Interesting move... So they have Schwinn and Mongoose at the bottom still, a few other mid level city ebike and commuter brands like gazelle, SC, Cervelo, Cannondale and Focus.
Focus seems like a weird one as maybe they're big in Europe? But they also have a a very paired down line now, with a few e-mtb's, a gravel line and one road model that all cross over on cannondale. Does Cannondale get shut down or does Focus get folded into Cannondale and Cannondale keeps being the generalist to SC and Cervelo out of the same area.
They have also closed down Charge which I didn't know which is a shame, they had some cool bike a before they went full ebikes.
“There are too many brands in this space” is something we hear a lot in this thread, and it makes intuitive sense. But is that really...
“There are too many brands in this space” is something we hear a lot in this thread, and it makes intuitive sense. But is that really true?
Yes, of course, some industries and markets can’t carry a lot of brands, and we should expect to see consolidation, like toilet paper. You've got your Charmin, your store brands, and maybe a regional brand or two.
But other industries can carry an enormous variety of seemingly redundant brands, like beer. Even before the explosion of microbrews 20 years ago, there were still way more brands in the macrobeer market than there was meaningful differentiation between products. If you try to tell me with a straight face that Coors Light, Bud Light, Busch Light, Miller Light, etc are meaningfully different products, I've got a bridge to sell you.
From my own observation, whether we're talking about microbrews or macrobrews, the beer market is all about labels, branding, marketing, and telling a story about your product to solicit a feeling in potential customers. As well as local market fiefdoms and territory battles. And that goes for my own beer purchases, too. I'm not above the fray, and I know I buy beer based on feelings.
Two questions for the peanut gallery: First, what makes beer fundamentally different than toilet paper as a product or as a market, such that beer can sustain more brands and firms in the marketplace while the toilet paper market can't. I have some ideas, but I'm curious to know what people think. I'm particularly curious to hear what Brines thinks, because I tend to think in terms of customers/demand side and I know he will bring in some supply-side/firm constraints that I haven't thought of.
Second, once we have our theories out there for how beer and toilet paper are different as products and markets, do you think bicycles are more like toilet paper or more like beer?
I think bikes are more like beer, at least at the premium level. Look at road bikes for instance. Very small differences in geometry, weight, etc. and roadies openly admit to buying one bike over another based on looks because they know that an SL9 and a supersix aren’t actually that different and when you get used to one, you’ll forget there even is a difference…
The difference is that one you sit with, enjoy, you’re seen using, is part of a memorable experience etc and the other is ideally forgettable and brief. People build an identity around what beer they drink, not so much for commodities they barely pay attention to. That’s not to say that marketing and branding and all that doesn’t matter, it’s just less powerful.
The thing with there being too many brands is it comes down to diminishing returns I think. 15 years ago it was pretty easy to ride a bike, pick out a bunch of flaws and say to yourself, man I think I could do this better. Now, I think we’re beyond that and more into preferences. And where this gets really scary for brands is in competition with the Chinese manufacturers.
With beer, the cost of switching or trying something new is next to zero. Yet people still struggle to do it. With bikes the barrier is obviously way higher. I think this makes it even harder to differentiate your bike from a competitors. Additionally there are obvious problems with reviewing bikes which further obscures any differences you try and make, which is exacerbated in a very crowded market. So if the kind robot were to make the perfect bike for robots to ride in robotic terrain, how would it convince the squishy things of that of the extent that they are willing to part with thousands of dollars? And how scary does that prospect become when you realize x-lab is about to bring their half price stumpjumper clone to your market in the coming months?
I think the main difference between toilet paper and beer is that one is required for most people, the other is not. You also don't get to show off what brand of toilet paper you have (outside your home). I think with many 'essential' items, its hard to compete on anything other than price as everyone has to buy it regularly.
As onxx said, beer is a relatively low cost thing for people to switch between (compared to bikes). The difference between cheap beer and medium priced beer is a few dollars. Perhaps a closer analogue to bikes would be wine? There are options that are cheap and kind of suck. There are also options that are ridiculously expensive. Wikipedia has an 'incomplete list' of vineyards and wineries which makes it hard to compare.
