A new trade body has formed with the aim to highlight issues facing retailers – with its first target the Cycle to Work scheme’s “financially unsustainable” model.
The Bicycle Dealers Association (BDA), made up of Bespoke Cycling, Cotswold Cycles, Cycle Exchange, Cyclefit, Pearson Cycles, Saddle Safari and Velorution, with other businesses invited to join, said it is challenging how the administration involved in the Government’s Cycle to Work scheme is currently structured.
“We have tried, over an extended period, to positively engage with the bicycle industry, to discuss a more rational and fairer system,” says a statement. “This, to date, has been an unsuccessful process – there seems to be resistance to change because of vested interests predicated on a history of excess profits within the Cycle to Work administration sector. In essence, we feel this a failure of appropriate governance of the sector.
“The costs associated with administering the schemes are largely the same if the bike is £500 or £5,000”, BDA continues, “but Cycle to Work providers levy the percentage on the whole transaction – typically 5 to 15%. This is unfair and leads to excess profits.”
Cycle to Work providers also “levy a charge solely upon the retailer” – whose bicycle and accessory margins are typically between 25-35%, which BDA says is a “financially unsustainable model”. The trade body says it is committed to working with all parties to achieve a “fairer and more sustainable model for all stakeholders” – UK taxpayers, consumers, bicycle retailers, Cycle to Work providers and the UK bicycle industry.
It is suggesting a “more balanced scheme, where retailers, manufacturers and the UK cycle industry share the financial burden, based on reduced or capped fees, that benefits from structured Government oversight”. It adds: “We would further suggest that a proportion of the fees contributes to a cycling industry advocacy and sustainable transport initiatives. We look forward to positively negotiating with all stakeholders on this basis.”
But taking the commission charge aside, the Cycle to Work scheme has been a force of good for the industry, Matt Connelley, founder of Cycle Exchange, tells BikeBiz. “I think the issue is when there’s a third-party involved, an intermediary, you get a conflicting agenda. More recently, there’s been a bike shortage. A lot of retailers haven’t got access to stock they need – we’re looking at spring before in demand product is available again. Shops just can’t afford, with the limited supply, to give away so much of the margin. It’s just not sustainable, it puts them in the difficult position of turning away sales that involve a cycle to work voucher. ”
Adrian Warren, director at Cyclescheme, has issued this statement on commission:
“Given the recent situation around COVID-19, cycling and cycling to work has seen an unprecedented surge in demand. As well as this, we at Cyclescheme have been instrumental in working with the UK government to remove the £1,000 cap on the value of a bike eligible under the Cycle to Work scheme.
“This has meant that many more people have had access to a wider range of bikes that suit their commuting needs, including pedal-assisted and adapted bikes. These changes are hugely important to support wider mobility and to make cycling accessible to everyone – something we feel very passionately about.
“Over the past 15 years, we have significantly invested in the compliance of our scheme. Cyclescheme participants typically save 25-39% on the cost of cycling equipment – this is inclusive of paying an End of Hire fee. This fee is charged in line with the Department for Transport (DfT) and HMRC scheme guidance to ensure there is no benefit-in-kind liability for participants.
“At Cyclescheme, we have historically charged an agreed percentage rate of commission for our services. But we also realise that since the £1,000 cap has been lifted and the price of bikes has risen under lockdown, this means an uncapped commission may not be the best way forward.
“The last thing we want to do is to treat bike shops unfairly. That’s why we have already been working directly with bike manufacturers and retailers to agree a new commission structure that means we all receive value from bike sales while also working collaboratively to continue to encourage more people to ride bicycles. Talks are ongoing, but we are confident we will have a new commission structure in place that benefits everyone.”
Read the September issue of BikeBiz below: