Demand for ‘certified used’ bikes is so strong, some sell above new sticker price

Like so many other industries, the coronavirus pandemic has changed and the bicycle business is in a big flip. The pandemic disrupted the bicycle industry’s supply chains while also pushing demand to unprecedented heights as people sought alternatives to public transportation.

New bicycles were extremely scarce – but the market for used bicycles is on fire. A big player in the used market is The Pro’s Closet in Boulder, Colorado. It has a slightly different tactic that is common in the auto industry but rare in the cycling world: certified used bikes.

The company operates locally but has a primarily online presence, selling avid bikes (typically over $ 1,000) nationally – having originally built its business on eBay. Unlike bike stores that mainly sell new goods, The Pro’s Closet’s business model is tailored to the current coronavirus moment and can capitalize on demand thanks to its unique and relatively untapped garage supply chain across the country.

“We use every garage to buy bikes from people who have a bike in the garage or a bike they don’t use,” Nick Martin, founder and CEO of the company, told Yahoo Finance. “We are in a unique position to have our own supply chain and provide bicycles to meet demand.”

Cyclists wear face masks while waiting in line at a bike shop during the coronavirus pandemic in New York City on April 25, 2020. (Photo by Jamie McCarthy / Getty Images)

Demand is still high even at the end of summer. In April, US revenue increased 75% ($ 1 billion) year over year to $ 7 billion. At the same time, imports fell dramatically and rose by only 3% by June, according to the Bicycle Retailer magazine. The bike shops were constantly struggling to maintain inventory levels due to supply chain difficulties.

This year, The Pro’s Closet’s sales are up 130%, and the company says it sells through its inventory every 13 days.

“We believe that if we could process twice as many bicycles, we could sell twice as many,” said Martin.

Thanks to the pandemic and the huge increase in sales, The Pro’s Closet raised another $ 12 million on a total investment of $ 27 million. Money, said Martin, is the reason why no one has done this yet. It is capital intensive to ship, sell, and inspect every bike that comes through the ground. And it takes a lot of expertise to make sure that every bike is certified as models vary significantly between brands and years.

The story goes on

The used bicycle market is traditionally very decentralized

Traditionally, used bicycles have been sold through classifieds, craigslist, newsletters, word of mouth, mail order bicycle stores (essentially locally certified), and other local means that weren’t particularly scalable. During the pandemic, other bike dealers also jumped into the used game to make up for the loss of new inventory.

As an individual buying and selling outside of a business context, things have not necessarily been trustworthy or easy over the years.

Shipping a bike to another city or state is unwieldy and expensive, so most bike owners limit themselves to local rather than national markets when looking to sell. And for people who do transactions, issues of legitimacy and security are often an issue.

HIGHLANDS RANCH, COLORADO - MAY 31: People line up outside for their turn to get into the Elevation Cycles bike store on May 31, 2020 in Highlands Ranch, Colorado.  (Photo by RJ Sangosti / MediaNews Group / The Denver Post via Getty Images)

People are lining up outside for their turn to set foot at the Elevation Cycles bike shop on May 31, 2020 in Highlands Ranch, Colorado. (Photo by RJ Sangosti / MediaNews Group / The Denver Post via Getty Images)

Martin says the company’s goal is to “legitimize” the used market as certification gives people security – and a convenient and scalable way for people to dispose of their bikes would add to the company’s inventory.

The company also works with local bike stores to set up trade-in programs and expand the national pool of bikes it can sell – working with trusted and returning partners.

There is no longer any depreciation – but a change is coming

Since the pandemic began, the average selling price for inventory at The Pro’s Closet has increased by over 30% due to limited bike availability across the country and pent-up demand, Travis Erwin, chief revenue officer of The Pro’s Closet, told Yahoo Finance.

In essence, the “drought” in new inventory has driven prices higher in the much cheaper secondary market.

This Tuesday, June 9, 2020, Harvey Curtis (left) discusses repair plans with customer Jack Matheson outside Sidecountry Sports, a bike shop in Rockland, Maine.  Matheson looks forward to getting his 40-year-old Raleigh back on the road.  (AP Photo / Robert F. Bukaty)

This Tuesday, June 9, 2020, Harvey Curtis (left) discusses repair plans with customer Jack Matheson outside Sidecountry Sports, a bike shop in Rockland, Maine. Matheson looks forward to getting his 40-year-old Raleigh back on the road. (AP Photo / Robert F. Bukaty)

Indeed, Erwin said, “The demand is so strong that certain used models are being sold above the original MSRP.”

“People want to get out there and go by all means, which removes the depreciation and creates a sellers market,” he said.

The company recognizes that all of this is likely to be temporary, but hopes the bike boom will continue to some extent.

“I think we will see a momentum in the opposite direction in the near future,” said Erwin. “Fair weather riders will most likely switch to seasonal sports, just as inventory made in Asia will reach our ports. A massive market saturation could become apparent. “

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Ethan Wolff-Mann is a writer at Yahoo Finance, focusing on consumer affairs, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.

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