Bikes are an expensive purchase that gets used for a medium time period, whereas beer and toilet paper are immediate consumables. Perhaps a more similar market would be motorcycles - they can be used for transportation (and therefore are essential to some), but for the most part are a recreational vehicle you hold on to for the medium-term. Wikipedia lists ~120 motorcycle manufacturers on their page List of motorcycle manufacturers - Wikipedia
“There are too many brands in this space” is something we hear a lot in this thread, and it makes intuitive sense. But is that really...
“There are too many brands in this space” is something we hear a lot in this thread, and it makes intuitive sense. But is that really true?
Yes, of course, some industries and markets can’t carry a lot of brands, and we should expect to see consolidation, like toilet paper. You've got your Charmin, your store brands, and maybe a regional brand or two.
But other industries can carry an enormous variety of seemingly redundant brands, like beer. Even before the explosion of microbrews 20 years ago, there were still way more brands in the macrobeer market than there was meaningful differentiation between products. If you try to tell me with a straight face that Coors Light, Bud Light, Busch Light, Miller Light, etc are meaningfully different products, I've got a bridge to sell you.
From my own observation, whether we're talking about microbrews or macrobrews, the beer market is all about labels, branding, marketing, and telling a story about your product to solicit a feeling in potential customers. As well as local market fiefdoms and territory battles. And that goes for my own beer purchases, too. I'm not above the fray, and I know I buy beer based on feelings.
Two questions for the peanut gallery: First, what makes beer fundamentally different than toilet paper as a product or as a market, such that beer can sustain more brands and firms in the marketplace while the toilet paper market can't. I have some ideas, but I'm curious to know what people think. I'm particularly curious to hear what Brines thinks, because I tend to think in terms of customers/demand side and I know he will bring in some supply-side/firm constraints that I haven't thought of.
Second, once we have our theories out there for how beer and toilet paper are different as products and markets, do you think bicycles are more like toilet paper or more like beer?
TP is essentially a commodity. My ass can't tell one 2-ply sheet from another. While there are multiple brands on the shelf, differentiation is based primarily on marketing.
While TP has a single major function, beer simultaneously exists as a drug, near-luxury good [sometimes], social status indicator, and pleasure provider. Wine and coffee are similar. Tasting something is a unique experience for the consumer. It could be said that macro beer lies closer to the commodity side of things [TP], while the thousands of micro brands definitely hit the near-luxury mark. Translating this to bikes, macro beer is like big-box bikes and entry-level bikes from the major manufacturers - they roll on two wheels and are generally cheap to purchase, but nothing special. Micro brew is like "proper" bikes - more expensive to acquire, but far more attention is paid to personal enjoyment, and there's sometimes a prestige factor there as well.
From the manufacturing side, big-box / macro relies on high volume for profitability, while the smallest micro brands maintain much higher margins but with very limited production, like a custom frame builder. Between those two extremes, there are so many ways to make bikes or beer work as a business that there are going to be a lot of brands in both industries.
I own/operate a [very] small commercial brewery, and will be happy to go down the rabbit hole of the craft beer industry if anyone so desires.
Interesting move... So they have Schwinn and Mongoose at the bottom still, a few other mid level city ebike and commuter brands like gazelle, SC, Cervelo...
Interesting move... So they have Schwinn and Mongoose at the bottom still, a few other mid level city ebike and commuter brands like gazelle, SC, Cervelo, Cannondale and Focus.
Focus seems like a weird one as maybe they're big in Europe? But they also have a a very paired down line now, with a few e-mtb's, a gravel line and one road model that all cross over on cannondale. Does Cannondale get shut down or does Focus get folded into Cannondale and Cannondale keeps being the generalist to SC and Cervelo out of the same area.
They have also closed down Charge which I didn't know which is a shame, they had some cool bike a before they went full ebikes.
Your use of the word "generalist" hits the root of the problem.
Premium bikes are specialist items in a specialist market. The only reason I see to be a generalist brand is if you want a brick and mortar concept store to be a one stop shop - but brick and mortar retail is struggling even outside of bikes. Pon have some concept stores with the Mikes Bikes chain etc, but they also contain the specialist, premium options so they compete against themselves.
I can imagine a situation where Cannondale could tell a story of being the premium aluminum brand, and the other premium Pon brands were carbon only. But that would mean restructuring all the brand portfolios and removing more affordable options from the premium brands - but it would probably just move sales between brands rather than creating new.
