This week: Alibaba shakes up global sports sector; Starkenn Sports to manufacture ‘high-end’ bicycles in India; Specialized announces global layoffs; European Bicycle Manufacturers’ Association (EBMA) appeals cancellation of Giant China’s dumping conviction; the value of a good brand spokesperson.
Market Talk is a weekly collection of market intelligence from across the Asia-Pacific region selected to educate and inform anyone interested in understanding the APAC bicycle industry, its key players and the business behind the machines.
ALIBABA SHAKES UP GLOBAL SPORTS SECTOR
China’s Alibaba Group has been quick to send its recently-created Alibaba Sports Group subsidiary to work. In the past month alone the sports unit of China’s largest mobile e-commerce company has signed a broadcasting rights agreement with the NFL and pinned down an eight-year partnership agreement with FIFA’s Club World Cup.
Though Alibaba is yet to make a play in the cycling space, a recent push by the Chinese Government into sports sector investment means it may only be a matter of time.
STARKENN SPORTS TO MANUFACTURE HIGH-END BIKES IN INDIA
Importers of bicycles in India currently face import duties that range from 18 to 44% depending on the product’s country of origin. Though this may not influence the very small number of deep-pocketed Indian consumers who will buy a premium imported bicycle at any cost, the significant impost remains an impediment to introducing imported brands in the ultra-competitive INR10’000-25’000 (USD150-370) retail price segment referred to as ‘high-end’ by industry members.
The Economic Times reports Mumbai-based Starkenn Sports Pvt. Ltd now intends to manufacture ‘high-end’ bicycles in a new facility situated 100km east of India’s most populous city.
Founded in 2012, Starkenn (which doesn’t take the umlaut too seriously, hence the wanton misspelling here) has been the exclusive distributor of Giant Bicycles in India since June 2014. Led by Managing Director Pravin V. Patil, the company has grown its independent bicycle dealer (IBD) network to over 100 retail outlets nationwide. Starkenn also owns four Giant concept stores and plans to open two more this year, while aggressively rolling out a Giant franchise program that targets an additional 20 Giant-branded stores this year alone. However, Giant’s portfolio does not adequately serve the majority of potential consumers, for whom a INR25’000 bicycle is out of reach.
Patil’s solution is to manufacture bicycles up to the INR25’000 retail price point locally, potentially eliminating the need to import bicycles in this price range.
SPECIALIZED ANNOUNCES GLOBAL LAYOFFS
In a statement released to US media on Tuesday, Specialized announced it intends to reduce its global employee base by 3%.
“We are tightening up our structure and focusing on three key areas: innovation, marketing and supply chain,” said Mike Sinyard, Specialized founder and CEO. “We are investing in new R&D space in Switzerland, Taiwan and Morgan Hill that will keep us at the forefront of cycling innovation. We are focusing on marketing that will expand the global market for our brand and help our retailers drive traffic and sales. And finally, we are investing in our supply chain to ensure we are delivering the best product at the best price to riders and our retailers. All of this is an investment in our future.
“We have made the difficult but necessary decision to reduce the number of employees and realign the organization. Our employees are, and have always been, what make this brand so special,” Sinyard added. “This decision, and the impact on our teammates, is of course very hard.”
More at Bicycle Retailer
EBMA APPEALS CANCELLATION OF GIANT CHINA’S DUMPING CONVICTION
The European Commission first applied an anti-dumping tax to Chinese-made bikes in 1993. The protectionist tariff was a response to the huge volumes of cheap Chinese-made bikes flooding European markets. This threatened the livelihood of European bicycle producers, so a 30.6% anti-dumping duty was enforced by the European Commission, in addition to the usual sales and import taxes.
The levy was renewed in 2005, but at the much higher rate of 48.5%. Controversially, when the European Commission decided to renew the anti-dumping duties for an additional five years in 2013, three Chinese companies were exempted: Oyama Bicycles and Ideal Bike had the duties waived altogether, while Zhejiang Baoguilai Vehicle Co. Ltd had its duty reduced to 19.2%.
Though this permitted some OEM brands (such as Fuji, an Advanced Sports International brand made by Ideal) to circumvent the significant tax, larger brands with Chinese production facilities such as Giant and Merida were left to wait it out until the next review in 2018.
In November last year, the Court of Justice of the European Union ruled that Giant’s anti-dumping conviction would be dropped. The European Bicycle Manufacturers’ Association (EBMA) is now appealing that decision, reports Bike Europe.
THE VALUE OF A GOOD BRAND SPOKESPERSON
Presumably before layoffs were on the table, former Specialized CMO Ben Capron (who now works for Seven Cycles) gave a masterclass in marketing spin to Bloomberg Business shortly after Vicenzo Nibali’s 2014 Tour de France win. One example (at 3:24) is when Bloomberg host Adam Johnson asks the curly question about origin:
Adam Johnson (pointing to Vicenzo Nibali’s Specialized Tarmac): “this is made in the USA?”
Capron: “All of the technology is developed in the United States, so we really focused on the technology – so our wind tunnel, all our engineers, all our scientists, right in Silicon Valley, that’s really where it takes place. And then we partner with the very best in terms of manufacturing, wherever they might be in the globe.”