Business case: Rollin’ with the Danes

In a city of million bicycles, the bike culture has the potential to be big business.

Photo: Jussi Puikkonen

Annukka Oksanen, 09.10.2014

Long forms

Annukka Oksanen talks to Kenneth Bødiker and Christian Linde about how they jumped in with both wheels. 

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The light turns green at the Queen Louise Bridge. The column of bikes surges forward. A woman in high heels is riding her bike while talking on the phone. A businessman has placed rubber bands around his pants legs to keep them from getting stuck in the spokes. A kindergarden teacher is pushing four of her little students to the park in a trailer attached to the front of her bike. A dog peeks out from another three-wheeled cart. And of course the mail is delivered by bike.

After all, this is Copenhagen.

Around 52 per cent of Copenhagen residents ride their bikes to work or school every day, and many of them cross the Queen Louise Bridge, which connects Nørrebro and Copenhagen’s other heavily populated northwestern neighbourhoods to the city centre. Over 40,000 riders cross the bridge every day. During rush-hours, it’s such an impressive sight that tourists gather to watch the mad rush.

In many countries traffic is eased by synchronising traffic lights into waves of green lights. In Copenhagen, bike riders going 20 kph can ride green waves in special express bike lanes that run through the city.

You might catch a Danish government minister riding his or her bike to an audience with Queen Margrethe. MPs ride bikes. Business leaders choose bikes over taxis, which are usually slower. Crown Princess Mary bikes to a trendy Copenhagen restaurant to meet a friend. Crown Prince Frederik takes his kids to nursery school in a cargo bike. And why wouldn’t the heir to the Danish throne hop on his bike whenever possible? His grandfather did back in the 1930s, when he’d ride from the Amalienborg Castle to his job at the Royal Danish Navy.

People in Denmark would think it was very strange if the prime minister didn’t ride a bike. Biking is mentioned in the government programme, so of course Prime Minister Helle Thorning-Scmidt rides a bike. Her bike is bright red, the colour of her party, the Social Democrats. The name of her Velorbis bicycle is Dannebrog. The Danes refer to their red and white flag as ”Dannebrog”. Velorbis, on the other hand, is a new-generation design company that makes things like leather bags in addition to its iconic bikes. Velorbis’s strategy is based on one very simple in- sight: a bicycle is an accessory, not a piece of sporting equipment or means of transportation. That’s why you’ll find  Velorbis at fashion fairs. And it’s also why Velorbis bikes are designed and styled right down to the tiniest details.

Today’s bike companies have to be able to read both the silent signals coming from their own community and the newest global trends. They have to be able to analyse the risks and make sure there’s money coming in. And they have to hold their own when dealing with global suppliers. At least if their sights are set on world domination, they do. Velorbis’s founders, Kenneth Bødiker and Christian Linde, know how to do it all. They built Velorbis up from nothing, but before everything really started, a bomb went off in London.

***

There are so many bikes at Denmark’s biggest and busiest railway station, Nørreport, that they have to be parked at two-tier bike racks. Follow the sea of bikes down Frederiksborggade two blocks to the west and you’ll see the orange Velorbis bike stand and sign.

Founded in 2006, the name Velorbis comes from the words velo and orbis. Velo means bicycle in many European languages and orbis is Latin for circle.

It’s no coincidence that Velorbis is located on Nørre Farimagsgade with its wide bike lane separated by a small divider – common practice in Copenhagen. Even the garbage cans are placed diagonally so that it’s easier for riders to throw trash away as they ride. The people who ride past the Velorbis store might well just be the most demanding and style-conscious bike riders in the world – in other words average Copenhagen residents. In this city, the streets are literally full of product developers.

Velorbis is owned by a Dane, Kenneth Bødiker, and a Swede, Christian Linde. These stylish fourty-something Scandinavian guys say they’re glad that their customers hold Velorbis to such high standards.

“We started in Denmark, where people ride their bikes in all kinds of weather. If you can make bikes that are good enough for the Danes, you’re going to be able to sell them anywhere in the world”, Bødiker says.

