CODEX
Global Bike Inc. is in need of help!
In this project, I was given the dataset for Global Bike Inc. (GBI), a bike company founded by John Davis and Peter Schwarz in 2001 through the merge of Heidelberg Composites and Frankenstein Bikes.
** GBI is a fictitious company created by Epistemy Press books.
Let’s explore the data!
The revenue distribution for both Germany and United States shares the same trend. The lowest revenue was in 2015 and highest was in 2019. It can be observed that revenue has decreased in 2020.
Revenue for United States has always been higher compared to Germany. And it seems like the current dataset only contains up to Q2, 2020 sales records.
Globally, the highest revenue is derived from United States West followed by United States East. In Germany, revenue in Germany North is higher than Germany South.
Figure above shows that both Germany and United States shares the same Net Profit distribution, which aligns with revenue.
In majority, highest sales occurs between March and April and lowest sales is during June to August. In 2019, a spike of profit can be observed in July and from October to December, which differs from historical data.
No discount has been given to accessories product. For bicycles, most discounted product is Deluxe Touring Bike Silver.
On average, product with the highest cost is Professional Touring Bike (Silver). And products with lowest cost are water bottle and water bottle cage.
For Germany, product with the highest quantity sold is T-shirt, followed by elbow pads. The bicycles have lower sales compared to accessories in general. For United States, product with highest quantity sold is air pump, followed by T-shirt.
A new variable was created to calculate payment turnaround time.
Payment turnaround time=Payment Receipt Date-Billing Date
For Germany, Red Light Bikes requires 29 days from billing to payment on average. In United States. Silicon Valley Bikes require 19 days from billing to payment on average.
A new variable was created to calculate quote to order turnaround time. The formula is as such:
Quote to Order turnaround time=Sales Order Create Date-Quote Date
For both United States and Germany, customer require 6 days from quoting to ordering process.
The lowest profit margin is in 2015 and highest profit margin is in 2019. Data for 2020 will have to be further analysed using Q1 and Q2 historical data since Q3 and Q4 records are not available.
It can be observed that Red Light Bikes has an upward trend in net profit margin, but no purchase was made in 2020.
Figure above shows that there is a downward trend for net profit in Q1 and Q2 2020 Bicycle product.
Top 3 customers with highest profit ratio are Airport Bikes, Fahrpott and Cruiser Bikes. The bottom 3 customers with lowest profit ratio are Bavaria Bikes, Neckarad and Osteerad.
For bicycles, highest profit ratio product is Deluxe Touring Bike (Silver). For accessories, highest profit ratio product is knee pads.
Alright. So we have looked into GBI’s historical sales data and now let’s carry on with some information analysis.
When profit and revenue for both United States and Germany were compared, it can be observed that in overall, profit and revenue for Germany is much lower than United States. Results from data analysis showed that on average the profit ratio across GBI Germany’s customers does not differ much, ranging from 50% — 52%. GBI, as mentioned in the introduction focus mainly on manufacturing durable, high quality and reliability touring and off-road racing bicycles. These bicycles have been seen in major bicycle races such as Tour de France. However, during information analysis, it was found that races such as Tour de France and Tour of Germany in particular have been placed on hold since 2008–2017 due to athlete’s doping scandal. This could explain why Germany, despite being world’s most bicycle friendly city, has an overall lower sales revenue and profit compared to United States. Without bicycle races in the region, it can be highly assumed that there is no customer intention in buying touring and off-road racing bicycles. The resumption of Tour of Germany in 2018 could explain why there is an increase of sales revenue in 2018–2019 for Germany. This is because there is an increase in demand for racing specific bicycles. There is however, a decrease in sales compared to Q1-Q2 for historical data and 2020 data. In late November, a pandemic named Covid-19 spread across all regions forcing government authorities to implement lockdown policy. At the same, health ministry has urged public to reduce public transportation usage to minimize contact. The lockdown has resulted in a drop of sales revenue and profit for GBI in 2020. Additionally, Red Light Bikes which has seen an increase in sales for 2018–2019 has not made any purchase with GBI in 2020. This has also contributed to the decrease in sales revenue for GBI in Q1 — Q2 2020. Major races such as Tour de France, were postponed due to implementation of lockdown policy. At the same time, due to major rescheduling work for all races, Tour of Germany 2020 had to be cancelled. When the lockdown was lifted in Germany in April, the bicycle industry sees a boom in sale. E-bike in particular, sees an increase in demand as compared to conventional bicycle. This is not the first time E-bike has seen an increase in demand. According to Vanderpool (2017), e-bike has been growing steadily since 2017. This is also shown in the figure below. Globally, the search for electric bike has constantly increase compared to touring and off-road bike. This is shown in the figure below.
