Fox Factory Holding Corp. expects to offer a lower priced suspension fork in the next two years for mountain bikes that retail for less than $2,000. The effort comes as independent bicycle dealers continue to lose significant market share to discounters like Wal-Mart.
“Right now we're predominantly $2,000 end-bike price point and above,” FOXF CEO Larry Enterline told investors at the ICR XChange investor conference in Orlando last week. “We'd like to get into the $1,500 to $2,000 price point. That's a project we been working on, making good progress.”
Recent research from Gluskin Townley Group estimates that 39 percent of adult bicycle owners and 17 percent of adult bicycle enthusiasts purchased their last new bicycle from a Discount store like Wal-Mart, compared to 25 and 6 percent in 2012. The percentage who made the purchase at a Specialty bicycle dealer/bike shop dropped to 31 and 59 percent respectively, from 43 and 63 percent. Among adults moving up to better bicycles, the specialty channel increased its share to 51 percent from 46 percent.
“Over the past two years, the Casual segment of the adult bicycling population switched their retail channel of choice for recent bicycle purchases to discount stores like Wal-Mart and away, in significant numbers, from bike shops,” reads The American Adult Bicycle Segments 2014 Report. “Another channel that saw a significant decline over this period was specialty outdoor retail, while small it still suffered a seven point decline.”
FOXF typically enters a components market by selling sponsoring racers. As its athletes win, they fuel aftermarket sales. Eventually, bicycle brands take notice and specify Fox components and sales to OEMs ensue. Today, about 80 percent of the company's sales are to OEMs and about 62 percent comes from mountain bike (MTB) components.
On a $3,000 bicycle, suspension components typically comprise 30 percent of the bill of materials. FOXF earns the remainder of its sales from selling components for powered vehicles, including motorcycle, snow mobile, ATVs, pick-up trucks and other off-road vehicles. Through the first nine months of 2014, FOXF sales grew 12 percent to $232.6 million, with powered vehicles sales growing fastest.
Enterline said FOXF continues to shop for bicycle components companies such as Race Face Performance Products Inc. and Easton Cycling, two Canadian companies it acquired last month for CAD$30 million. Race Face designs and manufactures MTB and road bike wheels, while Easton Cycling designs and manufactures MTB and road bike wheels. Both companies are based in Vancouver, B.C., were controlled by commons shareholders and sold to the aftermarket and OEMs.
“Our recent acquisition of Easton Race Face got us into high-performance wheels and carbon fiber technology, something we're very excited about,” said Enterline.