Or they could double down on the moto story and make it an emoto brand to compete with Also/Surron/Super73.
“There are too many brands in this space” is something we hear a lot in this thread, and it makes intuitive sense. But is that really...
“There are too many brands in this space” is something we hear a lot in this thread, and it makes intuitive sense. But is that really true?
Yes, of course, some industries and markets can’t carry a lot of brands, and we should expect to see consolidation, like toilet paper. You've got your Charmin, your store brands, and maybe a regional brand or two.
But other industries can carry an enormous variety of seemingly redundant brands, like beer. Even before the explosion of microbrews 20 years ago, there were still way more brands in the macrobeer market than there was meaningful differentiation between products. If you try to tell me with a straight face that Coors Light, Bud Light, Busch Light, Miller Light, etc are meaningfully different products, I've got a bridge to sell you.
From my own observation, whether we're talking about microbrews or macrobrews, the beer market is all about labels, branding, marketing, and telling a story about your product to solicit a feeling in potential customers. As well as local market fiefdoms and territory battles. And that goes for my own beer purchases, too. I'm not above the fray, and I know I buy beer based on feelings.
Two questions for the peanut gallery: First, what makes beer fundamentally different than toilet paper as a product or as a market, such that beer can sustain more brands and firms in the marketplace while the toilet paper market can't. I have some ideas, but I'm curious to know what people think. I'm particularly curious to hear what Brines thinks, because I tend to think in terms of customers/demand side and I know he will bring in some supply-side/firm constraints that I haven't thought of.
Second, once we have our theories out there for how beer and toilet paper are different as products and markets, do you think bicycles are more like toilet paper or more like beer?
I think beer might be a tough example, since from what I’ve heard, smaller craft breweries are closing left and right.
How big is the premium aluminum market and how big is it going to be when next Sea Otter x-lab has carbon fiber mountain bikes for less than those aluminum bikes?
How big is the premium aluminum market and how big is it going to be when next Sea Otter x-lab has carbon fiber mountain bikes for...
How big is the premium aluminum market and how big is it going to be when next Sea Otter x-lab has carbon fiber mountain bikes for less than those aluminum bikes?
I think most riders seeking a premium alloy frames are buying from companies that have an established history of building long term durability not the cheapest option available.
How big is the premium aluminum market and how big is it going to be when next Sea Otter x-lab has carbon fiber mountain bikes for...
How big is the premium aluminum market and how big is it going to be when next Sea Otter x-lab has carbon fiber mountain bikes for less than those aluminum bikes?
I think most riders seeking a premium alloy frames are buying from companies that have an established history of building long term durability not the cheapest...
I think most riders seeking a premium alloy frames are buying from companies that have an established history of building long term durability not the cheapest option available.
100%. My decision to buy alloy has nothing to do with price.
And when the time comes to buy carbon, I’ll pay more to go with a known entity.
Beer is a product where input costs are almost all variable and uncontrollable. Set that aside.
The bike industry is wildly inefficient in terms of both production and inventory management. That’s why there are too many brands. There’s always some brand doing a fire sale, killing margins.
Inefficiency means the product costs too much to make. Automate more of it. Amortize development and overhead costs over more units.
Constant inventory chaos just brings prices back to ~where they would be if the industry were more efficient, but without any profits to be had.
So would consolidation be good for consumers? Not in the short term. Maybe not at all. But it would certainly be better for the remaining brands and their employees. It would be painful for many getting to this place of greater stability.
So are there too many brands? Yes. But also no. Just depends where you’re sitting.
I think most riders seeking a premium alloy frames are buying from companies that have an established history of building long term durability not the cheapest...
I think most riders seeking a premium alloy frames are buying from companies that have an established history of building long term durability not the cheapest option available.
Exactly. Although Klein and Cunningham argue over who was the very first, Cannondale were probably the most influential in bringing fat aluminum tubes to market, their CAAD frame story is still told on the road side.
How big is the premium aluminum market and how big is it going to be when next Sea Otter x-lab has carbon fiber mountain bikes for...
How big is the premium aluminum market and how big is it going to be when next Sea Otter x-lab has carbon fiber mountain bikes for less than those aluminum bikes?
I think most riders seeking a premium alloy frames are buying from companies that have an established history of building long term durability not the cheapest...
