Will more companies be shutting down in the next 12-24 months?

Pedals
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10/5/2023 6:19am
dolface wrote:
One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like...

One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like it was gonna be 2020 forever." happened.

What kind of CFO/money person thought the boom was going to continue and was able to convince private investors, people who's whole job is figuring out market cycles, that it was worth taking a chance on?

Why/how?

Having been on the inside during this time period I can tell you that where I was the prevailing thought was "this isn't going to last - we need to capitalize now while planning for a soft landing". I don't think it was until we were 18 months in that we started to realize that this wasn't even a 'boom', we were mostly pulling sales out of the future and into the present.

I'm hesitant to paint everyone else in the industry as idiots so I'm going to say that they 'got used to the new revenue' and balked when we started to cancel PO's 18 months ago (and even with all those cancellations we ended up in a huge inventory glut).

My guess is that the companies that best weather the slow-down are the few that never really ramped up (Shimano) and those that were too small or under-resourced to ever actually get in on the feasting (see HLC which was in creditor hell). Those that attempted to keep up with the demand are probably sitting on big piles of product that has only started to move with heavy discounts.

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dolface
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10/5/2023 6:39am

Thanks, this thread was incredibly interesting !

Seconded. Really appreciate folks taking the time to share knowledge/experience here!

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gibbon
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10/5/2023 6:48am Edited Date/Time 10/5/2023 6:51am

"I'm hesitant to paint everyone else in the industry as idiots"
I was forced to sit through a multi-hour presentation where the management of a very large bike brand starting with T explained to us that it was'nt a bike boom caused by the virus. It was the result of all THEIR hard work making everything sooo awesome and it was our duty not to let them down. Anyone who voiced anything approaching common sense was roundly chastised for a 'negative attitude'.
When the downturn bit and the 50% increased target turnover was consistently missed, it was due to our lack of commitment to the company values.
The same company has had to keep the previous generation bike in their line up alongside the newly launched version because they are so overstocked.

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Pedals
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10/5/2023 6:50am

Another part of all this that I feel goes underreported was just how WILD the demand was. If you weren't ordering a shit-ton of product retailers/consumers would all but send you death threats. To some extent it didn't even matter if you thought the Covid-Bike-Boom was real - it was real to everyone else so you had to at least try to keep up.

It also doesn't help that bike industry pay isn't that great. It's not that there aren't good people - you don't get into bikes if you're not passionate about them - it's just that there are fewer resources to go around. Maybe you've got one good inventory analyst, or can only afford to do your forecasting in Excel, etc.

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Pedals
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10/5/2023 6:54am
gibbon wrote:
"I'm hesitant to paint everyone else in the industry as idiots" I was forced to sit through a multi-hour presentation where the management of a very...

"I'm hesitant to paint everyone else in the industry as idiots"
I was forced to sit through a multi-hour presentation where the management of a very large bike brand starting with T explained to us that it was'nt a bike boom caused by the virus. It was the result of all THEIR hard work making everything sooo awesome and it was our duty not to let them down. Anyone who voiced anything approaching common sense was roundly chastised for a 'negative attitude'.
When the downturn bit and the 50% increased target turnover was consistently missed, it was due to our lack of commitment to the company values.
The same company has had to keep the previous generation bike in their line up alongside the newly launched version because they are so overstocked.

I guess I should've put a caveat in there that Sales and Marketing folks don't count. They live in a different reality.

I once visited a friend who worked for a large bike company that starts with 'T'. He invited us to ride their trails and had us meet him at the HQ so we could get a quick tour. Ready for the ride, I was wearing my clipless shoes and was click-clacking my way into the front door - when he saw that my shoes had a big red 'S' on it he actually told me I had to go and change my shoes because he would get in trouble for inviting someone in wearing them.

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jeff.brines
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10/5/2023 6:55am
gibbon wrote:
"I'm hesitant to paint everyone else in the industry as idiots" I was forced to sit through a multi-hour presentation where the management of a very...

