Sunday, October 12, 2008

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

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Posted by Tim Jackson at 11:00 AM

16 Comments

  1. Anonymous Anonymous posted at 3:30 PM  
    Interesting times, as they say.
  2. Anonymous Phil posted at 4:31 PM  
    Absolutely a positive future for cycling, as an industry we know how to survive hard times.

    Why? Because much of what permeates our business is a genuine love of what we do, we care and we live it.

    Remember when (e.g think back to the 70's) no one gave a stuff about us, well we were still out there riding our bikes and selling them, talking the talk and walking the walk, now that was love, it's what feeds our passion.

    ((yeah, I'm feelin' the love right now))
  3. Anonymous james posted at 7:59 PM  
    Over the past year I've seen so many more people on bikes equipped with baskets and decent transport gear.

    Its a good sign - people are using their bikes for errands and purpose - not just Sunday rides through the park..

    james http://www.futuregringo.com
  4. Blogger Tim Jackson- Masi Guy posted at 8:21 PM  
    Anon- the times are VERY interesting indeed.

    Phil- yes, we do have a potentially positive future ahead. It won't be perfect, but we're in SUCH a better position than years past because it is real and sustainable. New riders coming into cycling have been needed for many years and now it is happening- even if in modest numbers... but we're getting significant numbers of new riders.

    James- very true. I see more commuter and non "enthusiast" cyclists on the roads every day. It's great that the market is embracing utility bikes and not just the gee-whiz wonder bikes. Don't get me wrong, I dig race bikes still, but I have been aching to see the day when "regular" bikes would make a major comeback. This feels pretty good.
  5. Blogger Carlton posted at 1:39 AM  
    Good to see you've changed your mind, Tim! However, I liked your last column because it provided a dose of reality: high gas prices won't get everybody on bikes.

    But from such a low existing base (1-2 percent of all journeys), a doubling of the percentage is possible and there's still a lot more growth potential after that. In fact, Joe Breeze thinks the transportation category will be bigger than the MTB category in 80s and 90s.

    I have an interview with him in the next issue of BikeBiz.

    And, of course, I agree with him.

    The bike trade is hungry for this market to take off. Tim Grahl and myself are producing the Bike to Work Book and we're getting excellent support from the bike trade. All of the major brands have booked ads in the book - except Specialized - and it really wasn't too hard to get them in.

    Similarly, I hope mags like Momentum go from strength to strength and continue to get lots of ads from the bike trade. Mags like this need to be encouraged.

    I remember the early days of mountain biking when the first mags on the scene really helped to boost the market.

    Transportation cycling may be a turn off for some on the performance side of our industry but more people cycling more often will help us bring new people into cycling. In turn this will create lots of new sports cyclists.

    It's in everybody's interests to increase the number of people cycling.
  6. Blogger stickboy posted at 6:49 AM  
    Great words Tim.

    As the popularity of cycling from an urban and social/commuter scene increases, the industry needs to continue to remind the IBDs to articulate to the customers about the importance of spending an est $700 on a quality commuter bike vs. buying a junker from Mega-lo-Mart.

    Look what has happened in the snow sector; ski/snowboarding has become very trendy and commercialized to the point where consumers are lumping it with basic outdoor sports like tennis; figuring their needs for gear can be properly satisfied by going to a big box chain store. Instead of seeking out a knowledgeable brick and mortar stores to align them with the proper tools for the trade, the customer is skunked with a 40lbs tank that does nothing to heighten their cycling experience or needs.

    My dealers are making huge buying changes for 2009, realizing that commuting bicycles are the artery to tap or continue to tap into. We as a company have scaled WAY back on the high end of bikes for 2009 due in part to the high end market isn't where the stability is at. Just like the industry changes, dealers need to change, re-invent themselves, their stores. Freshen up the displays, continue staff training, and continue to make the cycling culture more approachable to new riders...open arms.

    Pour me another glass please!
  7. Blogger Mark Davidson posted at 8:52 AM  
    I really enjoyed reading this post. I'm the resident bike expert at my workplace and have noticed that many of my co-workers are riding to work, curious about riding to work and have asked me for advice about getting started for riding to work.

    I work in the tech industry in Silicon Valley where the temperature is moderate and the terrain is flat and the employees have the financial means to change their commute. My fellow employees have had a long standing desire to be more green but gas prices seemed to be the tipping point.

