How did the bike industry get into such deep trouble?

I dont know where else to put this but my favorite LBS is closing on the 26th. They were one of the biggest Specialized shops in the area. They claim they are shutting down because of the industry, D2C sales and decreasing margins (all the fire sales from the big S killed them).

They found that the shop was not sustainable any longer.

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Man, I could write a book on this, but 100% yes. The challenge is that there is a unique blend of skills required for the bike biz…some of it professional and some of it enthusiast. There aren’t a lot of people who have both. So you get enthusiasts who don’t understand business, or business people who don’t understand the bike biz. Compounding the issue is that anyone who has greater business experience is immediately viewed with skepticism and concerns that they will take whatever brand they are working for into the mass market.

If you can find a copy, go read No Hands which was a detailed accounting of the demise of Schwinn. Damn near a literal “how-to” on destroying a company.

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That is a good call out on No Hands.

For folks really interested in the business, the history of Specialized and TREK and perhaps Cannondale are also instructive.

(1) Folks new to the sport think of Specialized as a bicycle company and don’t know that the bikes are al made by Merida which owns (last time I looked) 49% of the company. Specialized started as a parts reseller and then had some really good tires. Turbos. Check out the old ads with Peter Weigle who is one of the best frame builders of all time.

What “made” Specialized was the original Stumpjumper. All of which were contract built overseas. Japan at that time because Taiwan and China were not in the game yet.

(2) TREK, on the other hand, started as a frame builder. I still remember selling some of the first 531 bikes that came out of the barn. Nice enough bikes, good price point. TREK did some really cool stuff pushing MTN bike designs in the 90s. But they don’t make anything anymore. Giant makes all their stuff.

So in my view, the two biggest USA brands are not what people think they are. They are design and marketing houses. Am overstating this for simplicity. Importantly, not making stuff leaves them vulnerable in many ways.

If you look at the things that affect Trek and Specialized and then look down chain to smaller brands who outsource all their manufacturing, it just gets worse when times are hard and it magnifies all decisions made for the business. Think IBIS, Pivot, etc etc

(3) Cannondale was also an important brand for a while. Particularly with Aluminum frames which were good and a good value. If you couldn’t get a Klein, then a Cannondale was not a bad beer can frame to own. Dale also innovated with things like the headshock and lefty. But they were done in by a business decision(s) when they decided to make trick components (CODA / Magic) and branch into motorcycles. Toast.

For the LBS, have been good friends with a half dozen shop owners. Only one guy survived to retirement. He did that by selling bikes, service and having a side business with toys. All the other guys went up and down and invariably went out of business.

I think you need three things to survive long term in the LBS business and this might not be enough:

a) Smarts to establish and stay in your lane. You aren’t going to get rich but you can have a good business that goes up and down and provides for your family and a few employees. It’s hard to staff and manage one shop. Often folks expand to two and then the whole thing goes under.

b) As the owner, you also better be a good mechanic. It’s really hard to find and keep a good mechanic. People come to their LBS for mechanical service first and then buy other stuff maybe. If you can’t reliably fix bikes or don’t want to, then you have a problem. As much as I loved working on high end bikes, that is not a business. In my day you needed to be able to rebuild a 3 speed hub (and working on those dirty greasy pieces of crap really stinks!!)

c) Charge what your parts and service are worth. If everyone gets a bro-deal you don’t have a business, you have a hobby.

Im gonna stop typing. Really love this stuff and have a lot of friends who have been in the business. But it’s probably too much and not the right place for this discussion.

Cheers and enjoy your bikes everyone. Bikes won’t ever go away but the decal on your frame will change :slight_smile:

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No need to stop typing if you want to. I am enjoying the read at the very least, so +1 for all that :smiley:

As a part-time LBS employee and long time shop rat, this all rings very try. My shop just celebrated it’s 50th anniversary last year so the history is deep there. Only 2 owners in that time and the current one came from building his own business from scratch and sold that some 30-ish years later to step into the LBS. He is strong on the biz side and a massive enthusiast so he has those bases covered. Not a mechanic himself, but he does fairly well in keeping good staff on hand despite some turnover (that still seems less than I see in other shops). No shop is perfect, but this one seems to be making mostly good choices through this and the prior bumps in the market.

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Agreed! We are usually a specialized family. Not necessarily because we thought they were best. Just when we started riding years ago all the local bike shops had them. 15 years later. We bought canyon. Went to the Special site. The bike I wanted was 15k. Closed the tab and bought my gravel bike elsewhere. For everything I wanted for a lot less. Now Canyon is discounting I might buy but if the rumors are true on how much inventory is out there. Perhaps I’ll wait?

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+1 on what Chad said….that is a damn fine rant.

The whole motorcycle thing with Cannondale….what an ego-fueled fiasco.

I’m still in Taipei and it is late, but a quick point re: the parallels and timing of the demise of Schwinn and the rise of the other companies you mentioned (along with the aforementioned egos)……it was the MTB (along with BMX), combined with Schwinn’s hubris, which spelled its demise. Ed Schwinn thought he could do no wrong and acted like the CEO of a Fortune 500 company. (Again, read the book if you can). Schwinn ignored these emerging and critical product trends until it was too late. Again, it was ego.

