My very good friend, and sometimes “boss”, Patrick Brady has recently penned a pair of posts at his wonderful website, Red Kite Prayer. He’s a smart guy, with an incredible talent for finding words that get to the heart of the topic, and in the case of the two pieces recently, they are uncomfortable topics within the broad scope of the cycling “industry.” I say “industry” because these issues impact manufacturers, media, consumers, athletes … every aspect of the business, sport, and activity of cycling.
Patrick calls out the fact that bringing these topics up is akin to touching the third rail of the subway, and he’s right. But it needs to be done. Again and again. One of my favorite musicians is Colin Newman, front man of 70/80’s punk/techno band Wire. In 1986, he released a solo album called Commercial Suicide. It’s one of my favorites. Maybe I’m playing with professional suicide (again), but it’s worth the effort to save us from ourselves.
It’s a very uncomfortable truth that sexism is alive and well in our “industry.” We’re no different than any other industry, agreed. Sexism is still rampant throughout every facet of our culture and society. Humanity has a problem with sexism. That said, that does not mean we should continue to institutionalize it or not fight against it within our little world. It’s also true that the overwhelmingly white, and male demographic of the “industry” is not unique to us. And it’s also true that as you migrate down price range, the demographic is much more diverse. But, the marketing of the sport/ lifestyle, the demographic of the industry itself, and the leadership of the sport is largely white, male, and getting older.
Let’s say we bring in new and diverse consumers to cycling. Many join our party all on their own, not because our marketing or outreach was effective. A hispanic woman buys a bike at Target, or even Wal Mart. She rides and decides she likes cycling. She then visits an IBD to see what her next step up might be. The IBD world is largely male- regardless of skin color. Maybe she picks up a magazine in the shop, and thumbs through the pages. As a woman, especially a woman of color, she is very unlikely to see anybody who resembles her. Let’s swap “hispanic female” for “black male” and the story is nearly identical. There are a few excellent examples of black men in the sport and business, but they don’t exactly make it into print ads that might help to paint a more diverse image. These examples are grossly oversimplified, but they’re still real.
We have a problem. “We”, meaning the cycling business (and especially in North America), have made a (bad) habit for decades of mostly trying to sell more bikes to an existing consumer base, especially at the upper end where nearly all of our marketing dollars are spent. The obvious problem is that those consumers are getting older, their garages are getting full, and their numbers are dwindling. If we simply look at sustainability and commercial viability- profit- it makes lots and lots of sense to do a better job of trying to grow that consumer base, while at the same time working harder to retain the ones who wander in on their own. Target and Wal Mart, as examples, get badmouthed by the IBD for many reasons (some of them accurate), but we should really be thanking them for creating new consumer opportunities for the rest of us. They are helping those of us who work in/ with the IBD network. And, you can also spread that to online retail as well. Many consumers who do not prefer IBD shopping, still wander in with boxes of parts and questions. We need to embrace each of them because they represent potential and hope.
I don’t pretend to have all the answers. If I did, I’d be making lots more money. I am passionate about cycling, at all levels. I love this “industry” to my very bones. And I feel blessed to have been a part of it for so many years, and to have made the innumerable friends that I have. All of us are lucky.
We can do better. We can be better. We can be more creative. Selfishly, we have to … or “we” will be more irrelevant than we are already in danger of becoming. A less sexist, more diverse cycling world is good for us all.
Chief Kool-Aid Dispenser
The hot, sweaty, dust of Interbike 2013 has now mostly settled… in a sticky mess of spilled, over-priced, “free” beer and delusional dreams. The show’s much anticipated and over-hyped move from the Sands Convention Center at the Venetian, to the Mandalay Bay and it’s convention center, was the biggest topic of discussion… followed closely by the questions, concerns, and curiosity surrounding the “Interbike by Invitation” pseudo consumer day. And, well, as is tradition, the yearly bitch session about “why the hell are we in Vegas AGAIN?”
