Estimating the Size of the Handbuilt Segment

[landshark]

As part of my ongoing research into the handbuilt niche/segment I've been trying to get a handle on the actual size of the segment, and to place this in the context of the overall bike trade in the U.S. As we all know, this is a tricky task for there are few consistent data sources, and many potential data sources are not very forthcoming. This week I've been working up some back-of-the-envelope guesstimates, and I've posted these to my project blog (http://www.handbuildingvalue.com/blog//how-big-is-the-handbuilt-bike-segment-part-iii). If you are into this sort of thing, I'd be grateful for feedback - either on the blog comments or here in this thread. Though the wisdom of the crowd obviously varies by crowd, folks on the forums are likely to be about the wisest such crowd I might find!

Ben

PS - I'm posting this "across the hall" as well, so apologies if you are seeing it twice!

[BobbyJones]

...and to place this in the context of the overall bike trade in the U.S.

a rounding error.

[landshark]

I should have added as well that I am an academic researcher and do not have a commercial interest here. Indeed, I'm hoping that my position as an academic "outsider" of sorts will free me from some of the (justifiable) skepticism that has attended other efforts at building lists, surveying builders and so forth, by those "in the biz" or with some commercial stake in the process.

Ben

[AngryScientist]

so what is the actual question?

[JAGI410]

My guess is 2% of the US bike industry.

[echelon_john]

My bet is .001% by $

look at every bike pouring out of bike shops, sporting goods stores and mass-market retailers every saturday and days like Christmas Eve, and the dollars from handbuilt bikes are a flea on a flea.

[echelon_john]

Good article for context on the NBDA site.
http://nbda.com/articles/industry-overview-2014-pg34.htm


Excerpt:
Distribution Channels

Bicycle sales are accomplished in this country through five primary and distinct channels of distribution specialty bicycle retailers, mass merchants, full-line sporting goods stores, outdoor specialty stores, and "other," which is comprised of a mixture of retailers (including Internet sales). While sales were down in 2013 for each category, all were impacted equally in terms of their market shares.

Department, discount and chain toy stores (mass merchants) sell mostly price-oriented products. Approximately 75% of bicycle units were sold through the mass merchant channel in 2014, representing 31% of the dollars at an average selling price of $82. The market share represents a slight increase from 2013, while the average selling price fell by a few dollars.

The approximately 4,000 specialty bicycle retailers commanded approximately 14% of the bicycle market in terms of unit sales in 2013, but 50% of the dollars, a dominant dollar share. Dealer price points generally start at around $200, with the average at $714, though prices can range into the thousands. While the number of specialty bicycle stores has declined in recent years due to consolidation, they are responsible for approximately the same amount of business through these fewer (but larger) stores today. It should be noted that new bicycle sales represent about 47% of the revenue for the average specialty bicycle retailer, with parts, accessories, service/repair, rentals and fitness equipment sales comprising the rest. Specialty bicycle retailers as a group feature quality merchandise, and add value through services such as bike fitting, assembly, repair, and community involvement.

Chain sporting goods stores sold approximately 7% of the bicycles in 2014, and 9% of the dollars, at an average price of $255. These are merchants that fall somewhere between mass merchant and bicycle dealers on the spectrum, and include stores such as The Sports Authority, Champs Sports, JumboSports, Sportmart and Big 5.

Outdoor specialty retailers sold approximately 2.5% of the bicycles in 2014, representing 7% of dollars and an average retail selling price of $554.

The "other" category sold 1.5% of the units, representing 2.5% of the dollars, with an average price of $330.

[Mikej]

i see where you are coming from, but you would have to know the actual total number of new bikes sold each year and then define niche or set a frames per year or certain definition of niche builder. Then it's just 5th grade math once you have those!

[54ny77]

hundreds!

http://robertkaplinsky.com/wp-content/uploads/2013/04/drevil_cover.jpg

[peanutgallery]

I would say even less than that

QBP nets more in presta valve adapters in a single year then the entire handbuilt segment combined. If you had a few years of performance data I would be willing to bet that the highwater mark of the segment was 2005-2010.

That highwater mark of the handbuilt segment did affect the market in a big way though. Just take a look at the Specialized rod bike selection for 2016 - road, road disc, endurance, endurance disc, cross disc and variations there of. 10 years ago there was not nearly the selection or variation of road based bikes. Most are for a fairly good deal and available pretty much immediately. Specialized is selling them by the cargo ship-load and I'm sure everyone else is too

The handbuilt market will never go away, I think it;s just rightsized at the moment

My guess is 2% of the US bike industry.

[David Kirk]

I can recall a time I was talking with a Trek engineer while i was working as the head of R&D at Serotta. I told him we built about 2500 frames a year and he told me they made more than that per day.

Perspective is good.

dave

[landshark]

I mention at the end of the post that Townley has estimated the handbuilt segment as no more than 3% of the market....by which I believe he has in mind 3% of the "specialty" bike shop channel. As I say in my post, 3% of new bike sales at U.S. bike shops is still something around 75,000 units. However, those sales figures includes all wheel sizes, whereas the handbuilders are obviously focused on adult road and mtb bikes.

