Canyon discontinues direct sales to South African market

[Trashy]

What an insightful explanation of the South African consumer!

This completely makes sense to me.

I remember a friend saying a similar thing about VW. Proportionately, of total Golfs sold in the country, South Africa sells more Golf GTI's than in any other market.

Heck, the Malawian tiler who did my kitchen this week arrived in a red GTI!

[JPLRoux]

2 hours ago, DonatelloOnPinarello said:

 

But you can all thank me later when in about 3 weeks time you are again able to buy some Shimano goodies for your bikes from your supplier of choice.

 

Great post thanks, but I am mostly interested in this sneaky comment... please do elaborate! ????????????????????????

[MORNE]

34 minutes ago, Endurobro said:

Great post thanks, but I am mostly interested in this sneaky comment... please do elaborate! ????????????????????????

pretty obvious he's implying to be a buyer for some or one of the local distro's. 

To paraphrase another thing he said though...."E-commerce is not a big thing in SA yet" We'll I've not been waiting for the local retailers to get shimano stuff back in stock...been sourcing my own from all over the world ????.

it's a double edged sword. They better have stock or i'll find it myself lol 

Edited July 29, 2021 by MORNE

[Skott5]

Meh - support local - some awesome bikes coming out of Howick. 

[DieselnDust]

3 hours ago, DonatelloOnPinarello said:

 

Sorry to chip in here, but I have to correct both of you. As an logistics consultant and supply chain analyst, Working in the bike industry, I think I can provide some unique insight, while I having breakfast in Macau, and waiting for what will be a rather unpleasant 47 hour ordeal to get back to JHB…. But you can all thank me later when in about 3 weeks time you are again able to buy some Shimano goodies for your bikes from your supplier of choice.

Canyons business model would never work in SA, but not for any of the above reasons.

Duty on bikes in general, including Canyon is 15%, levied against the CIF (Cost/Insurance/Frieght) price of the bike. Essentially that’s the total purchase price, as delivered to a customs port in South Africa. But every single bike you buy in South Africa is subject to this duty. You just don’t realise it, because it’s already factored into the price on the sticker in the bike shop. The only other tax/add on is VAT, but again, that applies to every other bike sold in the country as well. 
 

You could argue that the shipping cost for mainstream brands is lower because they buy in bulk, but that is also not really true. Bikes are bulky, and expensive to ship. The slight saving they make by bulk shipping is completely wiped out by warehousing and distribution costs locally.

So the price you pay for a canyon consists of: CIF + 15% Duty + 15 Vat

The price of the bike you buy at the LBS consists of: CIF + 15% Duty + local wharehousing + distribution + dealer margin + 15% Vat

(depending on the sales model, there might also be a local distributor/agents margin. But in most cases this is worked into the ex factory price. At least for Spez and Trek and Scott, who all have proper brand representation locally. The others handled by “middlemen” it’s a free for all, and local distributors totally screw the entire supply chain. No wonder Spez/Trek at least are so dominant in the market. Trek is getting there, having only recently gone this route) 

But essentially the Canyon shouldn’t be costing more because of shipping or duties. Those apply equally whether you buy the bike from cyclelab or you import it directly yourself. And granted the exchange rate is reasonable on the day you buy your canyon, then your total cost would have been comparable to local prices for the other brands.
 

When I bought my spectral in 2018, it was very favourably priced, in fact it was a bargain compared to the similar options available locally at the time. Granted I took delivery of my bike in Germany and “smuggled” it back as check in baggage, so I skipped shipping and duties, but I had to pay German VAT at 19%, which I didn’t get back at the airport, because I had ridden the bike in the alps on that trip, so it was used by the time I left the EU, and my excess baggage fee to fly the bike on Air France was 150Eur or something. So all in very close the what I would have paid in VAT and Duty if I had shipped it to SA.