It is expected that the Q3 — Q4 sales for GBI Germany will not see any growth as more races are getting postponed and cancelled. Germany has recently implemented a second lockdown to halt the spread of new Covid-19 strain (Taube, 2020). Inevitably consumer is less likely to go on a long-distance cycling tour at the moment. As mentioned by Ricker and Hawkins (2020), consumers are more likely to purchase e-bikes for the purpose of convenient daily usage transport than leisure only bicycles. With efforts by Germany authorities launching National Cycle plan 3.0, constructing safer cycling tracks as well as bicycle highway, post Covid-19 bicycle sales could see an increase of demand for leisure only bicycles. Cycling tourism would boost the demand for touring and off-road bicycles, as well as sharing bikes.
The seasonality trend in sales for Germany can be explained by major race date and weather in Germany. Germany experience winter between December to February, hence there could be lesser probability people go on long distance bicycle during this period. Moreover, per figure above, majority races are held between Q2 — Q3 in Germany, which could explain why GBI Germany has higher sales between Q1 — Q2. Race participants are likely to purchase touring or off-road bicycle upfront for training purposes.
Phew. That was a lot to take in. So, what should I propose so increase net profit in Germany? I have came up with 3 strategies.
Strategy 1: Sales visit to Red Light Bikes
It is observed that Red Light Bikes sales revenue is seeing a growth in 2018–2019 but surprisingly there were no sales made in 2020’s Q1 — Q2. Dedicated sales representative should pay a visit to Red Light Bikes to understand the current situation — whether the dealer was affected by Covid-19 situation or if they have decided to stop ordering from GBI due to certain aspects. The cost of implementing this strategy is low and should be placed as first priority among other strategies.
Strategy 2: Shifting gears to serve Direct-to-consumer market
Currently, GBI is selling through authorized dealership, restricted by the possible market share size. This should be changed in order to increase market share size and start building customer loyalty. Through Direct-to-consumer strategy, GBI can better understand customer’s preference and feedback via data collection from direct sales. There are 3 phases for this strategy to be implemented.
Phase 1: Do what GBI does the best — Launch of Build-to-order service online
Since Frankenstein Bikes and Heidelberg Composites era, GBI has been focusing in manufacturing high durable, reliability and quality touring and off-road bicycles, which are then used in major cycling races. During the Frankenstein Bikes days, John Davis has been customizing bicycles for friends and competitors. This practice should be brought back and launching it online as an exclusive online-only service. The bicycle customization service builds customer’s ideal bicycle based on their needs and preference. This is especially important for race participants, who would appreciate a customized bicycle based on their competition strategy.
Phase 2: Selling GBI accessories online
As observed during data analysis, no discounts have been given to dealers for products in the accessories division. Hence there will be no pricing concern if GBI decides to sell them online. GBI can start expanding its accessories option, offering online-only specials starting from products that have been giving higher profit ratio and top sales products — T-shirt, elbow pads and knee pads. Moreover, consumers are not required to be in the physical store when purchasing accessories. By selling these directly online GBI could potentially reach more customers, not just restricted to Germany, but worldwide. This could be the start of creating brand loyalty.
Phase 3: Setting up GBI’s direct physical store and selling bicycles online
GBI can start sourcing for new outlet location starting from phase 1. Ideally, the location should align with the Transport Ministry’s National Cycle Plan 3.0. GBI can also start selling bicycles online even before the opening of GBI’s first physical outlet. And from phase 3, further analysis will have to be done to determine if GBI should proceed to halt all dealers’ partnership or doing it both ways.
Strategy 3: New Product Development
This can be carried out in parallel with strategy 2 as it will be time consuming. As explained in the previous section, GBI’s sales revenue relies heavily on touring and off-road bicycle. GBI should start expanding its market share as the forecasted sales for conventional bicycles are seeing a downward trend. There are 2 product line that GBI can consider developing:
E-bike and foldable E-bike
As per current trend and forecasted pattern, the demand for e-bike has been increasing. GBI can consider tapping into this segment by forming partnerships with e-bike motor company. GBI could be innovative by coming out with foldable E-bike to cater consumers who has bike storage issue either at home or in the office. Foldable E-bike product line can be further marketed to countries known to have low storage capacity such as Japan or Singapore.
Kids bicycle
In existing product line GBI does not offer kids category bicycle. This is something that GBI can consider venture into considering that the National Cycling Plan is expected to promote cycling habits within various cities in Germany.
Could I have done this better? Comment below and let me know how should I better improve this ! If you like what I’m doing here, give me a clap !
And … that’s all for today. tata !
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