Executive Summary
The Australian market is relatively small in terms of population compared to other large markets, but is highly-lucrative in nature due to the stability of its economy, high output, and sales of over 1.2 million bikes per year. Entering the market and facing the existing competition will have a moderate-to-high level of difficulty due to the availability of other brands already filling the niche. Should Worldwide eBikes choose to follow through with expanding into the Australian market, it should focus on market penetration strategies and SEO strategies at the same time. The KPIs proposed to track the progress include Sales volumes, money spent on advertising in relation to sales volumes, returns from e-celebrity advertising, and customer product reviews, all of which could be tracked by Google Analytics and CRM modules.
Introduction
Worldwide eBikes is a well-established company trading in regular bike and electric bike platforms, accessories, and parts. Its main markets are Europe and the US, with the production of parts and critical components having been outsourced to China, in order for the brand to remain competitive. In lieu of the brand name and the overarching mission to provide high-quality bikes to customers worldwide, it has been considered to expand into Australia as part of the next big marketing push. The country is over 25 million people, with a well-established economy, infrastructure, and large distances that need to be covered on a daily basis (Fishman & Cherry 2016). The purpose of this expansion report is to evaluate the profitability of the expansion into the Australian market in the next several years.
Overall Market Description
Australia is a large yet sparsely-populated continent with a landmass the size of Europe, yet relatively little population. The majority of Australians live along the northern and eastern coasts. The total number of people living in Australia is 25 million individuals, out of which 17.75% constitute children aged between 0-14 years, 12.62% – aged 15-24 years, 41.35% – aged 25-54 years, and 28.28% – individuals aged 55 or above (Wilson 2019). With that in mind, over 50% of Australia’s entire population could be potentially interested in purchasing a means of transportation, such as an eBike, for work or entertainment purposes.
The Australian economy is large of the post-industrial westernized kind like that found in Europe and the US, meaning that the majority of the population is well-off and has a respectable purchasing power. The average household income before tax in Australia is 48,360 USD, which is also comparable to Worldwide eBikes’ high-end market (Wilson 2019). Australia sports an incredibly resilient and stable economy, which is well-protected from recessions. For the past decade, the average annual growth rate balanced between 2.5-3%, surpassing that of other giants, such as the US and the UK (Vii et al. 2018). Australia was estimated to become the world’s 13th largest economy and the 5th largest economy in the Asiatic region, despite the relatively small population. Resilience, adaptability, and low-risk environments make it an attractive market for many companies, including Worldwide eBikes.
At the same time, Australia is very peculiar in terms of its geographic positioning. It is the only nation in the Australian continent, which is separated from the rest of the world by the ocean. As such, it negates the possibility of land-based transportation and puts increasing value in naval and air deliveries for high volumes of goods. This makes large shipments of goods by land nearly impossible and forces Australia to rely on its sea and airports for handling massive quantities of imported goods. This affects the logistics of deliveries for companies like Worldwide eBikes, which has most of its production facilities located in China.
Market Opportunities
The global market of eBikes is estimated to grow to 36.5 billion dollars by 2025, and the majority of that growth is expected to come from Asia and Asia-Pacific regions, which includes Australia. According to the statistics for the past decade, the average sales of eBikes in Australia constituted between 1.2-1.4 million units, showing very stable demand for the products, parts, and accessories (“E-bike market by class” 2020). According to Bartlett and Beamish (2018), roughly 21% of all males and 12% of all females in Australia ride a bike on at least a weekly basis, which explains the stability of demand despite the various economic crises that shook the world in the past decade.
Based on the keyword analysis from keyword.io, Australians are very interested in eBikes as a method of transportation, with over 50 million search queries for the first 100 keywords a year (“Google Autocomplete” 2020). The contents of the keyword search are interesting, as they give insights into what kind of customers are seeking to purchase eBikes and assorted parts, as well as from whom. Some of the most frequent searches include “affordable ebike,” “best affordable ebike,” “cheap ebike,” “Costco ebike,” and others, which indicate that the majority of the potential market base are interested in low-price segment eBikes (“Google Autocomplete” 2020). Many searches are related to eBike parts and repair shops in one’s own vicinity, meaning that the second important criterion for the promotion of a product into the Australian region would be repairability and availability of parts to individual users and repair shops alike (“Google Autocomplete” 2020).
Based on the search keywords as well as statistical market data, the most popular eBike brands in Australia are Dyson Bikes, Enduro Bikes, Dillinger Bikes, Diamond Back Bikes, Dost, Dream, Bosh, and Add-E (“Google Autocomplete” 2020). These are the companies most commonly associated with eBike sales in Australia. The leader of sales in affordable eBikes is Dyson, which existed on the Australian market for over 30 years and possesses a solid network of suppliers, repair shops, production facilities, and a powerful brand name to match (“E-bike market by class” 2020). Other companies in the list largely address specific niches within the larger eBike community in Australia, promoting high-endurance bikes, sports eBikes, and premium-segment machines. Audi has been making a recent entry to the eBike market, but its presence is currently very small, as the massive auto-giant is testing the waters in the new market (“E-bike market by class” 2020).
