The tariffs have not been rolled back. I don’t know if bike parts are affected. The general perception is that a change in US government wouldn’t affect the tariff situation - nobody wants to be seen as soft on China. We have assumed US-China tariffs will be maintained in both directions, but reduced the probability of US-EU trade fights in our 2021 planning as a result of the US elections results.
This is an excellent post…and it highlights several factors which ahd not been addressed so dar.
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None of us know what is driving the increase, but the supply chain in the bike industry is long and complex. You can literally have almost a dozen suppliers for a given bike. Saddle, frame, seat post, HB, stem, bar tape / grips, drivetrain, rims, hubs, etc. We simply don’t know what component suppliers are doing to OEM prices.
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As noted, shipping costs are increasing…and it is not insignificant on bikes. A bike box is fairly large and you can only jam so many in a container. Even less when you are a company like Canyon, which has their bikes almost ready-to-ride in the box. A container cost is a container cost…but the more crap you can jam in it, the lower you shipping costs. A bike box ain’t small, so your freight cost / unit is pretty significant.
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Product mix - there was some discussion about why prices were increased only on some models. Companies can make the determination to spread the pain of cost increases evenly, or associate them more heavily with popular models. I do this all the time when working with customers…it doesn’t make me nefarious, it means I am trying to find a solution that works for both parties.
This is a complex issue and likely cannot be boiled down to a simple “They are using COVD as an excuse to raise prices”. No doubt that the current demand is a factor in the price increases…but almost certainly not the only one.
ETA - and yes, the higher tariffs are likely a part of this as well.
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I can tell you with absolute certainty that there were significant shutdowns and cost increases across a number of factories / suppliers.
Demand for our thermometers has obviously skyrocketed…which led to increased costs for the sensors we use form the supplier, which led to increased prices to our customers.
Further, our factory was shut down for almost all of March and a decent portion of April was at much lower capacity due to lack of workers (could not get back to their jobs after Chinese New Year). I know that many bike companies faced a similar situation…so when the shutdown hit and sales exploded, there was limited ability for suppliers to respond because the factories were shut down. So all the supply that should have been going on was delayed…it takes months to catch back up from something like that, if not longer.
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Some of my customers have been having issues sourcing semiconductors and related components. I’m in the software services industry and haven’t asked for details, but am still hearing complaints about component shortages. It’s not all components, and not everyone appears to be impacted, possibly because some stockpile components, or possibly the components used are still easily sourced.
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Indeed. I’m in the electronics business, and unpredictability is the new normal in terms of availability. The cloud hosting operators are pulling massive capacity to support media delivery increases (Netflix, Disney, name it) and work-from-home demands, and if you happen to need a part they need, you get decommits all the time.
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Yes, sounds like we are seeing the same. I’m an electrical engineer and been in electronics, chip design, and software for my entire career.
In regards to Taiwan, a lot of production shifted / was in the process of shifting there as a result of the tariffs. And while Taiwan had higher production costs, they were still lower than the tariffs…so this is likely another factor is some of the price increases we are now seeing.
Again, it is an incredibly complex weave of product supply.
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Not sure if is over…
But, this is not great news for those 12% increases…
Shareholder responsibility does not equate to social responsibility. Agree that 12% isn’t mega, but if Banks suddenly increased their product pricing and the only drier was demand there would be uproar. We’ve got to an unusual place where the conduct of banks is somewhat pushing boundaries where others could follow.
As a friend of mine remind me recently:
“The purpose of the company CEO is not to please employees or customers, but to make money for their share holders”
This is both true and very sad.
If a company loses 1000 customers that is bad for business, but if a company loses 1000 shareholders, the share price will drop further, others will sell, and it will snowball into a much bigger loss than those 1000 people who are going to buy their ______ somewhere else. Investors keep companies afloat, Peloton wouldn’t have the money to be where they are today if it wasn’t for bullish investors.
Initial investors?
Sure. But as long as the company is making profit, what the market thinks a company is valued is meaningless, except for people who own stocks (like CEO and other executives).
Keeping the stock as high as possible while pleasing the other share owners is for their own benefit.
And they do this while effing up employees (reducing benefits, flat raises if one is lucky) and effing up customers (less warranty, poor quality control, cheaper materials, and higher prices for inferior products).
All of the stock market is a BS game than only a few lucky people get to play well.
Riiiight, I should have known better than to come back here without my tinfoil hat
Not tin foil. I would like to hear what does a stock owner brings to the table once the company goes public?
I get that while they are not public (companies like Strava and Zwift), they actually need investor money to do things. Once you go public, people just trade the ownership of the stock for money. They company already used the money, and the stock holder is there waiting to get their pay back.
Most of the time, the payback is pushed by people who were not initial investors but still want a piece of the action.
Do i agree with the 12%? No. But I do get it. Bikes are selling well, its expected from bike company owners to milk the cow.
I don’t think it’s worth the time to have a serious discussion with someone who thinks price increases during a global pandemic are as simple as “milking the cow” and corporate greed
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classic. Dont worry, I am used to the “not worth my time discussing…” argument. Seems like a lot of people who either don’t have anything to sustain their claims or have evidence love to use that argument as a way to show superior, but unreachable knowledge.
You are welcome to explain why a 12% raise is not a combination of luck and greed.
Yes, a lot of supply chain is broken. But China (where most of this things are made anyway) have been open to business for a long time now.
It is not out of the realm of possibilities that bike companies are using the new boom to increase profit.
At the end, they do what they think is best for them. Will see how long can they keep up the price increases.
One case for my point.
I am shopping for a bike for my older dughter.
ALL COMPANIES ran out of 2020 models already.
Now the 2021s are out. Exact same bike, Different colors. $80 more expensive.
They did absolutely nothing on the bike except increase price. No retooling, not components upgrade. Nothing. Except a nice bump in price.
Tell me how this is not using the moment in history to increase profit.
Ill wait.
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That’s a very simplistic view. There are very few businesses where you can accomplish the latter without a solid dose of the first two - in particular in a human resources constrained world and a competitive market.
Everyone is entitled to an opinion. Don’t hold your breath too long 
100%.
This is specially true in tech companies like google, amazon, and other.
In many others, like big defense contractors and other business that are not mass consumer driven, profits come from cuts to salaries and benefits.
You can always move for more money, but most big companies will have the same garbage benefits and they know their competitors have the same, so they do nothing about it.
This is also correct. And dont worry. Was not expecting a response.
Intense pressure. That’s what stock owners bring to the table. And they vote against stock option programs. And they elect active board members. And they punish you by dumping your stock, making further capital rounds impossible, when you don’t deliver. Believe me, they have a lot of power. Don’t confuse the lack of power of a small shareholder with a lack of power of the shareholdership.