Thorsten Heckrath-Rose appears relaxed and a little shirt-sleeved for the video interview. He is one of three managing directors of the bicycle manufacturer and mail order company Rose Bikes from Bocholt. The family entrepreneur is sitting in a t-shirt in an unadorned room, the window in the background is wide open, and a racing bike is parked in the corner. A smile, a friendly greeting, a short chat. With the first question, the eyes are fully focused on the screen.
manager magazin: Mr. Heckrath-Rose, 2022 is a crisis year for many companies – lockdowns, supply chain problems, lack of parts, rising raw material costs. How much does it bother Rose Bikes?
Thorsten Heckrath-Rose: We had a good summer. While the market is stagnating, we will have produced and sold 40 to 50 percent more bicycles this year than in the previous fiscal year. But of course the crisis hits us too. We clearly felt the dependence on Asia. We couldn’t complete production series even though we had a lot of goods in stock. One or two components were often missing.
Can you quantify how many bikes you couldn’t build given the problems?
We have 60,000 bikes that are almost ready. But we can only complete about a quarter of it. The rest are missing parts – that’s our big problem right now.
The bicycle manufacturer and mail order company Rose Bikes is based in Bocholt (NRW). The family company employs around 480 people. Whether racing bike, mountain bike, trekking bike or e-bike – Rose designs its bikes in Germany and assembles them by hand in Bocholt. Most of the frames and components come from Asia. The direct provider sells its bicycles via the Internet, five stores (Bocholt, Berlin, Munich, Cologne, Posthausen) in Germany and two more in Switzerland. In addition, there are less expensive shop-in-shop areas in individual German cities. Rose Bikes also sells bicycle parts, accessories and clothing on the Internet, both from its own brands and from other brands.
Erwin Rose (79), daughter Stefanie (49) and husband Thorsten Heckrath-Rose (49) run the business on an equal footing. Founded as a small bicycle shop in 1907 by Heinrich Rose, Heinrich junior took over the business in 1932, selling bicycles in the summer and sewing machines in the winter. Erwin Rose runs the company from the early 1980s, imports Japanese bikes as one of the first Europeans and builds up the mail order business. The first Rose mail-order catalog was published in three languages in 1982 and grew to 1,000 pages and 600,000 copies. Rose Bikes continues to grow, in 1994 Erwin introduces the Canadian brand “Red Bull” in Germany. From 2011, the family will be marketing wheels under its own brand Rose and assembling them in Bocholt. The catalog is discontinued in 2017, and Rose Bikes generates 80 percent of its sales online.
What are you doing about it?
We have to react flexibly and constantly learn. We have reduced production runs and often ended up building with what is available. In consultation with customers, we have also frequently exchanged individual parts in order to be able to deliver more quickly. This crisis requires an enormous amount of exchange and communication – but fortunately everyone is pulling along, even the competition.
What do you mean?
We set up an exchange market with other bike manufacturers, so we sent our lists of needs back and forth. This has allowed us to produce hundreds of wheels faster. These are not big numbers, but in a situation like this every drop helps, figuratively speaking. At the same time, it was nice to see that the manufacturers are helping each other in the crisis despite a competitive situation.
“During the crisis, we set up a swap meet with other bike manufacturers”
That sounds unusual. Has this ever happened?
No, not to my knowledge. However, I believe that this is the only way and that the brands should work together more on other issues as well, because then everyone could win. Sure, you have to stay clean in terms of antitrust law and observe the rules. But when it comes to helping each other out with goods, that’s a good and customer-centric approach.
Rose has the frames manufactured in Asia, many parts and components come from China or Taiwan. Taiwan’s political future remains uncertain, as do supply chains given China’s zero-Covid doctrine. Is it a measure to produce more in Europe again?
We are indeed thinking very intensively about the topic of nearshoring. The Taiwan-China conflict, for example, poses a risk for our industry. Many manufacturers who are active in China in the bike industry, especially in the performance area, are owned by Taiwanese. So they are extremely intertwined. We hope that the Chinese will realize that an escalating conflict would primarily harm their own interests.
“We are thinking intensively about nearshoring”
Does Rose Bikes already have locations in Europe in mind for frame production?
A cluster of manufacturing companies for aluminum and carbon bicycle frames is currently forming in Portugal. But in terms of capacity and quality, they are not yet ready for us to be happy. We’re hoping for a bigger hit in the medium term.
What could such a larger litter look like?
Frames are currently made of aluminum and carbon. That costs a lot of energy, and these materials are also difficult to recycle. That is why we are working with universities and technology partners to find other solutions.
Many high-quality bicycle components are manufactured in Asia; Shimano and Sram, for example, have their products manufactured there. You probably won’t be able to get past them in the medium term, right?
Yes, we are dependent on these suppliers for many parts. They won’t be easy to replace either. Shimano is now more broadly based and is therefore no longer so dependent on China. Brakes, for example, are manufactured by Shimano in large numbers in Malaysia. When the corona lockdown hit there, there were hardly any brakes available from Shimano worldwide. All bicycle builders therefore hope that component manufacturers will spread their production facilities even further and thus reduce the risk.
“Meanwhile, more than half of the turnover comes from bicycles”
Rose had big plans for the new fiscal year, which ends at the end of October: One goal was a turnover of 190 million euros
, around 28 percent more than in the previous fiscal year. Can you create this brand?
We won’t quite make it, precisely because we couldn’t produce many bikes due to the poor availability of goods. Nevertheless we are very satisfied. Despite all the adversities, we have sold significantly more bikes and now generate more than half of our total sales from bicycles. This share should rise to 70 to 75 percent. At the same time, we are concentrating on further developing our own range of clothing and accessories.
