A New Spin On Cycling: What Is The Market Value Of A Name?

Submitted By xinxincoco
Words: 2557
Pages: 11

Case study
A New Spin on Cycling: What is the Market Value of a Name?
Cycling presents a great number of advantages over other forms of transportation.
The advantages of cycling include, for:
Society, inexpensive infrastructure requirements and environmental sustainability, and
Individuals, benefit from cycling as a healthy exercise as well as an inexpensive mode of transport that, in some urban areas, can be faster than other transport modes (e.g. it often allows cyclists to avoid traffic jams and other obstructions).
St. Kilda Bikes is a small to medium sized enterprise (SME) situated in the CBD of Melbourne, Victoria, Australia. The firms specialises in distributing the worldrenowned Spanish brand “Orbea” bikes and their own design bike models, which are manufactured in China under the firm’s brand-name and sold in the Asia Pacific region.
During 2008-11, the firm doubled its sales, even though the global financial crisis had dramatically eroded consumer purchasing power.
Vincent Hong, the 25 year old owner of the business, learned from reading a popular magazine (Business Review Weekly) that much of the firm’s recent success may be attributable to cycling becoming a trendy and popular sport in Australia. Browsing the
Internet, he decided to briefly cross-check the article with the Retail Cycle Traders
Australia Website (RCTA, 2008), from which he found that the trend has continued for at least a decade and that: “Bicycle sales in Australia averaged 795,000 per year for the four years 1998-2001. In the four years since then, bike sales averaged 1,133,000 per year. By comparison, car sales have never reached one million in a year”. This information raised


Vincent’s interest in researching the trend further. Perhaps, the car dealer next to his store may cast more light on the trend, he thought.
Discussions with the car dealer confirmed the website assertion. Furthermore, the dealer noted that some popular iconic-European-cars (e.g. BMW, Mercedes, Mini
Cooper, Porsche, etc.), despite being very popular, have all lost sales in Australia due to falling consumer credit and confidence. The drop in car sales is expected to deepen also because relatively lower-cost, quality Asian cars increased their market presence around the world and in Australasia. The big problem appears to be that, while people love
European cars, fewer and fewer can afford them. “People just do not want to spend that much in hard times, particularly when there are so many lower-cost, quality options in the market”, the dealer argued.
On the way home, Vincent was thinking: “ASUS Computers has changed what is essentially a commodity product (laptop computers) into a luxury good by linking one of their top-end laptops with Lamborghini (e.g. the VX1-5E004P Laptop Computer)—can I do something similar with bicycles by linking them to luxury cars? Many people here love European cars, admire their engineering and design, and desire to own prestigious vehicles, but few can afford them—especially, these days”. Vincent remembered hearing from somewhere that during an earlier severe recession in the 1980s, Wally Amos founded Famous Amos Cookies against the advice that a recession was the wrong time to establish a luxury cookie company—Mr. Amos, correctly surmised that if people could not afford the best cars, houses, and travel, they could be tempted to satisfy their desire for luxury with the best cookie in the world. “Thus, in the current extended recession, if fewer people can afford prestigious cars and bicycling is becoming trendy, maybe we can


satisfy their desire for luxury transportation by selling them bikes with design and logos of quality European cars? We can negotiate with the European car manufacturers and get licenses to design and manufacture bicycles under their logos”. Of course, he thought, there are well-known racing bicycle brands and we cannot compete with them. Yet, it seemed possible to enter the conventional bike market with road