Velorbis’s attempt at world domination is already underway, albeit slowly. Today, the company has 72 dealers and Velorbis bikes are sold in 16 countries. But their main focus is still on their home markets of Denmark, Norway and Sweden.

Bødiker and Linden’s Velorbis bikes are the perfect mix of quality, nostalgia and classic design. The handlebars curve beautifully and the mudguard is leather. And the back of your bike is the perfect place to carry your briefcase, which is also from the Velorbis collection, of course. The  saddles  are  made  by  the  iconic  British Brooks company, and the gears come from the British company Sturmey Archer or Japan’s Shimano Nexus. Because the frames of Velorbis bikes are made with Chromol steel, which is lighter than regular steel, they weigh less than 20 kilograms. The bikes are assembled at a small family-owned company is Bremen, close to the German border. The sleeve joint that joins the frame to the front of the bike is another mark of quality. Most bike makers  weld  their  bikes  together  because  it’s cheaper.

The average price for a Velorbis bike is around a thousand euros.

While Velorbis is surrounded by product developers – or Copenhagen’s bike riders – it’s also surrounded by competitors. There’s a bike shop, rental shop or repair shop on almost every Copenhagen corner, sometimes even two. The majority of bike shops sell Batavus bikes from Holland, Raleigh bikes from Britain, Swedish Monarch bikes and Danish Kildemoes bikes. Hardly any of them are made in Europe these days.

There are also an increasing number of bike boutiques competing with Velorbis for the same style-conscious customers. Customers for whom a bike is a continuation of who they are. They want a bike that makes a statement and they’re prepared to pay more for it than most.

Shopping for a Velorbis bike is also an experience, as the shops are nothing like regular bike shops. The postindustrial red brick walls and classic Danish Artichoke lamps designed by Poul Henningsen set  Velorbis shops apart from most sporting good stores. Here in bike-crazy, style-conscious Copenhagen, it’s only natural that you can do your bike shopping by candlelight, for example at the Cykelmageren bike shop on Store Kongensgade.

The popularity of bicycles has gotten a boost from a number of big trends, including environ- mental awareness, the rise of individualism, healthy living, saving money, and mindfulness, which focuses on awareness, enlightenment and being pre- sent in the moment. There are few products on the market that are associated with as many posi- tive qualities as bicycles.

All this makes Velorbis’s Christian Linde very happy.

“Competition is a good thing. There’s always someone trying to sneak up behind us. And that definitely keeps us on our toes.”

And with business backgrounds like Linde’s and Bødiker’s, these two have what it takes to handle both speed and the competition. They honed the skills they would need to become bike salesmen in London City. The Swedish Linde and Danish Bødiker met over ten years ago in London, where they were both working at the accounting and consulting company, Deloitte.

After studying IT and finance at the University of Lund, Linde ended up in London almost by accident through his job at the accounting and consulting firm Arthur Andersen. City of London was booming at the beginning of the 2000s. Linde remembers how much fun he had helping to open the search engine AltaVista’s London office. There were lots of long days, but also lots of parties and travelling.

Arthur Andersen filed for bankruptcy and then fell along with Enron as part of one of the first major corporate scandals of the 2000s. Linde moved to Deloitte. That’s when he met Bødiker, an Arthur Andersen veteran and fellow Scandinavian transplant in London. Bødiker, who studied accounting and business management at the Copenhagen Business School, and Linde starting having lunch together. They became fast friends, although they spoke English for the first year because the Swedish Linde couldn’t understand Bødiker’s Danish.

***

At 8.50 in the morning on the 7th of July, 2005 a bomb ripped through an Underground  train near the Liverpool Street station. Seven people were killed.

Fifty seconds later another bomb exploded on an Underground near Edgware Station. Six people died. Fifty seconds after that, another bomb went off, this time on an Underground train travelling from King’s Cross to Russell Square. Twenty six people lost their lives. The morning rush hour turned into pure chaos. Less than an hour later a bomb went off on a double-decker bus at Tavistock Place. Thirteen people died.

Kenneth Bødiker was on his way to work. He was sitting on a city bus heading to central London and Deloitte. Oblivious to what was going on, he wondered why the bus was so full and there were so many people on the street.

