The Bikeconomics (Mega)Thread

No kidding. This thread is freakin amazing! 

The things I've learned from The Hub on Vital in the last couple years are remarkable to say the least. 

what's gonna happen to bike sales in 2026? Another slow year, I think, but maybe the surviving companies will have had time to adjust their output and supply of new models will be low enough to not exceed demand by so much as of late.  

same here! basically any time a certain handful of people type something (specifically in this thread)... I start researching like crazy and learning sooooo much. its been incredibly insightful to read along the way

I'm not a big conspiracy guy but going to a totally fiat currency while retaining a fractional reserve banking system obviously further entrenches wealth and the power to create wealth in the hands of the already economically privileged.

It all comes down to policy.  Removing the gold standard isn’t an issue in itself.  An independent fed is a good thing.  Simply there has been a total failure in leadership since the 90s on both sides of the aisle.  When Clinton left office we were on a path to completely eliminate our national debt by the late 2000s.  Since then we have continually increased our costs (some good, some bad) while cutting taxes across the board.  But the shift (or realistically return) of the government supporting business over normal folk started much earlier.  When Eisenhower was president taxes on corporations and the wealthy were so large most of Americas museums were built and grown just because wealthy people had to try to dodge them.

our grandparents and great grandparents (if you are a millennial) grew up in the Great Depression and then served in a world war.  They were easily the most politically active as a result with a strong preference for people serving policy on both sides of the aisle.  Even Americas poor are pretty dang well off these days.  Much of America’s middle and upper class are completely ignorant of real hardship.  As a result people are both politically ignorant and often completely uninterested in a government who’s primary function is to redistribute wealth to the lowest class so it can move its ways up the ladder as it naturally does.

Globalization while certainly has added a great amount of wealth around the world has also made it so the jobs go where the labor is cheapest (slavery or borderline slavery) and created a global elite more inclined to serve one another than a nation.  And it has been allowed because wealthy politically savvy people are very happy to pat themselves on the back for a decent paying job and cheap stuff to buy with no regard to what’s happening to industry in the Midwest and rural communities across America.

now we live in a country that we have a corrupt Hitler only interested in self enrichment running one side of the party, and a democratic leadership that the majority of democrats disapprove of but will almost certainly put back into office every November as they have since 2012.

the cycle will be broken.  But that assumes democracy survives and either way things will surely get worse before they get better.  People naturally value short term gains over long term functionality.  And that only really changes when a generation learns hard lessons that eventually their children and grandchildren forget.
 

To bring this back of the bicycle industry, heard a few brands are straight up asking dealer to prepay any orders they make including booking orders which is wild. Pre-Covid, net 180 and net 210 terms were common for booking orders and usually in-season reorders were often net 60 or even net 90 if you were on the highest dealer tier with a brand. Pre-Covid commons practice were most likely not the best practice for bike brands as that meant they were bearing most of the financial risk of booking orders and it was pushing dealers to make the biggest possible booking orders to maximize their payment terms which often meant oversupplied dealers that created the constant discounting habit.

would love to know which brands those are. 

This is interesting.

Over the long term, I think you're right. Having bike shops incentivized to book big orders early to get the best terms creates a real distortion over time, leading to gluts of inventory on the show room floor and a culture of discounting at the end of the year. 100% agree.

On the other hand, going from 180 and even 210 day terms to zero? Brutal for a bike shop's cashflow and inventory costs, which were already pretty grim before losing their built-in zero-interest inventory loan system. That's a big correction for the market.

In the long term, I can see why moving away from the old model will be good for the market, but in the short term my prediction is pain.

This might be hopium on my part, but the GenAI bubble finally bursting.

Edit: I'm only thinking of the LLM industry here, rather than machine learning broadly.  Incidentally I dislike the term "AI" in general because it's so vague.  The behavioural scripting of adversaries in video games right from the very start of video gaming to now is still called "AI", after all.  Anyway I've already gone far enough off topic...

Thanks, subscribed!

Are there really more PE firms in the US than McDonalds?

Noticed this is incomplete: Update, a few people asked for data points around consumer health, though there are a gazillion, the ones that stood out the most to me include

(Who  heck down-voted your post?)

I also wonder if bike brands see the cash flow problems of a bike sitting in a bike shop versus their warehouse.  As well as are questioning for mid to high end bikes how many people are actually walking into a shop  to spend several grand without knowing what they want.  When they can easily just pick their local shop for a brand to ship to on the brands website.  

Still a ton of value in bike shops for low end sales, maintenance, demo opportunities, community engagement.  Etc.  And I’m sure in certain markets having the classic big bike shops with racks and racks of bikes for sale is still a working model.  But I doubt that’s true across the board in the modern age.

On the same note, the companies have to be realistic with pre-order expectations. Typically, the shop puts in the order they want and the reps comeback asking for more.. One dangerous act I saw at a former employer was the rep came in with a suggested order and one of the owners didn't even question it. After the senior parter booted him, an inventory was done and it was quickly found out why they were so deep in the hole to the big red S.. Hell, day one when I went into the store that I would eventually manage,  they showed me the dead stock storage area.. I couldn't believe how much was in there.. I looked at the guy that I would be replacing and asked, "Do you have any idea of how much money is in here? This is seriously what puts shops out of business.." He just shrugged.. It took over a year to dump it all at 50% off..

It's crazy how many people in the bike biz can't grasp the business part..

