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Bike shops pedal into strong headwind from GST-free zone

Date

Eli Greenblat, Lara O'Toole

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The local bicycle shop is in crisis.

Damien Lack, owner of Flemington Cycles.

Damien Lack, owner of Flemington Cycles.

The local bicycle shop, always the mainstay for parts and accessories for the Malvern Star to professional road bikes, is in crisis.

After 65 years of representing the interests of bike shop owners Retail Cycle Traders Australia has voted itself out of business, succumbing to dwindling membership and the power of online shopping that has seen industry sales of everything from snazzy Lycra to high-tech speedometers go offshore.

The explosion in online retail has been stalking the nation’s $1.1 billion bike shop industry for years, and was made all the worse argues insiders by the $1000 GST-free threshold on goods bought overseas and mailed to Australia, with premium bike accessories once sold by bricks and mortar stores now cheaper and more widely available on the web.

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However, some stores are combating the growing popularity of online sales by charging to fit items bought online and selling dealer-only available stock.

Flemington Cycles owner Damien Lack customers were often unable to install items bought online correctly, usually due to a lack of knowledge or the correct tools.

‘‘It’s a safety issue. There were a lot of people coming in. There was a a lot of guilt that they did not buy it from a bike shop’’ Mr Lack said.

‘‘But we can’t begrudge people for buying from overseas.’’

In a letter sent to members and obtained by The Age, RCTA executive officer Graham Bradshaw said the peak body had decided to close down at its recent annual general meeting.

It is an industry employs 10,000 people across an estimated 1052 shops and 432 wholesale businesses. 

Mr Bradshaw told The Age many members could not compete with overseas websites that did not pay the same level of staff wages and particularly GST.

The $1000 GST-free threshold was a huge problem for local bike shops as customers were buying accessories, such as uniforms, wheels, gears and bike computers, online from overseas and bringing it in GST free.

‘‘Bikes themselves, there are some coming in, but its a big product and shipping becomes an issue ...  it’s the accessories, clothing, shoes that sort of stuff,’’ he said.

‘‘A store that has a good service department, does a lot of service and repair, it impacts on them if the customers are walking in – and some people do this – they walk in with the stuff [bought online] and ask can you fit this on, and it doesn’t take long to find out they have bought it from overseas.’’

City stores are not alone in battling online sales.

Regional centres such as Bendigo are also affected despite having a large cycling community and several bike shops.

Bendigo Cycles sales manager Richard Martin said the store had turned to offering a point-of-difference in selling dealer-only brands such as Specialized to support their business.

‘‘We started focusing on things that you can’t buy online,’’ Mr Martin said. ‘‘They’re [Specialized] dead against it.’’ 

He said parts are often found at similar prices except tyres, discounted online to what stores would pay cost for.

However, online parts will often come without a warranty and service.

‘‘Customers come in and say they can match it online. We always try to give them the best price. It’s just awkward people because think they’re getting the right advice online,’’ he said.

‘‘I ride in a big bunch and a lot of those people we ride with buy things online. You have to accept it.’’

 

48 comments

  • The retailers are like a broken record...
    It's not the GST!
    I recently needed an inner tube for my bike:
    Bike shop: $15.90
    AUSTRALIAN website: $50.46... FOR TEN! Yes, that's ~$5.00 each. One third of the price.
    Postage free. Including GST. (Probably could have got them even cheaper from OS, but why bother!)
    The entire retail model is outdated and no longer appropriate.

    Commenter
    dansthyarra
    Location
    South Yarra
    Date and time
    October 16, 2013, 12:11PM
    • Absolutely spot on. I bought a Wipperman Connex chain link from my LBS for close to $30 (I needed it urgently). When I had time I stocked up with a few from Wiggle at just under $8 a pop.

      That example proves it's not about the GST.

      Commenter
      G
      Date and time
      October 16, 2013, 1:06PM
    • Go ahead. Charge the GST for overseas purchases.
      It'll still be cheaper for me to buy things online, and it'll end up being a net cost to the government as they try to administer it.

      Commenter
      Yep
      Date and time
      October 16, 2013, 1:47PM
    • Then when they are called out on blaming the GST, they start blaming high rents, wages, utilities bills, insurance blah blah blah, all of which are known as overheads. Find a way to stand out from the competition instead of being so myopic about it. I would have thought as business owner's, trying to adjust to a variety of conditions and using some imagination would have been a given.

      Commenter
      Kev
      Date and time
      October 16, 2013, 2:02PM
    • It comes down to a few basic factors:

      -Range
      -Price
      -Speed of Delivery

      You can get on the big online stores and find exactly what you need and have it delivered to you in a week. (I've received things in 3 days from the UK) Your LBS won't carry much range on hand because inventory is a liability to the shop. I know Abbotsford cycles in Richmond have pretty much turned to "fitting fees" only. In that, you bring in the parts and they will fit them. If you don't know what part you need they tell you and you buy it online, bring it in for them to fit. The few things they carry are mainly focused on delivery bikes/brompton style bikes.

      Commenter
      Mike
      Location
      St Kilda
      Date and time
      October 16, 2013, 2:12PM
  • It's not the 10% GST that's killing them, it's the fact that ordering on line can be literally 75% cheaper, and still arrive quicker than waiting for the shop to order the item in....

    Commenter
    Michael
    Date and time
    October 16, 2013, 12:17PM
    • Retailers know it's not the GST, but they push for GST to be levied for a good reason (for them).

      Any package inspected to determine the value for GST would attract a Customs inspection fee of ~$50, regardless of value. Now, that would make all small private imports uneconomic, and this is what retailers are gunning for.

      Commenter
      morrgo
      Date and time
      October 16, 2013, 2:02PM
  • We are going to see more and more of this.

    Because we live in a high-cost economy, driven to a large extent by wages that are too high because people have to pay off huge mortgages on overpriced houses. This will kill us in the end.

    Commenter
    DRN
    Location
    Melbourne
    Date and time
    October 16, 2013, 12:21PM
    • Would these be the same retailers that sell a basic bell for around $20.00? Of course we're 'walking'.

      Commenter
      Grant
      Location
      Melbourne
      Date and time
      October 16, 2013, 12:21PM
      • I've bought 3 bikes from Damien's business in the past 6 years or so and given the high level of service he provides, I feel guilty about not sending all of my cycling purchases his way, but the fact is, buying pretty much anything cycling based offshore (regardless of whether there was GST applied or not) is just SO much cheaper, it's a no-brainer. This is without even discussing product range available online compared to onshore.

        Also, without looking to denigrate the skill that many bike mechanics have, they are not complicated machines in comparison, for example, to a car. As such, it's easy enough to buy parts online, and fit them yourself with some guidance from YouTube.

        I realise that this isn't for everybody, but it probably suits the majority, especially those who are likely to spend big bucks.

        Also, the service in bike stores often borders on absolutely woeful and you really have to question whether the advice is 'customer needs' based, or 'sales based'.

        A bike store the other day told a friend of mine (that wouldn't know better) that they should be budgeting on spending around 10% of the bike purchase price on a lock. Really??

        Commenter
        GTTTT
        Date and time
        October 16, 2013, 12:33PM

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