Hello Vital MTB Visitor,
We’re conducting a survey and would appreciate your input. Your answers will help Vital and the MTB industry better understand what riders like you want. Survey results will be used to recognize top brands. Make your voice heard!
Five lucky people will be selected at random to win a Vital MTB t-shirt.
Thanks in advance,
The Vital MTB Crew
Im very impressed by everyones counting skills, but maybe you can take Count van Count with you and start a different thread instead of derailing this one? Please and thank you.
He did: https://www.vitalmtb.com/forums/hub/125-mtb-companies-too-many-heres-li…
Looks like Eminent Cycles is closing it's doors
Eminent Cycles auctions remaining inventory three years after Chapter 11 | Bicycle Retailer and Industry News
Yes, posted already on the previous page.
If this quote is true, its heartbreaking:
"he [the founder] has invested more than $300,000 in the company and worked without salary for two and a half years"
Whoops, my bad. Sorry for double post. But yes, super sad. Jeff is a great guy in the times I have talked to him. Sucks to see this happen.
You HAD to see this comming. They look like crap.
and yet somehow, Ellsworth is still in business.
You say that, but I don't believe they've released a new model since 2018. I'm not convinced Ellsworth hasn't become some sort of elaborate tax dodge for Tony and chums to funnel money through and 'lose,' in the process.
Companies across the cycling market from LBS, to component manufacturers, and all the way to bike companies will continue to go under throughout 2024 and likely into 2025 unless demand picks up in spring 2024.
We have only started to see the beginning of the closures.
No idea how close scott was before taking real damage but having to take a loan of 150 mio francs sounds like quite some trouble:
The North Face supplier Youngone lends $177 mn to Scott - KED Global
price of headset cable routing parts must be going up!
Scotts Sports owner Youngone loans company $176 million | Bicycle Retailer and Industry News
Another article that was on pinkbike home page. Shockingly low profit margins for a major player like scott.
scott sports isn't just cycling. it also encompasses the winter / ski brand, and they make running and moto apparel as well.
The filing also disclosed that Scott Sports made a profit of $35.8 million in 2022 on sales of $628 million and profit of $23.2 million in 2021 on sales of $695 million.
5.7% and 3.3% margin for '21 and '22 which from talking to friends employed at Trek, was an insanely profitable year.
If i had $176 million i definitely wouldn't be loaning it to a company with that margin.
How do all the smaller boutique bike brands that are discounting their products up to 40% (Evil Knolly Revel Ibis Fordibben etc) then convince everyone to start paying full price again?
There's a non-trivial segment of the market that will only buy the newest whatever (not just bikes).
They launch a new product... Discounting is done across all sorts of markets/industries when a product is being discontinued or replaced with a new model. Keep in mind that the big brands are also discounting. The goal being that they sell out of the old model just in time for the new model to launch and keep the revenue stream moving at a growing pace.
I'm more interested in how the reaction to price increases will go for companies that have had year+ long firesales. It's one thing to discount a product even if it is 40-50% for a bit as that's how most 'sales' work, but how do you justify a price increase when your product has been even just 20% off for over a year?
totally agree. when the new uncaged capra came out the other day at $6500 with X0 transmission and ohlins, my initial reaction was "whoa, that's expensive." it's not really expensive, but it's not $4700 like the capra uncaged model being blown out a few weeks ago. def a grab-the-popcorn-and-watch year for the market!
Some companies started lowering MSRPs last year... guessing we'll see more of this.
https://www.pinkbike.com/news/we-are-one-reduces-the-price-of-convergen…
https://www.pinkbike.com/news/scor-announces-significant-price-decrease…
(Sorry, couldn't quickly find Vital links)
If you read up on Youngone, they are partial owners of Scott. There is more in the background to the loan than what the headline appears to be saying. Paging Jeff to the white courtesy telephone to break the business side of this one down... @jeff.brines
It's not sustainable, and not just for the small brands. The discounting will stop when the industry as a whole works through their oversupply, and as we're discussing here, many won't survive.
The bazillion small companies in the space don't help, but the real problem is the discounting that the big players are doing. The whales drive the market and the minnows respond.
The covid boom was just like cash for clunkers- stealing sales from future years to current year. My question is how long will that last? How long is the trough after the peak before prices and demand return to normal, or will another "crisis" arrive first?
What happens with these firesales if all this older inventory never sells? What do you do with a 2 year old bike that won't sell?
trash them.
