Don DiCostanzo’s business model is a simple one: make it fun for customers to ride electric bikes. And make it easy to buy them.
He’s certainly been on a dynamic ride in the last two years with his Pedego Electric Bikes. Its sales have zoomed 180% to $58.4 million for the year ended June 30, helping the Fountain Valley-based firm rank No. 5 on the Business Journal’s annual list of the Fastest-Growing Companies in the midsize category for firms with between $10 million and $100 million in revenue.
“We have discovered that the secret to our growth is to open new retail locations,” DiCostanzo told the Business Journal last week.
“It’s like a shoe store where you cannot try them online. You have to go into the store to see if the shoes fit. We want to make sure customers have a place to try electric bikes before buying them.”
The number of Pedego stores has doubled from three years ago to 200 in the U.S. and Canada.
DiCostanzo’s goal is to open 1,000 stores.
Celebrities Abuzz
DiCostanzo, who spent 30 years in the car industry, including many with Wynn International, began Pedego in 2008 along with a friend.
The company got a lot of buzz when William Shatner, the actor famous for “Star Trek,” became a fan; he still promotes the bikes. Another fan is Martha Stewart, whose magazine recently profiled Pedego.
Other celebrities who have bought his bicycles include Shaquille O’Neal, Serena Williams and Miley Cyrus.
A client recently told him that “Pedego was Prozac on two wheels.”
In 2016, DiCostanzo won a Business Journal’s Excellence in Entrepreneurship award.
In August, Ernst & Young LLP selected DiCostanzo as its 2021 Entrepreneur of the Year for Orange County.
Buy it Twice Online
DiCostanzo said he isn’t worried about competition from big-box retailers like Costco or from online sellers. Costco buyers cannot get their bikes fixed at their stores, while online buyers cannot return batteries through the mail because “it’s against the law.”
“You cannot test ride a bike on Amazon and you cannot get it fixed on Amazon. An electric bike is like a car where it needs to be serviced,” he said. “You can buy it twice online or you can buy it once at our store.”
Nowadays, he advises potential buyers to visit stores and rent bikes before purchasing them. Then if they buy an electric bike, they service them at his stores, which are independently owned like car dealers, and aren’t franchises.
“They are entrepreneurs who know how to cater to the customer,” he said of Pedego store owners. “Our goals are to delight the customers and make our dealers successful.”
Currently, his company offers 19 models, ranging from $1,895 to $5,350. The more expensive models have been out of stock for a year, he said.
Inventory has been so tight because of a worldwide component shortage that Pedego recently placed its orders for 2023. He also keeps $5 million worth of inventory on hand to service any of his bikes.
He plans to offer five more models “because everyone is different” in their height, length of legs and arms, and other preferences.
Clients, who have traditionally been older, have recently been skewing towards young teenagers, he said.
Demand Exceeding Supply
Fewer than 1 million electric bikes were sold last year in the U.S., or about 5% of the total bikes sold in the country, he estimated. By contrast, electric bikes total around 50% to 60% of European sales.
“We’ve got a long way to go,” he said.
In Orange County, several new electric bike companies have sprouted up, such as the Electric Bike Co., now based in Costa Mesa. Electric Bike Co. was among OC’s fastest-growing private companies a year ago.
“Orange County is definitely the mecca of electric bikes,” DiCostanzo said. “We sell a lot more in Orange County than elsewhere.”
IPO Plans
Its 41-employee count in OC is similar to two years ago because the company’s hired “smart people” who are more efficient, he said.
“We’re able to grow infinitely without spending a lot of capital. It’s like a copy machine. We duplicate, duplicate.”
Private equity firms often come knocking “all day long, every day,” he said.
Since the company is cash flow positive and can quickly expand, it’s not looking for investors, although it may if the right offer came along. His preference is an initial public offering.
DiCostanzo’s goal is for Pedego to become what Tesla is for electric vehicles, Uber is to car rides or Hertz is to car rentals.
“We’re building brand ubiquity,” he said. “I’m a 100% confident we’ll win. Everyone else is selling a bike. We’re building a brand.”