I think most riders seeking a premium alloy frames are buying from companies that have an established history of building long term durability not the cheapest option available.
I guess it depends on what you mean by premium. I'm not talking about cool-guy frames like frameworks, raaw, etc. Instead I'm talking about for a company like Cannondale, under Pon, presumably a "big" brand. Stuff like Stumpjumper, Levo, Ripmo, Vala, Spectral, etc. You really think MOST of the people buying those are choosing the alloy versions not because it's cheaper? Why can't you buy an alloy Nomad then? Why are the alloy options so limited across the industry? All those brands have "established history of building long term durability not the cheapest option available" too. Keep in mind Specialized probably sells more alloy levos than frameworks + raaw combined.
I think that to you guys it probably looks like there's a bigger gap in the market for Cannondale to go after with that strategy than actually exists. I get that there ARE people out there that actually prefer alloy to carbon, cost no object, but I think that's a very small minority. I'm pretty sure we know what happens when you put a CAAD 14 on a shop floor next to a carbon RS7 that's over 1kg lighter and $500 less, or alloy RS5 that's $1000 less with the same 105 groupset... and I'm pretty sure Cannondale knows what'll happen to their margins. I wonder, how did x-lab sign up so many dealers so fast?
Again, this really goes back to there being too many brands. The market is crowded AF.
Toilet Paper consumer choice is mostly driven by quantitative factors : price, number of ply, size of roll, etc. The only real qualitative factor is how it feels when wiping and I don't that think that ranks high in consumer final decision compared to price.
Meanwhile beer consumer choice is more driven by qualitative factors: taste, mouthfeel, bitterness and sourness personal preference, aroma, foaminess.
Marketing can help you spread the word of your quantitative advantage or difference with others brands/products but marketing main force is to impact and differentiate on qualitative factors.
So bike purchase decision can be driven by quantitative factors like price, weight, aero, travel length, wheel size, tire clearance, etc but when there is many options available with similar quantitative spec, qualitative factors come into play, does it look good, does it ride good, does it feel good when mashing the pedals or plowing into tech or jumping. And all those are highly subjective and personal.
Next up, you got chain of supply logistic that is relatively simple for toilet paper and beer. Wood pulp, water, grains is available anywhere so setting up local factory that take raw materials and turn them into finished products with a few production steps and only buying from another supplier packaging mean simple operations and forecasting.
Bike need multiple assemblies and sub-assemblies. Giant is the most vertically integrated brand in the market and they still need to rely on multiples suppliers to provide sub-parts like bearing, hubs, spoke, tires, drivetrain, brakes, saddle, etc to be able to assemble a finished product. And as much as most of those parts are made in east asia, you still need to consolidate, track, forecast and ship all of them to your assembly line.
Bike seems easy to western entrepreneur because they can just go to one of the frame manufacturer with a rough idea and let the frame manufacturer take care of the rest and then go to an assembler with a rough spec bill of materials and let the assembler take care of all the logistic to forecast, order and receive all those sub-parts and the western brand just take care of the logistics and sales of those completed bikes but that leave a lot of the operations out of your control.
And there are plenty of assembler and frame manufacturer especially for carbon frame that have very low MOQ to start production so barrier of entry for a new brand is relatively low.
In terms of price, Bike is more in between DSLR camera (mostly quantitative based) and mechanical watches (mostly qualitative based in your budget range)
Interesting move... So they have Schwinn and Mongoose at the bottom still, a few other mid level city ebike and commuter brands like gazelle, SC, Cervelo, Cannondale and Focus.
Focus seems like a weird one as maybe they're big in Europe? But they also have a a very paired down line now, with a few e-mtb's, a gravel line and one road model that all cross over on cannondale. Does Cannondale get shut down or does Focus get folded into Cannondale and Cannondale keeps being the generalist to SC and Cervelo out of the same area.
They have also closed down Charge which I didn't know which is a shame, they had some cool bike a before they went full ebikes.
I think bikes are more like beer, at least at the premium level. Look at road bikes for instance. Very small differences in geometry, weight, etc. and roadies openly admit to buying one bike over another based on looks because they know that an SL9 and a supersix aren’t actually that different and when you get used to one, you’ll forget there even is a difference…
The difference is that one you sit with, enjoy, you’re seen using, is part of a memorable experience etc and the other is ideally forgettable and brief. People build an identity around what beer they drink, not so much for commodities they barely pay attention to. That’s not to say that marketing and branding and all that doesn’t matter, it’s just less powerful.
