Electric bicycles, once scorned by the western bicycle industry for more than a decade, are becoming the major profit driver of the bicycle industry, world wide. Larger tickets, larger margins, larger need for after sales service and for more dealer support are all benefits for the bike industry. And a bike that is easier to pedal, extends range, utility, and comfort is a big benefit for the consumers.
They are also becoming a part of nearly every category of cycling. Their earliest use was almost exclusively for transportation. But now we have electric mountain bikes extending the range and scope of MTBs. We have electric assisted road bikes, cargo bikes, pedicabs, and more.
We even have electric bike races, and “mechanical doping” helping to cheat in conventional cycle competitions.
The prediction of a few years ago - [I]that electric assist would become a ubiquitous part of the bicycle transmission in nearly every category,[/I] is coming true.
And electric bikes make money. A refreshing point in an old, tired industry that has accepted low margins as a matter of course for nearly a century.
Many new players seek to enter the field.
At least 400 brands for electric bicycles exist, today, in the western world. And another similar number, or greater, in Asia.
Many of these “brands” are companies destined to fail. (Of the more than 160 brands in the USA, only about 95 imported any product last year) Many are tiny. A large number are the conventional bicycle brands that have added an electric bike product or line. A few are car or motorcycle companies that are seeing the opportunity. A few are specialists in electric bikes with sufficient resources and skills to take advantage of the current lack of a dominant brand to build a new and likely to succeed business.
Some are hobby businesses.
For any new entrant, this is a daunting situation.
For any supplier, it is difficult to know who will be successful, and who will fail. Giving support to the right player can be golden. To the wrong, maybe a disaster.
And there are no simple rules. The biggest and best businesses of yesterday have often failed suddenly in recent years. And brands we never heard of before have become important in the course of months as a result of our information intensive life today.
Any business history book will teach us that in the early days of a new industry a very large number of players will enter. The industry will then go through a period of contraction as some players merge, others fail. A stable number of brands is probably less than a dozen in each market. Perhaps less than 6 over time.
This author sees a great opportunity for new electric bike brands to come into creation. This is a rare event, for most products in the world market are offered by well established brands that have secured a position in the mind of their consumers, and a solid distribution channel. More often, there is an expensive fight for market share in a well established market.
Where are the opportunities?
Until today, the mind set of most electric bike brands has been dominated by supply issues. What the author thinks of as “Engineer Thinking”. The basic “engineer idea” is that the only important thing about the brand is that the product be so wonderful that everyone will want to buy it. Sometimes the ‘Engineers” will recognize that design is important. But rarely do they pay much attention to the distribution channel, marketing, salesmanship, promotion, and the consumers.
This is backwards from a successful approach.
The first consideration should be “how will we sell this product?”
And that leads to: “who will we sell it to?” and “how will they hear about us?”
Finally: What should it be…?
And underlying all of this: It must be reliable, durable, and easy to use. That simple issue used to be problematic. But today many ebikes meet this requirement.
It is rare for a product development team to be so brilliant that they can dictate to their end users what the product must be. Those few occasions when it has happened have led the “engineers” to strive for this. It is better to ask the consumer, and the elements of the distribution network what the product should be, and then find a way to offer exactly what they asked for.
Every time a consumer or dealer asks for “something unreasonable” a door opens to opportunity. Sometimes it is not a practical request. But often, exactly those ideas that are seemingly impossible, or too expensive, or just silly, are the keys to success.
We can look at the big success stories of new types of product and see that a major part of their effort was in marketing, sales, and developing the distribution channel.
Apple gets a lot of attention for the huge success of their well engineered, brilliantly designed products. But the existence of the Apple Stores, iTunes, the App Store, and a very well funded marketing campaign that has used the same style and basic message for decades, are perhaps more important than the product itself.
In companies that are dominated by product development concerns, with engineers, or designers for bosses, it is ordinary to ignore the need for a sales department, and for marketing.
Allowing enough resources for hiring talented sales people, talented marketing people, and supporting them appropriately is essential. The marketing budget of car makers, motorcycle makers, consumer electronics companies, and nearly every other consumer product totally dwarf the marketing budgets of normal bicycle companies.
And then the typical electric bike company approaches the market with even less resources…
As for channel of distribution, here are some that exist, with comments from the author. Most do not work as well as one would hope…
Mass merchants such as WalMart, Carrefour, IKEA, TESCO, still move more goods of all sorts, than any other channel. (But…we can see that Amazon and other players are becoming powerful enough to challenge them). All of these mass merchants focus on low price, and on shifting costs to their suppliers. Access to the market through these exists for companies thatch live with low margins and have product that satisfies the consumer enough to stay sold. Returns are often the only after sales service offered by a mass merchant, and returns are usually catastrophically expensive for the supplier of the goods. Sales staff in these stores usually know little about the product, and test rides are usually not possible.
Category killers in the sporting goods industry, such as Dicks Sporting Goods, Sports Authority, or Decathlon share many of the characteristics of the major mass merchants. Price is very important, the staff and test ride issues are similar.
Toy stores, such as Toys R Us, sell a large number of normal bicycles. But so far, very few electric bikes. Focused on children, they are, again, dominated by the same advantages and challenges as the major Mass Merchants.
Internet through Amazon, eBay, etc. is another very powerful distribution channel, and one that is open to nearly any player. Margins may be challenged by the fees charged by the channel, and “rules” for selling via these can be complex and require study and adaptation.
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[/FONT] Edward Benjamin