How BikeExchange (ASX: BEX) CEO Mark Watkin Plans to Deploy $ 18.9 Million
It has been 3 months now that BikeExchange Ltd (ASX: BEX) initial public offering (IPO) on February 9.
The company, which provides an online cycling marketplace, connecting brands, retailers and distributors with customers around the world, has been in existence as a private entity for well over 3 months. It was founded in Melbourne in 2007 by Sam Salter and Jason Wyatt.
Today, BikeExchange hosts more than 1,500 brands, 1,640 retailers and 900,000 products worldwide. The latest figures indicate that it attracts 28 million customers per year.
According to BikeExchange Global CEO Mark Watkin, “Our goal is to make it easy for customers to buy and sell anything bike related.”
Earlier today, the Motely Fool reached out to Watkin to get his take on how the company has been following so far and what he sees to come.
Growth from all sources of income
“We were very happy to arrive at this set of quarterly results. This is an important milestone for us, ”said Watkin, referring to the first quarter results of BikeExchange (Q3 FY21) as a listed company.
The company recorded solid growth across all revenue streams, as well as a record total transaction value, which increased 220% from the previous corresponding period.
Noting that BikeExchange maintained a net cash position of $ 18.9 million as of March 31, Watkin said:
The highlight is that we have achieved this growth without having to deploy the capital raised during the IPO. We have a lot of confidence in it. We are currently in an upcoming strategic planning phase, especially for FY22 – increasing subscriptions, increasing e-commerce transactions, etc.
Not all markets are created equal
Not all of the geographic markets in which BikeExchange operates have grown so rapidly.
“Europe has been remarkable,” Watkin told us.
Indeed, in the third quarter, the turnover of its European operations increased by 134% compared to the previous corresponding period, with growth in all categories. E-commerce was particularly strong, reflecting strong demand for bicycles in Europe. Revenue growth in Australia and New Zealand is 19%.
According to Watkin:
Much of this concerns the cultural aspects for Europe, where cycling is a mode of transport relative to the performance of the category and sport. There are a lot of ideas in there. The use of e-bikes is growing alongside debates on infrastructure and the environment, which have become global debates.
Adoption in Australia has been slower, but barriers are falling. I am very excited about the next 10 years. Cycling is 100% part of the solution to many of these great debates around the environment, transport, infrastructure, health and convenience.
While COVID lockdowns and social distancing ushered in rapid adoption of Down Under online shopping, Australia still lags Europe in e-commerce.
Watkin told us:
In Europe, more than 90% of transactions are done online via the platform. And 40 to 50% of those transactions are e-bikes. Europe accounts for up to 30% of total e-commerce, while in Australia it is still single digits. But those barriers are disappearing, the online influence is here now.
Regarding the strict bicycle helmet laws in Australia, Watkin said it remains a big debate. “For some people, this can be a barrier.”
He added: “In Europe you can say it’s safer because the infrastructure supports bicycles. Infrastructure is a key part of the daily use of a bicycle. Personally, I think helmets are important. “
The bank account is full… what now?
To bring the conversation back to BikeExchange’s $ 18.9 million net cash flow, we asked what the company’s plans were to deploy IPO capital.
Watkin said sales and marketing were priority areas.
“Marketing, especially in some areas, will be very important. SEO [search engine optimisation] and SEM [search engine marketing] has always been an important element.
The company is also looking to add key personnel.
“We have been a very light and very light company. We will therefore proceed with key recruitments in key functional areas… which are not linked to any geography. “
BikeExchange will also seek to improve its technology.
Our main platform is Marketplacer, a robust engine. But I think there are opportunities for us to improve things, especially on the front end… Personalization for the consumer is a really important area. We have started this process now.
Watkin added that the company wanted to continue, “Anything that helps us enable the retailer and brands to sell more products and reach more people, and for the consumer to find what they need.”
The bank account is full but we need to deploy it appropriately. In this, the key areas are the main ones. The EU and the US are the big markets where we have important leads, so we focus a lot on those regions.
How quality can drive growth
BikeExchange’s growth figures for the third quarter of FY21 were impressive. The Motley Fool wanted to know if this level of growth is sustainable.
According to Watkin, “We are confident that we can maintain the growth rates. It’s hard to say if this reflects the growth we’ve seen in the last quarter. “
We believe the growth models are sustainable, but it will happen in a slightly different way as we expand businesses. Many marketplaces derive 80% of their volume from 20% of their customer base. It comes down to a quality product, quality retailers, etc.
We find that a lot. The quality product retailer we work with, the availability of this product drives demand and brand awareness. It is certainly part of our strategy.
He stressed that the United States and the EU were the main engines of medium-term growth.
If you take America, there are probably 4,500 to 5,000 [cycling] retailers in the country. The goal is not to get them all. The target is 1,500 to 2,000 quality retailers who are good operators with good products on the platform, which makes the destination attractive to the consumer.
Have been [currently] single-digit penetration in the EU and the US. With the arrival of capital growth in the business, we hope to see good quarterly growth rates.
Risks and opportunities in the coming year
The uncertainty that continues to be raised by COVID-19 is the only real risk Watkin foresees in the coming year. “But we’ve been through this whole pandemic and we’re still healthy. Productivity increased, the team got even closer to the whole world. We took a lot of comfort from that, ”he said.
Other than the unpredictable nature of the virus, Watkin does not foresee any major risks to the business in the coming months.
“We’re in a fairly sustainable category,” he told us. “We believe cycling is part of the solution to the major macroeconomic trends that are occurring. Electric cars are not the only answer. “
Watkin is focusing on the company’s existing growth markets before moving into new territory.
We have the first-mover advantage, we have a good foundation and we have a good track.
The temptation is to continue expanding into new countries in the short term. But I want us to be 100% focused on what we have. Two huge regions in the United States and the EU. Latin America is just as big. Let’s just focus on these and prove the model.
At the same time, we can make our operating model absolutely solid so that we can more easily replicate it in these new markets.
Watkin also said the company will do more to help consumers with their purchasing decisions.
The average person on the street doesn’t know much about bicycles. Like utility bikes – cargo bikes where you can transport your kids – there is a huge opportunity there. And it’s a technical buy, which can be a bit intimidating. If we can be a destination that helps them, this is a great opportunity.
In addition to this, a category where bicycles can be considered as a means of transport. In Australia, it really needs a bit of cropping. Achieving equality on the roads is an important subject. Our great opportunity is to help countries around the world establish this even further.
It’s a fragmented industry, and we’re trying to bring that together.
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