In an earlier post on my blog I went through the NBDA data which shows (and as echelon_john's link/post reiterates) that by unit output the handbuilders are indeed a "rounding error" (in BobbyJones' terms)!

Even once I account for the mid-size handbuilt shops with significantly higher output (e.g. the Seven, IF, CoMotion, Calfee, Moots, Waterford/Gunnar), it's hard to imagine including those shops will more than double my estimate of 4500 frames. Or, let's say it's 10,000 frames a year with all of these builders included...that's still tiny by the larger industry standards.

Ben

[landshark]

Yikes! And my impression is that Serotta at its peak was doing far more frames than Seven, IF, Moots or CoMotion might be doing today. But I might be wrong...

I'm turning next (as I note on the blog) to estimating the output from the mid-size and/or semi-production shops; it wouldn't take many shops putting out 1k-2.5k frames a year to quickly multiply by guesstimate of 4500-5000 handbuilt frames a year for the segment (again, excluding the mid-size higher volume shops for now).

Ben

I can recall a time I was talking with a Trek engineer while i was working as the head of R&D at Serotta. I told him we built about 2500 frames a year and he told me they made more than that per day.

dave

[bking]

a rounding error.

agreed. out three or four places to the right of the little .

[David Kirk]

Yikes! And my impression is that Serotta at its peak was doing far more frames than Seven, IF, Moots or CoMotion might be doing today. But I might be wrong...

I'm turning next (as I note on the blog) to estimating the output from the mid-size and/or semi-production shops; it wouldn't take many shops putting out 1k-2.5k frames a year to quickly multiply by guesstimate of 4500-5000 handbuilt frames a year for the segment (again, excluding the mid-size higher volume shops for now).

Ben

At its peak there were more like 3200 a year but that only lasted a few years. From what I've seen folks generally seem to want to believe that the numbers that custom shops are much bigger than they are.....but the reality is that even the big handbuilt guys are vey small in the big scheme of things.

dave

[SoCalSteve]

I can recall a time I was talking with a Trek engineer while i was working as the head of R&D at Serotta. I told him we built about 2500 frames a year and he told me they made more than that per day.

Perspective is good.

dave

And this was before the Lance Armstrong era of Trek, yes? Can you imagine how many times over that 2500 a day was when he was in his " peak " and people were buying them up left and right.

What was the saying : Win on Sunday, sell on Monday

[raygunner]

I posed a question in the recent thread about Geekhouse & their 2 year wait list. My question pertained to the current economic vibrancy of the handbuilt bike industry.

Not to drift the thread but any insight?

[oldpotatoe]

At its peak there were more like 3200 a year but that only lasted a few years. From what I've seen folks generally seem to want to believe that the numbers that custom shops are much bigger than they are.....but the reality is that even the big handbuilt guys are vey small in the big scheme of things.

dave

And many, small, one-two person builders are in the 75-100 frames per year.

I'd say the majority are like this, with 'a few' going to low mid 3 figures. I'd say look at their distribution..if direct to consumer, I'll bet small-ish. Double margin to keep lights on. Cannot cut margin hugely to allow bike shop to also have their margin.

[David Kirk]

And many, small, one-two person builders are in the 75-100 frames per year.

I'd say the majority are like this, with 'a few' going to low mid 3 figures. I'd say look at their distribution..if direct to consumer, I'll bet small-ish. Double margin to keep lights on. Cannot cut margin hugely to allow bike shop to also have their margin.

From what I've seen on this side of the wall I'd say your numbers are nearly double the real output.

dave

[FlashUNC]

A drop in the bucket?

[alancw3]

not a frame builder but was a cpa for many years and i cannot imagine a custom frame builder producing more than one frame a week week in and week out with all of the back office requirements i.e. marketing accounting and production etc. just don't see it. no custom frame builder is getting rich imho. and i could even see a custom frame builder having to do outside welding just to keep the doors open. i maybe entirely wrong but that is the way i see it.

[landshark]

I posed a question in the recent thread about Geekhouse & their 2 year wait list. My question pertained to the current economic vibrancy of the handbuilt bike industry.

Not to drift the thread but any insight?

I don't have much insight yet, based on anything systematic. My sense, from what I'm finding, confirms what a lot of old heads often argue: the segments within the "handbuilt" segment yield much different experiences, so it's difficult to actually talk about the "handbuilt bike industry" as a coherent object. A handful of builders might be doing very well (by comparative standards), another chunk are fine, and a big chunk are always struggling to make it work. While the first group and the third group are both "bike builders", the lived experience (and the business sustainability) is much different.

The big challenge here is also making comparisons over time. It's hard to enough to figure it out at one time point. Finding comparable measures over time is even harder!

From what I've seen on this side of the wall I'd say your numbers are nearly double the real output.

dave

Yes, while there certainly are a few single-builder shops producing in the 75-100 range, they are probably the exception. That's why, for my estimate of the hypothetical top-50 of professional builders I still stuck with a guess of an average of 50 frames a year.

What this all points to is needing another round of data collection with actual output as a variable (assuming a self-reported "frames per year" is valid; many builders I've talked with don't seem to have a very precise sense of this).

[jlwdm]

Alancw3, I am guessing you are right. Frame building is a business you need to be passionate about. Not a business to get in for the money.

Jeff