Shut Up and Drink the Kool-Aid!

Taichung and the Bicycle Industry

I just returned earlier today from a two week trip to Taiwan. Part of those two weeks was spent visiting the RideOn and Taichung Bike Week mini-tradeshows for the OEM market. If you don't already know, RideOn began about 4 years ago when a small group of OEM suppliers decided to have a small and very informal gathering to allow product managers a chance to get either a first look at upcoming products or a last look at existing products so they could make their spec decisions with the best and most recent information available. Taichung Bike Week began as something of an offshoot of the early success of RideOn. The plan was to provide another option for visiting product managers to Taichung, since they were already in town. Over the past few years, this has grown into a small, informal meeting for the suppliers to the OEM trade and their customers. It has also proven to be quite successful and valuable for the industry.

The spec process gets more difficult each year as so many options pop up in the marketplace and as the need to finalize spec earlier each year grows. In the "old days" of just a few years ago, spec didn't need to be finished for bikes until March and you would still get bikes delivered in the late summer time frame- in time for Interbike and the other major tradeshows. However, that is a thing of the past as factory capacities are stretched thin and leadtimes grow and grow. Now, spec is due to factories as early as mid-December if you have any hope of seeing bikes delivered by Interbike. Throw into this mix the fact that many companies like Shimano, SRAM and Campagnolo have continued to present new products earlier and earlier ever year as well. All of this combined has made a product manager's job harder and harder each year- not to mention those of purchasing departments.

So with all of these various challenges and the timing of product cycles, the Taipei International Cycle Show has become decreasingly important to product managers across the cycling industry. The show is now more important to the International Distributor (ID) business and the various retailers from around the world who like to go to the show to see new products before they show up at the larger shows or who have their own private label products made in Taiwan or China. But, for the OEM trade, Taipei has become less important simply due to its place on the calendar.

Because of this and because of the growth of the two Taichung events happening with overlapping schedules in December, many product managers have been making the trip to Taichung. With this growth and activity, the events have caught the attention of the Mayor of Taichung, Jason Hu. Mayor Hu, who happens to be a very funny man with an Oxford education, has created a committee to work with the cycling industry to see how Taichung can better facilitate the work it is already doing on its own. Rumors had been going around the industry for weeks that the Mayor might have plans to create a competing bike tradeshow to rival Taipei International Cycle Show. These rumors were creating quite a bit of buzz among the attendees of the two events. As Taichung is the virtual center of the Taiwan bike industry, some felt that a major tradeshow hosted by the city might shut down the Taipei show altogether- even as the organizers of the Taipei show are now discussing the possibility of moving their own show's dates closer to the time of December/ January to better meet the needs of the OEM trade. Those rumors were put to rest and the uneasiness settled after a few minutes of discussion with the Mayor's liaison to the bike industry, Anna Wang.


After asking the representatives of the bike industry for their feedback and a list of their needs, Ms Wang made it clear that Taichung has no intentions to try to put the Taipei show out of business, but truly wants to help the industry go about doing its business. The cycling industry is a major player in the Taichung economy and keeping the industry happy and located in the city and county of Taichung is of vital importance to the Mayor and his team. Ms Wang stated that the city would simply like to help the industry work better and more efficiently and at a reasonable cost for all who attend. As it is now, RideOn happens at one end of the sprawling city and Taichung Bike Week at another. While RideOn offers a demo area to test product, Taichung Bike Week is all centered in the Landis, now renamed Tempus, Hotel. Product Managers are therefore forced to either shuttle back and forth between the two sites or make the choice to select one over the other. Each location has its pluses and minuses, but all seemed to agree that a venue that could handle multiple meeting or presentation areas and still allow a demo would be best. Worst case scenario, having some sort of shuttle service to and from the two sites would be a good starting point.

As it is now, there is no real cooperation between the two events and neither event produces a very accurate list of exhibitors and schedules for the attendees- something nearly all felt would be very useful. Another major point given by nearly all in attendance at the meeting was the need to keep the event/ events very low key and informal. Nobody present in the meeting wanted to see the casual event turn into a more structured and rigid tradeshow, nor did anybody want to see it become a marketing extension for any one brand- ie; Taichung Bike Week, presented by SRAM/ Shimano/ Brand X, etc. All felt that it was the low cost, low key, informal format of the events that has made them so successful and allowed them to grow so organically without any real coordination or effort. Taking all of these comments and concerns into consideration, Ms Wang said that she and her counterparts would take the notes and information to the Mayor and begin the process of finding ways to help the industry continue to use the event as a major tool in the product process.

Personally, I find this to be a very exciting development for the cycling industry. Having this level of cooperation from the city government is amazing and the cycling industry needs to do all it can to help the city of Taichung with this process. The organizers of the Taipei International Cycle Show, TAITRA, should also be excited by this news as it shows that the city of Taichung is not trying to steal away the show or force them out of business. TAITRA still has the chance to improve the show to benefit the customers it has and address the changes that have taken place over the past few years there. With more and more distributors and retailers attending and fewer and fewer product managers using the show for their final spec process, TAITRA could reshape the show to more accurately reflect the needs of those attending.

