PARIS — It’s the time of year when bike dealers are all smiles. For three weeks, the Tour de France provides the best advertising possible. But it’s a different story this year and both wholesalers and shopkeepers look a little glum. They fear that cyclists from the Movistar or Katusha teams might win too many stages, or worse, win the Tour with their Canyon bikes.
Industry behemoths loathe the brand as much as taxi drivers hate Uber, especially after Canyon accompanied Cadel Evans when the Australian won the 2009 world championship. Ten years ago it was an almost invisible start-up. Now it’s swooping in on the emperors of the cycling world — U.S. manufacturers Trek, Specialized and Cannondale — after cruising past renowned Italian brands such as Bianchi and Pinarello, and leaving France’s Peugeot in the dust.
Whether on flat roads, in the woods or in the mountains, Canyon bikes are taking over, at least in Europe. These little gems, priced at more than 600 euros a piece, have sports enthusiasts falling for them like children with toys.
In Western countries, the bike market is divided in equal revenue parts between a large amount of cheap bikes sold and a small amount of very expensive, high-end equipment sold only to aficionados. The latter is Canyon’s target, and it’s eating a large chunk of it with its formidable sales pitch: premium material at relatively low prices.
The German company sells its bikes for about 30% less than its main competitors. In terms of quality, the products are comparable. It’s as if a car company started selling Audis for the price of a Logan. “This is the bike everybody dreams of at a price which most people can afford,” employees like to stress.
So how do they pull it off? The idea is simple but expertly developed: Canyon sells its products only on the Internet, thus circumventing the usual distribution channels — not unlike how Dell, in the 1990s, revolutionized the PC market by selling machines assembled and sent out on demand. Canyon uses its own website and delivers about 100,000 bikes every year via UPS, thus giving back its clients the money that its competitors pay to distributors.
This incredible success was born almost by chance in the mind of Roman Arnold, a nearly seven-foot-tall giant who always loved to bike. “In the 1990s, Roman and his brother Frank used to ride their bikes a lot,” says Rodolphe Beyer, who created Canyon’s French branch in 2005. “But they were struggling to find equipment or spare parts to their liking. At the time, buying by mail order would cost a fortune, so together with their father, the two brothers had an idea. They traveled to Italy to buy their parts and, to pay for the trip, brought back more parts to sell in their trailer at races.”
The little family business prospered. The two brothers were selling parts in their parents’ garage in Koblenz after school. They even ended up opening a proper shop of their own. The story could have ended there. “But one day, somebody offered Roman a series of frames that had been seized by customs,” Rodolphe Beyer explains. “He sold them in his store and via catalogue. That’s when he noticed there was a huge demand and he ended up ordering frames directly from Asia.”
Without noticing it, Roman Arnold got caught up in a circle since, by ordering these frames, he was becoming a direct competitor to the brands he was selling in his store. That’s when he decided to throw caution to the wind and start his own business. It may have seemed like a crazy move but, inspired as he was by the Internet bubble, the cyclist who became an entrepreneur told himself he would perhaps be better off alone.
In 2003, Roman the German, born in 1964, eventually realized that his frame business had made him both weak and vulnerable. Weak because he was no different than his competitors, and vulnerable because just one batch of faulty frames could have him facing huge guarantee issues.
To make himself stand out from the rest, he created Canyon, betting on an upgrade strategy that saw him work hand-in-hand with academics, engineers and researchers to reach his only goal: to make the best bike in the world.
The challenge was soon fulfilled. Canyon boasts the lightest mass-produced bike, as well as the fastest. Since then, the group and its engineering army has become a patenting machine, earning several prizes in the specialized press. Design, quality and prices between in the 499- to 8,499-euro range are the brand’s three main features.
Canyon has doubled its workforce in five years but still has only 650 employees for a turnover of 100 million euros and 3 million in benefits last year.
The company now faces three challenges. First, it must expand its market, which isn’t easy when sales are online and the items cost an average of 2,000 euros. With that kind of money at stake, customers can be forgiven for wanting to “touch” the product. To address the issue, the group is investing massively on its website and in call centers. “But we’re not going to open showrooms or stores,” says Frank Aldorf, a German who worked for a long time with Specialized, one of Canyon’s competitors.
Aldorf says it would be a mistake to invest in a network of stores, as it would increase costs and remove what makes the brand special. Instead, the priority is to develop the quality of the product and continue to improve service.
UPS delivers the bikes in pieces, meaning customers have to do the final assembly (putting together the wheels, handlebars, pedals) themselves. When they need help, they sometimes have trouble finding it, since traditional stores often refuse to repair these bikes sold by the devil. “It’s a shame because the Internet is less of a threat to them than it is to bookstores. Their future is in the service,” Rodolphe Beyer says.
Some traditional makers, worried by Canyon’s rise, have already tried their own hands at direct-to-customer sales, though these have been limited to just a few series. Brands are wary of getting on the wrong side of resellers.
Canyon’s second challenge for the years to come, therefore, is to reassure clients worried about after-sales services. For that reason it is considering developing a network of mobile independent repairers who would go out and meet clients directly. The company estimates that for the 100,000 Canyon bikes in France, some 20 mechanics would suffice and that they would provide better service than traditional stores do.
The company’s third and final challenge is both industrial and global. Although it does sell some of its bikes to Asian customers, 90% of Canyon’s business is still done in Europe. To continue growing, the group needs to expand its sales outside of the Old Continent and start competing in a very demanding U.S. market.
“We don’t sell to the U.S., but people there know about us, through the specialized press. And some American customers have come to Koblenz to pick up their order directly from us,” says Frank Aldorf. If they eventually enter the U.S. market directly, “American brands will see it as a declaration of war,” believes Ward Grootjans, the head of strategy and of the group’s global expansion.
To succeed in its bid to take over the cycling world, Canyon will open this fall a new ultra-sophisticated 15-million-euro factory on a stretch of land big enough to triple the company’s size.
“We drew our inspiration from the car manufacturing production techniques and we’ll be able to produce 450 bikes with every eight-hour shift,” explains André Koch, head of production and logistics. The goal is to be able to produce more and do it faster, and “also to be able to fulfill the clients’ demand for personalization,” he says.
“Our competitors have almost no growth now. Our problem is meeting demand. And keeping cool. We need to grow, but not too fast. Before we can be the biggest, we first need to become the cyclists’ favorite brand,” Franck explains bluntly. “The most important thing is to last.” And also, maybe, to win the Tour.