The problem with Canyons business model in South Africa is the South African. They failed to understand South African consumer behaviour. A DTC distribution model will not work for luxury goods in South Africa, and even more especially bikes. Whether you guys on this site believe it or not, you are the minority of the cycling consumer in South Africa. Who follow cycling religiously and know about canyon because you watch world cups and grand tours etc. The typical consumer has probably never heard of red bull tv, and might maybe watch a bit of the TdF, but only because it gets a bit of coverage on the mainstream news, and he doesn’t want to sound an absolute fool when he meets up with the rest of the C group for the Saturday club ride. South African Consumers are also extremely image conscious, what they buy is more about impressions, with very little concern for value. So there’s just no way they going to buy a Canyon, that is essentially an unknown brand here, even if it offers much better commented etc at the same price as a known local brand.

If you buy a S-works, you don’t need to explain your choice to the mates. They will all be wowed by the sticker alone. Same goes for a new pro-Caliber. Or a Spark 900 RC Team. Your mates know it’s the bees knees, and they have seen it on the floor in the shop, and know what the sticker price is. But a Canyon you would need to explain/justify, and that kinda defeats the point here. An upper middle class South African with with a decent credit score, is a sales managers wet dream. The smart marketing folk from the car industry cannot makes sense of our spending habits, same goes for consumer electronics and so on. So to imagine it would be different with cyclists was a oversight from Canyon. We are a relatively small market for Specialised for example, but we sell more s-works bikes as a percentage of all units sold than any other market. I rode SANI in 2017 with the German supply chain manager for Specialised. He was astounded at the number of epic Pro and S-works models, and also the fact that’s almost everyone taking part was on a carbon dual sus of relatively recent vintage. In Europe that simply wouldn’t be the case, at what is essentially a sportiv/social race. Europeans, although having superior spending power, are much more value conscious, and much less concerned with vanity. 

Without a retail presence with storefronts in major retail spaces, there is no way to build the brand awareness needed to become “cool” in SA. Canyons impressive trophy cabinet doesn’t matter to the target market in SA. 
 

Then there is the fact that South Africa is still not really a e-commerce nation. Covid has changed that in a big way, mainstream e-commerce has a long way to go still. I know 30somethings that still use travel agents to book their holiday flights because they are afraid to put their credit card details into a website. Last weekend at a friends place for a few beers, we decided to get a few pizzas. Next thing my mates ask if I wanna drive with him? Perplexed I ask why we don’t just use Uber eats. He says he has never used it, and doesn’t know how. This is after the lockdown of last year when for the longest time it was almost the only way to get take aways. So I say, no problem, I will order. No, he insists, he is happy to drive, and besides he likes chatting to the staff while he waits. On the way to pizza perfect, we chat, turns out he has also never used an Uber either. This is a 37 year old senior manager in a large marketing company, who also travels (locally) at least extensively. So I ask what he does if he needs a taxi, like at the airport or whatever? He uses those guys that Harrass you at the arrivals terminal. Says he trusts them more. At least he knows who his driver is. He is a cyclist, earns close to 2mil ZAR a year. And even though he isn’t the kind to buy a bike based on its “street cred” alone, he is definately not going to be buying R80k + bike, from a website, with zero personal interaction. He may be an extreme case but there’s a lot of people in the target market for top end bikes, who are just like him. We don’t shop online if we don’t have to. 
 

And then lastly, Canyons main market is the EU. As previously mentioned, Europeans are much much more value conscious than South Africans. Labour is also very expensive. So people tend to DIY a lot more wherever they can, especially with regards to hobbies. So cyclists will be a lot more willing to work on their own bikes. Have some tools, and would be more than happy to buy a bike that arrives in a box and they have to build it themselves. Here, a large amount of riders don’t even lube their own chains. Because a wash and lube costs R150.00, and a service costs R500 odd rand. In the EU, a standard service would cost 65-70 EUR. 
 

So buying a bike that’s arrives flat pack in a box when spending R80k plus, that just doesn’t appeal to a South African buyer.

