Viewing 31 posts - 1 through 31 (of 31 total)
  • The whole bike industry meltdown thing…
  • BadlyWiredDog
    Full Member

    If you’re morbidly fascinated by what when wrong with the bike industry over covid and afterwards, the Escape Collective guys have put together a series of podcasts where they’ve spoken to folk from the US industry – brands, retailers, distributors – about what happened. I’ve listened to the first two and they’re really interesting.

    I guess what I’ve taken from it is that on the one hand, people made some quite dumb assumptions about how sustainable the covid lockdown sales boom was, but there were also systemic issues linked to how retailers and distributors order in stock and the disruptions to shipping and manufacture which took on a sort of self-sustaining momentum and by the time people realised the full impact, it was a bit late.  Interesting stuff and well done:

    https://escapecollective.com/how-did-the-bike-industry-get-into-such-deep-trouble/

    DickBarton
    Full Member

    This is what I find interesting about it – as a rider but not in the business, it was incredibly obvious from the very start that this wouldn’t be sustainable or long lasting. The supply issues due to the Suez canal wasn’t foreseen, but the boom in bike sales surely wasn’t seen as sustainable beyond that first year…
    Clearly not for many though. I’m not professing to be some kind of knowledgeable person, but it was very clear…to some.

    scotroutes
    Full Member

    Any mention of the Shimano factory fire that severely impacted production just pre-Covid?

    cookeaa
    Full Member

    but the boom in bike sales surely wasn’t seen as sustainable beyond that first year…
    Clearly not for many though. I’m not professing to be some kind of knowledgeable person, but it was very clear…to some.

    Wasn’t the main issue that companies wanting to take advantage of that limited period of ‘boom’ essentially had to over-order to get to the front of the queue with various suppliers.
    Once they were committed to a big numbers of frames, groupsets, wheels, etc their fate was sort of sealed, a fair chunk of what they’d ordered was always going to arrive long after that peak in demand had dropped away, but that was tomorrow’s problem. Plus borrowing was relatively cheap still at the time.

    I don’t think anyone can claim that they’d have necessarily done things differently. If you’re choices are between scoring a big lump of (often marked up) sales, but knowing you’ll be left a bit over-stocked Vs missing out on the biggest selling opportunity you’ve had in a decade or so, what would you do?

    BadlyWiredDog
    Full Member

    I don’t think anyone can claim that they’d have necessarily done things differently. If you’re choices are between scoring a big lump of (often marked up) sales, but knowing you’ll be left a bit over-stocked Vs missing out on the biggest selling opportunity you’ve had in a decade or so, what would you do?

    I like to think that I’d err on the side of running a sustainable, long-term business rather than getting sucked into some sort of profit ahead of reasonableness/make hay while we can scenario, but then I don’t run a bike brand or shop and I have the benefit of hindsight. But what’s interesting about the podcast is that it’s clearly not quite that simple.

    And people weren’t left ‘a bit overstocked’, there’s an interview in the second part where a retailer talks about another retailer ending up having around 900 unsold new bikes sat in a warehouse and industry projections based on the fantasy that 80% of those people who’d bought bikes for the first time during the lockdown would be converted into regular cyclists and upgrade their bikes going forward.

    Like I said, it’s an interesting listen. Some of it does seem like wishful thinking bordering on stupidity, but there’s clearly a lot more to it than just that. It’s never explicitly said in the podcast, but I wonder how much of the ‘wishful thinking’ is down to an industry run by cycling enthusiasts/obsessives being unable to grasp that there are people out there, who even after riding a bike, still won’t get it.

    crazy-legs
    Full Member

    I hate listening to podcasts – all the umm, err, ahh, well y’know, innit… Same way I can’t listen to any sort of talk radio. The news is about as much as I can tolerate but at least that’s a professional delivery.

    Wish they’d put together an actual article, something I can sit and read at my leisure. It did pop up on my news feed and I thought it looked interesting. Then discovered it was a series of podcasts. 🙁

    benpinnick
    Full Member

    It wasn’t so much believing the boom would last forever as not realising the bust would follow. Warehouses sat empty, so brands ordered enough to fill them up. Except when lead times were over 1 year, they ordered enough to fill them twice over because they’d see those in 2023/4 and by then the warehouse would havee cycled another years worth of bikes….except of course they hadn’t.

    chestrockwell
    Full Member

    I hate listening to podcasts – all the umm, err, ahh, well y’know, innit…

    That’s bad podcasts. Plenty are very high quality these days.

    ampthill
    Full Member

    I like to think that I’d err on the side of running a sustainable, long-term business rather than getting sucked into some sort of profit ahead of reasonableness/make hay while we can scenario, but then I don’t run a bike brand or shop and I have the benefit of hindsight. But what’s interesting about the podcast is that it’s clearly not quite that simple.

    My limited understanding is that ordering a sensible amount wasn’t easy.