So then to see Cannondale’s death follow a similar path as far as its orgins is striking.

I gotta get some sleep, but will post more ramblings on this, and my thoughts on the podcasts, later. Suffice to say, I have a few. :crazy_face:

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Check out Allied Bikes. As far I know, they are doing well making their frames here and adding whatever components you want to your build. Survived the pandemic without much of a hiccup, and expanding at a modest pace.

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It was mentioned that Merida make Spesh and Giant make Trek…who makes Cannondale these days?

And another thank you for the education!!

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Don’t now exactly what factory, but ever since Cannondale was bought by Doral, the frames have been made by whatever factories in Asia that the parent company is doing business with at the time. Cannondale quality seems to move up and down over time which suggests different factories and QA/QC at different times.

Typically for all these brands, the high end frames are out of Taiwan factories utilizing very good manufacturing processes and skilled labor. The lower price point frames come from China and sometimes other Asian countries. Giant and Merida, as the big examples, have production in many different locations across Asia. But they aren’t the only makers. There are many smaller firms with names you never hear unless you are in the biz.

It’s probably worth saying that there are some very good and very high end manufacturing capabilities in Taiwan, so country of origin doesn’t mean what it once did in terms of quality.

It’s probably not worth saying that bikes do have an awful lot of mythology associated. We like to think of a bicycle being lovingly toiled over by a devoted artisan who is passionate about the sport and is crafting the perfect machine for each individual rider who then bonds with said jewel and merrily rides off into the sunset.

The reality is almost all bikes, even high end marques, were always and still are produced by laborers. Skilled / trained Janes and Joes who go to work and who do a job for a wage making bikes being engineered to a price point. This was true when frames were made of steel and brazed together and it’s true today with carbon fiber. The good news is we can get some truly phenomenal products because modern manufacturing principles work and a bicycle is not that complicated.

Sorry couldn’t answer your question 100% definitively wrt Cannondale current manufacture.

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Yeah, not to go off track too far, but I am a bass player. My preferred manufacturer is based out of Canada and they make high end Canadian guitars. They also make more moderately priced instruments that are assembled in China and then shipped to Canada for final inspection, fret leveling, setup, and finishing before being shipped to the customer. This results in an instrument that is very high quality, but costs about 1/3 what the Canadian instruments cost. It’s definitely possible to manufacture low cost offshore and still deliver high quality product.

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A lot of these bad strategic decisions are the result of private capital firms buying large shares of these brands.

The way they work is to kill the golden goose to recover the initial investment and get some return. Since the initial investment usually includes buying some debt, they can recover it as an expense. If the business goes under, they can just move to a different industry.

This business model incentivizes maximizing short-term at the expense of long-term stability and profits.

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The genie is out of the bottle in terms of outlay for a mid to high end bike.

No doubt the halo models are unlikely to return to pre pandemic levels in terms of RRP. Sales are already apparent on entry level bikes while pre owned bikes seem to be shifting slowly. It remains to be seen if numbers improve as the weather gets warmer but personally I remain sceptical.

I see prices dipping for the short term but manufacturers will throttle back on supply as a reaction to their current position and prices will start to increase again.

Owners are usually complicit in the sale. These are not hostile takeovers - the owners are usually looking to cash in to some degree, get capital for their ambitious growth plans, etc. Private equity fills that role they are already looking for

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Absolutely.

Yes and no. The large suppliers don’t really have majority PE investors. While I don’t know the exact makeup of the ownership groups, I would guess that PIN and Doral may be the exceptions to that rule.

But Specialized, Trek and Giant don’t. As noted Merida owns 49% of Specialized, but they obviously aren’t PE.

Yup. Also worth noting is that Specialized and Trek don’t (I believe) use Merida and Giant exclusively. They are likely the largest factories they use, but not the only ones. We used a handful of factories depending on price, capabilities, spec and relationship.

Back in my day, bikes under ~$1500 came from China and anything above that came from Taiwan. Things gradually moved more and more to China as their capabilities and quality increased at the higher ends. At one point, the bike manufacturing in Taiwan was struggling because so much had gone to China.

The game changes was tariffs….that brought a lot of production back to Taiwan.

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Did autocorrect get you? PIN = PON

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I hate that bastard Otto…:crazy_face:.

Yes, PON. :man_shrugging:

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Episode 4 available now:

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After 4 episodes and over 4 hours of listening, the under-appreciated money shot acame at 47’ into the E$…when the QBP guy said “This wasn’t a COVID problem, it was a decades long industry problem”.

FINALLY!!!

Yes, obviously COVID was the accelerant, but this issue has been plaguing the industry for as long as I can remember…the forecasting and purchasing models in the industry absolutely blow chunks. You see it every year in the discounts and sales that happen. I almost never buy any of the newest tech ebcause I know if I just wait a few months, or maybe a year, the stuff will be on sale somehwere.

COVID took all the forecasting issues and put them on steroids and it blew up spectacularly…but the root problem has been around for decades.

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Overall yes this is true, but there are still plenty of custom frame makers out there. My bike is hand made by one dude.