 

So when you consider all that, it’s actually easy to see why it may just not be worth it for Canyon to continue to service a very a marginal market in South Africa. But it’s not because there’s a problem with the model. The model just isn’t right for our market. 
 

The one thing that I do think is wrong with Canyons business in terms of servicing ROW locations, is that they are choosing to distribute from their German HQ. They claim that the raw frames are sent to from Asia, and then finished in the German factory, before assembly and testing, but I don’t buy that, if they were doing half of the value adding they claim to be doing in Germany, they would be allowed to ship the bikes with a German country of origin stamp, and they don’t. If they could claim Germany as origin, the bikes would be able to ship to most of the world duty free, or at worst with 5% duty. However, now they are shipping from their factory in Taiwan, into Germany, where a 15-20% duty is imposed, and obviously added to the total cost, and then when you order the bikes to South Africa, or the US, and now even the UK, they are again knocked with a 15% customs duty. If they kept all the assembly in a single plant in Asia, and shipped direct from there, they would immediately lower their ROW pricing by 15-20%, and that would make them extremely competitive. 

Sorry for the long post. Hope I haven’t bored you all to death.

 

Not bored at all, its refreshing to have someone post the facts. The SA consumer behaviour isn't new to me but there is also the other side of the coin in that if you want to introduce a new brand its better be dirt cheap or they don't bite. Even if it breaks every 3 months as long as you replace the dirt cheap item with similar unit they will be happy to take the crap over and over. really bizarre. So to get a new brand established you have to take a financial knock for 2-3 years grow the customer base, develop your service delivery and gradually raise prices to a profitable point. If not, you fail and its bye bye no matter how great the product.

So you nailed it. We're a strong brand association country. I have pals who swear Spez is the best purely because its the most expensive. The reasoning is that they have to charge that much for the superior technology....ya well not everyone can be saved.

Canyon isn't perceived in the same way. Most folk who as you say, just cycle and have awareness of Canyon consider it be an expensive Makro special and they won't touch that because only Makro sells you a bike in a box

3 hours ago, Trashy said:

What an insightful explanation of the South African consumer!

This completely makes sense to me.

I remember a friend saying a similar thing about VW. Proportionately, of total Golfs sold in the country, South Africa sells more Golf GTI's than in any other market.

Heck, the Malawian tiler who did my kitchen this week arrived in a red GTI!

Yeah VW's GTi is a very good case study. Most people buy it purely on image. I bought one mostly because it was a brand new factory demo with most of the important bells for 5% less than base price. 95% of buyers load the vehicle with extras to point it exceeds the cost of Audi A4 in Medical rep spec.

GTi Mk8 already has waiting list 8 months long @ base  R670k with R150k extra. Nearly a bar for a Golf. SA gets GTi priority because 705 of the Gol sales are GTi. The only people who buy aR-line are those who can't stretch the budget to the GTi and the trendline is mostly sold to Car hire companies. Only in SA. In Europe its the complete opposite.

[MORNE]

11 minutes ago, Skott5 said:

Meh - support local - some awesome bikes coming out of Howick. 

i really dont think most of the people who bought a Canyon actually bought a MTB...

and they might be awesome and all...but they aren't exactly affordable or easy to come by either lol. And i'm sure if you got them with their backs in a corner they'll tell you that they don't (or wouldn't)  prioritise the local market either.

 

[JPLRoux]

37 minutes ago, MORNE said:

pretty obvious he's implying to be a buyer for some or one of the local distro's. 

To paraphrase another thing he said though...."E-commerce is not a big thing in SA yet" We'll I've not been waiting for the local retailers to get shimano stuff back in stock...been sourcing my own from all over the world ????.

it's a double edged sword. They better have stock or i'll find it myself lol 

Not so obvious. "able to buy some Shimano goodies for your bikes from your supplier of choice" could also mean that C$%^heat is lifting their powermoneygrab and we can all import Shimano from wherever we want. Not holding my breath! As if that wasn't happening anyway ????