    One of the biggest concerns they have is for their personal safety. There are annual bike to work events but to get more commuters on the roads I think there needs to be smaller quarterly events. I think more "bike buddy" programs in which experienced commuters can mentor novice commuters on equipment, safe routes and riding defensively would probably be the best way to create a pipeline of new bike commuters.
  8. Blogger Tim Jackson- Masi Guy posted at 9:16 AM  
    Carlton- Exactly; gas won't do it all, but it is making more of an impact here than I expected. With the rest of the economy slumping, it has helped get more new riders on bikes. And, yes, transportation cycling isn't as sexy as talking race bikes, but there is nothing more sexy to me than more people riding... ANY kind of bike.

    Stickboy- 1) it was great to see you in Vegas, my friend. 2) Yes, there are reasons to remain optimistic and consumers are learning that proper service and education actually do mean something. But retailers do need to remain vigilant in educating consumers and helping them in the learning process.

    Mark- this is the kind of comment that makes me get goosebumps! Thank you for sharing this. You are completely right that mentoring programs are a great idea and many retailers can provide that as well- many shop employees or even the owners commute by bike. Keep the love alive man... we're counting on your help!
  9. Blogger jeff posted at 10:13 PM  
    So great to see the Kool-Aid flowing again.
    Couldn't bring myself to write my annual Pro Cycling piece.
    Did you see the DirtRag Steve Flagg interview where he said QBP had seen a spike in sales of 27" tires?
    That's where we need to gain retention. Legions are paying bike shops to "tune up" their 30-year-old bike!
    Retail guru-without-equal Kevin Reed says, "I can work up a quote for this while you ride that bike over there..."
    My guess is that the public skips right over all the half-measures and goes straight for the xtracycle or freight bike or e-bike....
  10. Blogger EVOMO posted at 10:46 AM  
    awesome. only if cities would now embrace that bikes need bike lanes and respect on the roads. come on Los Angeles!

    oh and on a side note, why didn't Momentum include Evomo in their "cutting edge" Urban Legend fashion show? Which by the way I have been saying we needed to have something like this at interbike for years now... pool together all the clothing brands and make a show.

    Help out the up and coming brands people! Not everyone wears lycra or man-pris.

    rant rant rant.
  11. Blogger kind1 posted at 5:59 PM  
    Glad to see the talk about high gas prices saving the industry brought back a little. It was like we were waiting for something outside of our control to drive up sales.

    Despite all the Kool-Aid drinking, the fact is we are on pace to sell LESS bikes this year than we were last year as an industry, according BRAIN. We all know the voodoo behind industry stats, but still.

    I too believe that transportation bikes will be as big as the MTB boom, but I am not sure if it will translate into more sales for the industry. If anything, it will just be a category shift. We are already seeing it at the high end with premium bike sales dropping and this sector growing (in general). While still unsure of the ratio, it can't be good swapping out a $3000+ sale for a $700 one, can it?

    I am not all doom and gloom as I am trying to get my own brand off the ground, so believe in the long term viability of the industry. I just hope we can get to the industry peak of 22 million units in 1977 within the next few years...
  12. Blogger fixgear posted at 10:27 PM  
    just came across your blog just now- very cool. I'm gonna post this here since its the latest- but not related to my thought- On the topic of how to market bikes/bike lifestyle to non-initiated/potential users: What occurs to me is that non-cyclists don't have a context to visualize themselves w/ respect to bikes/retail. LBS's are for cyclists. It is a sophisticated consumer group w established norms etc. What if a bike shop was more of marketplace of identity? do you get my meaning? If you shopped there for things BESIDES bikes/parts by say, selling fresh roasted coffee and w/a farmers market attached, and some other tangentially associated market you would get a broad range of consumers looking for coffee and vegetables (stay with me). It provides un-initiated an potential customers other things w/ which to associate bikes/culture. They buy fresh veggies and see that cyclists also like fresh veggies...lightbulb...'i must like bikes too'...think about it. If you are unsure about/know nothing about a new product, you look at associated social markers (who uses it- what kind of car do they drive, what shoes do they wear, how is it used, when, where, etc.etc..). You make a decision about that product based on your assumption about those markers. If a bike shop only provides markers associated w/ bikes the consumer has nothing by which to draw a conclusion about relevance...make sense? you need to provide other iconography/semiotic reference points for the uninitiated to latch on to and with which create connection. That is essentially what all the ad images are for right? But they miss because they are in bike magazines, which only bicyclists buy. But put that imagery in the context of Sunset Magazine, or Dwell, or Elle and it starts to piggyback on their cultural imagery. Take those Electra ads w/ the face shot and a small bike pic..that sort of thing...only less lame placed outside of bike land and you start reaching customers. This idea needs work, clearly, this is just off the top of my pointy head..
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