Who will make the most money on electric bikes?
How to connect sales, rental, repair, and production for bigger profit and better customer service?
Today I will tell you who will make the most money on electric bikes and how.
Many of today’s ebike companies do only small parts of this business, but the secret lies in connecting and controlling the whole customer experience. So how to keep every division of your e-bike business more profitable by even providing a better service to your customers? Let’s dive in.
There will be hundreds of millions of electric bikes worth tens of billions of dollars sold worldwide in the next decade. (If you want to see the exact numbers, check out this post).
The e-bike business was healthy and growing even before the coronavirus pandemic.
But after that, it goes even faster. And it is not only because of the needs for individual mobility but also for sports and recreation. There is a high demand from many new customer groups.
The bike industry is pushing harder and transitioning from classic bicycles to e-bikes. It now finally understands that it is much better and profitable to sell one electric bike instead of one regular bicycle. You can make on average three times more profit. You can see on the producer’s websites that e-bikes move from the last to the first positions in the menu or advertisement.
The market grows so fast that the bike industry doesn’t supply enough, and many new players want to join this business, even from different industries. And this is happening not only on a complete e-bike level but also on the components and services level.
Nowadays, there is also more extensive support from local or even global governments because of the environmental changes and city transformation to cleaner and more livable.
There has never been a better time for the e-bike business than now.
What options do you have when starting an ebike business? Depending on your expertise, interest, and financial background, you can choose from smaller and easier parts like sales, repair, or rental. But you can also go to bigger stuff as R&D, production, or software. Options are endless. But before you start working hard, you better think in advance about how you need to build this thing also for the future.
So, who will make the most money on the electric bike market? We can look at it from two perspectives.
The first is from a retail standpoint. I will give you an example of what we did in the local market.
Let’s say you have your e-bike shop, and you sell electric bikes to the end customers. But you can also sell them to your own rental business. (I will speak about how to run your rental business some other time).
What are the advantages? By selling to your own rental, you will sell more electric bikes. At the same time, you will have a place to send your customers for a test ride in a better location than your store. The customers will test the products that you sell (not that somebody else sells). This way, many customers will see and try your products. An average rental, even with only 10–20 units, can generate thousands of customers per year (you can do your math, but the bigger the rental, the more customers will ride).
Depending on the local market’s development, some percent of rental customers want to buy an ebike immediately after the ride or in a short time.
With your own rental, you generate qualified leads for your sales for free or relatively cheap. By having your customers try the e-bikes in the rental, you save the time of your shop staff because it takes much less time to sell an ebike after the customer spent a lovely day on an ebike. He already knows how it works and how to use it. He also knows more about the particular type, about the right size. He already has an idea of how he would use it if he had it. And essential is that he already knows that he wants to buy. He might not say it out loud and even admit to himself, but deep inside, he knows.
From the rental standpoint, you save money on purchasing electric bikes and on the maintenance fees. How? You get cheaper e-bikes because you have sold them to yourself for a better price than buying them from somebody else. When you have your shop, you mostly have an in-house repair center. So you also assemble and maintain the rental e-bikes during the season for a better price.
If you do a good job renting and communicating with the customer, you will generate qualified leads and send your rental customers to buy directly at your place. Everybody knows that it costs money to get a new customer to your door. Depending on if you or your partners own the rental, it can generate provision based on sales. That’s an additional great revenue stream for your rental business. And sometimes it can make even more money than the rental itself.
There is also another advantage: At the end of the rental ebike’s lifecycle, it is much easier to sell it in your shop. Because you know exactly how and when it was purchased (because it was from you), what is its complete repair history and warranty status. You also know how much money it has made in the rental so that you can give real value to the particular machine.
This is good, for instance, for customers who don’t have the budget for a new e-bike or want to go for a cheaper version in the beginning. You can sell them your used rental bikes.
To sum it up:
E-bike rental business generates leads for your sales and your products for cheap, free, or even making money. So if you have your sales and repair, try adding rental for generating more qualified leads.
E-bike sales sell to your rental for better prices, so the rental is more profitable and even makes money on provisions. If you have a rental business, try to add or connect it to sales for an additional revenue stream.
Your repair makes money on maintaining sold and rental bikes. If the rental bikes are in excellent condition, it makes a good name for your repair centers. You also generate more work for your employees.
When you do all this correctly, you get referral customers from each division. And so you close this cycle. By doing this, you will be way ahead of your competition.
But sometimes, it can be hard to do all of this.
You must decide if you can do it by yourself and your team or if you need partners. You need to adjust the processes, keep it all simple, and train your partners and staff.
Now let’s take a look at another situation. If you have your brand or production, connecting these parts of the business can be even better.
By having rentals, you promote your brand in different places. The customers see and ride your ebikes in the nicest tourist regions or cities. These regions are good because there are people who wouldn’t usually get to your store, website, or see your ads.
At the same time, you test your bikes in the most demanding conditions. In rental, the customers don’t care about the e-bike. It is not theirs, so they push it really hard. You can get great product feedback from there.
When we go back a few years to the beginning of e-mountainbikes, we saw many rentals in the mountain regions. And we have sold a lot of electric bikes based on this. The customers came from summer holidays and said at my store — we have seen these ebikes in the Alps, we have also rented them, we know it is a good thing. They even knew an exact brand or exact model and size. The sale is much easier with an informed customer. You skip an introduction with a test ride, and you go directly to the proposal and sale. This sales cycle is much shorter.
Conclusion: it makes sense to combine rentals with sales and repair (and even production).
Each of these businesses can make money on its own. But their connection boosts the performance and profit. And it also makes the customer experience better from the beginning to the end. When you provide more value to your customers from the first test ride through sales and services, you build a much better relationship with them. So they don’t need to look for another place and get to test, rent, buy, and repair their bikes in different places at your competition.
If you need to connect your business divisions or create new ones, or just want to know more about the e-bike business, visit my website ebikesteve.com or my social media channels and contact me. My name is Stefan Ceman, and I help people and companies to start, grow, optimize their e-bike businesses or create future business models.