    This of my understanding of the time line

    Bike demand peaks early in the pandemic and shops and brands sell out

    Bike supply plummets for a variety of reasons inducing factories shutting due to covid

    Bike shops and brands now have no stock and no income

    When they go to order the suppliers aren’t interested in sensible orders. They prioritise those that order big. Shops and brands can either order big and hope they can sell later or not order now and go bust

    Eukraine invasion has treble whammy. Costs go up, disposable income goes down interest rates go up

    I’m sure some where greedy but i think that the whole situation was full of times when there were no correct decisions

    scruffythefirst
    Free Member

    Except when lead times were over 1 year, they ordered enough to fill them twice over because they’d see those in 2023/4 and by then the warehouse would havee cycled another years worth of bikes

    Seen this before in another industry, carrying over the unsold portion of a forecast month after month and adding it to the original one because they’d definitely catch up = warehouse (and office and shop floor) full of not moving stock.

    wbo
    Free Member

    I think it’s very easy in hindsight to say that you’d have taken a conservative approach, but it’s very difficult, in the middle of the biggest boom to ever hit your trade to say, no , I’ll stay small, other people can take all the extra sales and money, and I’ll assume that it will be quiet in the future.

    That to me looks like a quick way for a shop manager to get a trip to the job centre, or similar when they’re fired or the shop is bought, plus you look even worse if the boom had continued..

    mos
    Full Member

    It’s easy to overestimate the business acumen of people running companies. I run a construction company with circa £10m t/o and I haven’t got a chuffing clue what I’m doing.

    squirrelking
    Free Member

    It doesn’t matter if you kept a cool head or not. When everyone else is having fire sales to get rid of stock who’s going to buy stuff at full price?

    PSA: big players getting to the point where they’re massively undercutting the little guys is bad for everyone.

    crazy-legs
    Full Member

    I’m sure some where greedy but i think that the whole situation was full of times when there were no correct decisions

    I don’t think there was time to be greedy. Manufacturers, suppliers, shops etc are all working 2 years in advance so for 2020, they’ve ordered product from the factories (and from suppliers like Shimano etc) in 2018, got everything delivered in phases in 2019 and shipped to store from late 2019 onwards.

    Everyone knows what is going to sell and when – everyone has masses of data showing that Europe, N.America, Australasia will all be expected to buy x amount of 1, y amount of 2 and so on.

    Then Covid hit, the world stops and suddenly, they weren’t selling x and y; they were selling x + 30% and y + 40%.

    So shops sold out and were clamouring for more stock which simply wasn’t available. People with existing bikes were breaking / wearing out drivetrains, suspension etc and ordering replacements, not available.

    So when the factories were allowed to re-open, everyone is working twice as hard to fulfil the new and greatly increased order book, raw material goes into short supply, prices go up… Suppliers absorb some of the increased costs to the detriment of their bottom line.

    Other incidents like Suez Canal & Ukraine, contribute massively to disruption and costs.

    Shops finally get their hands on more stock a year later by which time the world has returned to normal, roads are busy again and the people that were briefly getting around by bike are now scared away again, the people that wanted bikes now largely had them (and had stopped using them, were trying to sell them S/H) which further impacted the new market – why buy new when a barely used bike is on sale for 20% of new price RRP?! – the people that already had bikes carried on more or less as normal….

    I don’t think the industry was greedy as such.

    It’s like a restaurant catering for an expected x number of covers per night and suddenly some celebrity tweets about them and next night they have x + 30% – they don’t have time to cash in on the windfall, they just can’t cope with it – not immediately anyway. And by the time they’re ordering in 30% more food and have built an extension to accommodate the increased patronage, all the punters have gone elsewhere.

    cheers_drive
    Full Member

    Lots of people have claimed that the industry was being greedy, and no doubt some were. Many of these were the speculators that entered the industry on the back on the pandemic.
    Imagine a small bike brand in 2020. It had say 80% of the frames delivered and 50% of components for builds. Suddenly you’d sold everything you could. But with no more components coming in you couldn’t finish those builds. Your ordered were cancelled and lead times were 2 years plus. You still had staff and overheads to pay so anything you could sell had to sell for top dollar so you could pay those overheads.
    What is clear is that the bike supply chain isn’t at all resilliant and is far too complex for the relatively small side of the market.
    Edit. Didn’t read other posts, Ampthill said it before me

    grimep
    Free Member

    Cycling isn’t the only industry that messed up, my completely unconnected world misinterpreted the lock-down and post-covid boom where people suddenly had more ready cash as the new normal, over-hired for ambitious new projects, and are now making mass redundancies, as cost-cutting is now the only way to get share prices to go up.

    mboy
    Free Member

    If you haven’t already heard it, the Rory Hitchens one from a few months ago with Road.cc all about CRC and their downturn/demise is a good one… There’s not many more insightful people than Rory in the bike industry, he’s absolutely on the ball with this one…

    https://open.spotify.com/episode/4j1MmE9K2wTKR7wPsE6FMf

    chiefgrooveguru
    Full Member

    As someone running a small business which has some similarities to a small bike business I can imagine it’s absolutely hellish trying to deal with these peaks and troughs in demand in conjunction with horrible increases and unpredictability in lead times.

