June 2016, by Rupert Faircliff, Senior Consultant
Halfords reported its 2016 figures this week – a 1.7% sales growth with motoring performing strongly, but its cycling division down 1% in line with a weather-related dip in the market.
Despite this short-term drop, cycling in the UK is in robust shape. Over the past 20 years, more and more people are taking up their bikes, be it for leisure, commuting (helped in part by the Cycle to Work scheme), or more serious fitness and sport. More than two million people across the country now cycle at least once a week, an all-time high according to British Cycling.
Halfords themselves are bullish on the market’s long-term growth prospects. As keen cyclists at BrandCap, many of us buying a bike in the past couple of years, we agree. With high awareness and long heritage Halfords are in a strong position to capitalise. Much work has been undertaken already. The business’ transformation strategy is in its second phase, and is setting about taking its customer-centricity, service levels, distinctiveness, shopping experience and infrastructure to the next level.
As part of the strategy, we’ve noted with interest the move to target “serious fitness and commuter cyclists” with the right offer and “right channel” – an acknowledgement that whilst the Halfords brand works for the “mainstream and families”, it currently struggles to appeal to the more discerning, urban and higher spending cyclist, especially when it comes to parts, accessories and clothing.
The acquisition of Tredz and the relaunch of Cycle Republic in 2014 are Halfords’ key plays here, and there’s certainly much room for expansion in this segment. As the business seeks to not just capture the market’s growth, but position itself to outperform its competitors, we see two key areas on which it will be important to focus:
Maximising opportunities across the portfolio
Multiple retail brands is a relatively new strategy for cycling at Halfords, the previous incarnation of Cycle Republic aside. The Halfords brand will serve the mass market. It’s not immediately clear to the outsider how the Tredz acquisition might affect the positioning of Cycle Republic, but it looks as if it will seek to attract the urban enthusiast, with Tredz continuing to appeal to the price sensitive but high spending premium audience. Such an approach will require the ongoing and active management of a portfolio of brands, continually ensuring that they are ruthlessly targeted at specific segments with specific offers, and avoiding cannibalisation. From our experience advising clients on portfolio optimisation, some questions spring to mind:
• Will Cycle Republic continue to stock the same mix of product brands as Halfords, as it currently does, if the target is different?
• How will the business use data to encourage Halfords customers to move up the value chain to the more expensive parts of the offer?
• Finally, whilst Halfords currently endorses Cycle Republic, how visible should those links be between the brands, so that equity is maximised but distinction maintained? What is the benefit for Tredz customers of being part of Halfords – explicitly or not?
Optimising channel strategy
Plans are afoot to launch a fully transactional Cycle Republic website next year. This will be a much-needed tool in the brand’s expansion, removing its reliance on Halfords ecommerce platform and the current ‘break’ in the customer experience. There will need to be a clear reason for customers to seek out the revamped online presence over competitors. Could this be an opportunity to revisit the brand’s visual and verbal expression and ensure it maximises appeal with the target? And can the brand translate its well-reviewed in store customer service (4.9/5* on Google for its Margaret Street branch in London) into a viable and distinctive proposition online – where by its very nature service takes on a different form?
As for Tredz, forging deeper emotional connections with customers old and new will be critical to standing out online and avoiding competing solely on price with competitors such as Wiggle and Ribble. Market leader monobrand Rapha has created strong premium appeal by focusing on the power of storytelling, its physical presence as well as its members’ Cycle Clubs with their exclusive benefits. How can Tredz tap into some of these learnings? Could expanding its four branch physical store presence help to differentiate the brand nationally – and beyond? And what incentives, experiential or otherwise, could be put in place to encourage loyalty?
It’s certainly an exciting time for Halfords. As we get out on our bikes over the summer, we look forward to seeing how the business and its brands perform in its ambition to ‘Move up a Gear’.