My predictions for 26: 1. More bike shop closures. I think it's inevitable at this point. We're seeing a large number of shops closing on the powersports end. Dealers who've been in business for 50+ years too. If not closing they're getting gobbled up by larger chain ops.They're citing a number of factors and one of the bigger (if not biggest) is falling consumer confidence. I think decades of stagnant wages compared to inflation really hits hard at what was the middleclass. The opportunity is there for growth of service based retailers, but for large swaths that will be a seasonal model to be developed. 

2. A class brands (Spec, Trek, Giant) will need to scale back their sales goals. With each co having 2, 3, and now 4 year old inventory still being sold they'll have to face facts that growth would be nice, but sustainable needs to be accepted. I think it's far more advantageous from a company stand point to sell out of inventory at/near MSRP rather than having to do the discount tango, and that requires reining in production goals. Sure, you may lose a sale to someone else, but you won't be on the hook with staid product 4 years later. 

3. B class (Marin, Kona, Jamis, Fuji)  they will figure out the dance between being an A class and a C class manufacturer (TBE in a bit) by growing into areas where they have little to no market presence. This is a risk as they'll likely need to partner with smaller shops, think 3 or under locations and likely younger businesses as well. Larger, established shops will likely be held by a contract covenant about how much floor space can be given to competitive brands, and this will be too small of a footprint for these mid tiers to wanna vie for. Some brand and shop combos will work out as their 'ethos' will align. Others will be a tough sale as some of these brands produce bikes akin to the gas station apple: It is apple shaped and apple colored, but on first bite it is bland and mealy and not particularly enjoyed or look forwarded to.  I will expect some of them to enter a burn cycle and shutter.

4. Some C class manufacturers will shutter. These are the small, generally higher end manufacturers that rely heavily on a combo of e sales and shop sales for their business. This I see relates to the bit about consumer confidence waning. If one already purchased a high end product, one is now ready to let the latest n greatest go for the next 2-5+ years as they wait n see what their job prospects are gonna look like. This is bad news for these high end ops. Of note, while I'm not nor have I ever been an Intense fanboi, I do give Sterber and crew credit for how many shots they've taken to try to align their business with changes in consumer demand. This flexibility in thinking looks sorely lacking from pretty much every co of every size. The other manufacturers in this class will need to try a number of new hats to see which ones align with their core values and their sustainability. 

5. We'll see a large push from consumer direct brands to try to get into brick and mortar ops. As enthuisasts, we're kinda numb to the need for them to do so since we know what we like and what to look for, but for larger cos like Canyon that produce a healthy mix of product across disciplines/types, they'll need to get in front of the audience (think commuters, ebike curious, and the like) to show why they're better. To a degree it is already happening, and I anticipate it accelerating. 

6. The fringes will sustain. To me these are the small frame builders and co's like RAAW where SKU count is low. I think the MUSA contingent will persevere as there are a number of people who'll bite into those wares from that standpoint, and to an extent that some it is an affordable luxury. I don't get taking a sorta clapped out 90s MTB and rebuilding it to new splender with a heap of anodized goods, but I ain't knocking anyone's kicks. Companies that take a low inventory/low risk/high sellout gamble will be better positioned to adapt to future conditions.

TL;DR, I think the larger companies will tolerate the storm, mid tiers are in for a fight, high end will suffer if they can't reimagine and pivot, the outliers will be where they generally always have been. Thank you for attending my JuanTalk

i worked in such a shop once for a few months. one day, the troy lee softgoods arrived, at least 3-4 of each size. later, when trying to find space for the boxes, i found last year‘s order, about the same size, same things, neatly packed away in the basement…

So about that whole discussion around YT's pricing, margins, etc...

https://www.vitalmtb.com/news/press-release/yt-relaunches-icon-new-tues…

my first question...do all sales (not just profits) go to making former MOB athletes and staff whole from contract breaches?

Probably not. I would guess they are low on the list to be paid back first 

Oh Spomer... those contracts were with the old YT company run by old YT CEO Markus.

New YT company CEO Markus has no idea what you're talking about.

it wasn't a serious question. i know they'll never get paid back.

here's another question. didn't markus blame other brands for a price "race to the bottom" as a reason YT cratered last time? starting off 2.0 with a bang.

that thing is a pr-stunt, nothing more! they can‘t make any profit with that pricing. maybe a symbolic € 😅

my uneducated guess would that they won‘t see a penny… but i‘ll ask andi kolb next time i meet him on the hometrails.

edit: ok, just saw sspomer was joking. btw, i think someone mentioned that the mob contracts had a clause in the fineprint that they don‘t owe the riders shit if the mob folds.

that quote by him plus the price of that tues should show anyone to never ever trust anything that dude says! disgusting person IMO.

"You miss 100% of the bikes you don't sell." - Markus Flossman - Waynkus Flostzky - Wayne Gretzky 

Might be missing a point with YT's Tues release. Given the rapid turn of new company, who dis? to the release of an uncaged DH model kinda says these were not just in the pipes but landed prior to the dissolution of the old and inferior brand. These may have been picked up by the neu and impruved YT for .50/dollar or less, so could not only be a marketing gimmick but also a bit of a profitable one to boot. 

Allow me to rewrite this headline:

“YT Attempts to Rebuild After Bankruptcy With New Pricing and New Bankruptcy.”

The PB article links to the YT website which offers no info on the bike and continues to use the likeness of riders they fired / stop paying months ago.

Classy.