehouse in Minneapolis, MN.
  • Riteway: this is a national wholesaler with multiple warehouses.  Riteway has an extensive product catalog and does offer a decent amount of closeouts, in part due to a minority holding of the GT bicycle company.

Bicycle retailers tend to favor one type of distributor for certain things.  Some variables that influence decision is price, availability, shipping time, and available terms.  The retailers will often use one main wholesaler and aggregate as much as possible into an order to save shipping costs.