If cycling was a modest way to commute some years ago, it certainly isn’t any more. And that’s because cycling has taken on the additional dimension of contributing to healthy living. And as lifestyles veer towards greater fitness, the cycling business has suddenly acquired top rating. The story of Bike Studio serves as an example.
At times, it’s just a glaring gap that needs to be noticed. As it stands, it was the great disconnect between the Indian bicycle market and the global trends as well as lack of premium in-store experience which prompted Rohit Kalra, Managing Director, LA Sovereign Bicycles, to launch his initiative ‘Bike Studio’ in 2015. The idea was to passionately fine-tune the overall customer buying and ownership experience, which leads to pride of owning a bicycle. As Rohit puts it, the Bike Studio retail initiative was majorly targeted towards breaking the great misconception about bicycle purchase behaviour.
The company caters to a broad range of customers, including kids and teenagers as well as professional bikers and fitness enthusiasts. “While kids and teenagers form the largest buyer group with demand for entrylevel and mid-range bicycles, the demand from fitness enthusiasts opting for mid to premium range bicycles is growing the fastest,” shares Nitin Ghai, Country Head, Franchise, LA Sovereign.
AN ENTREPRENEURSHIP FORMULA
Over 25 years back when Bike Studio was in no sight, Rohit joined his father RS Kalra’s small cycle manufacturing unit in Ludhiana. It was his entrepreneurial spirit and acumen that the small unit was transformed into a large component manufacturing business by 1991 and began exporting to countries like Sri Lanka and Bangladesh in 1994. He was later joined by his younger brother, Rahul Kalra, who now handles the export business.
However, Rohit had bigger plans. Looking at the nascent bicycle market in India with primitive designs and technology, he sensed a huge opportunity to grow in this market. “We started designing and sourcing of world-class bicycles by forming a joint venture with Thailandbased LA Bicycle group to launch LA-Sovereign range of modern bicycles with impressive designs and features, quite unheard at that time. The organisation has never looked back since,” he elaborates.
It was not a cake-walk though. The company faced major challenges in terms of positioning and targeting the audience. “The market was not mature enough to promote premium bicycles in 2006. While entry-level bicycles with prices up to Rs 3,000 were in high demand, premium bicycles from Rs 8,000 onwards required a different approach to sell, which multi-brand outlets were unable to offer. We didn’t have any exclusive stores at that time; hence we were dependent on multi-brand outlets, which were driven by entry-level bicycles. Premium bicycles were unable to mark their presence in the clutter,” he elaborates. And that’s how the concept of one-stop shop for premium customer purchasing experience, including bicycle, spare parts and accessories sales as well as comprehensive servicing, originated.
THE FRANCHISING ROUTE
After setting up its first store, the company chose franchising to quickly spread wings across the country. Bike Studio opened its first franchise store in February 2016 and by 2017-end it had six franchised outlets, which increased to 16 outlets by 2018-end. “Things changed as we matched premium customer experience with our premium and super-premium range of bicycles. In addition, consumer consciousness of health imperatives and the search for adventure and experience worked in our favour,” recalls Tushaar Kalra, Head, Marketing, LA Sovereign.
The company is now present in over 18 cities across India, with outlets across Tier II and III cities like Akola, Amravati, Anand, Aurangabad, Bengaluru, Bhopal, Chandigarh, Faridabad, Jaipur, Jodhpur, Karnal, Kolkata, Ludhiana, Mysuru, Pune, Rajkot, Surat and Udaipur. The objective was to create a niche for itself in a highly competitive market with high degree of commitment and passion. “We target franchise partners from diverse backgrounds, not necessarily from the bicycle business. We have three criteria for franchisee selection: passion, passion, and passion. Hence, many of our franchise partners are fitness enthusiasts and bike lovers,” elaborates Ghai.
This high level of enthusiasm across the franchise chain has led the company to sell over 40,000 bicycles per annum. “We have witnessed over 25% growth in our cycle sales in just two years,” Ghai informs. The price range covers Rs 8,000 to Rs 6 lakhs and there are over 80 models to choose from. Export of bicycles and components fetch USD 7-8 million per annum, covering more than 25 countries, including Poland, Germany, Italy, Bangladesh, the Middle East and South American regions, with offices in China and Thailand.
THE BUSINESS MODEL
Bicycle retailing is a capital-intensive business and its setup involves strategic location of outlets. As per Nitin Ghai, Franchise Head, LA Sovereign, the business calls for an investment of Rs 30-40 lakhs, including franchise fee.
The retail-cum-servicing shop requires two people to run the show: sales manager and service manager. Hence, operations cost remains in the range of Rs 1.5-1.7 lakhs.
On the income side, the franchise model offers margins of 40% on MRP, plus an additional 8-10% margin to support a franchisee for the first six months.
The company supports franchise with aggressive marketing through channels such as newspapers, radio, cinema, hoardings, flyers, social media, etc. “Our ‘Launch Pad’ exercise leads to sales of 15-20 bicycles worth Rs 3.5-4 lakhs on the inauguration day itself. In fact, we were able to sell 42 bicycles worth Rs 9.6 lakhs on the opening day in our Amravati outlet,” shares Ghai. “The expected break-even is just 1.5 years,” he adds.
AMBITIOUS PLANS
The company is looking at over 50 franchised outlets by 2020 and over 100 over the next five years. It has two outlets in pipeline for opening in April 2019. There is also a plan to widen the range of its products. “India being a high growth market many of the foreign brands are interested to grab the opportunity. We have recently collaborated with brands like Giant and XDS to offer them an entry into the market and widen our portfolio. While the bicycle segment has grown at 20% over the last five years, we will continue to outpace it with our business acumen,” states Tushaar.
Exclusive Interview
A Win-Win Proposition
Rohit Kalra, Managing Director, LA Sovereign, speaks on how the company is creating excitement and awareness among the consumers and the spin-offs
Is lack of infrastructure for safe cycling in most cities a challenge?
It’s true that many of the cities are still not cycle-friendly. However, there are government projects to create dedicated lanes for cycles in cities like Bhopal and Indore. And then of course, you have cities like Pune and Chandigarh where cycling is very popular. In fact, the Indian market is maturing. Currently, mountain bikes on an all-India basis contribute to about 45% of overall sales. Further, we see a lot of people getting on hybrids as they want to get fit, use it for recreation, and commute to work; that’s another 45%.
How are you amalgamating healthy lifestyle with your business interests?
Our entire business is around health and fitness. In order to generate excitement and awareness around Bike Studio as well as to promote health and wellness among the consumers, we have recently started a ‘Cycling Club’ initiative. Through this initiative, besides promoting healthy habits, we are enabling fitness enthusiasts to experience our premium bikes. The group cycles to a nearby location and does some yoga and exercise on Sundays. We are executing this initiative through all our outlets, where we collaborate with professional riders as event ambassadors. We have received quite an exciting response. Besides, we encourage each franchisee to hold promotional drives every month by sharing 30-50% of the marketing costs.
How do you support your franchisee to ramp up the business?
It is understandable that a franchisee will require additional hand-holding for the first six months. Hence, we create an intense marketing campaign before the inauguration of the outlet. The inauguration day sales are a big encouragement. As stated earlier, we offer additional 8-10% margins on the sales happening in the first six months. With comprehensive marketing and training, we ensure that every franchisee is up and running as soon as possible.
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