A version of this article ran in the August issue of Bicycle Retailer & Industry News.
BOULDER, Colo. (BRAIN) — After nearly 50% sales increase industry-wide from 2019 levels in 2020 and 2021, most retailers were sitting on more cash than ever before.
With no inventory available for replenishment, that cash was invested in creative ways. And as we review windfalls, we must keep in mind the corresponding human costs involved.
"I'm not sure the COVID situation was a windfall," said Raleigh Burt from Kristi Sports in Alamosa, Colorado. "The term implies a strike of good fortune with little effort. COVID felt more like a hurricane. Financially, we did well, but it didn't come easy. We paid for it on the back end with mechanic burnout, owner burnout and retail staff overload."
With that healthy dose of perspective, let's look at some of the smart investments we uncovered in our retailer survey.
New buildings
Dan Sirkin, Solon Bicycles, Cleveland
"When cash started to accumulate from the COVID insanity, my path was clear. It's time to buy a building," Sirkin said. "So we bought a two-story bank building around the corner from our old store.
"Customers are thanking us for moving, since we now have a dedicated parking lot. We have a bank vault right behind the cash wrap, and we hear the same joke a lot, 'I bet you keep the expensive stuff in there.' We're actually storing repair bikes in there.
"We went from 3,000 to almost 4,500 square feet, with a mortgage payment about the same as our previous rent. It's also a bit of a retirement plan as well. It's great to take a little more control over our space. We don't need to ask for approval, so I've become the part-time building manager and landscaper. It's a lot of extra work, and I'm so grateful that our COVID success allowed me to do this. That being said, it's the scariest thing I ever did in my life, and of course, moving is horrifying."
Matt Wurth, I Cycle Bike Shop, Houston, Texas
"We're buying our own historic building after renting since 2006," Wurth said. "It's the Oak Forest Masonic Lodge, built in 1962. It's right on the White Oak Bayou bike path and includes two acres of forested land. We're planning lots of community cycling events there.
"Our best year before COVID, we grossed $1 million. Our best COVID year, we broke $2 million and we're projecting $1.6 million this year. Our lease was about to expire and the rent was about to double, which got me shopping with my COVID bonanza. I saw a "For Sale" sign on the Masonic Lodge a mile from my house before the pandemic, $1.2 million. Oh my God, I can't do that. Then March 2020 came, and it all seemed possible.
"I called the seller and it was already under contract to someone who wanted to cut down the old-growth oak forest and build condos. I was second in line and when the condo deal fell through, I got it for the 3-year old price. Our mortgage payment is less than the rent we were paying."
Windfall, what windfall?
Joseph Drennan, Earl's Cyclery & Fitness, South Burlington, Vt.
"That 'wind' of the COVID windfall you speak of must have blown right past us," Drennan said. "Business did go up in 2020, from $3.1 million to $3.3 million, and in our mature market (here since 1953), we didn't see the explosive growth that others experienced. Our balance sheet is stronger, and we're still trying to stabilize our cash flow. These large payables in late 2021 and early 2022 haven't happened before. All I want is to get back to pre-pandemic predictability and stability.
"After the thousands we spent on isopropyl alcohol, hand sanitizer and other COVID-related expenses, any extra monies were invested in future inventory, both bike and components. "And securing existing employees and attracting replacements for those who quit wasn't cheap either. Bottom line, I'm waiting patiently for a 'windfall' that doesn't have unforeseen expenses attached."
Clean up paint up fix up
Laura Harris, Cross Country Cycle, Holland, Mich.
Cross Country Cycle operates out of a 22,000-square-foot building with an indoor test riding space. "We didn't really have a choice about how to spend our COVID dollars," Harris said. "The roof was leaking like a sieve, we needed to remodel two of our four bathrooms, and it cost us $20,000 to get rid of our septic system and hook up with the city sewers. Our $6,500 mortgage payment is so small compared to the space we have, and COVID dollars helped us catch up on deferred maintenance."
Great timing
Jason Faircloth, Splitrock Tap & Wheel, Fairfax, Calif.
"We opened in April 2020, so the real windfall for us was the intensity of the '20 and '21 seasons that gave us a huge visibility boost and likely accelerated our business's path to profitability," Faircloth said. Our sales doubled from 2019 to 2021, and 2022 is tracking for a further 25% increase over 2021. We built a 1,000-square-foot outdoor dining patio with an unfiltered view of Mount Tamalpais. This addition bumped our cafe/taproom/beer garden capacity to 115 seats.
"Hiring has been tough, but we're over 25 employees now and are offering more and more of them health benefits. We also provided pay increases to longer tenured employees as well as increasing our base pay to $15 per hour based on the California minimum wage."
Spread the wealth
Jake Scheidemann, St. Helena Cyclery, St. Helena, Calif.
"Our sales went up by 80% for two straight years," said Scheidemann, who sold his store to Trek in April 2022. "We paid a thank you bonus of $2 an hour to all employees from April to November. Bonuses make much more sense than raises. Every up is followed by a down, then you end up with overpaid employees. We also put in a new A/C system, bought new repair stands, paid off our debt, got new computers, and a new truck for me.
"We also threw a huge customer thank you party at the end of 2020. About 200 people came. We had six different rides leaving from the shop in the morning and coming back to a fully catered lunch, entertainment, and prizes. That was the best $10,000 I spent in 2020."
Sue Hobby, Box Canyon Bicycles, Telluride, Colo.
"We mostly spent our COVID windfall on wage increases and bonuses," Hobby said. "Our staff worked their asses off on rentals, when we couldn't get our hands on product. We have four employees other than ourselves. Our starting pay is $20 an hour and goes as high as $30 for veterans. We don't pay ourselves that much.
"The cost of living in Telluride is just outrageous. A not-very-nice 600-square-foot one-bedroom apartment goes for $2,400 a month.
"We need to be able to compete with restaurants and other retail. We're not thrilled about paying that much, but we have the best guys in town, and we want to keep the family together. We also paid bonuses up to $4,000 during COVID. Our mechanic negotiated a bike as his bonus, a Rocky Mountain Slayer, instead of cash. So we were both happy."
Invest in the future
Travis Beane, Clemmons Bicycle, Clemmons, N.C.
Beane gets the last word with a wise perspective: "We didn't spend our windfall. We invested in ourselves by purchasing inventory, remodeling the store, and placing additional cash into an account for future needs."
