How did the bike industry get into such deep trouble?

This is the first of four episodes on the topic:

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That was great. I learned some things.

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Haha…was gonna start a similar thread but have been traveling.

About halfway through the episode and it has been really good so far. The comment about the $2B in orders for SRAM is just so on point……and the fact that they didn’t realize it was not realistic is just :man_facepalming:t2:

The other interesting development is that Giant has signed a deal to sell into some subsidiaries of Dick’s…places like Moosejaw, etc. This is a HUGE move for Giant and one not taken lightly, I’m sure.

It will be interesting to see if this is just laying the groundwork for Giant to end up in actual Dick’s stores. It would not surprise me if that happens in 6-12 months. The fight in the bike industry is switching to a fight for distribution and floor space. There is WAY more product than demand right now, so if you can squeeze someone else out on a floor, you’ll get more sales.

Again, this is a ratty significant move by Giant….and likely not only motivated by inventory issues, but also their AR sheets. Big time suppliers reportedly owe them MILLIONS of dollars (dozens? Hundreds? Either way, it is a LOT). Being owed significant money and having excess inventory is a really, really bad combination….so it feels like Giant is being forced into this to some degree.

The more I hear about the current situation in the bike biz, the more I wonder how bad it is gonna get over the course of the next year. Things are really pretty dire right now.

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Really enjoying the series. Lots of interesting insights. Amazing the ripple effect on some of the decisions, like being told to order aggressively because you can always cancel later.

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Shimano just reported sales were down 30% for their bike division in 2023.

Wow.

If Sram ends up passing Shimano, I think we can point to the availability of Sram during covid as a major contributor. Once you get used to the hand controls on one of those systems, you don’t tend to want to switch.

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I might have to quit riding bikes if this happens.

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The lack of Shimano equipped builds is what kept me from buying another bike during that period.

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The cycling industry is about the most opposite example of vertical integration. So you compound that with the other mistakes.

100%….the list of suppliers needed to build one model of bike is staggering long. That is one of the biggest challenges for factories….coordinating all their suppliers across different brands, specs, models, etc.

The SKU management makes D-Day look like a simple walk in the park. :crazy_face:

One of the last companies I worked for at one point had been almost 100% vertically integrated at one point….to the point of rolling the threads onto their own bolts. That obviously was not sustainable, however.

Episode #2 is available in the link at the top.

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Yeah looks like it came out late last night. I’m hoping EP 3 drops tonight

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People said/say the same about Campy. :grin:

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That’s part of the appeal of cycling though, the ability to customize almost every last detail to your liking.

The industry has already deviated from its roots by having proprietary seatposts on aero bikes.

Simple fix for oversupply? Lower the f-ing prices – alot. On all the bikes, including the ‘top end’ stuff. There is absolutely zero reason a bicycle should cost $7000 (or more). Groupsets at $1500+ ? C’mon.

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The problem is the lack of vertical integration makes this challenging. For example let’s say Shimano reduces OEM prices to move inventory, but bike manufacturers don’t pass that along to end consumers- Shimano loses out - they make less on every OEM groupset sold, with no offsetting increase in sales volume.

So if Shimano wants to spur demand by lowering prices, that only works for groupsets sold not on a bike. Same issue for every component. So complete bike prices don’t really drop

At the risk of sounding like a broken record, a products value is not the summation of its COGS. If I am a supplier and one of my OE partners lowers their price to me, I’m gonna put that money in my pocket if I can vs. lowering the retail……assuming I am providing the end product at an appropriate market value.

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I remember the days where one looked at the high end bikes and was like “man, I wish I could have that”

Now I can get a base model SuperSix with 105 Di2 and then get a pair of carbon wheels, and I have 98% of what I would get if I paid 10,000 USD more.

How does that make sense?

They need to understand that the consumer isn’t an idiot anymore, especially with inflation and whatnot. They should aim for something more like this:

Aluminum frame, 105 mech, aluminium wheels - 2250 USD
Carbon frame, 105 Di2, aluminium wheels - 3000 USD
Carbon frame, Ultegra Di2, carbon wheels - 5500 USD
Carbon frame, Dura Ace Di2, carbon wheels, one piece cockpit, etc - 8500 USD

Its utterly insane that a Ultegra Di2 bike with carbon wheels costs over 10,000 USD…

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Episode 3 now available:

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Thanks very much for sharing the links to this series.

Was going to write a long post, then remembered this is the internet - LOL

What strikes me most about this series is that while Covid was/is a huge exacerbation, the bike industry hasn’t changed much. The businesses by and large are simply managed poorly.

Some do OK for a while. Some benefit from an upswing sometimes. But mostly the business acumen is poor. There are certainly outliers with longevity, but it’s striking how in the bike business brands, shops, manufacturers come and go like the tides.

In the long post since deleted, was going to say I’ve been an avid cyclist since the time when every town in America had a Schwinn Shop. That’s a long time ago now.

If you remember Schwinn’s heyday you know what I mean. If you don’t remember Schwinn, go read the history of how a bicycle brand ranked #1 in awareness, with a huge retail presence and 125 years of history, which sold everything from $150 neighborhood cruisers (Varsity) to very top of the line and coveted racing machines (Paramount) went bankrupt.

It is timely because there are big brands today facing a similar fate as Schwinn. It won’t be a surprise to anyone familiar with the industry to see which companies fail next.

After you read about Schwinn, if you are so inclined, read about Campagnolo.

Finally, I think Escape only scratched the surface on this. They are likely not going to write the really hard stuff because they need to be part of the industry.

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