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Service may have the best margins but it is time limited. You can only do so much work in a day. Mobile cuts down on overheads but driving to clients eats into your billable hours hugely.
Also (at least anecdotally) there's an expectation that rates will be lower as you are 'not a proper shop' and getting trade accounts here is much harder if you don't have a bricks and mortar store.
It's actually getting easier to get set up with accounts from the distributors, but they all have different requirements. For instance, one of the biggest companies want you to have a vehicle that you can stand up and work in..
As for the expectation of being cheaper, remember, you are selling a premium service that is making things convenient for the customer and if they don't want to pay for that, then they can go to the brick and motar shop. There are pros and cons to every business model.
As seen on Bicycle Retailer, TPC is back after a 1 month hiatus..
Yeah, absolutely crazy. https://escapecollective.com/the-pros-closet-is-back/
Honestly, I was hoping they would stay down. Having companies like this lead to a dramatically over valued used bike market, with no real turnover.
Well one of the things about mobile repair is... I guess depending on your city you can basically set up shop at a trailhead or MTB-adjacent area and still act as a 'static' shop. Ironically Gravity Cycles in Orange County worked the opposite way. Starting as a mobile service, to my knowledge, and just recently opening a building as well. But yeah if cops aren't gonna make a fuss you can just pick an appropriate area and just have customers come to you. But the population density of SoCal is fairly unique so not sure how well that applies many places. But still if it's at a trailhead people might like to roll through just to shoot the shit. That's honestly what I see at Gravity's truck. Dudes are just there pre-ride or post-ride to chat. Brilliant natural 'marketing'.
I have seen a few people start mobile and move into a building.. The natural marketing you mentioned is a big part of a mobile.. In my area, it would be easy to park near one of the two entrances to the trails without any hassles.. Also, a tip used by one of the bigger players is if you're not at a job, park in a busy parking lot and work on your own bike. Make it easy for people to see you and see what you are doing..
Alright boys don't wanna derail the thread too much (more than it already does) but in regards to the TPC thing... Surely there is no way they actually are being bought to do the same exact thing. How willfully ignorant can you be to try to take that model in the current economy/industry and figure out a better way to work it?
So the question is, if they were smart enough to pivot to an adjacent model what do you think they could even pull off? An obvious one would be another Jenson clone as a standard store using that existing warehouse but again that's a heavy competition market still in an ailing economy/industry. Arguably a hybrid model of both used and new would at least be more diverse and better prepared to take advantage of either direction if one takes off more than the other.
But what else could they likely do with a well known web platform and oversized warehouse?
The Escape Collective posted above goes over why the original PE model saddled them with debt vs the model they have now. Not saying it will work better but it isn't just doing the same thing that matters. How it is financed matters quite a bit.
Meh, I don't want to be reductive of their statements nor my lackluster reading comprehension but it seemed like a top to bottom nothing burger and where it gets some points in the 'we arent siphoning money from PE sources with no ability to pay them back and massively generating debt'... It still ultimately loses points in the 'this is one of the worst business models to attempt to operate in a massive industry down turn' part. So, call it a moot point at net zero now. I still don't understand what they are legitimately doing differently.
From what I read they literally said hire the same staff, do the same thing, and then literally sit on our hands with our fingers crossed (ignoring the discomfort) and hope that the holidays at least get us started. Not an analogy I should be making but... If that article was an investment thesis for a stock it would just equate to a massive red flag imo. Again, not a business or english major. Someone else can point out the golden goose I missed within that article that actually highlights change. (Outside of the investment part which... Again is GOOD no doubt but is ultimately countered by the current market. Sure you're not starting with inherent debt... But you're still not in a position to generate viable revenue especially if you want to re-hire more of the old staff.)
I think my question still stands. If (when?) the overpriced scondhand bike sales don't work out, what could they do that sounds efficacious?
thats exactly what bike-components.de does with their b2b offering, you can offer your customers next day delivery on all the parts they sell and see in the app how much it would cost the shop and the shop can chose how big of a margin they want to make
As I read the PR, it sounds like they are moving to a different location (smaller?) and going back to their core business of used bikes. I'm thinking between too much growth on the physical assets (building and equipment) and buying overstock from manufacturers, they potentially were spending way more than they were bringing in.. I doubt that they were getting terms to pay off the bikes they were trying to move for the bigger players.. Even if they were, the economy didn't help them..
Ya that warehouse they showed... Just the cost alone would seem astronomical, then top it off with filling it to the brim with stock nobody actually wants. It's no surprise the former owners failed, I just legit don't see quite where the new owners succeed here. Even if they intelligently manage refurnishing, restaffing, and restocking the business. It seems like it's just an outright gamble on the market normalizing and being able to do the exact same thing at a smaller scale. "Bold strategy Cotton, let's see how it pays off for em."
This dovetails nicely into the idea of what can happen when a company overcapitalizes. There are numerous negative side effects to raising too much money and growing infrastructure well past the means of the business is one of them. As a refresher, TPC raised ~$60M (that isn't a typo) from 2019-2024. Two of my favorite finance minds (Bill Gurley is the mentor I wish I had) talk about the idea of company's raising beyond their means on their pod this week. The important part starts around 12:30.
