Cyclescheme slashes retailer commission rates after industry pressure

Cyclescheme, the UK’s largest provider of access to the government’s tax-friendly Cycle to Work scheme which enables people to buy a bike and accessories through salary sacrifice, has reduced its commission rates following industry pressure.

With effect from today, Cyclescheme’s commission on unredeemed e-certificates has been reduced to 8.33 per cent excluding VAT on all bikes, accessories and helmets.

It is also capping the amount on which commission is payable at £3,000, meaning that where certificates are issued for higher values, no commission will apply above that amount. That change takes effect from November to give Cyclescheme time to make the necessary changes to its platforms.

The changes to the commission structure come little more than a week after a Financial Times report highlighted how some retailers believed the Cycle to Work scheme had become “unviable” following a change implemented last year to the maximum value of bike that could be purchased under the scheme.

> Cyclescheme now claimed to be "unviable" for retailers following change in threshold

Previously, other than employers regulated by the Financial Conduct Authority – banks and other financial institutions, for example – the maximum value was set at £1,000, but there is now no limit.

A number of independent retailers last week launched the Bike Dealers Association, outlining that their first target would be the Cycle to Work Scheme, describing the current model as “financially unsustainable.”

> New trade body campaigns on independent bike dealers’ Cycle to Work scheme concerns

In a statement announcing the new commission structure, Cyclescheme acknowledged that the cycle retail industry had faced a number of challenges over the past year, “such as the removal of the £1,000 limit and unprecedented stock issues following UK lockdown. We have never had the intention of adding to these.

“In response to these challenges and your feedback, over several months Cyclescheme has been working in partnership with bike brands and retailers to review our commission rates.

“This includes Giant, Raleigh, Trek and Specialized, impartially facilitated by the Bicycle Association. The discussions have focused on how to build trust and support for the scheme, and how to fairly reflect the value and costs in the commission structure.

“As part of our ongoing commitment to unify our network and ensure value for all, Cyclescheme is going back to its roots,” it added.

“We were born in a bike shop and remain passionate supporters of the high street and independent businesses.”

Earlier this month, Will Pearson of south west London bike shop Perason Performance told the Financial Times that a recent transaction through Cyclescheme on a £2,200 bike and accessories totalling £300 saw the Cycle to Work scheme provider take £265 in commission.

He said his shop’s return on such a transaction would only be “acceptable,” but under the new commission framework effective from today, Cyclescheme would take a reduced amount of £208.25 – giving the retailer an extra £56.75 in profit.

Pearson also highlighted the example of a higher-cost bike, saying: “If somebody comes along and buys a £7,000 bike and then produces a cycle scheme voucher, it’s great for the customer, it’s great for the cycle scheme provider, but it’s not so great for us.

“Typically, as prices go up, the margins come down.If we are having to give up to 15 per cent of that £7,000 away, it doesn’t make it a legitimate proposition for us,” he said.

Under the new cap coming into force in December, commission would be 8.33 per cent on the first £3,000 of that bike’s value, a total of £249.90, as opposed to £700 under the previous regime – saving the bike shop £450.10.

In a statement today, Cyclescheme said: “During our commission structure review process, Cyclescheme received significant feedback from the Bicycle Association and bike brands, who together represent over 1,000 retailers and members.

“This process was thorough and provided valuable insight which has allowed Cyclescheme to make appropriate changes to its commission structure.”

On the subject of why it had capped commission at £3,000, it said: “Feedback from the Cyclescheme retailer network indicated that our rate of commission was challenging on scheme values over £3,000.

“This has come to light following the removal of the £1,000 scheme limit and e-bikes, cargo and adaptive bikes, which typically have a higher RRP, now being more accessible via the Cycle to Work scheme.”

It added: “Cyclescheme has worked extensively with bike brands and retailers to identify a commission structure that ensures value and fairness for all. There are no current plans to further review the commission model.”