Interbike, for all its warts and itchy rashes, is still THE North American cycling trade event of the year. The original premise and purpose of the show was to connect brands to retailers, so the brands could sell products/ services to retailers. Over the years, thanks to the ever-shifting product model year and earlier shows like Eurobike, Interbike has morphed into something else… though nobody is quite sure what it IS now… or they’re just not willing to admit what it isn’t. With numerous brands, well, nearly all, asking retailers to commit to “preseason” orders as early as July, September has become a nearly useless date on the calendar for a “sales” event. Don’t get me wrong, there are still some folks still doing business during Interbike, but it’s not at all like it was in years past. Not even close. The days of driving/ flying back from Vegas with a large stack of orders handwritten on paper order forms, then hurriedly entered into the “order system” at the office, with special care given to protect order priority, are LONG dead. Still, Interbike serves a purpose as a sales show, especially for smaller brands that are looking for new retailers. There’s no greater chance within North America to meet and talk with so many potential retailers. Interbike is still, king of the castle in that one regard… but is that enough to justify the incredibly huge expense? There are many CFOs who would emphatically suggest NO. And, with Interbike moving ahead another week earlier in September next year, it will be less than two weeks after Eurobike, meaning some brands will have to make some very hard choices about which of the two shows they will attend.
The opening salvo of Interbike, the OutDoor Demo, is perhaps one of the few things that really matters anymore- in many ways. For smaller brands, again, it proves to be the very best opportunity to showcase your product’s worth. If a retailer has the chance to ride your bike/ test your product and is impressed, it could be “the thing” that changes their minds and opens their wallets. Many brands over the past 5 years have either shrunk their indoor presence, or eliminated it altogether, in favor of larger and better OutDoor Demo presences. Bootleg Canyon, in Henderson, provides some great trails- though potentially very dangerous and challenging (I didn’t see the medevac chopper once this year though)- for evaluating MTB models, and the nearby roads and fantastic bike path network around Lake Mead provide ample road bike (or e-bike) testing options. The desert is hot, dry, and miserably windy sometimes in September, so it’s not the friendliest place to test a bike. But it’s pretty functional. BUT… would somewhere less hot, dry, windy, and dangerous be better and create even more excitement?
The new footprint at Mandalay Bay was equally crappy/ challenging/ wonderful for most brands. Some of the smaller brands with smaller booths got completely hosed by the incredibly crappy overall situation with columns all over the show floor and in booth spaces. Interbike graciously offered a discount (though pennies on the dollar) or other advertising “trades” to compensate for the columns… but for some brands, the columns simply destroyed their booths. Luckily for me and the company I work for, we already had a tower built into our booth design. It provides storage for our sales materials and other booth supplies, so we were able to build the tower around the column… losing nearly all of our booth storage in the process. But we were able to greatly minimize the visual impact on the display… thankfully. Had we not had such an element already built into our design… it is entirely possible my limp body might have been found dangling above the show floor… if I could’ve afforded the GES fees for the crane and harness.
With the move, nobody knew what to expect and the floorplan was almost as anticipated as a new iPhone release. When we first saw our booth placement, we were pretty excited because the map showed us near the front entrance. Only later we learned we were in the back end of Hall D, once Interbike realized that what they thought was the front door was actually the back door. We got lucky again, as we were just a few feet away from the Paddock outdoor demo/ booth/ food/ music stage area. The paddock did seem to create a bit of traffic flow, thanks to the increasing curiosity around e-bikes. With an e-bike test track in the melt-the-soles-of-your-shoes heat of the asphalt paddock area, there was a shocking amount of people venturing outside of the air-conditioned show area. Thanks to the heat, I’m sure Mandalay Bay sold more $6.00 bottles of water than they might have otherwise. Ah, the refreshing taste of Capitalism!
Over the course of the three days, I heard plenty of grumbling about how confusing the show layout was. And it was very confusing. However, before we sharpen our pitchforks further, it would’ve been nearly impossible for Interbike to make any significant changes without grumbling… because we’re lazy creatures of habit and don’t like change. The layout was truly confusing for many, regardless, and I heard numerous apologies for being late to appointments because “I was lost/ couldn’t figure out where to go.” Maybe it’ll prove to just be a first year hiccup… maybe it won’t. But we’ll be there again next year, like it or not.
