II. MARKET OPPORTUNITY
DEMAND FOR BICYCLES CONTINUES TO GROW NATIONALLY
Bicycling has long been a pastime of children and adults alike and are used most often for social and recreational purposes. In fact, bicycle riding is now the seventh most popular sport in the country (out of 62). In July 2001, the Bureau of Transportation Statistics estimated that approximately one in four adults (25%) in the United States had used a bicycle in the last 30 days. An Outdoor Industry Association Report found that within the Northeast, over 28% of adults participated in biking activities during 1994-1995. However, cycling is highly seasonal and usage declines to as low as one in ten in the winter months.
Statistics show that the number of bicycles purchased each year remains relatively consistent while the number of people riding is declining.
This indicates that more bicycles are being consumed per rider.
| 1992 |
15.4 |
54.6 |
0.28 |
| 1995 |
16.2 |
56.3 |
0.28 |
| 1998 |
15.8 |
43.5 |
0.36 |
| 2001 |
16.7 |
39.0 |
0.42 |
| 10 Yr. Avg. |
16.7 |
48.3 |
0.34 |
Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001
Ridership refers to the number of people aged 7 and over who rode a bike more than once during the year. Consumption refers to the number of bicycles purchased.
With fewer people cycling and a constant number of bicycles being consumed, either consumers are accumulating more bicycles or disposing of more bicycles. RAB’s experience points to the latter.
Further evidence of this “disposable” bike culture was indicated in the keynote presentation at the 2002 Taipei International Cycle Show, when Yoshizo Shimano, Chairman of Shimano Inc. said:
“American consumers buying mass-merchant bikes ride them fewer than 60 miles before hanging them up in their garages. In Japan the bicycle is so devalued that consumers dumped them in the streets creating a public nuisance. They [bicycles] have become a throw-away commodity.”
Source: Bicycle Retailer and Industry News, May 1, 2002
Recycle-A-Bicycle provides a unique solution to the commodification of bicycles while offering affordable, environmentally sound transportation and recreation options to residents of New York City.
CONSUMPTION OF BICYCLES IN NEW YORK CITY IS STRONG
Using a conservative average (20% less than the national standard), nearly 200,000
new bicycles are consumed annually in Brooklyn and Manhattan alone:
| Population |
277,800,000 |
2,465,326 |
1,459,596 |
| Bicycle Consumption per 1000 people |
60.2 |
50 |
50 |
| Annual Bicycle Consumption |
16,700,000 |
123,266 |
72,979 |
Source: National Bicycle Dealers Association Data Capture, U.S. Bicycle Market 2001. New York Data estimated
New York City boasts a healthy cycling community consisting of commuters, bike messengers/delivery persons, and professional and recreational cyclists. The New York City Department of Transportation estimates that 100,000 people commute by bike daily. In addition, there are several active bike-oriented organizations and clubs with memberships totaling over 10,000. The Five Borough Bike Tour, the largest cycling event in the U.S., takes place in New York City with a ridership of 30,000. Cyclists flock to New York City parks on the weekends during good weather. There are also New York City industries dependent on cyclists: messenger services, food delivery and pedicabs.
New York City has over 100 miles of bike lanes and an additional 75 miles of Greenways for use by cyclists. For the most part, New York City's terrain is flat, and the high density and mix of land use lend themselves to cycling. Traffic and parking are constant problems facing drivers and cycling is generally a faster mode of transport for trips within a five-mile range. According to one bike shop manager, cyclists will be active in temperatures of 50 degrees Fahrenheit and above, leaving only the winter season unpopular for biking.
The events of September 11th converted some commuters into cyclists. At this time, many people’s access to public transportation was disrupted or they became anxious about the possibility of biological warfare in the subways. The East Village shop did a record volume of sales and repairs from September to December. With a bus and subway fare hike scheduled for May 2003, the number of commuters cycling to work is expected to increase as commuters will choose to cycle rather than pay $4 daily for a round trip.
On a more positive note, the government’s recent investment in New York City’s bicycle infrastructure, perceived to make conditions safer, helps to encourage cycling. These investments include $1.5 million, received in 1994, to plan and implement a comprehensive bicycle network for New York City. Through this effort, 500 miles of bicycle routes have been identified and New York City has produced the New York City Bicycle Master Plan as well as the first-ever New York Cycling Map. In 1996, an additional $2.4 million was invested in the implementation of the Master Plan.
