Premium segment pushes cycle sales

Ghaziabad businessman Gurvinder Singh's recent acquisitions include two bicycles, one for his wife and another for his son. He did not mind paying Rs 12,000 for a cycle he bought for his wife eight months ago as he thinks "regular cycling enhances fitness". "We have maids at home to take care of the household work. My wife has a car to herself, which means she hardly gets to walk. Going to a gym was an option. But we decided to go in for a cycle to ensure that she stays fit," says Gurvinder, sitting at a badminton court waiting for his turn to play.

Gurvinder is one of several thousand urban Indians who are increasingly turning towards the cycle to improve their fitness. Although a nascent trend, cycle manufacturers have already reshuffled their product portfolio to cash in on this. "On day one of our journey, we started with production of 100 cycles a day. 70 of those were, what we call, black cycles and another 30 fancy cycles. Today after 12 years, we produce 3,000 cycles a day and 70 per cent of them are fancy (premium) cycles," says Sachin Lakra, executive director of SK Bikes.

Last year, SK Bikes opened seven exclusive cycle showrooms in places like Ludhiana, Bhatinda, Patan, Rohtak and Bhubaneshwar. Eight more showrooms are planned this year. His fancy cycle range starts from Rs 3,000 and goes up to Rs 8,000. The company is set to launch a premium range starting at Rs 10,000 next month and Lakra expects to sell 15,000-20,000 cycles a month.

Bicycle manufacturers are estimated to sell nearly 15 million cycles every year, 60 per cent of them standard cycles. This segment has seen a fall of three to five per cent in recent years. Manufacturers say that but for bulk orders from the state governments of Bihar and Tamil Nadu, this segment is clearly on the decline. And companies work on wafer-thin margins to sell standard cycles. The major players include Hero Cycles, Avon, TI, Cross, Firefox and SK Bikes. Hero Cycles is the market leader by far.

"While the overall market is not growing, customers are shifting to the so-called fancy bikes. Use, too, is changing. Earlier, the bulk of standard cycles was for bread earners," says S K Rai of Hero Cycles. Now, the demand comes from school children and for leisure, he adds.

The premium segment, therefore, has caught the fancy of manufacturers. It caters to two social groups: children and fitness conscious urban Indians. "The premium range of bicycles has come to be associated with fitness and recreation. There are cycle clubs in cities raising awareness about the eco-friendly nature of cycles. Then the concept of home gyms too has picked up in recent years," observes Gaurav Munjal, managing director of Heroeco. His company sells its premium range under the brand name of Cross. Cross cycles have shown a healthy growth in excess of 25 per cent in recent years, he adds.

Some citizens' initiatives too have helped cycle manufacturers. Raahgiri Day, observed in Gurgaon every Sunday starting November 2013, encourages people to cycle, walk or use public transport. It is now observed at Delhi's Connaught Place too. Cycle manufacturers also say that initiatives like the one taken by Infosys, asking its employees only to use bicycles inside its campus, have helped them in their quest to reach out to affluent urban consumers.

"The real challenge for all the companies now is to capture a bigger share in the premium segment. The volume still comes from the standard segment. But the premium segment is where the margin is," says Sameer Mehta, general manager (sales and marketing), Heroeco.

Premium cycles have aluminium bodies and come with multi-speed gears. They are designed differently too. Most companies rely on importing critical components from China and assembling them here. "We have an in-house group of professional cyclists. We rely on their inputs to change specifications," says Gaurav Munjal.

For bicycles made for children, companies are also relying on increasing sales of accessories to push up profitability. "I purchased a cycle for my son for Rs 8,000. One day he told me to get it fitted with gears as he saw them in his friends' cycles. That cost me an additional Rs 2,000. Then I purchased a helmet, which cost me Rs 1,800. I ended up paying almost half of what I paid to buy the cycle in buying accessories," says Amit Parashar who works for a multinational company in Noida.