Then, there was the much anticipated and even greater feared Consumer Day, aka Interbike by Invite. The premise was that retailers would have the ability to invite their best consumers to the show, as the official, invited guests on the final day of the show. In years past, the last day of the show has been pretty dead and most brands began tearing down their booths early to get out of the show as fast as possible. With a Consumer Day, one of the hopes was that there would be a reason for exhibitors to stick around until the end of the day. The passes to the show sold for $50, for a chance to squeeze saddles and sniff spokes… a Bike Nerd’s dream! BUT… turns out that $50 to sniff spokes on Friday, skipping work, didn’t have the appeal some thought. And even less appeal for retail consumers from out of town. One of the many rumors circulating was that only 72 passes pre-sold before the show began. The weekend Gran Fondo riders were given free passes to Interbike. Additionally, passes were given to anybody who attended Wednesday night’s CrossVegas CX races. Another popular rumor was that Interbike allowed passes to be given away at a local 5k running event… just to get some bodies. In the end, the post-show numbers stated that about 750 consumers attended. Less than 1000 consumers to the largest cycling product event in North America. Personally, I saw anywhere from 8- 12 of the special golden name badges. Of those, only a couple of the people appeared to be actual cycling enthusiasts. The others were clearly there either on a bet or out of morbid curiosity- “what do you mean that bikes costs $8,000?” So, it seems pretty safe to assume (for me), that Interbike by Invitation was an underwhelming flop. More than a few of the retail buyers I spoke to on Wednesday and Thursday said they were not going to be at the show on Friday, just to avoid the possible circus of a consumer day. In the end, that particular circus did not arrive and the retail buyers were gone, so it was sadly the quietest final day of the show that I have ever seen. The good news is, for me anyway, none of our products were stolen in a tidal wave of consumers- as many folks had expressed fears of.
Then there’s the venue; Las Vegas. I hate going to Vegas for the show. I’ve been doing it for too many years now and I simply don’t think it’s the right place- the casino environment, not the actual city and people- to showcase our industry. On a lot of levels, Vegas is perfect; cheap hotels (sorta), cheap flights and international access, myriad food options (sorta, and if you’re willing to wait many times), and enough floorspace to have the entire industry under one enormous roof. We, as a North American industry, bitch endlessly about the potential inconvenience of having the show elsewhere. Yet we’ll gleefully hop on a plane, fly to Germany, get a hotel an hour (or more) away from the show venue, and walk from show hall to show hall to show hall to Zeppelin hangar at Eurobike. Kinda begs an enormous WTF? I’d be thrilled to see the show move to Salt Lake City, Boulder/ Denver, Seattle, Minneapolis… anywhere. Sure, I’m willing to accept a few inconveniences, like having to walk a little farther from one hall to the next, or even drive- instead of walk- from my hotel to the show. There just needs to be a much more significant change in venue for Interbike- more than simply moving slightly down the strip in Vegas. One of the amazing ironies is that every year we collectively complain about returning to Vegas for the show, yet when options are offered, Vegas remains the favorite. Again… WTF? In my ever so humble opinion, if this industry is to break out of its flat growth conundrum, we need to grow up, drop the party-boy “WOOHOO VEGAS” mentality and put on our Big Boy Pants© and grow up. The casino world, with the overt sexism and overly abundant booze, helps to hold the industry back from increasing its value and potential. Slowly, but surely, we’re getting more and more very strong women in the industry- which has been LONG overdue- and we’re getting more professional business people exploring the industry. Showing up to the show and seeing an expansive sea of red-eyed, hungover faces, and hearing tales of strip clubs in the booths is just preventing real growth, and overdue change.
So, where do we go from here? How do we “fix Interbike?” Where should we move the show to? What city has the magical unicorn-pegasus-leprechaun ingredients of airport, hotels, restaurants, show space, and demo venue? Will people be willing to step outside of what they have known for several years? How do we add a tangible consumer day? Do we make the show straddle the weekend to attract more consumers? How do we meet the needs of the greatest percentage of the industry without completely alienating the rest of the people? When do we have the show? What IS Interbike now? Is the cost too high for too little return? How many licks does it take to get to the center of a Tootsie-Roll© Tootsie-Pop©?
