Category: Hard Times Ahead

Fear and loathing in the global economy.

The current rise and fall of the Global Economy is enough to make you reach for some Dramamine. With all the volatility surrounding pricing/ costs and ever-increasing leadtimes, it is enough to make many in the cycling industry wonder about their profession. But even though nearly all indicators look really bad, things might actually prove to be better than many of us have feared.

In a slumping world economy, it is certainly very easy to fear for the worst. After all, our potential consumers have less and less money to spend- if any at all. So why should we remain optimistic for even a second? Well, the economic squeeze has begun to cause a shift in the way people think of bicycles. I thought for sure that gas prices would have to climb much higher before people began to drive less and ride bikes more, but I am pleasantly being proven wrong there. I continue to hear from retailers and read about how repair business is increasing for many shops because people are pulling old bikes down from the rafters and out of tool sheds so they can drive less. Many retailers are even having a hard time finding replacement parts for older bikes because the demand has gotten so high for them, due to repairs. Those same retailers are also reporting that some of those consumers are coming back after a short while to upgrade the old clunker for something newer, lighter, better designed for their commuting needs. This is something that I personally did not expect to happen this soon. We still don’t possess the proper infrastructure to support proper commuting, but people are braving the rough streets to save a little money, improve their health or help the environment.

Consumers, who many of us feared would no longer buy bikes when the pricing increases went into effect, do not seem to be as sticker shocked as expected. Let’s face it, they are seeing prices go up on all of the things they buy and they have seen the dollar drop value against nearly every other currency, so they have come to expect the prices for everything to go up. It doesn’t mean they are happily accepting it, nor does it mean they are making the same planned purchases… but they aren’t all storming out the door without making a purchase. On top of it, many new consumers are walking in for the first time. Commuters and city cyclists are sprouting up all over the place. I’ve heard from retailers who have seen this shift taking place in their shops, seeing many new faces for the first time. Sure, some of these new or returning cyclists need a little more educating but they are walking in on their own and without us (the industry) having to drag them in kicking and screaming.

Cycling has also become much more fashionable, with plenty of celebrity bicycle sightings and an ever-growing urban hipster bike culture, it is becoming “cool” to ride a bike for the first time in decades in the US. I’m not trying to pass judgment on whether any segment or niche in the market is some sort of passing fancy or not, people riding bikes for any reason at all is a good thing in my mind (and in the minds of many of us in the industry). I mean, when you have bikes like this one showing up in the world- you know you’ve reached a certain tipping point. Many of these consumers will come in and spend a lot of money to look cool and then vanish from the market when they hop on the “next thing”, but there will be at least a small amount of retention of these new cyclists- especially if we embrace them and share our love of cycling with them and let them develop their own… even if we don’t “get it”.

As many of us have been screaming for years, cycling is also fun and enjoyable. Remember, in a bad economy, folks still need to have fun and others want/ need to escape their fears and worries. Riding a bike is incredibly good for that. Some of those new consumers might have been planning to buy a bigger car this year and might opt to save some money and buy a bike instead. Or, maybe, they want to escape the worry of their stock portfolio suddenly being worth less than a politician’s promises and riding a bike has popped into their heads. It has been seen in the gym/ health club world in the past; when things get tense, people want to work off their frustrations or fears by trying to get into better physical condition. For millennia, humankind has worked out frustrations, fears and anxieties by working up a sweat or taking the time to enjoy the outside world in some fashion. Cycling is an excellent vehicle for that.

When you take all the above into account and then toss in a growing global consciousness, things don’t look quite so bleak. Many people are thinking very much about the environment and fears of global warming, as well as the impacts of oil demand on sociopolitical issues across the globe. Cycling provides an excellent way to combat these concerns as well as local concerns about traffic congestion, etc. It’s an altruism, certainly, that many people say they believe in and don’t really- but altruism has also become fashionable… as it has been for countless decades.

So what does it all mean? Well, on the very surface it all means that things aren’t necessarily as bad as feared. More significantly though, I’m trying to point out that the bike industry sits poised to see growth that is actually sustainable and maintainable. I can not tell you how many conversations I had during Interbike this year about the hope many retailers felt about the future. Sure, there were many concerns about the economy, but overall the atmosphere was full of hope- much more so than recent years, by a huge amount. The cycling industry is paying better attention to the birth and growth of niche markets as well as the development of the commuting market. Nearly every bike manufacturer had a fixed gear bike and/ or a commuter bike in their line. And almost all of the clothing and accessory manufacturers had gear aimed at urban cyclists and commuters. I’ve never personally seen so much energy aimed at these segments of the market and the consumers who use the products. Hell, Interbike even put on the Urban Legend Fashion Show with the help of my friends in Canada at Momentum Magazine. When was the last time you saw or felt so much energy in this segment of the industry? I never have and I’ve been in the industry in one way or another for 26 years now.