"I'm hesitant to paint everyone else in the industry as idiots"
I was forced to sit through a multi-hour presentation where the management of a very large bike brand starting with T explained to us that it was'nt a bike boom caused by the virus. It was the result of all THEIR hard work making everything sooo awesome and it was our duty not to let them down. Anyone who voiced anything approaching common sense was roundly chastised for a 'negative attitude'.
When the downturn bit and the 50% increased target turnover was consistently missed, it was due to our lack of commitment to the company values.
The same company has had to keep the previous generation bike in their line up alongside the newly launched version because they are so overstocked.

My blood pressure just went up reading this. Cringe.

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matmattmatthew
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10/5/2023 6:58am
Pedals wrote:
Having been on the inside during this time period I can tell you that where I was the prevailing thought was "this isn't going to last...

Having been on the inside during this time period I can tell you that where I was the prevailing thought was "this isn't going to last - we need to capitalize now while planning for a soft landing". I don't think it was until we were 18 months in that we started to realize that this wasn't even a 'boom', we were mostly pulling sales out of the future and into the present.

I'm hesitant to paint everyone else in the industry as idiots so I'm going to say that they 'got used to the new revenue' and balked when we started to cancel PO's 18 months ago (and even with all those cancellations we ended up in a huge inventory glut).

My guess is that the companies that best weather the slow-down are the few that never really ramped up (Shimano) and those that were too small or under-resourced to ever actually get in on the feasting (see HLC which was in creditor hell). Those that attempted to keep up with the demand are probably sitting on big piles of product that has only started to move with heavy discounts.

"Pulling sales out of the future and into the present."   I was actually sitting around a campfire on a riding trip this past weekend and said almost the same thing to my riding buddies.  The way I see it, on a micro-level with the riders in my local area, a good portion of people I saw getting new bikes during the pandemic were probably going to get bikes or upgrade their bike in the next 1-2 years but working from home and the increased leisure time that came along with it led to people making their purchases 6-12 months earlier than they normally would have.  I also wouldn't discount the Psychology of it, (similar to people buying up all the toilet paper) if a couple of your casual riding buddies just got new bikes to ride more during the pandemic, you don't want to be left out.  

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gibbon
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10/5/2023 7:06am
gibbon wrote:
"I'm hesitant to paint everyone else in the industry as idiots" I was forced to sit through a multi-hour presentation where the management of a very...

"I'm hesitant to paint everyone else in the industry as idiots"
I was forced to sit through a multi-hour presentation where the management of a very large bike brand starting with T explained to us that it was'nt a bike boom caused by the virus. It was the result of all THEIR hard work making everything sooo awesome and it was our duty not to let them down. Anyone who voiced anything approaching common sense was roundly chastised for a 'negative attitude'.
When the downturn bit and the 50% increased target turnover was consistently missed, it was due to our lack of commitment to the company values.
The same company has had to keep the previous generation bike in their line up alongside the newly launched version because they are so overstocked.

My blood pressure just went up reading this. Cringe.

I'd been working in IDB's for 20 years and just needed a job through the lockdown- I thought, 'how bad could it be?'.

I found out.

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whitesq
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10/5/2023 8:35am

Since there's a lot of speculation with GG, I'll add some clarity from a pretty reliable source. The GG demise is somewhat different from a lot of the other issues (i.e. overstock) the other brands are facing. The investor came in with a ton of money, some ideas and zero manufacturing experience. He loaded up management with loyalist, then made a left turn with the direction of the company. All the eggs were in that basket and they didn't hatch. I'm not sure if the chance to pivot had pasted or he just lost interest but the cash flow ended. 

As for the industry in general, in my view, there are two types of boutique bike companies post pandemic:

A. Companies that had solid investors pre-pandemic and just stuck with them through the pandemic. These investors are mostly likely there because they have a passion or deep connection to the industry. 

B. Companies that took on new investors during the boom. My feeling is that these investors don't have the same connection to the industry and could be more focused returns.   

At the end of the day I don't think company A or B is more or less likely to fold. There are millions factors to running a business and it really just depends on management.  

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Pedals
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10/5/2023 8:41am
whitesq wrote:
Since there's a lot of speculation with GG, I'll add some clarity from a pretty reliable source. The GG demise is somewhat different from a lot...