I don’t think I have all the answers, but there are a lot of smart people in this industry, surprisingly, and we should be able to come up with an answer if we’re honest. Something needs to change, or Interbike slips further down the rabbit hole of obscurity and irrelevance. And this is coming from somebody who actually believes in and supports Interbike. I don’t want to see it die… but I don’t want to be a part of it limping and lurching ahead the way it seems to be now.
Tim Jackson- Chief Kool-Aid Dispenser
(Cross-posted over at my other blog…)
For years now, the bike industry has been riding a wave of popularity not unlike the “bike boom” of the 70’s. Not only has this boom been good to the US bike industry, but the entire worldwide bike industry as well. It’s been a really good ride, but almost all of us in the idnustry knew it would have to come to an end one day.
The world is not going to come to an end for the bike industry or for cycling enthusiasts and consumer, but there is going to be some noticeable change very soon.
Bicycle sales, especially in the US market, have been doing very well over the past 10 years. In many markets, that can be traced back directly to that Lance Armstrong guy and all those French bike races he managed to win. At least one brand really made out well on that deal, but at the same time many of the rest of us got a boost from their good fortune. Road bike sales climbed to an all-time high during the peak of the boom. Other categories faired pretty well too, in the end, with overall interest in cycling reaching higher levels than ever before. All in all, the past several years have been good to the bike industry.
The very competitive nature of the industry has lead to incredible values for consumers. Many years ago, a $1,000 bike was a pretty good bike. Maybe even a great bike. But now, the amount of product and technology present on a $1,000 bike is amazing. It is still possible to buy a bike that is not worth the money you pay for it- at all ends of the pricing spectrum- but it is pretty hard to. Technology and manufacturing have created a time where consumers typically get a very good product for the money they spend- this is especially true of bikes sold in the IBD/ specialty retail channel (ie- not Wal-Mart, Toys-R-Us, etc).
The down side of all of this pricing competition has meant that many manufacturers (and retailers) have had to operate with incredibly small profit margins- selling at lower than reasonable prices to gain market share. In essence, buying floor space (at the wholesale level) or buying loyalty (at the retail level). Thing is, it’s hard to keep a business afloat like that and it is the major reason brands or stores come and go from the bike industry. Worst of all, when you operate on such narrow margins, any kind of increase in costs of goods means an increase in ultimate sell price…
… which brings us to my point…
Over the past few months, the bike industry has seen the “perfect storm” of circumstances hit it (like much of the rest of the economy); a slumping US and global economy, a massive increase in manufacturing costs, a dramatic jump in labor costs in both Taiwan and China, a sharp drop in the value of the US dollar and an increase in value of nearly every other global currency. The Taiwanese dollar, the NT, has gone from a little over $34NT/ $1US to just barely over $30NT/ $1US in just over 3 years. That may not seem like much, but it adds up quickly and doesn’t even take into consideration any of the cost increases- that is just a loss in currency value. When you add in the cost increases for the actual products, it can become significant very quickly.
By some estimates, the cost of steel alone is going up as much as 65%! For my brand, which is heavily biased towards steel these days, that spells some pretty serious sleepless nights. Aluminum is going up. Carbon is going up. Anything petroleum-based is going up- like the materials used to make handlebar tapes and saddles. These costs are increasing leadtimes significantly as well, since many vendors are now unwilling or unable to spend the money to stock vast quantities of materials. This means that they need to order more often to meet their demands, but at least they don’t have their capital resources tied up in raw materials.
In China, recent laws there are forcing a much needed increase in wages being paid to factory workers- as well as limiting the amount of overtime a worker can work. These are good changes, but they mean an increase in costs just the same. In Taiwan, there is a massive shortage of qualified skilled labor. The bike industry was once one of the best paying in Taiwan, but the rise in power of the tech industries there has drawn in a lot of the once strong work force in the bike industry. So now wages have gone up to compete for and retain good labor. It’s a good time to be a factory worker in both China and Taiwan… or at least a better time.