When he got to his office, Bødiker heard about what had happened. He called the Danish Deloitte office to tell them he was alive. Not everyone was as lucky. The terrorist attacks claimed 52 lives and wounded over 700.

Bødiker’s Swedish colleague Christian Linde was in Copenhagen on business. He watched the news about how the Underground exploded on his route to work.

”I’m never setting foot on that train again”, Linde thought.

He called Bødiker and said: ”We’re going to start selling bicycles.” They had spent many lunch hours talking about how amazing it would be to own their own business.

Two weeks later panic struck London yet again. Bombs were found on three Underground trains and one bus, but thankfully they hadn’t gone off. Bødiker, Linde and many other London residents started avoiding buses and Undergrounds. London bike shops sold all their stock. Bødiker made a very Danish and very aesthetically-driven observation: ”Businessmen in pinstripe suits are riding around on racing bikes. It looked really stupid.”

Bødiker and Linde had what can only be described as an “aha moment”. They decided they would sell stylish, quality bikes that are nice to ride. Linde says that at first, his family thought he was crazy, but that didn’t deter him at all. Many people think that leaving a job that pays well is a huge risk. Bødiker thought differently.

”I know I can always go back to consulting. No one can take away what’s inside my head. You can lose a business, but then you just have to try again.”

”Denmark is a wealthy country with a high standard of living. So what’s the cost of failing here? It’s very small, especially since I have an advanced degree. The risks are much higher in the United States. But here, failure isn’t a major catastrophe”, says this son of the welfare state.

When they gave their notice at Deloitte, Linde and Bødiker had a business idea and years of experience in turning business ideas into business strategies.

Analysing risks and combing through companies’ books had taught them to understand and analyse business strategies from every angle.

”We thought it would be fun to test out those skills on our own business”, Bødiker says.

In addition to their experience as business analysts, the pair had a rare and valuable brand of intellectual capital: before the London terror attacks, they hadn’t given much thought to their upbringing in bike-crazy Scandinavia. When they did, it became the foundation for their brand.

”You don’t realise you’ve lived in a biking culture until you leave”, Bødiker laughs. He says in Britain teaching adults how to ride a bike has evolved into a whole business branch.

”Can you imagine?!”

***

Bødiker and Linde started studying bikes and the bike models on the market while they  were still in London, but they knew from the be- ginning that their new business would be based in Copenhagen, the Mecca of biking. They knew how  they wanted  their  bikes  to  look. They sketched them on paper. But who would actually make them? They had no intention of becoming factory owners. They would have to find a factory, a subcontractor.

Around 130 million bicycles are made each year. A little under 100 million of them are made in Chinese factories. Linde picked up the phone and called China. He’d heard about a company that could make the bikes at a great price.

The deal fell through because the factory want- ed to make 10,000 bikes, but Linde and Bødiker only wanted to order 400.They did some research and found a company in India. But they were sceptical after their first encounter. The factory had a little stand at the Eurobike Show in Germany, where the head engineer was fast asleep. But Bødiker and Linde liked the Indian bikes. The design was right, but the dimensions were too small for European riders.

Bødiker, Linde and a bike mechanic from London flew to India for a long weekend and the deal was done. The mechanic was there to make sure they didn’t get cheated. It was obvious that the pair had found an opening in the market because Velorbis sold all 400 bikes to customers who had pre-ordered them on their website. And they got paid in advance, too. That was all the marketing they needed.

It wasn’t long before Velorbis’s owners were calling to apologise to everyone who had ordered one of their bikes. The bikes were supposed to be ready in a month, but it actually took nine, because the cost-conscious workers at the Indian factory found it difficult to comprehend that it’s better to use higher quality and higher priced materials than to skimp on style.

Bødiker and Linde took out a loan to start the company. They also maxed out their credit cards and raised another 14,000 euros by hocking Bødiker’s Mercedes. Both of them lost sleep. Everything had to be paid for in advance and they had no bridge funding.

”It was a little uncomfortable having to call customers for the third time to tell them their bike still wasn’t ready.” Bødiker had nightmares of  Velorbis being featured on a Danish TV show investigating financial crimes and fraud.