Since there's a lot of speculation with GG, I'll add some clarity from a pretty reliable source. The GG demise is somewhat different from a lot of the other issues (i.e. overstock) the other brands are facing. The investor came in with a ton of money, some ideas and zero manufacturing experience. He loaded up management with loyalist, then made a left turn with the direction of the company. All the eggs were in that basket and they didn't hatch. I'm not sure if the chance to pivot had pasted or he just lost interest but the cash flow ended. 

As for the industry in general, in my view, there are two types of boutique bike companies post pandemic:

A. Companies that had solid investors pre-pandemic and just stuck with them through the pandemic. These investors are mostly likely there because they have a passion or deep connection to the industry. 

B. Companies that took on new investors during the boom. My feeling is that these investors don't have the same connection to the industry and could be more focused returns.   

At the end of the day I don't think company A or B is more or less likely to fold. There are millions factors to running a business and it really just depends on management.  

I'm going to largely agree with you except with regards to Company B's not being at greater risk. If the investors came in with the expectation of continuing to reap Pandemic-level returns they're going to be getting really antsy right about now.

With long term projections on (acoustic) bike sales continuing to decline and a crowded e-bike space that's expensive to get into there's just not a lot of reason to stick it out unless your company is more a passion project than investment vehicle.

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10/5/2023 9:29am

Came to see if anyone was speculating about Atherton bikes. I remember them looking for investors not too long ago, and we don't see much from them. 

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One Ghost
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10/5/2023 10:24am
Came to see if anyone was speculating about Atherton bikes. I remember them looking for investors not too long ago, and we don't see much from...

Came to see if anyone was speculating about Atherton bikes. I remember them looking for investors not too long ago, and we don't see much from them. 

They are doing ok in the UK and looking to expand further. Still  small batch and long waits (8 weeks or so) but they seem to be weathering it out. Still cheaper than a Yeti. 

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gibbon
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10/5/2023 10:53am
Came to see if anyone was speculating about Atherton bikes. I remember them looking for investors not too long ago, and we don't see much from...

Came to see if anyone was speculating about Atherton bikes. I remember them looking for investors not too long ago, and we don't see much from them. 

One Ghost wrote:
They are doing ok in the UK and looking to expand further. Still  small batch and long waits (8 weeks or so) but they seem to...

They are doing ok in the UK and looking to expand further. Still  small batch and long waits (8 weeks or so) but they seem to be weathering it out. Still cheaper than a Yeti. 

I suspect the buisness model isn't based on the ti/carbon bikes .Production is too time limited and too labour intensive.They are prototyping versions that whilst not 'mass production' can be made in much higher quantities for lower cost. And I suspect eventually a line of mass produced bikes that still have the heritage and image of the 'halo' products.
But again it all depends on the level of commitment and expected returns from their investors. If they get cold feet tomorrow, then it's all over the day after.

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jeff.brines
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10/5/2023 11:52am
whitesq wrote:
Since there's a lot of speculation with GG, I'll add some clarity from a pretty reliable source. The GG demise is somewhat different from a lot...

Since there's a lot of speculation with GG, I'll add some clarity from a pretty reliable source. The GG demise is somewhat different from a lot of the other issues (i.e. overstock) the other brands are facing. The investor came in with a ton of money, some ideas and zero manufacturing experience. He loaded up management with loyalist, then made a left turn with the direction of the company. All the eggs were in that basket and they didn't hatch. I'm not sure if the chance to pivot had pasted or he just lost interest but the cash flow ended. 

As for the industry in general, in my view, there are two types of boutique bike companies post pandemic:

A. Companies that had solid investors pre-pandemic and just stuck with them through the pandemic. These investors are mostly likely there because they have a passion or deep connection to the industry. 

B. Companies that took on new investors during the boom. My feeling is that these investors don't have the same connection to the industry and could be more focused returns.   

At the end of the day I don't think company A or B is more or less likely to fold. There are millions factors to running a business and it really just depends on management.  

Pedals wrote:
I'm going to largely agree with you except with regards to Company B's not being at greater risk. If the investors came in with the expectation...

