How Sigma Sports Dominated the Premium Cycling Market?

Rule 58 states that you should always support your local bike shop. And if you do buy cycling stuff online, you better be prepared to fit it yourself. But unfortunately in the modern digital world, the reality is far from it. Soon there will be a generational cohort of customers who will only buy online. And they expect the service to come with it.

I watched a cycling vlog the other day and they tried to explain who Sigma Sports are to viewers. After a slight hesitation they explained ‘a bike shop in London who has a good website’. Of course, a good website can help. But you can’t go from bike shop to online bike retailer with turnover of £55 million a year, just by having a good website.

Sigma don’t sell anything more magical than other bike shops. They don’t have an R&D department inventing bike 3.0. They sell bikes, tyres, tubes, wheels, cassettes, chains and so on, just like most other bike shops. So how have they managed to turn a bike shop into a national bike retailer with a gross profit of well over £10 million per year?

They know their customers

Sigma Sports know their customers. They know how much they purchase, when they purchase, what they purchase, they know what they purchase things with and when they’re likely to purchase again. They know the lifetime value of every customer to the business. They know how to interact with different types of customers to keep them engaged. They know how much to spend on a new customer for it to be profitable, because they know the value of future customers. Etc, etc.

This gives them an advantage because they know everything about their most valuable customers. It gives them the insights to give their customers what they want and the tools to go find more customers like them. They are able to personalise their communication with each segment or cohort to meet their needs directly. They give their best customers the best possible experience.

This is NOT about putting the ‘customer’ at the centre of every decision. It is about understanding who your customers are and appreciating that all customers are different. There are customers we want to focus on and others not so much. But that doesn’t mean ignoring low-value customers. There are just different ways to engage with them.

Growing a customer base

Sigma have played their hand. They focus on the premium cycling market. They provide products and services to customers who are willing to spend money on premium brands and want a high-level service.

They don’t discount as much as other retailers. And if they do it’s tactical. Why discount when your customers will pay full price? Discounts can always be personalised to your customers when they are more likely to purchase.

Sigma wouldn’t have seen a sales dip during the Wiggle closing down sale like other retailers, because even though Wiggle and Sigma were operating in the same industry, they don’t have the same customers. Ofcourse, there will be some crossovers. But Sigma’s customers will tend to purchase frequently and spend a lot. Compared to customers who took advantage of Wiggle’s closing down sale (like me) who are price conscious.

The reason Sigma has outpaced most other retailers organically is because they don’t concentrate on what they sell, they concentrate on who they sell to. The products are secondary. The customers are primary. Building a profitable customer base is the objective, they just happen to sell cycling products and services to high spending customers.

Selling premium products isn’t more profitable than selling at the lower end (think Sports Direct). Sigma is thriving because it has built a profitable customer base with lifetime value, something that Wiggle failed to do.

Focus on your most valuable customers

Not all customers are created equal. This means that all customers don’t deserve an equal share of your time and resources. This doesn’t mean you should ignore low value customers, but rather you should be aware of when you are wasting resources on customers who offer little value to your business.

I don’t want to dive into the statistics, but understanding the distribution of customer lifetime value is an important consideration. Most people think that you have a standard bell curve and your average customers are in the middle. But that simply isn’t the case when we model customer lifetime value for our clients. No matter the size or industry, the distribution always comes out looking something like this.

Now we know who our most valuable customers are, we can focus our attention on asking the right questions to understand them better.

Who are these customers? What do they purchase? What order do they purchase? How long does it take them to purchase? Where do they come from? How often do they engage? Etc, etc.

How do Sigma focus on their most important customers?

By asking these questions, Sigma understands the inherent characteristics that make up its most valuable customers.

For example, Sigma have developed a product range focused entirely around their most valuable customers. They sell the most high end bikes and put these at the forefront. The first call to action on the website currently takes you to a £12,000 bike! Granted, they do sell lower range bikes, but you have to do some digging to find them because their most valuable customers aren’t looking for them.

They’ve developed partnerships with popular and expensive cycling brands, like PNS and MAAP, who will cater to a similar audience. They’ve developed a feature called ‘Ahead of the Curve’ showing the latest (and usually expensive) bike tech to get your hands on. Another feature shows the most artisan cafes in London. They organise local social rides to cater towards a cycling community. They are giving their customers what they want. And being able to focus limited resources to serve your customers better inevitably leads to business growth.

The next stage is acquiring more customers with the same characteristics. They will know where their most valuable customers are coming from. For example, Instagram is likely to be a popular channel for high value customers as they invest their marketing budget into subsidising cycling influencers with high end bikes in exchange for valuable awareness.

All these actions come from having a holistic customer view backed up by a customer data platform. Collecting every interaction and purchase with your business lets you gain insights to create a personalised experience for all your customers, valuable or not.

Finding the right customers

The bike industry is going through a post pandemic lull, but there’s still plenty of demand out there from both new and seasoned cyclists. The challenge is being able to attract the right customers for your business. Sigma has been able to do this marvellously for years in the premium cycling space. Building a customer base that keeps coming back.

I am not affiliated with Sigma in any way. I’m using them as a case study because I’m interested in the cycling industry and its relevance to how we help clients build an online presence by focusing on their customers.