Both of Recycle-A-Bicycle’s shops directly benefit from these improvements. A new bike lane is being painted along Avenue C in the East Village, directing cyclists from the Williamsburg Bridge to pass by the shop. More impressively, a dedicated bike/pedestrian path is under construction that will run along the East River on the Brooklyn side. One of the main entrances is located at Washington Street just one block from one of RAB’s shops.
RECYCLE-A-BICYCLE COMPETES WELL AGAINST OTHER BICYCLE STORES
The retail bike industry in New York, like most cities in the country is comprised mainly of small, independent bicycle retailers that primarily serve neighborhood clientele. Mass merchants like K-Mart and Toys-R-Us and sporting goods stores like Sports Authority also sell bicycles.
Among sellers of new bikes, mass merchants and department stores are the greatest competition for Recycle-A-Bicycle because they offer products at affordable prices. However, these competitors are not equipped to handle adjustments or repairs and do not employ professional bike mechanics trained to offer appropriate customer service. In addition, the selection is often limited and the bikes may not be assembled properly.
Recycle-A-Bicycle is not in direct competition with most independent bicycle shops in New York City because the majority of these shops cater to the high-end market. The price of a new bicycle in these shops typically begins at $200. Recycle-A-Bicycle maintains favorable relationships with many of these stores and often will receive donations of materials from them. However, bike shops make their highest profit margin from the sale of parts and accessories and Recycle-A-Bicycle competes with these stores for accessory sales.
Few barriers exist to opening a bicycle retail store, though a capital outlay of approximately to $100,000 is required ($80,000 investment in inventory, $10,000 in tools, and $10,000 in other various costs, plus a good credit history). In general, dealer margins have been declining on bicycles and accessories, and more retailers are closing. Recycle-A-Bicycle does not anticipate any new retailers opening in the East Village or DUMBO trade areas in the immediate future.
New York City Market for the Sale of Refurbished/Used Bikes
Most bike shops do not offer used bikes because the cost of labor to repair them is high, and because selling used bikes requires an additional inventory system and liability policy (new bikes are insured by the manufacturer). Furthermore, due to the high rate of theft in New York City, many consumers want assurance that the bikes are sourced from legitimate places, requiring bike shops to develop additional inventory and sourcing systems. Used bicycle dealers are the primary competition for RAB and will be discussed in detail with regard to the trade area of each of the retail stores.
Thrift stores are another source for used bicycles. These stores offer inexpensive bicycles, however the supply is not steady and a bike is sold "as is", meaning that it has not been repaired and may not be safe to ride.
RAB has identified a market niche, used bicycles. Given the additional requirements such as a liability policy and inventory system, the majority of bike shops only sell new bicycles. While RAB directly competes with these shops for the sale of accessories, its core product of affordable, refurbished bicycles distinguish it from other bike retailers.
RECYCLE-A-BICYCLE HAS A STRONG PRESENCE IN ITS RETAIL TRADE AREAS
Recycle-A-Bicycle offers a unique product and service bundle that experiences limited competition in its two distinct retail trade locations.
East Village, Manhattan, Retail Competition
Bicycle retailers in the Lower East Side include:
- Frank's Bike Shop on Grand St
- Bikes by George on 12th St/1st Ave;
- Bike Works on Ridge St;
- Two local thrift shops on Ave. B and 6th St/1st Ave;
- Mobile bike mechanics on 7th St/Ave C and 10th St/Ave. A.; and,
- Local department stores including Toys-R-Us at Union Square and K-Mart at Astor Place.
A healthy underground market of stolen bicycles sold in the neighborhood (ie Thompkins Square Park) also exists, but for the past few years the police have been controlling these venues.
The trade area of the East Village Store is shown in Appendix B. The East Village is an established retail center with many affordable varieties of retail.
DUMBO, Brooklyn, Retail Competition
There are no other bike dealers in DUMBO. All are outside the radius shown on the trade area map in Appendix C.
Internet Sales Competition
There are no direct internet competitors for our product and service mix. Used bicycles are available on ebay, but there are few websites offering quality used bikes or parts. Recycle-A-Bicycle is planning to extend its internet sales capabilities to take advantage of this void as our prices are competitive even outside of New York.
CUSTOMERS SEEK VALUE IN THEIR BICYCLES
A strong market exists for used bikes because many consumers are unwilling or unable to purchase new bikes that typically start at $200 – 250. A typical RAB customer for a bicycle purchaser is 20 – 45 years old, will use a bicycle as a primary means of transportation, and has a median income of at least $20,000. Secondary customers are in similar age demographics, but will use the bicycle primarily for recreational purposes. Repair services and parts are sold to a wider variety of cyclists, and Recycle-A-Bicycle is a strong supplier to the messenger and delivery bicycling communities.