I'm going to largely agree with you except with regards to Company B's not being at greater risk. If the investors came in with the expectation of continuing to reap Pandemic-level returns they're going to be getting really antsy right about now.

With long term projections on (acoustic) bike sales continuing to decline and a crowded e-bike space that's expensive to get into there's just not a lot of reason to stick it out unless your company is more a passion project than investment vehicle.

Don't forget one of the huge drivers in all of this is interest rates. I know that sounds super nerdy/dorky/vomit-inducing, but as rates go up, your willingness to invest in risk shifts toward higher yielding assets. Conversely, when rates are basically zero, allocators do crazy things to find "some level of return". This is why low rates = lots of economic activity, high rates = lower amounts of economic activity. 

If you are a bike company and you are in need of an additional fundraising round, one of two things happen. Either you figure out a way to elicit a higher return from your company at the same underlying risk or you no longer are fundable. Company I was with until recently was victim to this btw (though it was in tech/finance). We were very fundable when rates were zero. We had zero interest when rates moved to where they are now. I saw the writing on the wall...CEO? not so much. 

This is sort of the basics of the capital asset pricing model, and those who understand this have been thriving lately. Those who don't are getting absolutely crushed. 

 

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Mwood
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10/5/2023 12:51pm

This thread is why I keep coming back to vital. Honest thoughtful discussion and no sidetracks or anger.

Talking with my local shops, unless you have money saved and CRUSH it on getting labor through the door...it's rough. 

Funny enough the small mom-and-pop shop that still feels like it's in the 90s and never stopped selling family bikes seems to be killing it. They are always 1+ week out on service and don't seem to spread thin. Maybe that cool new 'core' shop just doesn't cut it. 

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dolface
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10/5/2023 2:25pm
Came to see if anyone was speculating about Atherton bikes. I remember them looking for investors not too long ago, and we don't see much from...

Came to see if anyone was speculating about Atherton bikes. I remember them looking for investors not too long ago, and we don't see much from them. 

One Ghost wrote:
They are doing ok in the UK and looking to expand further. Still  small batch and long waits (8 weeks or so) but they seem to...

They are doing ok in the UK and looking to expand further. Still  small batch and long waits (8 weeks or so) but they seem to be weathering it out. Still cheaper than a Yeti. 

gibbon wrote:
I suspect the buisness model isn't based on the ti/carbon bikes .Production is too time limited and too labour intensive.They are prototyping versions that whilst not...

I suspect the buisness model isn't based on the ti/carbon bikes .Production is too time limited and too labour intensive.They are prototyping versions that whilst not 'mass production' can be made in much higher quantities for lower cost. And I suspect eventually a line of mass produced bikes that still have the heritage and image of the 'halo' products.
But again it all depends on the level of commitment and expected returns from their investors. If they get cold feet tomorrow, then it's all over the day after.

Didn't Atherton do a big (north of US$1M) crowdsource raise? Not sure of the nuances between small private and large institutional investors but I have to think the former are less sophistcated.

Found it, £1,389,168: https://www.crowdcube.com/companies/atherton-bikes/pitches/bj9Q5Z

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bulletbass man
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10/5/2023 4:00pm

They also have dyfi, Red Bull money, and long careers at the top of the sport.  They can weather never making a dime of their bikes as long as it isn’t costing them too much money.

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Dave_Camp
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10/5/2023 6:02pm Edited Date/Time 10/5/2023 6:02pm

Interesting about Commencal and Trek having tons of stock (new and old models on sale side by side) then looking at Evils website- almost nothing in stock.  
 

What position is worse at this point?

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pinkrobe
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10/5/2023 6:35pm
Dave_Camp wrote:
Interesting about Commencal and Trek having tons of stock (new and old models on sale side by side) then looking at Evils website- almost nothing in...

Interesting about Commencal and Trek having tons of stock (new and old models on sale side by side) then looking at Evils website- almost nothing in stock.  
 

What position is worse at this point?

