Not so long ago, a shiny new bicycle was the pinnacle of Santa’s generosity. In more recent years, grown-ups as well as children started looking out for handlebars poking out of large packages under the tree, inspired by a new generation of British Olympic medallists. However, a raft of failures, last-minute rescues and refinancings of major UK bike businesses tells another story.
Earlier this month Scottish mountain bike brand Deviate Cycles was bought out of insolvency by co-founder Ben Jones. German rival YT Industries, famed for its advert starring Christopher Walken, was exploring the same founder-rescue route in October. Last year, Mercian Cycles, the Derby-based maker of top-end bikes with a cult following in the UK and US, ceased trading and entered voluntary liquidation, while major problems at retailer Wiggle saw many of its operations snapped up at knockdown price by Mike Ashley’s Frasers Group.
Whatever happened to the MAMIL – or ‘Middle Aged Man in Lycra’? Often heading a queue of overtaking traffic at weekends, these cyclists clad in spray-on ‘technical’ apparel breathed new life into 21st century bike retailing, sometimes paying the price of a perfectly good car for two wheels on a lightweight frame. Nonetheless, this phenomenon appears to have suffered a series of punctures.
Although the Covid pandemic prompted purchases of new bicycles as a means of keeping fit during lockdown or avoiding public transport, the boom in sales has subsided. Bikes last a good while; even the most obsessed MAMIL is unlikely to change his mount regularly. The Bicycle Association of Great Britain reported cycle sales in 2024 of 1.45m, a 39-year low and well below historic averages of around 3 million. This year is expected to improve to nearer 1.9 million.
UK cycle retailers (and their suppliers) were relieved to see a rumoured scaling back of the
government’s once popular Cycle to Work scheme left out of the recent budget. The economics, however, remain challenging. Bikes are capital intensive stock, at £500 to £3,000+ per unit, with gross margins as low as 30%. Overstocking ties up cash and forces heavy discounting, often below cost. Many sector failures are stock-driven cashflow insolvencies.
In the days when volumes were much higher, workshops subsidised bike sales. Servicing was reliable, repeat income. Now bikes are more complex – not least e-bikes – with many proprietary parts. Warranty labour charges are often underpaid or even unpaid by brands, yet customer expect fast, cheap servicing.
It’s sad to say that there are still too many shops chasing a smaller market. The retail footprint of cycling hasn’t shrunk fast enough, leading to price wars, a race to the bottom and weak players failing first. In a highly fragmented sector, with around 1,500 truly ‘independent’ (single-to-few shops) outlets, many owners are enthusiasts first, retailers second; reluctant to cut losses early and slow to write down obsolete stock. These businesses – unlike car dealers – lack manufacturer-backed floorplan finance. They rely on overdrafts and personal guarantees, so when cash tightens, banks pull support quickly.
Independents or indeed larger groups must take control and decide if staying in the sector makes sense.
It’s never too early for operators to scope the potential for an alternative future if unhelpful market dynamics mean that a Creditors’ Voluntary Liquidation or more drastic elements of the insolvency toolkit cannot be ruled out.
Written by David Buchler, chairman at Buchler Phillips, a UK based independent boutique firm with an impeccable Mayfair heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.