Rose Bikes invests heavily in its brand awareness: the company took Sports stars like goalkeeper Manuel Neuer for 18 months in summer 2020
, tennis ace Angelique Kerber, NHL ice hockey pro Leon Draisaitl under contract. Was it worth it?
The campaigns with professional athletes or football clubs have undoubtedly increased visibility in the market, but they are only part of it. You mustn’t neglect your online marketing homework, and store infrastructure also plays a big role. A shop with test bikes in a big city always helps to raise awareness. The bottom line is that it is the sum of the measures that pays off. We see that basically more people are looking for us and buying, the sales figures underline that.
The larger competitor Canyon sponsors professional racing cyclists directly – for example from the Movistar team or triathlete Jan Frodeno. Is this also an option for Rose? Or even a participation in a racing team in the distant future?
Whether teams or individuals, it has to fit. We are involved with professional cycling, but at the moment it would not contribute to our brand, especially since we are not represented widely enough internationally. Of course, we’re also about athletes, but we want to remain approachable – also for those who might just be getting into sporty cycling.
“We want to remain independent as a brand and as a family business”
Investors are increasingly discovering the bicycle business for themselves. Canyon sold the majority of the company to two investors for a good 400 million euros in 2021. According to our information, Rose Bikes was also considering bringing investors on board. The idea was discarded, why?
The considerations were not that specific. Sure, we exchange ideas in the network, of course consultants call us and we get offers. But we never really looked into it. We want to remain independent as a brand and as a family business. We reinvest a large part of our profits and can therefore make many investments ourselves. We are currently doing very well, also because local banks are giving us strong support. So we see no need for it.
more on the subject
So KKR or other financial investors don’t even need to knock?
Well, everyone gets a coffee from us (laughs), and we can talk about the market, but that’s all. I see with almost all competitors who have taken this step that a lot was invested at the beginning and sometimes money wasted senselessly. At some point, the spirit of the brand is lost.
One trend in the bicycle industry is electrification. You had big plans for 2022, the share of sales with e-bikes should increase to 25 percent. Did you do it?
Yes, we’re on the right track, we’re getting very close to 25 percent. In a good two years, e-bikes should account for up to half of sales.
For a long time it was a unique selling point of Rose that customers could configure their bikes relatively freely. You could choose between individual rims, tires, saddles or gears. Rose has done away with the tool and now offers fixed-configuration bikes, almost off-the-shelf. Why?
Bikes off the shelf? That’s not fair. We have very good product managers and engineers at the start who develop the bikes perfectly with the customer’s needs in mind. We build the best bikes at the best price. With the pre-configured bikes we cover the vast majority of customers. 90 percent are overwhelmed with the free configuration.
“Broad-level customizing is a real efficiency killer”
Nevertheless, you have given up an important unique selling proposition.
That wasn’t easy for us. It was economically the only sensible decision. Customizing on a broad level is a real efficiency killer. You can hardly get a grip on the stocks. If you really want to grow, you have to reduce complexity. In any case, production runs much faster this way, and the quality is much more constant because fewer work steps are repeated more often. And it’s also an answer to a very different problem…
Which?
We lack the skilled workers. For customizing, I need well-trained two-wheeler mechatronics technicians. However, we are currently not getting the number we want, so we have to start thinking and producing in carefully preconfigured series. In doing so, we can also introduce lateral entrants to production better. The newcomers learn task package A today, next week task package B and thus go through the entire production process, which is divided into around 60 steps. This is the best way for us to introduce them to the work.
“We have stable margins in the single digits, we can grow well”
In two pandemic years, Rose has increased the price of some bikes with identical equipment by almost 40 percent…
40 percent in two years, I can’t confirm that, you would have to check that on a case-by-case basis. We try to reflect our costs, which have increased massively in purchasing and transport, for example, in the price. We cannot ignore wage developments either. We raise prices where necessary. But our goal is to deliver the best bikes at the best price.
Analysts assume that direct suppliers like Rose were able to increase their margins from a mid-single-digit range to 10 to 20 percent during the Corona period. does that work?
No – we are far from there. We have stable margins in the single digits and we can grow well. In the recent past, however, we also had to contend with cost items that we did not have before. And by the way: During the pandemic, we didn’t get a dime in grants. We had to close the shops, install air filters, buy masks, laptops and much more finance.
more on the subject
The average price for a bicycle has tripled to around 1300 euros in the last three years – also due to the e-bike boom and premium strategies. Experts expect bicycle sales to fall in 2023, but sales to increase due to high-margin e-bikes and premium strategies. Is Rose also banking on this development?
I don’t expect quality bike prices to go down. The premium segment is sure to continue to grow and it will be the winner. I also believe that omni-channel providers who, like us, are close to the customer will do good business.
“The premium segment will continue to grow and it will be the winner”
70 to 80 percent of bicycles in Germany are bought at stationary stores. If you spend a lot of money on a bike, you want to test it. With five stores in Germany, which also do not have all models, Rose is in a weak position. Will that change?
We want to be available for more customers in the near future. There will be more stores in Germany, but the high quality with regard to advice and service must be right. Otherwise, the shop-in-shop partners such as Globetrotter, Borgmann, L&T, Breuninger or Reischmann are equally competent contacts. The customer may be able to test fewer bikes, but will receive the same advice.
So how many new stores will there be in 2023?
We want to expand Berlin, we’re too small, that’s project number one. And then we want to set up a completely new store in a German city with over a million inhabitants.
In Hamburg?
Yes (laughs), that’s quite possible. In any case, we are already in the process of evaluating possible locations.
Finding new mechanics, creating new service points – where does Rose Bikes see the biggest challenge in the coming year?
We first have to stabilize the supply chains and reduce the imbalances that have arisen along the entire chain to such an extent that we can get back into calmer waters. We will focus on consolidating processes and procedures in order to be able to breathe deeply again.