Podcast: How did the bike industry get into such deep trouble?

[capt_velo]

Is anyone else listening to the "How did the bike industry get into such deep trouble?" podcast? I find all the details that they present fascinating. For example, at one point, SRAM had 2 billion dollars in open orders at one time.

We all probably have a good idea in general about the supply issues, but I really enjoy the deep dive.

[glepore]

Originally Posted by capt_velo

Is anyone else listening to the "How did the bike industry get into such deep trouble?" podcast? I find all the details that they present fascinating. For example, at one point, SRAM had 2 billion dollars in open orders at one time.

We all probably have a good idea in general about the supply issues, but I really enjoy the deep dive.

Yeah, its pretty good. I haven't really liked Wade's other podcasts, but enjoying this series.

[AngryScientist]

Thanks for the heads up. I've got some trainer and treadmill time coming up, may give it a listen.

[mcteague]

The fact that some bike companies thought the bubble would not burst blows my mind.

Tim

[capt_velo]

Originally Posted by mcteague

The fact that some bike companies thought the bubble would not burst blows my mind.

Tim

The 80% retention rate was pretty absurd too.

[prototoast]

I've listened to the first two episodes. Some of the anecdotes are interesting, but it's also told from the perspective of a lot of people who can't see the forest for the trees.

There was an unprecedented rise and fall in demand for bicycles, for reasons outside of anyone in the bike industry's control, and the appropriate response was for the bike industry to expand and contract as well. Getting the timing just right was always going to be challenging, but there's no reason to think that a short-term contraction, which we're seeing now, could or should have been avoided.

The fundamentals of the industry are still there, and many companies in the industry are doing well. The companies that seem to be struggling the most seem to be the ones that maybe weren't the best run before the pandemic, and it might be better for the industry in the long-run for them to be gone. I'm sure it hasn't been easy to be working in the industry over the past few years, but that doesn't mean that anything is wrong. And the podcast does seem to be cherry picking stories of struggle--we hear about an unspecified party who can't sell a container full of goods because a competitor got their container a few days earlier and cleared all the orders--but we don't hear from that competitor.

I think it's interesting to hear these different perspectives, but I also wouldn't take all the testimonial evidence at face value.

[5oakterrace]

Terrific podcast. Fascinating to me. I am not in the industry but follow it a bit out of interest. My understanding from other reading is that BMC just asked the Swiss. government for support. We know about Wiggle. Supposedly, Pon, or Trek or Specialized owes 100s of millions to a manufacturer (I would guess Giant) and one owes millions to a group set provider. Now .... the latter two issues may not be " out of the ordinary." I suspect the spring buying season will be critical and if it does not pan out we may see further problems. That some bike prices are permanently "on sale" these days says something. The prediction from bike industry news is that the decline, so to speak, will last though 2024. Companies may need big lines of credit to manage that.

What struck me about the podcasts, to dovetail on what the previous poster noted, was that it was Shimano that seemed to have some discipline not to overproduce. Yet their sales are down by 25 percent? I do not recall the exact percent.

All this will affect new bike prices and then used bike prices. For instance, I just received a 20% off note from Lynskey. Received one a few weeks ago as well. I am a newbie to this world, but 20 percent off on what seem like already low prices ... Nice deal if you are in the market.

I purchased a Time frameset from an lbs at 65 percent off. Granted it is a year or two old, but great for me. I have seen the same frameset from another lbs at 20 percent off. And the same frameset used on some used bike site for $500 more than what I paid for new . Seems like it is truly a buyer's market if you are willing to shop around

[jimoots]

Originally Posted by prototoast

I've listened to the first two episodes. Some of the anecdotes are interesting, but it's also told from the perspective of a lot of people who can't see the forest for the trees.

There was an unprecedented rise and fall in demand for bicycles, for reasons outside of anyone in the bike industry's control, and the appropriate response was for the bike industry to expand and contract as well. Getting the timing just right was always going to be challenging, but there's no reason to think that a short-term contraction, which we're seeing now, could or should have been avoided.

The fundamentals of the industry are still there, and many companies in the industry are doing well. The companies that seem to be struggling the most seem to be the ones that maybe weren't the best run before the pandemic, and it might be better for the industry in the long-run for them to be gone. I'm sure it hasn't been easy to be working in the industry over the past few years, but that doesn't mean that anything is wrong. And the podcast does seem to be cherry picking stories of struggle--we hear about an unspecified party who can't sell a container full of goods because a competitor got their container a few days earlier and cleared all the orders--but we don't hear from that competitor.

I think it's interesting to hear these different perspectives, but I also wouldn't take all the testimonial evidence at face value.

I took a similar view, in that it is quite interesting to hear the anecdote and get a little look under the hood of how the industry functions.

Stuff like the incentives of some sales reps combined with desperation of shops to get their hand on any stock leading to phantom orders is stuff I hadn't really considered or seen discussed at length previously.

I am sure the stories of struggle are as isolated as you may think - as the guy from QBP said... SRAM blindly sent out millions of dollars of orders that were years old.

I do have trust that Wade would have had extensive discussions with a wider network than what we are being exposed to. That is, a lot of stakeholders in and around the industry do not want to put their take on the record.

Like you, I do take with a grain of salt some of the commentary from interviewees. But overall it seems to be well considered and thoughtful.

[AngryScientist]

Originally Posted by 5oakterrace

What struck me about the podcasts, to dovetail on what the previous poster noted, was that it was Shimano that seemed to have some discipline not to overproduce. Yet their sales are down by 25 percent?

It looks to me like over the last couple of years Shimano really tightened up their ship.