After the meetings and dinner reception with the mayor that took place in Taichung at the Splendor Hotel on December 9th, many of the attendees felt very optimistic about what the final outcome might look like. Members of both events felt that they had formats they wanted to protect, but both were willing to cooperate to build a better event that served the needs of their intended customers- the product managers and other representatives of bike brands from around the world. I am personally very excited by this time in the history of our industry and I hope that all of my brothers and sisters within the bike industry will work with the Mayor and his office to help them work with us to make the cycling industry an even better one to work in.

Tim Jackson
Chief Kool-Aid Dispenser

Labels: Anna Wang, Health of the Bicycle Industry, Mayor Jason Hu, RideOn, Taichung Bike Week, Taipei International Cycle Show, TAITRA

Posted by Tim Jackson at 12:45 AM 3 comments

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

Labels: Bad News, cycling, False Hope, Gas prices, Hard Times Ahead, Health of the Bicycle Industry, industry, Reality Check, Silver Linings, Survival of Cycling Industry

Posted by Tim Jackson at 11:00 AM 13 comments

Feeling gassy?

In recent days, weeks and months many conversations have been had about the current state of the US economy (and the global one for that matter) and the pressures put on Joe Consumer by the high (and climbing) prices of gasoline. Here in California, gas has been over $4.00/ gallon for weeks now and some experts believe that $5.00/ gallon gas will be here by the summer driving months. For stressed out wallets and budgets, that might just mean making some serious decisions about driving habits.

Here's the thing though: the current high gas prices are not the answer to the cycling industry's prayers. Not yet anyway.

US consumers are far too used to driving their cars. They practically live in them. We have all kinds of luxuries built into them. Our cars have become our sense of self for many of us. $4.00+/ gallon gas isn't going to change that any time soon. There are too many barriers to getting people out of their cars and onto a bike.

• Lack of infrastructure- this one always raises quite a bit of debate, but in many cases people will not ride their bikes to commute- even for a very short commute- if they do not feel safe. Bike lanes are not the end-all answer, but they sure do help and address the major concerns of most people. This infrastructure applies to public/ mass transit as well- many people live far from their work (I live 40 miles away) and need to combine some form of mass/ public transit with their bike commute. Which means that we also need more commuter stations with lockers, racks, etc.
  
• Lack of support- there are tax incentives for people to carpool or take public transportation, but none for cycling to work. Plus, how many of us have access to showers at our place of work? Not many, according to most studies I've read.
  
• The dreaded retail experience- this one raises a lot of debate as well, but the majority of non-cyclists find the Bike Shop experience to be intimidating or downright unpleasant.
  
• The price of gas isn't "that bad" yet. It is going to take gas prices well over $5.00/ gallon to really make people uncomfortable pumping gas into their cars. It will take gas prices, I believe, nearing $10.00/ gallon for us to reach that critical mass needed to tip the scales in favor of more people commuting.
  
• The Gub-ment. The price of gas is such a sensitive issue and politically charged enough that it is in the daily discourse of the power holders in our capitol. Even John McCain, the presumptive Republican candidate for president, is talking about putting a temporary hold on the federal fuel tax over the summer to keep gas prices down. Driving is such an important part of our nation's economy that the politicians want to protect driving... not discourage it. The US car makers wield amazing power as well- they have successfully lobbied against legislation to improve fuel efficiency of their cars. We'll reduce federal taxes before we force car makers to improve fuel standards? Insanity.
  
• The cycling "stigma". In the US at least, bicycle commuting is still widely viewed as something only poor people, convicted drunks with no driver's licenses or "losers" do.
  

I see plenty new large vehicles like Escalades and Hummers driving on the southern California freeways every day. The economy may be hurting, gas might be expensive and "going green" may be getting more popular... but people sure do love their cars. And our government likes it that way.

Those folks who are already on the fence, already considering bicycle commuting, might now have the needed incentive to begin commuting by bike. Maybe. An increase in gas prices is not going to be enough to drag the masses out of their heated/ air conditioned, rolling office/ entertainment centers. Not nearly.

There is hope though. There are more bicycle commuters now than there have been since the gas crunch of the late 70's. More and more manufacturers are embracing the product category. More communities are getting behind initiatives to get residents onto bikes. More companies are providing incentives to employees to ride their bikes by supplying lockers, showers and bike racks. The lobbying efforts of the industry and advocacy groups are beginning to get the attention of the check writers in DC.

All in all, things are improving. But... this continued talk about higher gas prices saving the industry from the throws of a bad economy (and rising costs) or being the catapult to move it into a post-Lance renaissance is foolish. We still have a lot of work to do and we still need to find new and better ways to reach out and pull in new consumers (non-cyclists). Otherwise, no amount of high priced fuel is going to save us.

Feeling a little gassy? I know I am...

Tim Jackson
Chief Kool-Aid Dispenser

Labels: False Hope, Gas prices, Health of the Bicycle Industry, Reality Check

Posted by Tim Jackson at 9:46 PM 15 comments

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

Labels: Hard Times Ahead, Health of the Bicycle Industry, Silver Linings

Posted by Tim Jackson at 9:34 PM 3 comments

Bad news brewing for the bike industry?

(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.

Tim Jackson
Chief Kool-Aid Dispenser

Labels: Bad News, Cost Increases, Health of the Bicycle Industry, Rant

Posted by Tim Jackson at 11:00 PM 4 comments