Edited July 29, 2021 by Endurobro

[MORNE]

12 minutes ago, Endurobro said:

 ...we can all import Shimano from wherever we want...

☝️

????

[shaper]

33 minutes ago, Endurobro said:

Not so obvious. "able to buy some Shimano goodies for your bikes from your supplier of choice" could also mean that C$%^heat is lifting their powermoneygrab and we can all import Shimano from wherever we want. Not holding my breath! As if that wasn't happening anyway ????

Not quite yet, but perhaps is in the pipeline as is starting to happen and get a market feel in other parts of the world https://cyclingtips.com/2021/07/shimano-expands-consumer-direct-options-but-not-for-components/

[Furbz]

hold up.

i know bicycles imported as a whole are subject to customs tax.

but what happens if the bike is imported in parts - in a single shipment. In theory it is classified as bicycle parts and not a full bicycle. bicycle parts attract no customs duties.

so if canyon ship it in pieces they in theory could save the end user in RSA 15%

 

[Jehosefat]

28 minutes ago, Furbz said:

hold up.

i know bicycles imported as a whole are subject to customs tax.

but what happens if the bike is imported in parts - in a single shipment. In theory it is classified as bicycle parts and not a full bicycle. bicycle parts attract no customs duties.

so if canyon ship it in pieces they in theory could save the end user in RSA 15%

 

Practically that is kinda what happens. Depends on the customs official that your shipment ends up with I guess. I've imported 2 Canyons and didn't get charged duty on either but I know a couple of other people who did.

[DonatelloOnPinarello]

3 minutes ago, Furbz said:

hold up.

i know bicycles imported as a whole are subject to customs tax.

but what happens if the bike is imported in parts - in a single shipment. In theory it is classified as bicycle parts and not a full bicycle. bicycle parts attract no customs duties.

so if canyon ship it in pieces they in theory could save the end user in RSA 15%

 

Whole bikes from EU are duties at 3% currently - but for all practical purposes bikes made in the EU don’t exist
 

All other bikes are dutied at 15%

 

Canyon cannot sell you a whole bike as parts. They would get into serious trouble with revenue authorities if they did. 
 

They could essentially sell you a build kit, and that would be duty free (except for the saddle @ 45% and tyres I think 5%) then obviously vat on the total price. 

but then the bike must be shipped completely disassembled. No drivetrain component fitted not even the BB. Same for headset bearings, cables, steerer cannot be cut. It also has to be sold as a set of parts, and clearly invoiced as such, and billed as seperate items with each component listed individually. Absolutely no assembly of anything may be done before shipment.

[shaper]

11 minutes ago, Jehosefat said:

Practically that is kinda what happens. Depends on the customs official that your shipment ends up with I guess. I've imported 2 Canyons and didn't get charged duty on either but I know a couple of other people who did.

Had the same, Bought a Speedmax in 2019 and did not get charged duty.  Had a friend who bought a Ultimate about 6 months later and they wanted to charge duty.  I dug out my invoice and the gave him details of the code used (to see if different or would help), which he went back to Fedex (I think) and they got the code changed, so he also didn't pay duty.  As you say, I think it comes down to the courier company and officer on duty at the time.

[Iwan Kemp]

1 hour ago, Furbz said:

hold up.

i know bicycles imported as a whole are subject to customs tax.

but what happens if the bike is imported in parts - in a single shipment. In theory it is classified as bicycle parts and not a full bicycle. bicycle parts attract no customs duties.

so if canyon ship it in pieces they in theory could save the end user in RSA 15%

 

As far as I am aware it needs to be separate shipments as well. Everything to build a complete bike in one shipment = a complete bike by import definition. 

[eala]

15 hours ago, MajG said:

We are already so limited for choice here, 1 less brand option.

Canyon are cool looking bikes, pity that shipping cost was always the underlying issue as to so few were on the roads in SA.

