2017 has been a year to remember at Orbea. Our prevision for growth at the start of the year was 8%, and we ended the year with 20% greater turnover than in 2016. Economic growth figures are important in and of themselves, but above all for what they represent.
They mean that you, our customers, have received our road, mountain and e-bikes …and the added value of our MyO customization option – one of a kind on the market – with enthusiasm.
…It also means that you, our dealers, trust in us and contribute your knowledge so that together we can continue to do things right, providing our customers with the bicycles and solutions they need at all times.
We spoke with Jon Fernández, General Director of Orbea, and with Gonzalo García de Salazar, Global Sales Manager, about the Orbea of today, and especially of the future.
Customization is what makes the difference
What are the keys to the growth we have achieved? Especially keeping in mind that we are in a market context that is stagnant or barely growing…
Gonzalo: Clearly, Orbea’s value proposition, the customization of our bicycles, is being received very favorably by out customers. It is something unique that does not exist in this manner in any other brand. What the large brands do is generate a product and look for a company to manufacture it. We don’t work that way; we manufacture it ourselves. And that is the big difference. If there is a change in color, because a new group of consumers want it that way, a new component, etc., we have a much greater capacity for reaction as compared to other brands. This gives us an important strategic advantage.
In which markets are we growing the most?
Jon: We’re growing primarily in Europe and the United States. We’re also growing in the rest of the world, but the growth lever is in these markets, in everything that is very closely connected to the ‘Closer To You’ concept….This strategy of being close to our customers is what enables us to offer a business model based on customization and a value proposal based on profitability through rotation. Here is where we are leveraging our growth.
“The customization of our bicycles is being received very favorably by out customers. It is something unique that does not exist in this manner in any other brand”.
To what extent is the explosion of the e-bike market helping us grow?
Gonzalo: Other brands are compensating for their drops in conventional bikes with the sales of e-bikes. At Orbea, we are growing in both categories, in conventional bikes, through the great acceptance our customization option is having, and in e-bikes, where our increases are spectacular. We are growing in the top of the range as the result of our brand value proposal, but we are also growing in terms of units.
Jon: Like Gonzalo says, both the high-end bikes – in all their categories: road, MTB, etc. – and e-bikes are two important growth levers at Orbea. Our average prices are increasing noticeably… If we break down the 18% accumulated growth we had in September, 10% corresponds to price increases – units with greater value – and 8% to an increase in units.
Gonzalo: We are very happy because this growth means that Orbea’s sales system is proving successful: we’re offering something that the others do not have and that the consumer wants, and that is what is leading to our double-digit growth, also in the Spanish market. In Spain, we are growing by around 10%, something very difficult when you’re already established in a market you dominate, but on an international level, the growth is far greater.
Keys for growth: foresight and provision
Were you surprised by this growth and such an important demand for our bicycles by our customers?
Jon: In our business model, in order to be able to grow, you have to have planned it beforehand, otherwise it is impossible. Keep in mind that we have a lead time (supplier delivery time) of around 5-6 months and if you are not capable of anticipating, planning and scheduling this growth, you don’t have the parts you need to build the product. Any growth planning has its risks and its point of uncertainty, but I would say that we expected this to happen. Otherwise, we wouldn’t have stockpiled the components the way we did.
Gonzalo: I completely agree with Jon. As a matter of fact, we have grown by 20% because we have “only” planned to grow by this percentage.
The question then becomes: “Could we have grown by more than 20%?”
Gonzalo: Probably so. In fact, there is a greater demand from customers that would have made it possible to have grown more than 20%, but it would have been completely irrational and irresponsible. Not only would we have needed to but a greater percentage of components, it would have affected the quality of our service. We wouldn't have been able to generate and produce the bicycles with the high quality standards that Orbea currently offers with growth levels greater than 20%.