The bikes finally arrived from India. But that wasn’t the end of Velorbis’s problems. The phone started ringing. On the other end were customers complaining about problems with the bikes; the pedals and seats were breaking. Velorbis bought new parts to replace the broken ones and offered to buy back the bikes to anyone who wanted to return one.

But no one wanted to. They liked the bikes. And that encouraged Bødiker and Linde to go on.

Now, eight years after the episode in India, Bødiker says they hadn’t thoroughly analysed their concept.

“We spent the first three or four years playing and searching. We started in 2006, but we really took off in 2010. We paid our dues. Understanding design wasn’t enough, we should have learned much more about the industrial manufacturing process. We had no idea. We’re not engineers, so the variations in the degree of rusting of different metals came as a huge surprise to us. We had a business plan, we had the design and distribution channels, but we had no overall understanding of our product. We learned through practice.”

In the beginning, Velorbis bicycles were made of crude steel that rusts easily. Brand conscious owners used to browse the bicycle stands in Copenhagen in search of rusty Velorbis bikes. If they found a rusty bicycle, they would leave their business card on it and offer repair services. Nowadays, the steel used in the bicycles resists the damp, northern weather.

“We learned a great deal about the dialogue needed for successful subcontracting and about the industry in general during our time in India.” In the end, Bødiker and Linde found a bicycle manufacturer in Germany, in a country that epitomises the industrial traditions of the old continent. Being European is a huge asset in the bike business.

***

As is the case with all businesses, Velorbis has had to identify its strength and core business focus. Was it mass sales, new innovation, luxury or something else?

There are plenty of engineers out there who can come up with a genius product without giving much thought to the market. It’s technical expertise that makes them successful. Many tech nical innovations, for example programming languages, belong to this category. And our everyday life depends on them.

There are companies that have mastered the production process and manage to manufacture their products for less and get them to the market faster than their competitors. A classic example of this is the Finnish mobile phone company Nokia, which had an astonishing distribution network back in its glory days.

Then there are companies who strive for exclusiveness in the quality or availability of their products. Sometimes it takes more than money to get your hands on the products like these, for example luxury brands that people queue up for months to buy.
Velorbis’s strength lies in its thorough analysis of the product, its story and the market. In other words, the entire world.

What makes Velorbis stand out among other bicycle manufacturers is the fact that Velorbis bicycles are seen as accessories or fashion statements. They’re not just a means of transportation or a piece of sporting equipment. They are part of your wardrobe.

This novel approach enables a range of design, conceptual and marketing opportunities. When a bicycle is seen a fashion item that’s part of a person’s wardrobe as opposed to a piece of sports equipment or a vehicle, it’s easier to build a product family around it.

“Our slogan is Ride in Style. Our bikes are de- signed for fashion-conscious people who want to look good when they ride”, Bødiker explains.

Because Velorbis bikes are fashion products, the company also exhibits at fashion fairs. Thanks to their visibility at fashion fairs, Velorbis has appeared, for example, in a set of Louis Vuitton advertisements filmed in Denmark. Velorbis bikes can also be seen in ads for a whole slew of international Danish brands. For example, the shoe brand Ecco and the originally Danish clock and watch manufacturer Skagen have both used Velorbis bikes in their campaigns.

“We like to use piggyback marketing with other Danish companies. Being Danish is part of our brand, and cooperation with other Danish companies strengthens our brand image.”

Simply put, piggyback marketing means marketing cooperation. Denmark and the Danes know the tricks of the trade. The furniture industry and architecture made Danish design a well-known and highly-respected concept in the 20th century. And Danish companies have masterfully used this reputation to their advantage for decades. Recent examples include the boom of Danish clothing brands and TV series in the 2000s. Copenhagen has created such a strong brand around its restaurants and Nordic kitchen that many people travel to Copenhagen just to eat. This is remarkable considering how poor Copenhagen’s culinary reputation was in the 1990s.

The public sector also actively participates in branding the country. It skillfully markets Den- mark as an easygoing, chic, ecological and modern country. Danish design fits the framework of modern paradise perfectly. ”Denmark” sells like a dream.