The thing with there being too many brands is it comes down to diminishing returns I think. 15 years ago it was pretty easy to ride a bike, pick out a bunch of flaws and say to yourself, man I think I could do this better. Now, I think we’re beyond that and more into preferences. And where this gets really scary for brands is in competition with the Chinese manufacturers.
With beer, the cost of switching or trying something new is next to zero. Yet people still struggle to do it. With bikes the barrier is obviously way higher. I think this makes it even harder to differentiate your bike from a competitors. Additionally there are obvious problems with reviewing bikes which further obscures any differences you try and make, which is exacerbated in a very crowded market. So if the kind robot were to make the perfect bike for robots to ride in robotic terrain, how would it convince the squishy things of that of the extent that they are willing to part with thousands of dollars? And how scary does that prospect become when you realize x-lab is about to bring their half price stumpjumper clone to your market in the coming months?
I think the main difference between toilet paper and beer is that one is required for most people, the other is not. You also don't get to show off what brand of toilet paper you have (outside your home). I think with many 'essential' items, its hard to compete on anything other than price as everyone has to buy it regularly.
As onxx said, beer is a relatively low cost thing for people to switch between (compared to bikes). The difference between cheap beer and medium priced beer is a few dollars. Perhaps a closer analogue to bikes would be wine? There are options that are cheap and kind of suck. There are also options that are ridiculously expensive. Wikipedia has an 'incomplete list' of vineyards and wineries which makes it hard to compare.
Bikes are an expensive purchase that gets used for a medium time period, whereas beer and toilet paper are immediate consumables. Perhaps a more similar market would be motorcycles - they can be used for transportation (and therefore are essential to some), but for the most part are a recreational vehicle you hold on to for the medium-term. Wikipedia lists ~120 motorcycle manufacturers on their page List of motorcycle manufacturers - Wikipedia
TP is essentially a commodity. My ass can't tell one 2-ply sheet from another. While there are multiple brands on the shelf, differentiation is based primarily on marketing.
While TP has a single major function, beer simultaneously exists as a drug, near-luxury good [sometimes], social status indicator, and pleasure provider. Wine and coffee are similar. Tasting something is a unique experience for the consumer. It could be said that macro beer lies closer to the commodity side of things [TP], while the thousands of micro brands definitely hit the near-luxury mark. Translating this to bikes, macro beer is like big-box bikes and entry-level bikes from the major manufacturers - they roll on two wheels and are generally cheap to purchase, but nothing special. Micro brew is like "proper" bikes - more expensive to acquire, but far more attention is paid to personal enjoyment, and there's sometimes a prestige factor there as well.
From the manufacturing side, big-box / macro relies on high volume for profitability, while the smallest micro brands maintain much higher margins but with very limited production, like a custom frame builder. Between those two extremes, there are so many ways to make bikes or beer work as a business that there are going to be a lot of brands in both industries.
I own/operate a [very] small commercial brewery, and will be happy to go down the rabbit hole of the craft beer industry if anyone so desires.
Your use of the word "generalist" hits the root of the problem.
Premium bikes are specialist items in a specialist market. The only reason I see to be a generalist brand is if you want a brick and mortar concept store to be a one stop shop - but brick and mortar retail is struggling even outside of bikes. Pon have some concept stores with the Mikes Bikes chain etc, but they also contain the specialist, premium options so they compete against themselves.
I can imagine a situation where Cannondale could tell a story of being the premium aluminum brand, and the other premium Pon brands were carbon only. But that would mean restructuring all the brand portfolios and removing more affordable options from the premium brands - but it would probably just move sales between brands rather than creating new.
Or they could double down on the moto story and make it an emoto brand to compete with Also/Surron/Super73.
I think beer might be a tough example, since from what I’ve heard, smaller craft breweries are closing left and right.
How big is the premium aluminum market and how big is it going to be when next Sea Otter x-lab has carbon fiber mountain bikes for less than those aluminum bikes?
I think most riders seeking a premium alloy frames are buying from companies that have an established history of building long term durability not the cheapest option available.
100%. My decision to buy alloy has nothing to do with price.
