Saturated sat nav market hits sales

EVERY driver seems to own a sat nav these days. Sitting in night-time traffic is like being at a festival with everyone holding their lighters in the air, each car emitting an unearthly glow from the dashboard. Their popularity accounts for the scorching growth rate of sat nav makers in recent years, but their ubiquity explains why the market is becoming saturated: selling prices and volumes are falling. With makers like Tom Tom operating on wafer-thin margins, retailers like Halfords are feeling the pinch.

Indeed, Halfords saw sat nav sales decline by 16 per cent in its first half, partly accounting for lacklustre trading across the business, with overall like-for-likes off 2.1 per cent.

There is no such explanation for the poor sales of bikes, which fell by five per cent in the second quarter. Halfords’ promise to “realign the range and pricing of cycles” suggests it simply didn’t have what consumers wanted, something that needs to be rectified. Because there is massive scope for bike sales in years to come. Politicians like Boris Johnson are trying to turn us into a nation of cyclers, but there is still some way to go. According to Eurobarometer, just 9.1 per cent of London commuters cycle to work, compared to 18.7 per cent in Stockholm, 45.6 per cent in Amsterdam and 59.5 per cent in Copenhagen.

This means that Halfords should have a bright future. Management will have to make a Herculean effort on costs to meet full-year profit guidance of around £136m. But it will also have to refresh its bike range and replace falling sat nav revenue if it wants to dismiss the first half as a short-term blip.