Eco-friendliness is important for Denmark, but it’s also used for business promotion. For example, Copenhagen markets itself as a bicycle city and has set up a separate “embassy” for the representatives of other countries who want to learn more about bikes.

Linde, who comes from Sweden, has been blown away by the Danish cooperative spirit and by how easy it is to launch projects with Danish companies. He says the Swedes are far less eager to cooperate with each other.

Velorbis is also happy to give piggyback rides to other Danish companies. The company launched its line of children’s bicycles and bags during a fashion fair in winter 2014. Velorbis’s stand also featured the Series 7 chairs by Arne Jacobsen and the classic Superellipse table by Piet Hein, which literally helped bring home the message of Danish design. The arrangement helped Velorbis label its products as Danish and gained visibility for the design furniture manufacturer Fritz Hansen. It was a win-win deal.

Understanding the concept of piggyback marketing has been central to Velorbis’ story and corporate DNA.

“We’re a young company, but we stand on the shoulders of a long tradition.”

***

The owners of Velorbis dream of some day turning the company into an international franchising chain. And these shops will sell much more than just bikes. After careful consideration, bags were added to the Velorbis product range. Bags are relatively small investment, so people tend to buy them more often than bicycles. The company has also launched a line of other accessories, such as sunglasses and belts.

Velorbis paid its dues with the big business, too. This time, however, the situation was reversed. At first, the bags were made in Italy. However, the zippers on the Italian bags broke too easily. Today, the bags are made in India at a lower cost and higher quality. And at 300 euros a piece, the brief- case-like work or school bags have to be high quality.

“Being made in Italy doesn’t guarantee anything. After all, they sell the products with their artisan tradition, just like we sell our bicycles with tradition. ”The leather for the bags comes from India. Velorbis emphasises the Danish design of the
bags in its marketing.

“Nowadays, no one expects the product to be made in Denmark if the design is Danish,” Bødiker says.

Striving to become the market leader pays off, because it yields profits. Bødiker uses the concept of fashion tax, which is the extra consumers are willing to pay if they like a brand.

The Indian factory Velorbis uses has an ISO SA8000 certificate, which means it’s committed to ensuring good working conditions. Leather products sold in the US, Canadian and German markets are manufactured at the same factory. For example, the well-known US fashion brand Kenneth Cole uses the same factory. Bødiker says they wouldn’t have selected the factory if they were its first Western client.

“The factory is committed to adhering to European standards of working conditions and not using child labour.”

It’s important to Velorbis that they’re able to ensure the appropriate production conditions. More and more importance is placed on the sustainability of imported goods, and any problems in the production chain could threaten Velorbis’s reputation as an honest and eco-friendly Scandinavian brand. In the top-luxury end, Velorbis is also working on manufacturing bags in Sweden, made of Swedish leather.

***

Vlorbis’s turnover is in the low end measured in millions of euros. The company’s first financial statement will be published for 2014, but Bødiker  says  the  company  will  already  turn  a profit this year. The company is growing fast, tens of per cents year on year. As usual for companies in this phase, Velorbis’s sales profits have been invested back in the company.

Until now, Velorbis has been able to finance its expansion from organic growth. This means the company has not been able to expand its opera- tions quickly and simultaneously into many new markets. Next up are the British and German markets.

In Britain, for example, Velorbis bicycles were sold in the early stages of the business at the Harrod’s and Selfridge’s department stores in London. But finding the right partnership has been difficult, and now Velorbis is planning to open its own store in London in the near future instead.

Linde and Bødiker are well aware that financing is scant, which has forced them to carefully con- sider their investments and strategies. They’ve also had to carefully consider their markets. Italy, for example, has a thriving bike culture, but the popularity of racing and sports bikes makes it very different from Denmark’s culture of everyday bike riding. And this means that breaking into the Italian market would be difficult.

It might well take 5 to 10 years for Velorbis to break into some markets. Biking isn’t considered cool in developing economies, where  the  rich might see it as embarrassing. The bicycle is not a status symbol in a country where only poor, foreign workers use them. And the same applies to countries that are becoming wealthier, where success is measured by fancy cars and flashy jewellery. “Here in Scandinavia, on the other hand, having the time to take it slow and bike to work is considered a sign of good living. The soft values are appreciated more and more. The situation is different in China. The Chinese are getting rich and looking to live their dreams. We’ll have the product when they’re ready for it,” Bødiker says.