Happens in lots of industries. The only issue is that the brands incredibly foolishly sunk too much into inventory. Normally you just absorb the loss of a bad year from profit of the good years (21 & 22) but the issue is the losses from 23 eclipse any profit from 21 and 22 combined.
The finance teams just totally cocked it up, and nobody questioned the fact that MTB (and bikes overall) hasn't actually exploded in terms of usage, people just bought new bikes, but they aren't going to buy new bikes every 2 years lol.
I guess this depends on where you are on the world. Down here in NZ the usage has increased big time. Trail and park numbers are up substantially and that’s maintained since the boom, but you’re right that it brought sales forward and these riders aren’t buying consumables (including clothing, protection, etc.) at the same rate the core users were before.
it wasn’t just the finance teams that got it wrong, it was EVERY part of the supply chain, retailers back to part makers, and now it’s the factories in Asia who are wearing the worst of the wests mistakes.
anyone know if Pembree is still operating? I’ve been after a seat post clamp and stem for ages but they’re out of stock on common sizes and colours.
Did anyone bid and win in the Eminent cycles auction? Curious about the experience buying from the auction house. Seemed kinda like a maze to figure it all out.
Factor Components. Everything is out of stock on their site, other sites have very limited stock, and I’ve heard the staff are non responsive. Does anyone know what’s up?
I heard that many auction items disappeared between action close/payment settling and pickup the next day, sounded like a total nightmare from my source
Sorry - missed this! Thx for the tag. While its impossible for me to know exactly what is going on, here is what appears to be happening...
1) As pointed out elsewhere, Yougone has a majority stake in Scott Sports. Its important to note their stake is large, which gives Youngone more incentive to help.
2) Youngone is publicly traded in S. Korea, making disclosures of this sort mandatory.
3) Of course no bank would give Scott a loan on these terms. In fact, the interest rate is closer to the 1 year treasury rate than what a business like Scott would otherwise borrow at (which would be an order of magnitude higher to justify the level of risk). I'd bet the only real loan Scott could get would be in the private credit market where it would need to be securitized against some kind of asset and only at about 60% of whatever that assets (or those assets) real world market value is. Not only would the interest rate be double digits (likely) but this would limit the amount they could borrow significantly.
This is all about extending Scott a lifeline to get the train back on the tracks by the proverbial "dad" in the room. What is clear about Scott (and has been clear for eons) is they need someone to come in and figure out what is really making money and what is dead weight. Good CFOing or consulting work will be required. Their net margins are lower than their cost of capital, which does not work.
Tl;dr - Youngone is saving the company. If they weren't owned primarily buy a well capitalized Asian company, Scott Sports would be filing for bankruptcy.
EDIT: If anyone is reading this from Scott ping me, I have time to help
Three points I'm compelled to make here...
1) I don't disagree that when you factor in all your SG&A plus what certain brands were doing on a COGS basis to rush product to market that a 3 year snapshot of most companies will look upside down. I wouldn't put this squarely on the shoulders of "those in finance" however. Nobody has a crystal ball and lots of very smart people really did think COVID was going to create long lasting changes as to "how we all hang out". (not true - obviously). I'm not trying to save face for these people, I'm just saying "madness of crowds" is a real thing and crystal balls in short supply.
2) Everyone who needed a bike did indeed buy a bike. Unlike the 2015-2020 era, where every 18 months something amazeballs would come out you were super tempted to buy based on the performance gains, that is no longer true. If you are a casual mountain biker, your COVID bike is every bit as capable as whatever XYZ brand is putting out there. This plateau of technology makes this problem extra bad. Add to this the fact we are no longer in ZIRP, govt not handing out checks superfluously and certain industries more affluent bike riders work in (tech/finance) have been ravaged by layoffs and its extra bad.
3) HOWEVER, based on what I just said, a 2 year old bike on the showroom has a lot more "performance value" than it otherwise would have 10 years ago. This doesn't mean you'll get MSRP if you are a dealer, but it does mean you can probably sell it at cost less 10%. Not ideal, but not a total write off, either.
Things do appear they'll get worse before they get better. That said, there is still a very solid core to the sport, and the fittest will absolutely survive. Its still a hell of a time to be a bike rider and the sport is in zero danger of "going away".
If anyone wants the playbook as to how to do things in 2024, look no further than Neko. He's keeping everything incredibly lean, and running his company like a business, realizing there is no free money. Its very pragmatic, very "unsexy" and very smart.
Post a reply to: The Bikeconomics (Mega)Thread