I’ve now had two YouTube videos pop up suggesting that the bicycle industry is totally screwed right now. One is from GMBN and references the insolvency of the parent company for Chain Reaction and Wiggle. Something about a $100M loss for the online retailers for last year.
The other was by a shop owner who says his slow season (Florida) was the slowest business has ever been. He says the used market for bikes is also the strongest ever and that nobody is buying new mid range bikes. There are some really sensationalist words like collapse being used. How severe is this and will it be good for consumers?
As someone in the market for a bike, I don’t see why anybody would buy anything new. You can get like new used for 20 cents on the dollar. You really don’t even need to spend more than $1,500 to buy a top of the line used race bike. Is the bicycle industry totally screwed right now? If so, what brands will be MOST immune, BEST capitalized, and thus most likely to be around? I would rather buy a bike with a brand that’s not about to go under.
Hell I saw a Premier Tactical in the Classifieds for like $800. There are so many Cervelos also that pop up on eBay with Zipps on them that go for $1,000 to $1,200. No you aren’t going to get the absolute latest disc brake bikes but they do not appear to be really any faster at all.
Yeah direct to consumer killing bike shops, high prices with no service, difficulty to make distinguishing quality, too many different bikes in the lineup…
My LBS is doing very well. He became a seller of a top MTB brand this year and has sold about 30 $6000 bikes. He has a strong service business and lots of parts and accessory sales.
It’s cause bike prices have gotten absolutely astronomical. No person with a right mind would spend $4k for an entry level triathlon bike. Bikes are really gimmicky too, like they start putting disk brakes on tri bikes so if I bought a new bike, I’d also have to buy new wheels. My old bike and wheels work perfectly fine.
I think the bike brands that will stick around are cheap direct to consumer and Chinese brands. I got a cheap direct to consumer gravel bike for training. I love the thing, it was $800 and I’m running 2.6in mtb tires in there. Literally everything about the bike is good and it was $800. Someone could make an aero aluminum tri bike for $800 and I’m sure people would buy it. I’d imagine you could make some kind of aero tubes with aluminum that’s probably only like 2w different. Maybe they could do it like a jet wheel where there’s a structural aluminum part and a cheap fairing.
Feels to me like an industry correction. Covid really through a wrench in the spokes of the bike industry. My non-expert thoughts are this. The big players will weather the storm, either through their own capital or from selling into a larger conglomerate. The online retailers who rely on higher volume/low margin, ie: CRC and other one that offer loads of discounts will suffer the most.
I feel like Trek, Giant, Canyon, Orbea are strong contenders to keep trucking along.
The mid and high cost bike industry in the USA is something like :
15 % selling bikes to cyclist (people who race, commute or train)
35% components and repairs (mostly to cyclist)
50% selling expensive bikes and clothing to people who will rarely use it.
It’s a really unstable business model…
And all of parts of this are currently contracting.
The bankruptcy of Chain Reaction/Wiggle is likely a net positive for the bike industry. It will cause short term pain at the supplier level, but removing that huge source of grey market and loss leader/very low profit product from the marketplace will really help rationalize pricing, and make it easier for dealers and even distributors to offer competitive prices. It’s also likely to act as a disincentive for other players to pursue their business model, or, perhaps more accurately, as a serious impediment to outside investment in similar efforts.
This doesn’t mean the bike industry isn’t facing some serious challenges, but the Signa Sports collapse is really the bike industry equivalent to what is happening in the media world, with the end of the “Great Streaming Era”. We’re no longer in the low interest rate environment that enabled these businesses to prioritize scale over profit, and investors aren’t interested in playing that game anymore. I expect we’ll see a similar pattern of (even greater) consolidation at the large player end of the spectrum - where those with the capital look to find good deals, and can self finance, or still have access to relatively cheap financing - and more niche specialization at the small scale side. It’s probably going to be really tough to hang somewhere in the middle.
Newer bikes are expensive and borrowing money isn’t cheap anymore. Money is tight with consumers right now because of the high cost of living and inflation. We’re forced with the decision to dip into our savings to make a large purchase or put it on a credit card with a high interest rate if it doesn’t get paid off… That leads to tough decision if a purchase such as this is warranted. Same goes for vehicles right now. No one wants to buy a car unless they have to.
If you take a look around transition you’ll see a variety of bikes, everything from mountain, road, gravel, etc. Lots of Tri bikes with 23c widths, manual shifting, rim brakes. Gator skins are a popular option for those who aren’t thinking about an age group placement but are worried about flats. Yes there are high end $10k+ bikes there also, but these are on the right tail of the bell curve.
Can you elaborate on why they’re considered grey market ?
The bankruptcy of Chain Reaction/Wiggle is likely a net positive for the bike industry. It will cause short term pain at the supplier level, but removing that huge source of grey market and loss leader/very low profit product from the marketplace will really help rationalize pricing, and make it easier for dealers and even distributors to offer competitive prices. It’s also likely to act as a disincentive for other players to pursue their business model, or, perhaps more accurately, as a serious impediment to outside investment in similar efforts.
This doesn’t mean the bike industry isn’t facing some serious challenges, but the Signa Sports collapse is really the bike industry equivalent to what is happening in the media world, with the end of the “Great Streaming Era”. We’re no longer in the low interest rate environment that enabled these businesses to prioritize scale over profit, and investors aren’t interested in playing that game anymore. I expect we’ll see a similar pattern of (even greater) consolidation at the large player end of the spectrum - where those with the capital look to find good deals, and can self finance, or still have access to relatively cheap financing - and more niche specialization at the small scale side. It’s probably going to be really tough to hang somewhere in the middle.
Can you elaborate on why they’re considered grey market ?
The bankruptcy of Chain Reaction/Wiggle is likely a net positive for the bike industry. It will cause short term pain at the supplier level, but removing that huge source of grey market and loss leader/very low profit product from the marketplace will really help rationalize pricing, and make it easier for dealers and even distributors to offer competitive prices. It’s also likely to act as a disincentive for other players to pursue their business model, or, perhaps more accurately, as a serious impediment to outside investment in similar efforts.
This doesn’t mean the bike industry isn’t facing some serious challenges, but the Signa Sports collapse is really the bike industry equivalent to what is happening in the media world, with the end of the “Great Streaming Era”. We’re no longer in the low interest rate environment that enabled these businesses to prioritize scale over profit, and investors aren’t interested in playing that game anymore. I expect we’ll see a similar pattern of (even greater) consolidation at the large player end of the spectrum - where those with the capital look to find good deals, and can self finance, or still have access to relatively cheap financing - and more niche specialization at the small scale side. It’s probably going to be really tough to hang somewhere in the middle.
Because he doesn’t believe in the first sale doctrine and only wants a selectively free market.
Can you elaborate on why they’re considered grey market ?
If/when you buy something from a seller like Wiggle/CR and it comes in OE packaging it’s a product that was originally sold to a bike manufacturer at OE cost, to be used in the assembly of a complete bike. It has long been a practice of some manufacturers to order excess inventory with the intention of offloading some portion of these purchases to retail outlets, who then sell to consumers. These are grey market products. They were not originally intended for retail sale, they are often not packaged for retail sale and do not include all documentation or parts that would be included in a retail product. In some parts of the world, manufacturers are allowed by law to prevent sales of this type, or refuse to extend warranty protection to these items. In other parts of the world, this is not the case. Internet commerce has afforded a competitive advantage to sellers located in parts of the world where these practices can not legally be constrained by allowing them to sell into parts of the world where they are constrained, and undercut the price points attainable to those operating in a more controlled market.