One in three customers shop at Recycle-A-Bicycle because they recently had a bicycle stolen. This was determined during a survey of shoppers conducted over a month in summer 2002. These customers reported that they were interested in purchasing a cheap, beat-up looking bicycle to reduce the likelihood of theft. Customers in this situation are also happy to learn that Recycle-A-Bicycle tracks every bike - from its source of donation to its final destination. Business is built on its reputation to avoid dealing in stolen bikes. The majority of customers purchase a bicycle to meet their primary transportation needs.
Parts and repair sales tend to sell to the messenger and commuter communities. The fix-a-flat stations are busy in the summer serving these two communities and the enhanced accessory lines also appeal to these groups.
East Village Customers
Residents of the East Village are aware of Recycle-A-Bicycle as the organization has operated in the neighborhood for five years. The organization is well known and has attracted many local supporters. Key target customer groups include:
- New York University and Baruch College students;
- Cyclists using the Williamsburg Bridge as a throughway to Manhattan; and,
- Neighborhood residents shopping at other Avenue C retail storefronts.
DUMBO Customers
DUMBO is seeing a revitalization of retail spaces attracting more residents to shop within the neighborhood. A new community bank opening directly across the street will dramatically increase foot traffic in front of the store.
The new store is beginning to cultivate a repeat clientele. Marketing efforts are focused on Brooklyn, and the local artists and students have been the biggest market. The neighborhood is becoming more ‘upscale’ with several warehouse to condo conversions occurring. Key target customer groups include:
- New York Technical College and Long Island College which are in the trade area;
- Cyclists using the paths off of the Manhattan Bridge and Brooklyn Bridge; and,
- Cyclists using the East River Greenway.
| Resident Population |
58,595 |
1,459,596 |
47,746 |
2,465,326 |
| Over age 18 |
46,290 |
1,213,652 |
40,687 |
1,802,827 |
| Ages 20 – 45 |
35,687 |
709,052 |
23,692 |
941,531 |
| % Renters |
92.6% |
80% |
64.8% |
72.9% |
| Median Earnings |
$43,767 |
$48,281 |
$56,293 |
$31,896 |
| % bike to work |
2.9% |
0.9% |
0.7% |
0.5% |
Source: 2000 Census, Census 2000 Summary Files (SF-1, SF-3) by Zip code; Manhattan = 100 3-Digit ZCTA;
Brooklyn = 112 3-Digit ZCTA
RESIDENTS IN OUR TRADE AREAS ARE MORE INCLINED TO COMMUTE BY BICYCLE
As evidenced from the above chart, Recycle-A-Bicycle is located in prime home markets for bicycle commuters. East Village residents ride their bike to work nearly three times that of other Manhattan residents. The DUMBO trade area rate of cycling is also higher than the Brooklyn average, and should continue to grow.
MARKET OPPORTUNITY SUMMARY
Recycle-A-Bicycle faces a welcome challenge: to recycle the supply and meet the demand for used bicycles in New York City.
The supply of used bikes is strong. National trends in cycling indicate that bicycle consumers are purchasing more bikes, though ridership remains constant. This creates a situation in which there are many bikes either sitting idly in storage or being thrown out or abandoned. In New York City, as space is at a premium, the latter situation is more likely. Recycle-A-Bicycle estimates that the supply of used bicycles is ten times greater than what the business can currently collect; these unused bicycles currently end up in landfills.
The demand for cycling is strong. Bicycling is the seventh most popular sport among adults in the United States and studies show that adults frequently participate in biking activities. New York City boasts a healthy cycling community consisting of commuters (over 100,000 people commute by bike each day), bike messengers/delivery persons, and professional and recreational riders.
Used bicycles are in demand in New York City. The high rate of bike theft in New York City results in many cyclists wanting to purchase both an affordable bike as well as one that will be less likely to be stolen in the future. The prohibitive cost of a new bike also generates business at used bike stores.
Despite this demand, used bike stores are not prevalent in New York City. Within Recycle-A-Bicycle’s trade areas, there are few other used bike dealers. In addition, most retail bike shops do not carry used bikes due to the high cost of labor that is required to refurbish the bikes. Demand has outpaced Recycle-A-Bicycle’s capacity for the past three years demonstrating an opportunity for expansion and growth.