In the past few months, I have seen 3 and 4 price increases from the same vendors. Just in the past 6 months- from some of the biggest names in the industry. Some vendors will not even quote a price any longer until they have a firm PO and then the pricing is only good for that one PO. This makes it impossible to accurately forecast the cost of a product and very difficult to create a selling price- when you have no idea if you will be making money on the product in 6 months. For me and the other brands at Haro, we print one price list per season and we live with that pricing for the duration of that product cycle/ season. This year though, we’ve had to issue a price increase to compensate for some of the price increases we’ve seen recently. We do our best to absorb those increases and preserve the pricing we’ve created, but when you are seeing double-digit increases, it becomes impossible to swallow all of those costs.
What does all this mean? Well, it certainly means there is a lot of nervousness in the bike industry right now. Many of us are very concerned about what the consumer is going to do; will they simply stop buying bikes (partly in thanks to what the economy is doing as well), or will they understand that we (the manufacturers and retailers) simply have no choice if we wish to stay in business? Some of us smaller players even worry if the Big Guys will simply eat the increases in the short term to maintain market strength and wait the situation out/ drive competitors from the market. Most things I have seen and heard indicate that those Big Guys are likely to pass on at least a small increase to their customers too. It would be hard to believe that they can afford such an increase in costs without passing along some of that burden. More to the point, it means that prices for Masi Bicycles are going to increase a little. On some bikes it will seem like nothing, but on others it might be more noticeable- when a bike goes from $700 to $775, it is more noticeable than when a bike goes from $4000 to $4300. Based on percentage, it is much less significant and the typical consumer in that higher price market is not as phased by the increase- generically speaking of course.
Bottom line- as much as it sucks, the bike industry is raising prices to slightly compensate for the rapid and painful increase in costs to produce a quality bicycle. I am seeing anywhere from a simple 5% increase to a massive 15-20% increase in my costs… and that’s just the ones I know about so far, but that does not mean the retail price (or dealer price) is going up that sharply. In all likelihood… more increases are coming. And coming fast. Does it mean you are getting any less of a bike for the money? No, not at all. It just means that you’ll be paying what is a more realistic price for the bike you get. Sure, there will be a slew of new low-spec bikes showing up on the market to keep the perceived necessary price points met. Some manufacturers will undoubtedly find ways to cut spec to keep a certain price (not our plan though). I’m not saying they are wrong to do it and we might find ways to create new models in those sensitive price ranges- it’s just going to be a fact of life.
How long should this last and what does it mean long term? Well, that has yet to be accurately predicted to my knowledge. My guess is that prices are not going to be coming down any time soon. The global economy is still looking pretty volatile and the US$ keeps taking a beating. The Chinese Yuan is getting stronger, as is the Taiwan NT, and the Euro and the British Pound… so it is unlikely the Dollar is going to regain enough strength in the short term to eat up the cost increases. The overall volatility is likely to settle down, but as oil/ gas/ petroleum costs remain high, costs of goods will remain high- as will the costs to transport them. The global demand for raw goods- like steel- isn’t going to decrease either. China and India, specifically, are eating up massive amounts of resources of raw goods as their economies expand and their development and growth increase as well. So, yeah… it’s not too likely things are going to change any time soon to keep prices where they are now. I do predict that some smaller companies (retail and manufacturing) are going to pay the ultimate price for these increases and will either fade into history or be eaten by healthier competitors.
All of this would seem to point to very dark days for the bicycle industry, but things have actually been coming back up a bit after a mild slump in sales the past two years. Road sales have dropped, but are remaining strong- especially at the higher price points- and MTB and BMX are both seeing nice signs of life across the industry. At first glance it would appear that the industry is getting some support from consumers who are seeing the price of their other purchases going up all over the place. Costs of nearly everything across the board are going up… it’s just a fact of life right now.
So even though buying a new bicycle might not feel as fun, due to the sudden increase in price, you’re still getting a great deal on great products and the industry you are supporting is showing good signs of health… which hopefully means I get to keep my job a bit longer… I hope.
Chief Kool-Aid Dispenser