And when the time comes to buy carbon, I’ll pay more to go with a known entity.
TP is a commodity, so set that aside.
Beer is a product where input costs are almost all variable and uncontrollable. Set that aside.
The bike industry is wildly inefficient in terms of both production and inventory management. That’s why there are too many brands. There’s always some brand doing a fire sale, killing margins.
Inefficiency means the product costs too much to make. Automate more of it. Amortize development and overhead costs over more units.
Constant inventory chaos just brings prices back to ~where they would be if the industry were more efficient, but without any profits to be had.
So would consolidation be good for consumers? Not in the short term. Maybe not at all. But it would certainly be better for the remaining brands and their employees. It would be painful for many getting to this place of greater stability.
So are there too many brands? Yes. But also no. Just depends where you’re sitting.
Exactly. Although Klein and Cunningham argue over who was the very first, Cannondale were probably the most influential in bringing fat aluminum tubes to market, their CAAD frame story is still told on the road side.
I guess it depends on what you mean by premium. I'm not talking about cool-guy frames like frameworks, raaw, etc. Instead I'm talking about for a company like Cannondale, under Pon, presumably a "big" brand. Stuff like Stumpjumper, Levo, Ripmo, Vala, Spectral, etc. You really think MOST of the people buying those are choosing the alloy versions not because it's cheaper? Why can't you buy an alloy Nomad then? Why are the alloy options so limited across the industry? All those brands have "established history of building long term durability not the cheapest option available" too. Keep in mind Specialized probably sells more alloy levos than frameworks + raaw combined.
I think that to you guys it probably looks like there's a bigger gap in the market for Cannondale to go after with that strategy than actually exists. I get that there ARE people out there that actually prefer alloy to carbon, cost no object, but I think that's a very small minority. I'm pretty sure we know what happens when you put a CAAD 14 on a shop floor next to a carbon RS7 that's over 1kg lighter and $500 less, or alloy RS5 that's $1000 less with the same 105 groupset... and I'm pretty sure Cannondale knows what'll happen to their margins. I wonder, how did x-lab sign up so many dealers so fast?
Again, this really goes back to there being too many brands. The market is crowded AF.
Toilet Paper consumer choice is mostly driven by quantitative factors : price, number of ply, size of roll, etc. The only real qualitative factor is how it feels when wiping and I don't that think that ranks high in consumer final decision compared to price.
Meanwhile beer consumer choice is more driven by qualitative factors: taste, mouthfeel, bitterness and sourness personal preference, aroma, foaminess.
Marketing can help you spread the word of your quantitative advantage or difference with others brands/products but marketing main force is to impact and differentiate on qualitative factors.
So bike purchase decision can be driven by quantitative factors like price, weight, aero, travel length, wheel size, tire clearance, etc but when there is many options available with similar quantitative spec, qualitative factors come into play, does it look good, does it ride good, does it feel good when mashing the pedals or plowing into tech or jumping. And all those are highly subjective and personal.
Next up, you got chain of supply logistic that is relatively simple for toilet paper and beer. Wood pulp, water, grains is available anywhere so setting up local factory that take raw materials and turn them into finished products with a few production steps and only buying from another supplier packaging mean simple operations and forecasting.
Bike need multiple assemblies and sub-assemblies. Giant is the most vertically integrated brand in the market and they still need to rely on multiples suppliers to provide sub-parts like bearing, hubs, spoke, tires, drivetrain, brakes, saddle, etc to be able to assemble a finished product. And as much as most of those parts are made in east asia, you still need to consolidate, track, forecast and ship all of them to your assembly line.
Bike seems easy to western entrepreneur because they can just go to one of the frame manufacturer with a rough idea and let the frame manufacturer take care of the rest and then go to an assembler with a rough spec bill of materials and let the assembler take care of all the logistic to forecast, order and receive all those sub-parts and the western brand just take care of the logistics and sales of those completed bikes but that leave a lot of the operations out of your control.
And there are plenty of assembler and frame manufacturer especially for carbon frame that have very low MOQ to start production so barrier of entry for a new brand is relatively low.
In terms of price, Bike is more in between DSLR camera (mostly quantitative based) and mechanical watches (mostly qualitative based in your budget range)
Post a reply to: The Bikeconomics (Mega)Thread