Cycle to Work reform must come from within the industry — GoGeta’s founder

Barry Scott, founder of Cycle to Work provider GoGeta, tells us how the Cycle to Work scheme can be fixed without government intervention

Clock11:30, Wednesday 28th February 2024
Bike shops want a better deal, but reform must come from within the industry, says GoGeta

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Bike shops want a better deal, but reform must come from within the industry, says GoGeta

The UK’s Cycle to Work scheme should be a gift for bike shops. It is a piece of legislation that allows employees to buy a bike from their pre-tax salary, giving consumers a massive discount, and giving bike shops loads of new customers.

However, the Cycle to Work scheme has become a poisoned chalice for independent retailers. Since the scheme was introduced in 1999, private providers have swooped in to capitalise on the scheme. These corporate entities facilitate the transaction for a fee, which lands squarely on the shoulders of bike shops. The cost of the transaction is so high that in many cases, bike shops only just break even.

Read more: MP on Cycle to Work scheme: 'Corporations are raking in profits as small manufacturers and shops suffer'

In recent weeks, hundreds of bike shops have united to bring their grievances to Westminster, demanding reform. But Barry Scott, founder of a new provider called GoGeta, is worried that upsetting the apple cart could backfire on the cycling industry.

As Scott explains in a call with GCN, he believes the reform must come from within the industry. He has built GoGeta, a scheme provider that addresses bike shop pain points, and in doing so, has demonstrated that with a bit less greed and a bit more collaboration, the scheme can go from being a leech on independent bike shops, to a powerful growth tool for the British bicycle industry.

The only task remaining is to persuade the legacy providers to change their ways. It’s no easy feat, but with bike shops around the country united in their call for change, Scott believes the power is in the retailers’ hands.

Read more: USA: Can I get a rebate for an e-bike? Our state-by-state guide

How can the Cycle to Work scheme be better?

Scott's service, called GoGeta, is a Cycle to Work scheme provider designed to tackle the problems facing bike shops and customers. Scott owned a London bike shop for 15 years, so he has felt first hand how punishing the provider fees can be. He saw other issues too: most schemes were unnecessarily complicated, with purchasing restrictions and hidden ‘end of hire’ fees, and they didn’t suit how cyclists actually buy bikes and equipment — that is, in dribs and drabs throughout the year, rather than as one big blowout.

In true start-up style, he created a new scheme that tackled the issues he’d experienced. Among the raft of changes that Scott designed into GoGeta, the most important was the adjustment to how the cost of the transaction was shared.

“With other schemes’ economic model, [...] the entire fee burden is placed on the retailers,” Scott tells GCN.

“They charge between 10 and 15 percent normally. And what we decided was, [...] if the fee is split more equally, we can reduce some of the pain and friction and actually, ultimately, lead to bigger and better savings.

“So instead of charging between 10 and 15 percent to retailers, we charged 3%. So effectively, a 70 percent reduction in fees to retailers.”

It costs a bike shop about the same to accept a GoGeta voucher as it does to accept a typical credit card. Scott mentions that GoGeta receives most of its customers from word-of-mouth recommendations from bike shops.

The rest of the transaction cost is passed on to the employees, who pay 4% on top of the cost of their bike or equipment to use a GoGeta voucher. People warned Scott that charging employees would go down like a lead balloon, but he believed that, just like with Airbnb or Netflix, people would be willing to pay for a better service.

“The way traditional vouchers have worked has been: you get a voucher issued and you must redeem it in one store in one day. And that basically means if you have a £2,000 voucher, your bike's £1,800, you have to find £200 of spend on the shop floor. So if you want a Poc helmet, but they only sell Specialized, unlucky: you're buying a Specialized helmet, which is stupid. I just think that's not how modern consumers work.

“We've got this thing called the flexi voucher, which is a 12-month duration, and it's effectively a digital wallet or ledger. So you can get a £2,000 voucher and then you can go to a bike shop today and buy a bike for £1,000. And then next week you can buy a pair of shoes from a different shop. And then three months later, you can buy a helmet. And then winter comes, you buy some lights.”