    I fervently hope that nothing similar befalls my own industry. The business of business isn’t much fun for many of us running smaller businesses, most of us running these kinds of business do it because we have ideas or innovations or enthusiasm, not because we want to play global CEO on a miniature scale…

    Andy
    Full Member

    Factor in to all of this as well, that once Bike Co’s had stocked up, component suppliers then released new groupsets. Any new bike now has to have the latest group set. Shimano 12 speed road and gravel I am looking at you. What do Bike Cos do with all the 11 speed they have? Component suppliers have not helped here.

    ganic
    Free Member

    It all started with Sick! bikes.

    chakaping
    Free Member

    Thanks for the tip, will give it a listen. There’s not too much Caley Fritz is there?

    What do Bike Cos do with all the 11 speed they have?

    A lot of it is in my conservatory TBF.

    BadlyWiredDog
    Full Member

    I hate listening to podcasts – all the umm, err, ahh, well y’know, innit… Same way I can’t listen to any sort of talk radio. The news is about as much as I can tolerate but at least that’s a professional delivery.

    Well, bad news, lots of people enjoy listening to podcasts, not least because you can do something else, like, oh I dunno, trueing wheels, at the same time. And actually listening to people in the industry talking about their personal experience arguably beats a lot of STW forum users saying what they think probably happened based on their own experience, prejudices etc. It’s actually really well done. Very heavy on interviews, very light on presumptions, mostly non critical. I was surprised by how good it was/is.

    Thanks for the tip, will give it a listen. There’s not too much Caley Fritz is there?

    Gratifyingly not. It’s all done by Wade Wallace, who I’ve not come across before, but seems quite sane and devoid of the Fretz tendency to simply make things up.

    nickc
    Full Member

    I like to think that I’d err on the side of running a sustainable, long-term business rather than getting sucked into some sort of profit ahead of reasonableness/make hay while we can

    Sure, but if you sell all your stock for the year in a couple of months, what’ll you do then? I don’t think most companies raced to make as much money as they could, I think mostly that scenario happened “to them” as opposed to something they “planned to do”. When then they go to place orders on their suppliers for more stock…Problem.

    chakaping
    Free Member

    Gratifyingly not. It’s all done by Wade Wallace, who I’ve not come across before, but seems quite sane and devoid of the Fretz tendency to simply make things up.

    Cool cool cool

    🙂

    Speeder
    Full Member

    Sure, but if you sell all your stock for the year in a couple of months, what’ll you do then?

    I like to think I would take the rest of the “year” off . . . but I don’t think we humans think like that when it comes to it. Witness all the companies that made huge Covid profits then started laying people off once things returned to normal.

    stevious
    Full Member

    It’s a really well reported podcast – wade wallace is the original founder of cyclingtips and I think he has a good journalistic sense.

    What struck me was just how stressful the covid times were for bike shops. Having to be the public face of a system that’s malfunctioning was not fun.

    chiefgrooveguru
    Full Member

    “I like to think I would take the rest of the “year” off”

    The problem with doing that is that whilst you’re having the time off a large proportion of your customers will buy from someone else, and when you do get stock again, how many people will have not discovered you, forgotten about you, or assumed that you still don’t have stock?

    Meanwhile, which of your huge suppliers will have lost interest in you because you’re not ordering enough? There are far fewer major suppliers than there are bike brands in the industry so you’re heavily reliant on them.

    Also, whilst you’re having the time off, you still have to pay all your fixed overheads, and salaries and premises are the biggest cost of most businesses.

    Supply chain issues can break a business so quickly.

    Hadge
    Free Member

    Being in the manufacturing side of the cycle industry our issue was basically raw materials, just the lack of it and it’s still an issue now. We couldn’t get some material at all, the prices quoted on one day would change the next to double or triple and it really was a nightmare. We heard off friends in the trade, as in running shops and their supply of stuff was awful.

    As a manufacturer we also reached out to some bike brands to help out machining parts here in the UK for them but they decided to go Far East and today we’ve seen one brand tell everyone they are suffering due to this. Sometimes it seems you can’t help but that’s business I guess. Just lets hope we can all ride this storm out and come out the other side.

    poolman
    Free Member

    Thanks for the tip I love podcasts.

    Covid boom caught a lot of people out in various industries, I just plod on regardless.  Having seen a few booms and busts I like to think I can spot them, sadly the people caught out lose a lot, just hope they learn and move on.

    I was in a londonish bike shop often talked about on here, they had a non e road bike at 13k, couldn’t believe it.

    Fantombiker
    Full Member

    thanks for the tip, super interesting podcast. Key surprise for me was that neither the brands nor wholesalers had first-party data so everyone was blind to the downturn.

    chakaping
    Free Member

    Yep, very interesting.

    Cheers for flagging up.

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