British bike exporters Frog and Brompton are counting the costs of an eleventh hour Brexit deal with exports suffering and price increases imminent, according to reports in the press over the past week.
Speaking to Wales Online over the weekend, Frog Bikes’ co-founder Jerry Lawson said “I can’t see any positives,” adding that costs directly attributable to the new trading conditions have in the first two months of the year already “wiped out our profit for last year”.
For Frog overseas trade is important, despite a strengthening domestic market. Lawson attributed 47% of the manufacturer’s trade to exports into the EU, a figure he expects to decline in the face of mounting concern from customers exported to.
“Unless we find a workable solution to the barriers, the non-trade barriers, we can see that diminishing because we will lose these stores. And we know that because we talk directly with the stores. And when we have lots of stores in these markets, and they’re all feeling the pain, it has a risk for our business. And the challenge then is, if we lose those sales where will we make it up?” he told the Welsh news portal.
It has been suggested that EU stores may have to absorb a 2% to 3% margin cut in order to maintain the value to the consumer.
Price aside, the additional volume and complexity of logistics paperwork has frustrated Lawson’s business.
“Spanish stores are being charged 60 euros per consignment. They might be charged a commission or finance fee by the courier. So, they can get the import VAT back but they can’t get the consignment fee, and they can’t get the commission fee or finance fee that is charged.”
“So, if we only send three bikes to them, that works out at about a 50 euros increase to the consumer per bike. And that then means it’s a real barrier.”
The kids’ bike specialist was joined the week prior in its chorus of complaint by Brompton, which having earlier this year told CI.N it was eyeing strategic acquisitions to bolster its position in the marketplace has since told the FT that the business is feeing the strain of both short supply of parts and Brexit’s ripple effects.
The combination of Covid and Brexit will result in further price increases, explained managing director Will Butler-Adams. A 6% expansion of retail prices previously outlined will not be enough to cover the costs said the Brompton boss. It is expected that once concluded the price adjustments will weigh about 10% heavier than previous 2020 pricing.
On Brexit in particular the Brompton boss said the change in trading relationship has exacerbated a variety of issues on rising raw material costs and shipping costs, among other factors.
“If you roll all of this together — logistics costs, Brexit costs, not enough people making bike parts — then it means customers paying more,” Butler-Adams told the FT, adding “we’re not over the worst yet.”
Cost of entry is not perceived is a major barrier to bicycle sales in the UK and according to CyclingIndustry.News’ own market report just 10% of shops perceived bike prices as a problem in growing ridership.
Butler-Adams is likewise bullish on that point, arguing that there is enough consumer cash available to maintain momentum cycling picked up during the pandemic so far. “Roaring Twenties, here we go,” he said on a prediction that a 20% sales growth in the past year could sustain.