Some of this I touched on briefly in the Pod I did with Spomer, but those really interested in the perverse incentives of "modern venture capital", namely around fees, size of fund and expected outcome, this is an excellent listen. If I'm honest, much of this thinking and risk taking seemed to trickle all the way into the bike industry, which is bonkers.
FWIW if you go to Jenson and add the new 2025 Bronson CC frame to your cart, the check-out price is $600 less than what it is listed at. Silent discounts on new Santa Cruz models already?
I'm guessing they need to move some product and not get in trouble with Santa Cruz for a MAP violation.. A manufacturer can't tell the dealer what they can sell a product for, but they can tell them what they can advertise it at..
If you had to guess... What leads a company at TPCs level to bother raising 60m? The general idea of 'if you could you should' and maybe even 'we can achieve anything with this kind of capital'? I don't see how you don't view that as basically a large high risk loan or something. I would be sprinting away from that money (granted, I am no genius with a marketable idea)... But ya what in gods name did TPC think they were gonna do with all that to turn it around lol
Are you sure it's actually the CC frame? SC was going to be selling the C frames for the Bronson and Hightower due to the backlash over the CC not having cable routing for a derailleur.
Going off the pod, it seems that for a brief moment, the bike industry showed huge growth and sales that many thought would carry on, and with the low interest rates during the pandemic, the bike industry actually looked promising to some investors that would normally not look at us.. And when things changed, they either pulled their money out or just let the company die..
This is correct. Don't forget, every company or industry that had a growth coefficient looked frothy and fun so risk capital went way to the outskirts of common sense to find a return. When interest rates moved up and the sport normalized - poof, the money and the investors were gone.
We shall see soon. AFAIK Santa Cruz doesn't sell non-CC frames as a frame-only option and hasn't for a while.
This is really the big question mark, yet it remains a ubiquitous problem. To start, I feel it's really easy for someone like me to say, "Of course I wouldn't take it," but that's hindsight being 20/20. Something I haven't mentioned in this thread is how uneducated most founders are when it comes to finance. Most founders don't study financing for an extended period of time before jumping in. To the contrary, they are usually a bit delusional (you have to be), see their idea being bigger than it probably is and have no "checks and balances" in place against larger and larger equity raises. I put myself in the delusional and dumb category when I first took a crack at starting something. It's taken me the better part of a decade to gain some sobriety on the matter, for what that's worth.
Regardless, excess capital in a system creates a lot of weirdness...eh?
The component companies who have a notable OEM portion of business were in many cases being dragged into the mess by these overzealous OEM forecasts and then were left holding the bag when many of the bike companies canceled orders. Seems like a tough position to be in as a component company - do you increase capacity and take the orders or turn down orders and say "no thank you" and maybe loose the other business too.
https://www.bicycleretailer.com/international/2021/03/07/specialized-and-accell-executives-urge-taiwan-increase-capacity
A friend of mine who has been a long timer in the TW bike industry basically blamed some of the big OEMs for the mess. This was due to them dramatically increasing forecasts to win production priority from component suppliers who service most of the big bike brands. "We're your biggest customer, you deliver to us first" type stuff.
I hear this term thrown around in some podcasts I listen to and it's become one of my faves: "Irrational exuberance"
This is a narrative I heard fairly early on that was very... Disconcerting. With the supply chain interrupted, every step of the global market was doing some... 'stuff' in terms of not only raising prices but basically only taking order from companies willing to put in the biggest orders and guarantee a more reliable single shot of income per everything they had to go through and pay. Shipping, labor, materials, etc. I just heard it as a theory so I'm not sure who specifically the big names are in this regard (one could imagine) and how true it is and how negatively it affected the already bottlenecked issue. But ya talk about a bullwhip effect when the only way to guarantee orders is to put your money where your mouth is, do a large order to guarantee shipment, and then ultimately by the time you got the product in question the market was already set to collapse. Weeeeeeeeeeeeee
That phrase first got play waaay back in 1996 when Greenspan ran the Fed and he was talking about what became the dotcom bubble: https://www.investopedia.com/terms/i/irrationalexuberance.asp
Given that craziness of everything happening at the time with a bunch or weird outliers coming together, I wonder if it was TPC going out and looking for the money or if someone caught wind of the unique position they had in the market and thought it would be worth investing in.. And of course, once you get the type of money you could only dream of, the only thing left to do is spend it.. Excessive capital leading to excessive spending that the business model wasn't going to be able to support even in good times. Then trying to find new ways to generate revenue lead to spending even more money and the spiral starts going downward quickly..
I just wanted to chime in and say the pod episode with Jeff was a great listen. I'm in my mid-fifties and I've been working in the industry at different capacities for 42 years. 2020/21/22 were years unlike any I've ever seen in the business and am floored that anyone with a modicum of logical thinking could have thought it would continue. As pointed out in the pod, it's a special (sometimes infuriating, sometimes wonderful) industry and I was impressed with the insight. Looking forward to what Jeff and Dave are cooking up.
Certainly appears to be the CC frame. List price is $3899 (wut?!?) and in cart it's $3300 and change.
I'll be pissed if it isn't.
Question for @jeff.brines, are some of these over capitalization bankruptcies just really short-term money making schemes for the owners? I.e. you keep raising capital for as long as you can all while paying yourself very well. Then, if or when it all comes crashing down you just walk away but your cash is already in the bank.
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