Nearly all of these brands have their production values located in China, which allows the companies to achieve economies of scale by producing cheaper machines and parts while supplying the customers with high-quality goods. Such a strategy keeps the profitable margins relatively high. It is very similar to what Worldwide eBikes are currently utilizing to maintain their market share in Europe and the US, so the company will not gain an innate advantage in Australia. It is more likely that such a model would put them on the even playing ground with the rest of the competitors, and force them to use the same logistical chains as others.
The market opportunity for Worldwide eBikes and its capacity to capitalize on it in comparison to the opposition and competition faced in the industry could be evaluated using the Porter’s Five Forces model. The model analyzes the key forces that determine the chances of success or failure in a venture, which are as follows (Min et al. 2018):
- Bargaining power of buyers: Moderate-high. The Australian market of eBikes is saturated with different models that address all kinds of tastes, with Dyson covering the cheap and affordable segment, and everyone else catering to sport, durability, and premium sectors (“E-bike market by class”, 2020). They have plenty to choose from, meaning that the company would have to cater to the customers.
- Bargaining power of suppliers: Low. Worldwide eBikes produce their goods in China, which has a well-developed chain of suppliers with plenty of substitutes to choose from, which drives the prices for the final sales down due to competition. At the same time, the variety of naval and airline transportation companies make altering between suppliers of logistics services an easier task.
- Threat of substitutes: Moderate-high. eBikes have to compete in usability and convenience with conventional bikes as well as cars. The product has an advantage of speed over conventional bikes, and the economical feasibility and eco-friendliness over cars and motorcycles. The emergence of the new COVID-19 virus, however, in combination with the drop in gasoline prices made cars a suitable and safer substitute for transportation, at least in the short-term perspective (“E-bike market by class”, 2020).
- Intensity of corporate rivalry: Moderate. The Australian market is characterized by its stability and a relative moderation of corporate rivalry, with no company making any overt attempts to try and aggressively take over the market, content with their niche positions. Worldwide eBike’s appearance in the market would generate some degree of pushback from companies that lose market share (“E-bike market by class”, 2020).
- Threats of new entrants: Moderate. The production of eBikes is a relatively capital-intensive enterprise, warranting a reasonably high initial fee entry barrier. It is unlikely for newcomers without support or experience to successfully design, produce, and maintain an infrastructure necessary for eBike production, sales, and maintenance. At the same time, as demonstrated by Audi, larger companies specializing in the production of cars, motorcycles, and other means of conventional transportation have the expertise and the resources to attempt to successfully enter the market (“E-bike market by class”, 2020). The primary threat of new entrants would come from them.
The final picture for market entry would be as it is for entering any other well-established Red Sea market: it will be reasonably difficult, and well-established brands will not give up their market share easily. The primary opportunity in this scenario is in the growth of the entirety of the market, allowing for newcomers to reap potential benefits from.
Persona Research
The utilization of an eBike allows for projecting certain qualities that could be found in a customer persona, enabling the company to customize the product to appeal to certain demographics. Customer persona research is the most important parameter behind target marketing, as Worldwide eBikes needs to know their customers prior to engaging them. Establishing a well-developed customer persona offers three key advantages to any venture, which are as follows (Micheaux & Bosio, 2019):
- Knowing the customer better. It is impossible to market a product without thoroughly learning about the individual’s habits, desires, and problems that the good or a service is supposed to solve (Micheaux & Bosio, 2019). Various psychological and social parameters that influence one’s purchasing decisions are important too. By investing in understanding their customers, Worldwide eBikes would learn what the customers want from their business, and how could their need be used to guide the company’s marketing campaign.
- Better marketing segmentation. Worldwide eBikes offers more than one model of eBikes, and knowing what drives different kinds of people in the Australian market would allow the company to capitalize on these differences more effectively, by shifting between messages that appeal to different audiences (Micheaux & Bosio, 2019). For example, male and female populations have different requirements towards their vehicles in terms of technical complexity, color, functionality, and price ranges.
- Future product development. In-depth analysis of customer personas allows companies like Worldwide eBikes discover the potential needs and pain points of customers that they are not readily aware of on their own (Micheaux & Bosio, 2019). By finding ways of capitalization on these issues and developing products to answer them in advance, the company in question can gain the advantage of momentum over its competition.
Based on these ideas, it becomes obvious that Worldwide eBikes needs to construct a customer persona based on digital information about their potential customers, approximations from other regions, as well as socio-economic and legal realities of the Australian market.
The first trait of the customer portrait would be their age. Traveling on an electric bike requires a certain degree of physical aptitude, a high sense of balance to not fall over, and the ability to react and make decisions on the fly. Therefore, eBikes are traditionally geared towards young individuals who can utilize the bikes often and to their maximum potential. The majority of individuals capable of using the product for entertainment and transportation purposes would be between 14 and 45 years of age. The lower margin of the age range is justified by the Australian law, which states that individuals aged 14 or higher can utilize an eBike for travelling purposes (Micheaux & Bosio, 2019).
