For most of four decades beginning in the mid-1950s, Hero Cycles was synonymous with the humble, black iron rod bicycle, which once dominated most small town roads of the country as a utility vehicle. Much has changed since then. With the rise in disposable incomes, changing lifestyles in urban India and the growing aspiration levels in rural India, the relevance of bicycles has diminished to a great level.
For the record, the total market size of bikes in India is 15.5 million units of which the organised sector holds over 80 per cent of share. Currently, the industry is growing at just about 5-7 per cent. One of the main reasons behind such a sluggish growth rate is the unavailability of cycling infrastructure.
Speaking to afaqs! about the changing consumer preferences and how Hero Cycles has transformed its offerings, GD Kapoor, director, marketing says while the bicycle has been considered as a "poor man's vehicle" for decades, the drift towards fancy bikes started in 2005.
"Many cycle brands have entered India in the last eight years, they have not been able to register huge numbers yet. But what they have done is revolutionised the bicycle category. Bicycling is now called biking, it is a medium of flamboyance and keeping yourself fit and healthy. Having said this, it's still a very metro phenomenon, but this category has been able to carve out a very special niche for itself," he explains.
The industry size of all bikes in India priced upwards of Rs 15,000 will be approximately 150,000 units. It's still a very small segment, but increasing at a compounded annual growth rate (CAGR) of 40 per cent since 2010. This community is tightly knit where bikers form groups and ride together for hundreds of kilometres at a stretch. These cycling groups are spreading across the country and fuelling a strong growth for this category. Urban Trail category is currently offering products for kids in the price range of Rs 4,000-8,000 and adults (Rs 10,000-35,000).
No spoke in this wheel
The company claims to have received encouraging consumer response and projected sales for Urban Trail is 35,000 units by the end of 2013-14. Kapoor is aware of the black cycle manufacturer tag attached to the company and says that it is trying to correct this image by communicating on all media. Their last two TVCs are targeted at the youth who are present on Facebook, Twitter, Interest and YouTube.
With the intense competition from foreign players, pricing continues to be a major driver for consumers, at least the first timers, to make a choice. Hero Cycles has started manufacturing aluminium frames out of its new factory in Ghaziabad. It helps the company avoid the high import duties if they had to import these.
"All the international brands available in India are actually respected around the globe. However, except for the frame, there is very little that these brands manufacture internally. The company is on the final leg of acquiring a German company which will help us set up processes to ensure international quality output," explains Kapoor.
For product differentiation, the company has a dedicated team, which benchmarks the competitors' products and tries to bring uniqueness in every bike through frame design, aesthetics and colour. Being the oldest in the business, Hero Cycles has the largest network of 2,300 dealers. The company claims to offer all after sales support through dealers according to the Urban Trail website, the special segment bikes are available in 24 dealer stores in Delhi itself.
"We are the only manufacturer that has a toll free customer care cell, managing all direct calls ensuring that every call, query or complaint that we receive is captured and actioned on within 24 hours," asserts Kapoor. Hero Cycles, as a unit, started operating in 1956 in Ludhiana Punjab. It is among the oldest companies of the Indian bicycle market. In 1984, the company joined Japan's Hero Group to create Hero Honda Motors. It competes with Murugappa Group's TI Cycles (which offers premium made-in-India bicycle brands Montra, BSA, Hercules) and Firefox.
Understand the consumer first
The homegrown companies, he says, have been struggling to cater to the 'special segment' of the bicycle. "I believe Hero Cycles have not done a 'satisfactory' job in this segment. On the other hand, TI cycles have done relatively better work as they have a better understanding of the lifestyle consumers," he says adding that there are companies like Firefox and Giant which are selling international-standard bikes in the country.
On a policy level, Sengupta believes that the Narendra Modi-led government might just give a much-needed push to the bicycle industry in India. "I believe that the day this sector will open to 100 per cent FDI, almost all global players will set foot in the country considering the growing market here. It is an alarm bell for homegrown brands which may very well be wiped out by such intense competition," he warns.
Sengupta complains that the domestic cycle manufacturers just do not understand the consumer in this segment. "Their campaigns just don't convey the right message," he points out. He believes that this segment will flourish due to increase in the earning capacity of the urban consumers, health consciousness and "high-end bicycles" becoming a lifestyle statement. There are many overweight people who have started cycling. "So, this trend is very urban and is going to stay. For brands it is a great opportunity to leverage only if they do it right," he opines. Sengupta, by the way, owns and rides a Trek 6000 mountain bike, a Dahon folding bike and a Scattante racing bike.