Monday, June 07, 2021

Opinion: What's Happening In The Bicycle Industry

The empty racks and shelves persist- When will it end?
 Note: Today's post is my opinion. My speculations based upon information I have read, been told, and have thought about deeply. This may or may not be the truth, or even close to it. Read on with this in mind......

Obviously the bicycle industry is in the midst of one of its greatest upheavals in recent memory- or maybe for all times. Shelves are empty, bicycles are difficult, if not impossible, to get a hold of. Repair parts are non-existent in some cases, or have risen in prices sharply. 

But more than this, the dealer model for bicycles is being changed now as well. Brands are allocating stock where they think it will pay off the best while shortchanging other smaller, loyal dealers out of the opportunities to sell product. Brands are rethinking how they will sell bicycles in the future. This may have a dramatic effect on many consumers. Meanwhile, I think one major player is in a pickle and is making, what I think is, a major play to corner production.  

First off- the shortages: You know things are not good when brands issue their own take on the problems with obtaining products on their websites. (Example from Ritchey Design here) If you have friends who think this is a false narrative, a conspiracy, or some way to 'rip-off consumers', then maybe they could be swayed by reading those types of statements on the brand websites where typically they are hawking product and marketing lifestyle. But yeah.....they probably wouldn't believe it no matter what. That doesn't change reality. 

A couple things to note: 2023...... Let that sink in. Many people I am hearing from in the industry are now saying that is when things will return to 'normal' stock levels. 2022 will be 'better', but not at 100%. Think about it- we are already halfway to 2022 and it takes months to get stuff from the Far East to our shores. We have not seen shipping issues improving- yet. When those roadblocks start coming down, I then feel we'll see more improvements in stock lists here. I know that as of now things are moving 'on the water', as they say, but almost all of those items are going out immediately to consumers via shops. What is coming is limited in numbers, and to top it all off, the prices for shipping containers from the Far East has seen a HUGE increase in cost over the past year. Guess who will bear the brunt of those costs?

Re-opening of things like Las Vegas will affect the so-called 'Boom".

And on one side of all of this we have the re-opening of the economy and social opportunities. Here in the U.S.A. the pandemic restrictions are all being lifted, or already have been. On June 1st, Las Vegas fully re-opened with no restrictions. Essentially 'back to normal' again. This is just one example, but while this may seem rash on one hand, or very positive on another, you may wonder what in the heck this has to do with cycling and shortages, and upheavals in the industry. 

Well, in many places, something is happening that is not being covered by anyone in the endemic cycling media- yet. I think it will have to be addressed soon though. But what I am hearing from mechanic friends in several places in the country is that cycling repairs and tune-ups are not at the levels they were last season. In fact, some are saying it is below normal, pre-pandemic levels for this time of the season. Why? The narrative in the media is that cycling is 'booming'. was, back when you could not do anything else and officials were telling us to get outside and exercise as a way to combat getting "the 'rona". 

But have you seen those families out cruising you saw last year? Have you seen those folks you never saw on the bike paths riding last year lately? What happened? Re-opening happened- that's what. People can go see movies, concerts, or, you know, go to Las Vegas again. Sporting venues are back at full capacity in many places. Families are going to water parks, vacations, Summer camps, etc. Those people are not riding bicycles. 

And finally- the way you find and buy bicycles is undergoing radical change right now. Brands are dropping dealers in some cases, and in others they are reallocating product to their biggest dealers and taking away from orders placed by smaller ones, leaving those dealers with nothing to sell. There is some in-fighting going on, and I feel that the results of what is happening now won't be fully known for quite a while yet. In one case, it is my opinion that a brand that is well known may well be trying to corner production for themselves and the result is that another brand may well be shut out, or greatly reduced in production numbers.

 The end result, I feel, will be that you are going to find that some brands are going to go to an online, direct to consumer only model in the future. Some brands will have no presence in smaller markets and will only be found in Southern California, (traditionally the biggest market for cycling in the country), or in bigger metropolitan areas like Atlanta, Dallas-Fort Worth, New York City, and the like. If you live in a state like Iowa? You may have to drive several hours to get a test ride, or just capitulate and buy online. 