 

I don't think Canyon will be missed .Saffas like quality even at a high price .But they know quality and the don't like warranty issues .They will pay more for a used Santa Cruz than a new Canyon 

Edited July 29, 2021 by eala

[Sprocket and Chain]

6 hours ago, DonatelloOnPinarello said:

 

Sorry to chip in here, but I have to correct both of you. As an logistics consultant and supply chain analyst, Working in the bike industry, I think I can provide some unique insight, while I having breakfast in Macau, and waiting for what will be a rather unpleasant 47 hour ordeal to get back to JHB…. But you can all thank me later when in about 3 weeks time you are again able to buy some Shimano goodies for your bikes from your supplier of choice.

Canyons business model would never work in SA, but not for any of the above reasons.

Duty on bikes in general, including Canyon is 15%, levied against the CIF (Cost/Insurance/Frieght) price of the bike. Essentially that’s the total purchase price, as delivered to a customs port in South Africa. But every single bike you buy in South Africa is subject to this duty. You just don’t realise it, because it’s already factored into the price on the sticker in the bike shop. The only other tax/add on is VAT, but again, that applies to every other bike sold in the country as well. 
 

You could argue that the shipping cost for mainstream brands is lower because they buy in bulk, but that is also not really true. Bikes are bulky, and expensive to ship. The slight saving they make by bulk shipping is completely wiped out by warehousing and distribution costs locally.

So the price you pay for a canyon consists of: CIF + 15% Duty + 15 Vat

The price of the bike you buy at the LBS consists of: CIF + 15% Duty + local wharehousing + distribution + dealer margin + 15% Vat

(depending on the sales model, there might also be a local distributor/agents margin. But in most cases this is worked into the ex factory price. At least for Spez and Trek and Scott, who all have proper brand representation locally. The others handled by “middlemen” it’s a free for all, and local distributors totally screw the entire supply chain. No wonder Spez/Trek at least are so dominant in the market. Trek is getting there, having only recently gone this route) 

But essentially the Canyon shouldn’t be costing more because of shipping or duties. Those apply equally whether you buy the bike from cyclelab or you import it directly yourself. And granted the exchange rate is reasonable on the day you buy your canyon, then your total cost would have been comparable to local prices for the other brands.
 

When I bought my spectral in 2018, it was very favourably priced, in fact it was a bargain compared to the similar options available locally at the time. Granted I took delivery of my bike in Germany and “smuggled” it back as check in baggage, so I skipped shipping and duties, but I had to pay German VAT at 19%, which I didn’t get back at the airport, because I had ridden the bike in the alps on that trip, so it was used by the time I left the EU, and my excess baggage fee to fly the bike on Air France was 150Eur or something. So all in very close the what I would have paid in VAT and Duty if I had shipped it to SA.

The problem with Canyons business model in South Africa is the South African. They failed to understand South African consumer behaviour. A DTC distribution model will not work for luxury goods in South Africa, and even more especially bikes. Whether you guys on this site believe it or not, you are the minority of the cycling consumer in South Africa. Who follow cycling religiously and know about canyon because you watch world cups and grand tours etc. The typical consumer has probably never heard of red bull tv, and might maybe watch a bit of the TdF, but only because it gets a bit of coverage on the mainstream news, and he doesn’t want to sound an absolute fool when he meets up with the rest of the C group for the Saturday club ride. South African Consumers are also extremely image conscious, what they buy is more about impressions, with very little concern for value. So there’s just no way they going to buy a Canyon, that is essentially an unknown brand here, even if it offers much better commented etc at the same price as a known local brand.