The flexible voucher means customers can take advantage of seasonal discounts, plus it means they can use a Cycle to Work voucher for all those little ‘as and when’ purchases that cyclists tend to make. GoGeta also insists that retailers honour their best pricing, with no surcharges or restrictions. Altogether, it means that GoGeta customers can recover that 4% fee.

“I don't see an issue with charging a modest amount if you can then uncover and unlock all these other savings on top,” summarises Scott.

GoGeta is not the only provider to apply their own take on the scheme. Not-for-profit provider the Green Commute Initiative (GCI) charges just 5% to retailers, and nothing to customers. Moreover, GCI gives bike shops the option to pass on the fee to customers, meaning that the scheme can be structured to cost bike shops absolutely nothing.

With traditional providers, the 'end of hire’ process, in which the bike or equipment transfers ownership from the provider to the employee after the payments are complete, is complicated. Most providers use a government-outlined depreciation curve calculation, which can dramatically erode the initial tax saving of the bike. Worst of all, most people never see it coming.

“The historic issue is presenting schemes as being ‘no charge’ to the employee, but then there's all these hidden fees,” explains Scott. “That's when people go, ‘The scheme wasn't what I thought. [...] And then people say, ‘I'm not doing that again — it's a pain in the arse.’”

GoGeta and GCI both simplify the 'end of hire' simple by charging everyone £1 to transfer ownership to themselves.

The government are more likely to scrap the scheme than reform it

At present, there is a fierce debate surrounding the Cycle to Work scheme. In late January, hundreds of bike shops united under the Association of Cycle Traders (ACT) to demand change. Now the group consists of over 650 bike retailers. Through meetings with members of parliament and the government, the retailers are pushing for reform.

Although Scott is aware of the pressure that the scheme puts on bike shops, he doesn’t think knocking on doors in Westminster is the answer.

“The current government don't seem particularly cycling friendly — I don't think that's particularly controversial to say. There's the ULEZ stuff, and the closing of the Low Traffic Neighbourhoods sort of stuff. It doesn't feel like this government's particularly caring about growing cycling.”

“So I think if the cycle body says, ‘Cycle to Work is broken, let's fix it’ I just think they’ll say, ‘Well if this isn't good enough, you just get nothing.’ That's my worry, that there's not enough appetite to change it."

Read more: Cycle to Work: UK government reminds disgruntled retailers scheme is 'entirely voluntary'

The change must come from within industry

Pessimistic about what the government will do, Scott instead suggests that, “it's up to us to change it.”

Of course, given what Scott has created with GoGeta, he has shown that the current Cycle to Work legislation can be shaped so everyone gets a good deal. All that’s left to do is put pressure on legacy providers to roll out reforms across the industry.

The most important job will be convincing the Cycle to Work Alliance, a coalition of the five largest providers of the Cycle to Work scheme – Cyclescheme, Cycle Solutions, Evans Cycles, Halfords and Vivup – to change. The Alliance represents around 80% of the Cycle to Work scheme market, and according to Scott, they are, “in no shape or form motivated to change this, because it's working really well for them right now.”

“I mean, they're the ones who are making an enormous amount of money from the scheme,” he explains.

The Alliance might be powerful, but with bicycle retailers across the country standing together, Scott believes they have a good chance of forcing the legacy schemes to change.

“Retailers are scared to individually criticise the schemes, because the schemes are so powerful. The schemes could simply say, ‘You’re no longer a customer of our scheme,’ and then all these vouchers get turned off. So they can’t overtly criticise.

“My thesis has always been that the retailers have more power collectively than they realise. Especially this ACT and this pledge that the 650 retailers have all banded together. Individually, they don’t have so much say, but collectively, they've got power; they have a collective voice together to change things.”

Will the retailers be able to convince the providers to change? Let us know in the comments.

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