At the same time, they do not need a license to be operated and the cheapest models can be bought for under 1,000 dollars, making the product even more available to the young (Micheaux & Bosio, 2019). The higher margin is justified by the physical capacity to ride such a bike – although the maximum speed of the vehicle by law does not exceed 27 kilometers per hour, the physical strain and the threat of injury make it less likely to be purchased by individuals over the age of 45, with sales dropping significantly by age category the higher it goes. Nevertheless, the safety and relative cheapness of the product in comparison to the motorcycle (the direct substitute threat) would, in theory, allow the product to be advertised and potentially sold to nearly half of the Australian’s population.
Nevertheless, this profile would be incomplete without additional research dedicated to constructing a more accurate profile. The first thing that should be researched is the male-to-female ratio of current eBike users. Previous researches suggest that males are the predominant demographic, being disproportionately represented in nearly every aspect of locomotion industry, ranging from cars to bikes, to motorcycles, to eBikes and so forth(Vij et al. 2018). Such a trend indicates to a strong untapped potential in the female demographic in Australia, which Worldwide eBikes could use to its advantage.
Another important aspect that should be researched in the scope of constructing a customer profile is the amount of money they would be willing to spend on a new bike, as well as various reasons they’d consider before changing from one product to another. Such data would allow Worldwide eBikes to provide a product that adheres to many of these qualities while sporting a preferential price tag, which would allow winning the initial customers during the market penetration part of the strategy.
Finally, the topic of eco-friendliness would need to be researched as part of the customer portrait. Considering the age range of the potential customers, the topic of the environment would be important for them, to some degree (Vij et al. 2018). Research shows that modern generations are much more responsive to ecological causes, meaning that Worldwide eBikes could capitalize on the eco-friendliness of the electric bike to expand their horizons and claim additional market share. The traits mentioned above would provide the backbone for a customer persona, with additional criteria added to complete the picture as needed.
Marketing for Fast Impact
In order to pursue the market share in Australia, the marketing campaign of Worldwide eBikes needs to be aggressive and secure short-term gains, which would then be capitalized upon to build up the success in the mid-to-long-term scenario. The proposed strategies, both of which could be pursued at the same time, are the market penetration strategy, and the Search Engine Optimization strategy (Bartlett and Beamish, 2018).
The market penetration strategy involves providing goods and services at a price lower than the market average in order to attract attention and gather an initial following willing to try out these products (Bartlett and Beamish, 2018). Worldwide eBikes would need to be featured in all major eBike shops to attract physical attention, and the company should use traditional and digital marketing practices to attract people interested in the subject. Although such a strategy will not gather much in terms of revenues, as the company would willingly cut its revenues for the sake of greater sales volumes, the strategy will help acquire market share and establish a brand on Australian soil, after which the company would be allowed to switch to more conventional strategies.
The second strategy to be used in combination with the market penetration strategy is the search engine optimization method. It will involve the company’s e-shop being featured in the top searches on various online aggregators, such as Google, Bing, Yahoo, and others, when answering a search query about e-bikes from Australia (Bartlett and Beamish 2018). In addition, the company must invest in the purchasing of customer data from social platforms for the purposes of constructing a better customer persona. It can also be used for target marketing using online ads and banners. All of these methods would be aimed at increasing brand awareness in customers while persuading them to check out the product next time they’re visiting an eBike shop. Online communities could be used to spread the word-of-mouth, while famous Australian bloggers, youtubers, and e-celebrities could be supplied the product for free to create a physical presence on the market (Bartlett and Beamish, 2018).
Fiscal Oversight
The strategies proposed above would require specific KPIs to establish appropriate fiscal oversight and analyze the effectiveness of the approach. The proposed KPIs necessary to understand which strategies are valid and which are to be modified or even discontinued are as follows (Grave & Greff, 2018):
- Sales volumes: The most important KPI out of the four, its fluctuations will be used to see how well do the chosen market penetration strategies work, and how well do they return the investment (Grave & Greff, 2018). The results would be compared to previous successful attempts at entering the market, for the sake of reference.
- The amount of money spent on advertising. These include the traditional advertising channels as well as online expenditures on target marketing and customer data. During the course of the campaign, purposeful increases and decreases in funding would allow establishing the rate at which individual channels influence marketing success (Grave & Greff, 2018).
- The effectiveness of celebrity advertising. Bloggers, youtubers, and other media personalities could offer their viewers special codes for discounts on their channels. The number of people using these codes would effectively help track and justify their involvement in the marketing campaign (Grave & Greff, 2018).
- Customer reviews on offered products. With the increased exposure would come customer scrutiny. These ratings will help understand not only the subjective quality of the product in the eyes of the public but also the quality of service, delivery, and other parameters (Grave & Greff, 2018).
These KPIs can be effectively tracked and reported using Google Analytics, and would allow to connect the sales KPIs with the quality of the product as well as the expenditures made on advertising and promotion. Based on sales numbers and their increase in proportion to advertising, certain channels will be modified or even removed from the lot, branded as inefficient.
References
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