For 70+ years, the Indian bicycle industry has been dominated by a few organised players and rightly so. These companies provided an inexpensive mode of transport to a nation facing the uphill task of rebuilding itself after independence from colonial rule. India was left poor in both resources and infrastructure.
The humble bicycle's contribution as a means of transport for farmers, small entrepreneurs, and students is invaluable. It quite literally moved the nation and became an integral part of multiple value chains.
As the nation evolved into a global economic powerhouse, its modes of transportation have also changed. Faster, efficient, and more comfortable options are now available to the masses. The motorcycle has become the first personal vehicle of choice for many, after public transport. Authored: Abhishek Chaudhary, Partner, Vector Consulting Group
This shift is visible in the astronomical rise of motorised two-wheelers in India. At the same time, many bicycle companies have either ceased to exist or are on the brink of doing so.
With continuously declining sales, it is tempting to label the bicycle industry a sunset industry. Yet industry pundits predict that the sector is poised for nearly threefold growth over the next decade, potentially making India one of the world's largest bicycle producers.
So, what is really happening? Is the Indian bicycle industry in its sunset phase, or are we witnessing a renaissance?
It appears to be the latter. The bicycle is undergoing a role change. Rather than serving primarily as the cheapest mode of transport, it is increasingly becoming a tool for adult health and a learning aid for children.
Why aren't the stalwarts winning this transition?
The organised sector is at the forefront of bicycle development, introducing new technologies such as advanced suspension systems, gearing mechanisms, improved materials, and refined geometries. These companies offer highly segment-specific products with class-leading features.
With decades of manufacturing experience, quality, cost efficiency, and brand recall are not the problem. So, what is?
The dealer channel bottleneck
The real issue lies in the age-old dealer and wholesale channel, a network built over 70 years. Its backbone has been the venerable kali cycle, or roadster.
The roadster was once the most popular bicycle format, prized by commuters for its simplicity, ergonomics, and robust construction. Its universal appeal enabled manufacturers to optimise reliability and cost efficiency at scale. For channel partners, the roadster was a cash cow: high turnover with low risk.
Although margins were squeezed due to commoditisation, high rotation ensured healthy returns for both brands and dealers.
However, as demand shifted, brands rushed to introduce new bicycle categories, ushering in the so-called fancy cycle. These bicycles, often inferior in metallurgy, were superior in functionality and aesthetics. They represented an opportunity to move away from commoditised roadsters and sell differentiated products that could command premium prices.
Yet successful launches remain few and far between. Incumbent brands struggle to place new products with dealers, even though they offer higher margins than the kali cycle. At the same time, these very dealer channels are introducing new brands to the retail market.
Why new entrants are winning
Why are new launches from organised brands failing, while newer players thrive using the very same dealer network?
The answer is simple:
Variety at retail drives conversion.
Dealers are rarely exclusive. A broader assortment across brands increases a retailer's footfall and sales probability. Unorganised brands typically offer smaller, more focused catalogues, allowing dealers to stock a larger proportion of their range within the allocated investment envelope.
Organised brands, on the other hand, offer massive catalogues but operate incentive structures designed for commodity trade: higher volumes unlock higher discounts. Faced with such schemes, dealers naturally prioritise the established, low-risk kali cycle when inflating purchases to meet turnover discount (TOD) targets.
Newer brands do not face this contradiction. They lack legacy products and offer focused portfolios.
Over the years, a large number of new brands, mostly regional, have entered retail stores and steadily chipped away at retailers' investments and available space for stalwarts.
The path forward
The only way to reverse this decline is to increase the display range of fancy cycles at retail. If the product is present in-store, the stalwarts' brand recall, quality, and cost efficiency will do the rest.
But with retail investment allocation already shrinking, how do you get more cycles into stores?
The dealer proposition must change. Instead of ever-higher volume discounts and schemes, brands must create an offer that changes dealer behaviour, one that provides the same risk-reward ratio for new products that the kali cycle once offered: high inventory turns without risk.
Reducing inventory depth while increasing width allows dealers to carry more variants without increasing investment. This directly boosts conversion. However, reduced depth increases the risk of stock outs unless replenishment is fast.
In the bicycle distribution channel, there exists an entity that guarantees reach without credit risk: the wholesaler. This entity is usually a large dealer in a region, operating a retail store while also acting as a wholesaler for smaller retailers that cannot buy directly from brands. These smaller retailers often have poor credit histories and lack mandated documentation. Wholesalers bridge this gap by extending credit, while allowing companies to transact with a single organised entity.
In return, wholesalers earn TOD from brands through demand aggregation and capture a portion of the retail margin. Wholesalers contribute 40%-50% of a region's sales.
Ignoring the high upfront logistics risk, the inability to dispense with wholesalers is what truly prevents brands from setting up regional warehouses. But herein lies the opportunity.
A lower-risk alternative: Converting wholesalers into distributors
This effectively 'variablises' the hub-and-spoke model without losing the reach to unorganised retailers, while protecting gross margins.
Unlike wholesalers, distributors actively sell, provide doorstep delivery, extend credit, and operate exclusively for a brand. This allows the company to control assortment, availability, and market coverage.
To enable this shift, brands must adopt several paradigm changes:
Enabler-based management instead of target-based control
Without this shift, the transition is a nonstarter. Volume-based targets are the root cause of limited market range. Moving incentives away from volume and towards enablers that increase range and reach enables sustainable distribution.
Critical enablers include:
Daily stock sharing with the brand to enable availability
- Maintaining capital availability to fulfil stock depletion
- Deploying and training a field force to actively collect retailer orders
- Visiting the market on a fixed beat plan
- Extending credit to all mapped retailers
- Frequent market visits to resolve retailer issues
- Infrastructure to guarantee order delivery within 24 hours
- Strict adherence to area demarcation
The brand's role
Ownership of distributor ROI
If the brand owns distributor ROI, the transition will not revert to wholesaling. Inventory control is the only sustainable way to maintain ROI, preventing volume-led dumping to achieve short-term targets.
Full-range availability at distributor warehouses
Providing distributors access to the full product range enables maximum fulfilment across segments.
Protection against obsolescence
This is essential to de-risk distributors and remove hesitation around adding new ranges.
Is distribution more expensive than wholesale?
Redirecting scheme budgets towards distributor development does not increase the cost of sales.
Ensuring area demarcation consolidates sales at the distributor, enabling predictable FTL transportation, better inventory control, and improved distributor ROI, without adding fixed costs for the brand.
While distributors may be exclusive to a bicycle brand, they often aggregate other product lines, keeping incremental costs low and making the transition economically viable within existing wholesale margins.
The new moon moment
Building and stabilising a distributor network is a long journey. But the reward is a high-speed highway to retail, allowing brands to react quickly to demand shifts in a rapidly evolving market.
This may not be the sunset of the Indian bicycle industry after all.
It may as well be the new moon.
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