Having stock is great, unless you can't move it. I think Trek has a lot of "dusty" inventory, and as they keep releasing new models, the old stuff has to be sold at a reduced margin. If Evil sold through all of their product, there is probably enough demand that they can easily sell new stuff when it arrives.

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bulletbass man
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10/5/2023 6:36pm
Dave_Camp wrote:
Interesting about Commencal and Trek having tons of stock (new and old models on sale side by side) then looking at Evils website- almost nothing in...

Interesting about Commencal and Trek having tons of stock (new and old models on sale side by side) then looking at Evils website- almost nothing in stock.  
 

What position is worse at this point?

Depends.  If trek and commencal have invested their own money then they are in a good position.  If evil doesn’t have their own money for new bikes they are in a bad position.

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JVP
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10/5/2023 6:44pm

Pure conjecture, but the panic discounts that Specialized started this spring do not give me any confidence that they're doing OK. Maybe they were just smart/cutthroat and got ahead of the crash, but it sure did a number on the entire market when they went off price so early in the season. 

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Pedals
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10/5/2023 8:15pm
JVP wrote:
Pure conjecture, but the panic discounts that Specialized started this spring do not give me any confidence that they're doing OK. Maybe they were just smart/cutthroat...

Pure conjecture, but the panic discounts that Specialized started this spring do not give me any confidence that they're doing OK. Maybe they were just smart/cutthroat and got ahead of the crash, but it sure did a number on the entire market when they went off price so early in the season. 

Better to be ahead of the curve when it comes to inventory reductions. That way you can set the tone by picking a margin % you can deal with - anyone who comes after you has to match or exceed. If they go lower, fine, but they’ll be doing it at an unsustainable level.

As for Trek - don’t forget that they own a significant % of their own retail fronts. This is particularly helpful when you’re trying to move old stuff because you don’t have retailers pushing back on you about having to stock dusty bikes. 

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mfoga
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10/6/2023 3:32am
dolface wrote:
One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like...

One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like it was gonna be 2020 forever." happened.

What kind of CFO/money person thought the boom was going to continue and was able to convince private investors, people who's whole job is figuring out market cycles, that it was worth taking a chance on?

Why/how?

Have you met people in those jobs?  Most higher level management people I have dealt with may have a fancy piece of paper but lack common sense or ability to say no to the top people in fear of losing their jobs.   Not shocked that they could not see it coming.  

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Pedals
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10/6/2023 4:22am
dolface wrote:
One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like...

One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like it was gonna be 2020 forever." happened.

What kind of CFO/money person thought the boom was going to continue and was able to convince private investors, people who's whole job is figuring out market cycles, that it was worth taking a chance on?

Why/how?

mfoga wrote:
Have you met people in those jobs?  Most higher level management people I have dealt with may have a fancy piece of paper but lack common...

Have you met people in those jobs?  Most higher level management people I have dealt with may have a fancy piece of paper but lack common sense or ability to say no to the top people in fear of losing their jobs.   Not shocked that they could not see it coming.  

I think that’s a little over critical. Sure those people are everywhere but bikes are hard to do at all - let alone well.

Besides, bikes really don’t pay as well for a given skill set so you don’t stay in bikes unless you love bikes.

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dolface
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10/6/2023 6:29am
dolface wrote:
One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like...

One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like it was gonna be 2020 forever." happened.

What kind of CFO/money person thought the boom was going to continue and was able to convince private investors, people who's whole job is figuring out market cycles, that it was worth taking a chance on?

Why/how?

mfoga wrote:
Have you met people in those jobs?  Most higher level management people I have dealt with may have a fancy piece of paper but lack common...

Have you met people in those jobs?  Most higher level management people I have dealt with may have a fancy piece of paper but lack common sense or ability to say no to the top people in fear of losing their jobs.   Not shocked that they could not see it coming.  

Pedals wrote:
I think that’s a little over critical. Sure those people are everywhere but bikes are hard to do at all - let alone well. Besides, bikes...

I think that’s a little over critical. Sure those people are everywhere but bikes are hard to do at all - let alone well.

Besides, bikes really don’t pay as well for a given skill set so you don’t stay in bikes unless you love bikes.