“There is a greater demand from customers that would have made it possible to have grown more than 20%, but we understand that growth must be sustainable over time”
Jon: Besides, we understand that growth must be sustainable over time. Could we have sold 30% more in 2017? Probably so. Would we have been capable of delivering 30% more? Maybe. It is not just a matter of manufacturing capacity, however. The organizations, the organizational structures, have to assimilate the growth. It is necessary to be able to dimension ourselves numerically and functionally to the new growth scenarios. You can’t choke the organization. An organization that is used to vegetative growth cannot be suddenly told that it will have a 30% growth in one or two years. Because it would probably bill them, but it wouldn’t be ready to gradually take on 15% growth.
Sustained growth to reach an Orbea worth €150 million
Therefore, if I understand correctly, Orbea’s goal would be to prepare itself to take on these levels of growth in a sustained manner over time.
Jon: We believe that it is healthier to do it like this: to plan the organization so that it can assimilate growths, like I said, of 15% annually over 10 years. How do we achieve this? By integrating this growth in the definition of our processes, reconsidering the functions and roles we each have in the organization…. Culturally, it is also necessary to adapt, to go from a €60-70 million company to a €150 million company, which is our turnover target for Orbea in the future.
This can be done by subcontracting manufacturing, or gradually, integrating the growth into the culture of the organization. This is what we’re currently working on, on being able to have an organization that stably invoices double what we have been invoicing up until two years ago.”
Gonzalo: We’re dreaming about an Orbea worth €150 million, to use the figure Jon mentions. Why? Some time ago we commented that we were too small to fight with the big guys and too big to fight with the little guys… our size was good, but uncomfortable. Around two years ago, we set up a project for the next few years in which we set that goal of a €150 million Orbea. That size would allow us, on a scale economy, to continue to be ourselves, and that is very important to us: not to lose that ‘soul’ of the company. But it would also give us enough size to be able to compete complex-free with any brand in the market.
Dealers: working together to grow together
What role have Orbea’s dealers played in this growth?
Jon: They’ve been essential. For us, it is very important to share this growth with them and continue to grow together in a sustainable, controlled and planned manner. Of course, we have many channels in which we actively listen to find out the customers’ tastes and market trends, but we place a lot of value on the information dealers provides us when it comes to knowing consumer trends. The knowledge that dealers provide us helps us in a very important way when it comes to better anticipating what we’re going to offer the market.
“This growth is a great success that belongs to everyone: we place a lot of value on the information dealers provides us when it comes to knowing consumer trends”
Gonzalo: This growth is a great success that belongs to everyone: it means that we have put the right product in the market and the role of the dealer is key in this process. Our value proposal to the dealer is closely based on product rotation. Therefore, as we continue to work together, and more and more intensely, we will be able to offer them better service: if we know beforehand the consumer trends that the dealer observes among its customers, we can plan better, provision ourselves in the right quantities and equip ourselves with enough capacity to give the end user the best experience possible. In the end, Orbea and the dealer are partners and we work together to find out what the consumers need and to meet their demand.
The Orbea (R)Evolution project
What actions do we have planned to make the most of this growth in demand for our bicycles by the market? I know our painting zone is now ready, which will enable us to increase our production capacity..
Jon: The new painting zone forms part of the Orbea (R)Evolution project, thanks to which we are going to be precisely more efficient, innovative and competitive. We are working to improve in the area of manufacturing capacities, but as we mentioned earlier, and while there is no doubt that it is important, it’s not about just this. It is also necessary to work on the manufacturing processes, on the size of the different areas in the company…we need to create ecosystems that go beyond ourselves, in other words, we have to be able to establish relations with others that enable us to grow more comfortably. It is not enough to just have a painting facility that will let me paint more, we need to be more efficient in the processes, to have enough human resources necessary to give sense to this process, to have good traveling companions in the industry, to generate the right relationships do that we are all aiming for the same goal…it’s all of this. It’s not just about laying two million euros out on the table for a new painting facility. That’s the so-called “easy” part.
Gonzalo: I think it is very important to stress that most of the growth that we anticipate for the next few years is based on manufacturing in Mallabia, with everything that means in terms of investment and job creation. The new painting facility and the new assembly lines that are the next big step in the Orbea (R)Evolution project are what are going to enable us to take the big step forward that we were talking about before.