It might not look or feel like it, as you watch the news and listen to the politicians painting a picture of doom and gloom, but the cycling industry stands on the precipice of fantastic potential if we just listen to our customers and friends. As long as we are aware of what is happening and what they are asking for- even if they don’t yet know what it is- we can bring them into our club and they will hopefully bring their friends along for the ride as well. I’m not advocating false hope or idiotic optimism beyond reality, but I do see great potential for cycling in general. The race scene will have its usual ebb and flow and I’ll be right there watching it, but the other categories of the cycling market and cycling culture are looking really primed for growth and expansion… and fun.

Let’s not lose hope too soon, even as worldwide money markets look very frightening. Things look better than expected. Even pricing concerns seem to be diminishing slightly as oil prices come down to match dropping demand and shrinking economies. Strap on your helmets; it’s an open road ahead.

Tim Jackson
Chief Kool-Aid Dispenser

It ain’t all doom and gloom…

My post from the other day, on 3/26, may have inadvertently painted an overly pessimistic picture of what I think is happening in the cycling industry. For sure, the industry faces some very real and serious challenges in the coming year (or more). All of the reasons I pointed to in the post- rising costs of goods, extended leadtimes, a shrinking US economy, etc – are very real and are not going away over night. However, I do see hope…

Historically speaking, the cycling industry has ridden out massive changes in the US economy over the years. If the economy dips sharply or even climbs dramatically, the US (and global) cycling industry tends to plug along at roughly the same level of strength (that’s both good and bad). We tend to simply float along down river without hitting too many rocks- regardless of the water level.

Here are a couple scenarios;
Good economy– People buy expensive bikes because they have more disposable income. During the dot-com boom, many shops found out that they could actually make some money selling high-end road and mountain bikes. It was a good time for shops that catered to a more affluent crowd. At the same time, many people were beginning to “think green” and the bicycle has always been a favorite of that crowd. More city bikes were beginning to crop up all over the place. Commuters were becoming an important part of the business for many retailers and manufacturers. Then there was that Lance guy who had a penchant for winning 3-week long races in France in July. His first win was in 1999 and it helped to catapult the US road market to new and unheard of heights (even though the mountain bike market didn’t do quite as well). The folks at Trek can tell you how good that was for them… and it was good, in case you’re wondering. Overall, during a strong economy, the bike industry draws in a few new riders to the fold and the regulars have a little extra coin to spend on a new bike or a few fancy upgrades or accessories. Basically, things plug along nicely and maybe a few folks make a nice little profit, but things don’t go up too dramatically.

Not-so-good economy– During a flat, weak or faltering economy, the US bike market doesn’t do too much differently than when things are good with the economy. Some of the regulars are no longer in a position to buy an expensive new rig, or maybe make the mega-upgrades so they end up making more conservative upgrades or maybe buy a new pair of $175 bib shorts instead of the $325 bib shorts and a new pair of super-nice carbon-soled wonder shoes. But, in their place walks in the consumer who is maybe giving up on the idea of getting that new Escalade or H2 and still wants to get themselves something unique and special… maybe something like a new full carbon bike with that new SRAM Red group and new Zipp wheels. Still cheaper than a luxury SUV, gets better gas mileage and even feeds the need to lose a few pounds. On that consumer’s heels walks in the person who is so mad about gas prices that they have chosen to ride a bike the 5- 10 miles to work. Or maybe they’re a starving college student without enough spare money to burn on gas, especially with tuition climbing and books getting more expensive. Essentially, the industry doesn’t fall apart and business for a few shops is better than ever while a few others might have a harder time than their competition.

So see, it sounds pretty similar either way. Here’s the thing- the industry always gets a few new shops each year and loses a few shops each year. New consumers enter the market, for various reasons, and some of the regulars depart. New strong niches show up all the time and the ones that have become saturated with too much product fade out of popularity. It ultimately stays roughly the same, regardless of the major economic swings.

Our challenge now is to draw in more people from outside of our existing customer bases. We need to embrace more commuters and Average Joe riders- there are far more of them than there are those guys who are going to walk in and spend a ton of money on a high-end bike. We also need to reach out to the aging population of Baby Boomers. We all know that they represent a huge mass of consumers and they want to remain fit and active. Cycling represents a great activity for them- low impact, great aerobic benefits and something that can be done in small or large groups. On top of that, many people are getting more and more concerned about the health of the planet and the impacts of global warming. Cycling is once again an ideal way for people to help the planet while helping themselves by saving money on gas and improving their health at the same time. BUT… and this is critical… we have to help them find safe places to ride. Without safe roads to use for their commuting needs, many folks will give up on cycling the first time a Starbucks-wielding, cell-phone-talking, distracted driver buzzes by inches from their shoulder.

The cycling industry, though faced with numerous challenges, has many ways to grow its health, even while the US economy staggers along like a drunken and penniless frat boy after a night of binge drinking. Sobriety will come in the form of figuring out how to cater to those who still want to buy our products, reaching out to new consumers, embracing the less glamorous commuters/ tree-huggers and working to provide more and safer cycling infrastructure for all. Sure, it won’t be easy and it won’t even be free, but it will lay the foundation for a stronger industry that can grow even further when the economy does eventually turn around again. “This too shall pass…” But we can do more than simply surviving through the usual status quo- we can grow and create a better future.

Tim Jackson
Chief Kool-Aid Dispenser