And some brands may not survive. I've felt that for years there have been too many brands out there. But who knows? Maybe these brands pivot and find a niche to survive. Electrified bicycles are certainly one area that could happen in, but again- as I have stated a million times here (not really, but you know), without safe places to ride, you may as well forget about the US being anything like Europe where HPC's (Hybrid Powered Cycles) are all the rage. 

And then again- maybe none of this will matter. If things go 'back-to-normal' again, does that mean we will find ourselves back to the same sort of economic numbers and participation in cycling numbers we had pre-pandemic? There are a lot of things in flux here and the results will be interesting, to say the least. But the ultimate irony may be that in the end the industry catches up only to find that nothing has really changed at all. 

UPDATE: June 10th, 2021- "Bicycle Retailer and Industry News" reports that Shimano now has shut down its Malaysian factory where most of the lower end components, hubs, and wheels are manufactured. This will be at least until 6/21 and then the Malaysian government will review the situation. Read the "BRAIN" story here. 


NY Roll said...

Think about the issue this way. Can we blame the bike industry itself? can we blame SRAM, Shimano, and Campy? All these different standards from 135 QR, 142TA, Boost to Boost + to DH, to 170QR to 177 TA to 197 TA. Yes, all these standards have a cost, the commonality is lost, and we are not fully discussing 7spd to 13spd. All those standards from frames and forks to spds limit the capacity of manufacturers. The machines making the parts need to have more change overs to cover the different standards. And yet, we are not even discussing nuances yet, from GX to Eagle for example or even rival to Red. We have several things stacking up on this storm.

Tman said...

Our little area called the Black Hills is an island unto its own in many ways. I see cycling, road, garvel and mtn bigger than ever here. Since my son also plays baseball I am perched in the bleachers several days a week next to our paved bike path. The amount of families I see out riding is staggering. The LBS' are hopping and doing well to keep inventory (as in working their asses off). So, locally it is good. From my finger on the pulse, nationally we have not seen the worst yet.

james said...

The cycling industry is a minute snapshot of our world economy as a whole. There's a bigger picture at play here. Don't be blind people. There's more to come

flying_sqrl said...

I’d recommend that folks interested in this topic check out:–-it-sales-surge
Hopefully that link works, if not, look for it under Supply Chain Woes.
Keep in mind that he’s talking about the U.S.
Anecdotally, as things have opened up where I live, the new cyclists have mostly disappeared. Overcrowded City bike paths are back to normal. People have gone back to work, or started using public transportation again. Our primary trail center was free until recently due to the pandemic, once they started charging for entry, the number of hikers and bikers has almost returned to pre-pandemic levels. Seeing a few more young people out there now, probably because they are unemployed.

TW said...

I work in a factory here in China and the shortages that you are seeing are in some cases even worse for us. MOQ's are hitting every smaller sized factory hard. We have some customers that we just can't make bikes for because something as simple as a dropout has a MOQ of 500 pieces. 500 isn't much but for a small brand that is more than the sell in a year for one model. The recent outbreaks here in South Asia has hit a few factories where they have had to shut down or reduce capacity by a significant amount. Shimano's huge facility in Malaysia is cut back to 60% or 65% due to this. A lot of our Shimano parts for production come from that factory.

Guitar Ted said...

@TW - Thank you for those comments. I hadn't thought about Minimum Order Quantities (MOQ) nor did I know about the outbreaks in South Asia. Those are blows to the industry for sure, and as you say, especially for the smaller customers.

DT said...

To bring it back local for a minute - last year, in my small town south of Buffalo, NY; a Facebook group was started for village bike rides. In 2020, these rides would draw 15-25 people depending on the day, and would have all comers including families with small children. I like to think these people are the "bike boom." Many of them had their old bikes serviced last year, and some bought new bikes. Fast forward to this year, and it has thinned out pretty significantly. Out of the original pool (the Facebook group has 630+ members), only 5-8 are showing up consistently. This consists of the people who were truly bitten by the bug, some of which have upgraded AGAIN, most to drop bar rigs and some to carbon fiber framed road bikes. I think this is pretty representative of what is going on in the country - there will be some growth, but not the major expansion that may have been predicted.