On the other hand, Scandinavian design is a strong asset in Asia. So you will see the occasional Velorbis bike hanging on the wall of a rich Chinese home, but more as a design item. This makes Linde very proud. Today, the only Velorbis concept store in Asia is located in Bangkok. It ‘s run by a Thai steel group.

The US isn’t ready for Velorbis yet, either. The high quality Velorbis bikes are too expensive for the US market, because most Americans don’t ride bikes every day. That said, Bødiker believes the bicycle culture is about to nudge forward in the United States.
“There needs to be an infrastructure, i.e. bicycle lanes, and a critical mass. When there are enough cyclists, the culture will begin to change. I wish every American city was like Portland. ”The hipster city of Portland, Oregon, is one of the few bike- friendly cities in the United States.

***

Bødiker and Linde have both made a living assessing risks. It’s taught them the importance of setting up several complementary sources of income.

In addition to its own bags, Velorbis manufactures private label bags at the Indian factory. They noticed that many clothing companies want to sell bags but aren’t interested in controlling the production process, with its factory audits and quality assurance systems. Ensuring acceptable production conditions is hard work, which makes the certificate Velorbis holds a big asset.

Velorbis designs bags for other companies. The process could be called the outsourcing of outsourcing: a brand outsources its bag production to Velorbis, who in turn subcontracts the manufacturing.

Velorbis also sells its bikes to companies and for sponsoring. For example, the champagne producer Deutz has a Velorbis bike, and the City of Copenhagen recently bought several Velorbis bicycles to transport lawnmowers. The appeal of the bicycle as a brand advertisement and image-booster is based not only on the high quality Velorbis design, but also on the positive image of the bicycle.

Children’s bikes are the latest addition to the brand’s range. The company continues to analyse and further develop the market. The Velorbis bikes that are sold in Europe are manufactured in Europe, but in the US, for instance, Velorbis could sell more affordable bicycles that are manufactured closer to the US market.

Balancing between agents and retailers can be difficult. Agents and their cultural expertise are often needed in new markets. The agent gets a cut of the price, of course, which leads to the next decision: Is it better to raise prices or reduce production costs? It’s not easy to cut production costs without moving production outside of Europe.

“It might make sense to manufacture closer to the markets, like we do in Europe for the European markets”, Bødiker says.

On the other hand, keeping production in Europe is so rare that Velorbis proudly prints the German origin of its bicycles in its brochures. Being Danish is an asset, but a German family business that specialises in bicycle manufacturing makes the brand’s aura even more positive.
A number of investors have already contacted Velorbis. Bødiker and Linde are not sure if the skillfully constructed brand is ready to receive a sudden surge of money.

“What if we had a hundred million Danish krone (14 million euros)?What would we do with it? We could visit every fair there is and set up marketing campaigns, but the growth could also be too rapid. Our factory and organisation has to be able to keep up.”

The idea is not to include investors, at least not yet. However, investors might be welcome soon, because Velorbis’s skillfully-crafted story and products have convinced those selling the Scandinavian dream. The Copenhagen airport has invited Velorbis to open a pop-up store for four months in the summer of 2014.The famous Danish interior design company Illums Bolighus will soon start selling Velorbis bicycles in its shops in Stockholm and Oslo, in addition to the Copenhagen shop. Illums Bolighus is a legend in the international design world, and its four-storey shop in the centre of Copenhagen is like the Holy Land for the world’s design enthusiasts. The NK department store in Stockholm has also confirmed that it will soon start selling Velorbis.

This means Velorbis will also have to develop its other products. Few people buy a bicycle at an airport, but travellers are likely to buy smaller items.

Linde is the IT-guy and Bødiker is responsible for the company’s finances. They both design the Velorbis products. Diversity is a good thing, because the two men share the same business vision. “Bicycles open the doors for us, and everything else comes after,” Linde says.

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