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| Word is that Wiggle/CRC is in deep financial trouble. |
As I perused YouTube I found a couple of creators that are independent shop owners who were telling their tales concerning the state of retail in the US. One claimed that "one of the big brands" has enough entry level hard tail mountain bikes warehoused to last them for 6 years worth of sales.
I had been reading about the overproduction and warehousing issues plaguing the industry, but six years worth of inventory in one of a brands best selling categories? Ouch! And I would imagine that this "big brand" is not alone in that issue.
Another point claimed was that lay-offs and consolidation is happening at a wider scale than is being reported openly, and that I can believe. In fact, I have sensed that a couple of my contacts are part of this "contraction". When these sorts of things happen, at least in the business of cycling, it can be very "hush-hush", even during good business times. So, that is why I tend to believe that point.
The comments from the viewers of these videos I have watched seem to have a few common threads. One being that there is a definite angst toward the cycling industry concerning "COVID-inflation", or the sharp increase in prices seen during the pandemic. Many people are pretty sore about that. One other point I see a lot is that bicycles are over-priced, with a comparison to motorcycles often used. The point there being that a road/trail worthy motorcycle costs less than many companies mid-to upper tiered MTB/Road product. Finally, lots of consumers seem to feel that, technologically speaking, bicycles are fundamentally unchanged in the last 5-10 years. I can sort of see this point as full suspension has evolved more than it has innovated while road bikes are essentially the same just with more cogs on the cassette.
Will there be further shake-ups? Absolutely. During my ride with Ben this past weekend he told me that the outdoor retailer, REI, has just made some sweeping layoffs in response to poor retail performance. I suspect this sort of news will become more common in the near future, not less. This Winter will sift out those barely hanging on and upheaval will be more commonly seen than not. Pundits in the industry say this inventory problem will last far into 2024, and with no budging in consumer spending on bicycles, the writing seems to be on the wall.
7 comments:
Just some random thoughts...
If it's true, stockpiling six years of entry level bikes seems like poor management - clearly a lack of understanding the pandemic boom. Those bikes are going to be obsolete before they leave the warehouse, especially as Shimano starts pushing CUES.
It isn't necessarily that bikes are too expensive (though anecdotally $1800 for a Sora-equipped road bike seems crazy) but maybe that people want mid market bikes, rather than high, electronic-centric bikes. My 7 year old road bike was less than $3000 with mechanical Ultegra. That part of the market is gone and that seems a miscalculation on brands and parts manufacturers.
REI lost $160 million last in 2022 - laying off 2% of its workforce isn't surprising. But they're clearly just trying to rid themselves of high cost labor, because they're planning to hire 1300 seasonal positions.
I have an MBA, and I am not shocked at the decision making. Business leaders lack impulse control. They see a trend (3 data points) and they want to react to it, without understanding what is the underlying issue/event or even understanding. If you were sitting home with a laptop and you saw a graph going up and up on sales. It is easy for you as a Supply Management person to say, buy more, thus we can sell more. WE MUST MAINTAIN OR GAIN MARKET SHARE. Instead of thinking, well we sold out, we made 1.2 million widgets last year, lets do that again, and maybe even add $25 to the MSRP as we are now a rarity.
I do not care about market share, every time I hear that, I am turned off immediately. It is a bad way to manage a business, at that point it is a ego. What business leaders should actually care about is the input costs / output costs. What is the return on our investment? How fast can we re-coup it in reality vs a chart, what is worse case scenario?
Instead what occurred was human's got greedy and yet again did not understand supply vs demand, and the supply always lags in manufacturing. I see things get air shipped to Europe at costs I am embarrassed to know. So there is the hidden costs the bike companies will have to deal with, all the waste they spent in rapid delivery, in lieu of riding Trans Iowa they made it a crit.
@N.Y. Roll - You have some excellent points there. I would add that many brands, in the past, have had the luxury of pushing off the warehousing of inventory onto their dealers. For some brands, that has ceased to be the case and they have this massive overstock sitting in big buildings, unseen, and hard to sell.
However; Trek, who the industry analysts think owns more retail stores than any chain or brand, has an outlet- their own storefronts - where that overstocked inventory can be seen on a showroom floor. Granted, if consumers are not buying, they are not buying. That inventory does not move.
But, as someone who has retail experience myself, I can tell you it is far easier to sell an item in the hand than one imagined in a warehouse. (Or on a computer screen) That's IF YOU ARE A GOOD SALES PERSON.
Traditionally, this is where the bicycle industry has, as far as retail goes, fallen flat on its face. The shops typically do not train retail selling to their employees, and while inventory levels and sales philosophies are a HUGE issue at the corporate level, as you state so well, you aren't going to clear that inventory unless you have sales people that can sell water to a fish. And in my experience, bike shops typically fail at having such employees in abundance.
I would add, not only bike shops but retail in general. Hardware, sporting goods, grocery, etc, interacting with an employee who has experience/ used or interest in products in-store is rare nowadays.
@Derek - You bring up a very good point there. Thank you.
Just a quick comment to refer that in the Chain Reaction besides unreasonable expectations post covid and the increase in prices there is a very specific situation that needs to be mentioned; BREXIT. The changes that came with the UK leaving the EU are now, that COVID has passed, being strongly felt. They had a big share of sales to the EU countries that now have practically dried out, not only there are now added taxes but also a nightmarish process if you want to buy something in the UK. Thank you for your excellent work.
@luis vasconcelos - Excellent point! Thank you for mentioning that. It is - obviously - a unique point that affects UK based businesses and is not an issue elsewhere in terms of the impact that Brexit has on sales. I had not considered that in my post, which I should have.
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