If you buy a S-works, you don’t need to explain your choice to the mates. They will all be wowed by the sticker alone. Same goes for a new pro-Caliber. Or a Spark 900 RC Team. Your mates know it’s the bees knees, and they have seen it on the floor in the shop, and know what the sticker price is. But a Canyon you would need to explain/justify, and that kinda defeats the point here. An upper middle class South African with with a decent credit score, is a sales managers wet dream. The smart marketing folk from the car industry cannot makes sense of our spending habits, same goes for consumer electronics and so on. So to imagine it would be different with cyclists was a oversight from Canyon. We are a relatively small market for Specialised for example, but we sell more s-works bikes as a percentage of all units sold than any other market. I rode SANI in 2017 with the German supply chain manager for Specialised. He was astounded at the number of epic Pro and S-works models, and also the fact that’s almost everyone taking part was on a carbon dual sus of relatively recent vintage. In Europe that simply wouldn’t be the case, at what is essentially a sportiv/social race. Europeans, although having superior spending power, are much more value conscious, and much less concerned with vanity. 

Without a retail presence with storefronts in major retail spaces, there is no way to build the brand awareness needed to become “cool” in SA. Canyons impressive trophy cabinet doesn’t matter to the target market in SA. 
 

Then there is the fact that South Africa is still not really a e-commerce nation. Covid has changed that in a big way, mainstream e-commerce has a long way to go still. I know 30somethings that still use travel agents to book their holiday flights because they are afraid to put their credit card details into a website. Last weekend at a friends place for a few beers, we decided to get a few pizzas. Next thing my mates ask if I wanna drive with him? Perplexed I ask why we don’t just use Uber eats. He says he has never used it, and doesn’t know how. This is after the lockdown of last year when for the longest time it was almost the only way to get take aways. So I say, no problem, I will order. No, he insists, he is happy to drive, and besides he likes chatting to the staff while he waits. On the way to pizza perfect, we chat, turns out he has also never used an Uber either. This is a 37 year old senior manager in a large marketing company, who also travels (locally) at least extensively. So I ask what he does if he needs a taxi, like at the airport or whatever? He uses those guys that Harrass you at the arrivals terminal. Says he trusts them more. At least he knows who his driver is. He is a cyclist, earns close to 2mil ZAR a year. And even though he isn’t the kind to buy a bike based on its “street cred” alone, he is definately not going to be buying R80k + bike, from a website, with zero personal interaction. He may be an extreme case but there’s a lot of people in the target market for top end bikes, who are just like him. We don’t shop online if we don’t have to. 
 

And then lastly, Canyons main market is the EU. As previously mentioned, Europeans are much much more value conscious than South Africans. Labour is also very expensive. So people tend to DIY a lot more wherever they can, especially with regards to hobbies. So cyclists will be a lot more willing to work on their own bikes. Have some tools, and would be more than happy to buy a bike that arrives in a box and they have to build it themselves. Here, a large amount of riders don’t even lube their own chains. Because a wash and lube costs R150.00, and a service costs R500 odd rand. In the EU, a standard service would cost 65-70 EUR. 
 

So buying a bike that’s arrives flat pack in a box when spending R80k plus, that just doesn’t appeal to a South African buyer.

 

So when you consider all that, it’s actually easy to see why it may just not be worth it for Canyon to continue to service a very a marginal market in South Africa. But it’s not because there’s a problem with the model. The model just isn’t right for our market. 
 

The one thing that I do think is wrong with Canyons business in terms of servicing ROW locations, is that they are choosing to distribute from their German HQ. They claim that the raw frames are sent to from Asia, and then finished in the German factory, before assembly and testing, but I don’t buy that, if they were doing half of the value adding they claim to be doing in Germany, they would be allowed to ship the bikes with a German country of origin stamp, and they don’t. If they could claim Germany as origin, the bikes would be able to ship to most of the world duty free, or at worst with 5% duty. However, now they are shipping from their factory in Taiwan, into Germany, where a 15-20% duty is imposed, and obviously added to the total cost, and then when you order the bikes to South Africa, or the US, and now even the UK, they are again knocked with a 15% customs duty. If they kept all the assembly in a single plant in Asia, and shipped direct from there, they would immediately lower their ROW pricing by 15-20%, and that would make them extremely competitive. 

Sorry for the long post. Hope I haven’t bored you all to death.

Excellent read and very insightful.