I work in tech so I work w/ people in those jobs every day. Somehow I thought that the love and care for bikes that working in the industry requires might have offset that (which, in retrospect, was pretty naive...)

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mfoga
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10/6/2023 6:30am
dolface wrote:
One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like...

One thing I'm having a hard time understanding is how this "...some people got a little too optimistic in the last 3 years and partied like it was gonna be 2020 forever." happened.

What kind of CFO/money person thought the boom was going to continue and was able to convince private investors, people who's whole job is figuring out market cycles, that it was worth taking a chance on?

Why/how?

mfoga wrote:
Have you met people in those jobs?  Most higher level management people I have dealt with may have a fancy piece of paper but lack common...

Have you met people in those jobs?  Most higher level management people I have dealt with may have a fancy piece of paper but lack common sense or ability to say no to the top people in fear of losing their jobs.   Not shocked that they could not see it coming.  

Pedals wrote:
I think that’s a little over critical. Sure those people are everywhere but bikes are hard to do at all - let alone well. Besides, bikes...

I think that’s a little over critical. Sure those people are everywhere but bikes are hard to do at all - let alone well.

Besides, bikes really don’t pay as well for a given skill set so you don’t stay in bikes unless you love bikes.

I wasn't even talking about bikes.  I am talking about corporate world.  My point it they don'tike to hear downsides or what can wrong. It how can we make it work.  I was literally in a meeting where I was told I don't need people who are telling what can go wrong but I need people who want this to work.   That guy is no longer with the company, nor are the 4 replacements because they all refused to accept they might be wrong.  It was always a air of I'm smarter than you.  My point was if bike companies were being run by people who are just guys with fancy piece of paper who knows better because they went to way to much school I am not shocked they would not see this was not substantial. 

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sethimus
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10/6/2023 6:39am
gibbon wrote:
"I'm hesitant to paint everyone else in the industry as idiots" I was forced to sit through a multi-hour presentation where the management of a very...

"I'm hesitant to paint everyone else in the industry as idiots"
I was forced to sit through a multi-hour presentation where the management of a very large bike brand starting with T explained to us that it was'nt a bike boom caused by the virus. It was the result of all THEIR hard work making everything sooo awesome and it was our duty not to let them down. Anyone who voiced anything approaching common sense was roundly chastised for a 'negative attitude'.
When the downturn bit and the 50% increased target turnover was consistently missed, it was due to our lack of commitment to the company values.
The same company has had to keep the previous generation bike in their line up alongside the newly launched version because they are so overstocked.

same company that started doing sales in the middle of season and every dealer needed to lower their prices too?

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whitesq
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10/6/2023 9:17am
JVP wrote:
Pure conjecture, but the panic discounts that Specialized started this spring do not give me any confidence that they're doing OK. Maybe they were just smart/cutthroat...

Pure conjecture, but the panic discounts that Specialized started this spring do not give me any confidence that they're doing OK. Maybe they were just smart/cutthroat and got ahead of the crash, but it sure did a number on the entire market when they went off price so early in the season. 

Reminds me of that line in the movie "Margin Call"

"Three ways to make it in this business: Be first, Be smarter or Cheat"

1
DServy
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10/6/2023 9:42am

Did the death of RideFast get announced publicly? Looks like their Shopify site is no longer around.


image-20231006104222-1

 

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gibbon
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10/6/2023 10:03am Edited Date/Time 10/6/2023 10:12am
sethimus wrote:

same company that started doing sales in the middle of season and every dealer needed to lower their prices too?

Same company who increased IBD pre-season orders by 50-70%, could'nt give delivery dates and would'nt let you cancel anything.

Same company that increased RRP's by 25% in 9 months and refused to honour orders that were placed at the original price.

Same company that constantly pushed their POS system (not fit for purpose), accounting package,finance products onto retailers whilst undermining them constantly with DTC offers and retail outlets.
Retail director for a large european market was franchise manager for fast food company previously. They visited every company owned outlet at the height of the pandemic to delivery christmas presents.......3 shops closed due to Covid outbreaks.

No one I dealt with above shop level had anything above a passing interest in bikes.

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