We used to be able to buy grey market Shimano parts from overseas easily, which to me signaled that Shimano was running fast and loose with their distribution channels. That all ended not too long ago, and the days of buying dura ace pedals for pennies on the dollar from the UK are long gone. That probably means they shrunk their overall production slightly but gained better control over pricing and distribution.

That's just an outsider's uneducated hunch, but seems to be what happened and probably a smart move. Probably included some clearing of house of people who facilitated such grey market practices too.

[FriarQuade]

When it comes to Shimano they've got nearly a century of sales history to draw on. They know that if sales move more than 5% in a given year that it's a blib and not to plan on it sticking around. Big manufactures also struggle to wind production down though, you build them with a certain thru put in mind and if you fall too far below that it gets ugly. Which explains the gray market product in the past.

[jimoots]

Originally Posted by FriarQuade

When it comes to Shimano they've got nearly a century of sales history to draw on. They know that if sales move more than 5% in a given year that it's a blib and not to plan on it sticking around. Big manufactures also struggle to wind production down though, you build them with a certain thru put in mind and if you fall too far below that it gets ugly. Which explains the gray market product in the past.

I agree. Shimano have the history and cultural discipline (some might call it risk aversion).

Question. Was grey market a function of overproduction?

I always saw it as a few opportunistic players that identified the opportunity to get product via always-existing OEM backchannels and then sell that product at serious scale using e-commerce.

And then, the whole thing being pretty novel, it took a few years for feedback mechanisms to force some changes in distribution.

Or did Lance's transgressions really kill cycling off so much that a glut of cheap groupsets and wheels hit the UK retailers in the early 2010's? (Slightly tongue in cheek re: Lance)

[bikeboy1]

I think its been a couple years or more now that Shimano has put the geo restrictions on parts and Sram followed suit not to long after that. There are still a couple shops in the UK that will send Shimano and Sram across the pond. I did order a Sram Force FD from one of them a day ago and not to sure that they are going to send it as the order is just sitting there but they havent said no yet. I did find that the Sram Force rimbrake brifters were hard to find at least onsale which leaves me to believe they havent overproduced on those parts and obviously the days are numbered on rimbrake parts coming out of Sram. I also ordered a D1 Force RD locally onsale and it was supposed to be free shipping on items over $200 but I was charged for shipping. I replied to the purchase email asking what was up and they said it is free on softgoods but they also said they are making a very small margin on that part when onsale. D1 is now surpassed by D2 so it is old stock that has been sitting for some time.
Seems to me the timing of shutting down the rimbrake market on the higher/middle end of sales and forcing the disc market on us when Covid hit might be biting them in the ass somewhat. I have both rim and disc but find myself buying Sram AXS levers now to keep my bike and the wifes old etap going as the D1 AXS levers are backward compatible with old etap. As much as I feel the industry is getting somewhat shafted from Covid and mismanged I also feel that those of us that wanted to keep our rimbrake bikes going are also getting shafted.

[Clean39T]

I've thoroughly enjoyed both. It's like NPR - but a topic I actually care about..

[fa63]

This sums up my feelings towards it pretty well, though I do think the industry could have done better by doing more critical thinking during the boom. But bike shop employees are humans too, subject to all the biases and irrational behaviors (fear of missing out is a powerful motivator). It also doesn't help that there is huge turnover in the industry (people who have been through previous boom cycles are mostly out of the industry now), and that the industry has a history of doing a terrible job of forecasting demand (though this is not unique to the bike industry) except some companies like Shimano.

The shop that I helped manage through the pandemic is owned by someone who has been in the business for several decades. We were also pressured by our sales reps, many of whom work on commission (unlike QBP reps who are salaried), to buy as many bikes as possible (totally rational for them, since that is how the economic incentives are set up). We simply said "no thanks" (even knowing that we could cancel after the initial order) because after the initial craze, it was apparent looking at our own data and keeping in mind past trends that this was another boom (the shop owner with several decades of experience helped here) and demand was going to fall off. Two of our brands basically threatened to drop us for not putting in bigger orders (but then they didn't). Another LBS owner that I am good friends with took the same approach. Both shops are doing great still, while we have watched several shops around us close down. I would question the judgement of any shop manager that caved in and ordered double what they normally would, but again, FOMO is real.

Originally Posted by prototoast

I've listened to the first two episodes. Some of the anecdotes are interesting, but it's also told from the perspective of a lot of people who can't see the forest for the trees.

There was an unprecedented rise and fall in demand for bicycles, for reasons outside of anyone in the bike industry's control, and the appropriate response was for the bike industry to expand and contract as well. Getting the timing just right was always going to be challenging, but there's no reason to think that a short-term contraction, which we're seeing now, could or should have been avoided.

The fundamentals of the industry are still there, and many companies in the industry are doing well. The companies that seem to be struggling the most seem to be the ones that maybe weren't the best run before the pandemic, and it might be better for the industry in the long-run for them to be gone. I'm sure it hasn't been easy to be working in the industry over the past few years, but that doesn't mean that anything is wrong. And the podcast does seem to be cherry picking stories of struggle--we hear about an unspecified party who can't sell a container full of goods because a competitor got their container a few days earlier and cleared all the orders--but we don't hear from that competitor.

I think it's interesting to hear these different perspectives, but I also wouldn't take all the testimonial evidence at face value.

[vertr]

Originally Posted by 5oakterrace

All this will affect new bike prices and then used bike prices. For instance, I just received a 20% off note from Lynskey. Received one a few weeks ago as well. I am a newbie to this world, but 20 percent off on what seem like already low prices ... Nice deal if you are in the market.

Lynskey's model is to constantly have sales, so it's mostly a matter of how good of a sale is on when you are purchasing. I find that model pretty annoying and would prefer they had a lower standard price and had less frequent sales. Then again if I were to buy a ti bike I would probably opt for a higher end brand.