Bird Cycleworks

Idea

Introduction

Bird Cycleworks is developing a range of mountain bikes to exploit the growing direct sales model. In recent years, the cost of purchasing a bike has risen sharply, well over inflation, driving consumers to brands offering direct to customer sales, without retail shops in the distribution chain, reducing the costs to the consumer, allowing their money to go much farther.

We think this has been exploited by only one company to any significant degree; Canyon. They have seen huge growth in the last 5 years as more consumers turn their backs on the high street model and go direct. You only need to visit a trail centre or bike race to see just how many Canyons there are in the UK now.

We believe that this model is the growth sector of the market; companies like Giant and Specialized simply cannot capitalise due to distribution infrastructure and heavy reliance on retailers. We intend to become the UK's largest direct complete bike manufacturer, in a valuable and as yet relatively untapped market.

Intended impact

Right now, a bike buyer in the UK has 3 options:

- Buy a bike from a mainstream brand at a premium through a high street retailer.

- Buy a bike direct from the manufacturer at a far reduced cost, but without trying it first.

- Build a bike from components for themselves. A challenging exercise for anyone but an experienced mechanic.

Our model would create a fourth choice:

- To get the benefit of buying direct from the manufacturer, but with UK based customer support, service and demonstration days where they can try out our products.

Our model will allow our customers to benefit from many of the aspects that a retailer offers, including bike testing, UK based service and delivery, customer support and 48hr delivery. Even more importantly, our unique customisation system would allow the customer to tailor the bikes components for fit and usage style without impacting the cost or lead times. A feat even the high street retailers cannot match.

We're not building a boutique brand, Bird Cycleworks is looking to sell over 10,000 units in our 5th year of trading, which makes us a significant player in the UK and European market. We plan to deliver a broad range of bikes that offer a blend of value and performance unmatched on the high street.

Combine that with our passion for the sport, and the ability to deliver seamless online integration of retail, customer service and marketing, and Bird Cycleworks would become a potent force in the cycle market.

We plan to become the first port of call for any off-road cyclist looking for high performance at an affordable price.

Substantial accomplishments to date

Since our formation in April of this year, we have:

- Developed our first line of bikes, the Bird Zero range, with prototypes arriving soon, and manufacturing of our initial models scheduled to complete in December ready for consumer launch.

- Established accounts with major OEM suppliers.

- Designed and built prototype wheel sets for our bikes, ready for production in time to distribute with our bikes and standalone.

- Established an online sales platform, currently being populated with our products.

- Modelled the full cost of manufacture and distribution for our 2013-2014 lines down to the last nut and bolt.

- Scouted for potential manufacturing facilities.

- Established an active online community via Facebook and Twitter that provides us a starting market for our sales activities, as well as a means to survey our potential customer base in order we make the best informed decisions we can. Something we have been very active in doing.

Monetisation strategy

Our business model is simple - we are a manufacturing business with product manufacture that is planned to provide a 30%+ profit margin on every item we sell.

Unlike traditional bike manufacture, our supply chain would be extremely short:

Traditional Bike Manufacturing Model -

Factory > Assembly Agent > Brand Owner > Wholesaler > Retailer > Consumer

Our Manufacturing Model -

Factory > Bird Cycleworks >Consumer

For more information on ODM/OEM manufacture and the various sales models, this blog is an excellent read: http://cyclingiq.com/2011/11/08/vertical-limit-.

We plan to source all components for our bikes as close to the point of manufacture as possible. This means dealing direct with factories for major components such as frames and wheels (produced under the Bird brand to our specifications), while finishing components such as gears/handlebars etc. would be provided OEM to us by major brand owners, such as Shimano, RockShox etc. The components would be brought into the UK for assembly by us.

Our customisation model requires this to enable us to tailor each sale to the customer's requirements. However, we plan to limit the amount of customisation to ensure that our cost of assembly remains manageable. Further, the variation in import duty for parts versus complete bikes (4.7% against 14%) should help us to maintain a UK manufacturing base without suffering disproportionately high costs.

Each model is specified by us to suit the current market trends and preferences, and then priced in order to generate our desired margin. We have already established pricing for the first models which demonstrates a significant benefit to the customer in terms of bicycle specification at the same price point. We expect to be able to improve this specification over time as our purchasing power increases.

Use of proceeds

All the proceeds of our fund raise will go into establishing the production run of our first model, and paying for assembly related costs going forward.

At this stage, none of the founders will take any salary, and David and Ben will continue to undertake part-time consultancy work in addition to their responsibilities to Bird Cycleworks. It is expected that the eventually all the founders will move to work full time and salaried as the business grows.

- Stock order from our suppliers; in order to get beneficial volume pricing, 100 unit purchases are common, a significant capital outlay.

- Assembly premises & tools; at this time, and until sales justify otherwise, assembly will be undertaken at the premises of the founders, however, that will only be viable for a short period of time. We will require a storage and assembly facility in early 2014.

- Marketing/Brand costs. At this time we have a web presence, as well as a comprehensive online sales and stock management system in development. However these will both need brand 'skins' applied prior to launch, something we will require a third party for.