You know how when you get back from a long bike ride and get cleaned up and slip into your flip-flops, your feet just feel so darned…good?

Of course you do. And so do our friends in the running and hiking communities. That’s because, like cycling, those activities cyclically smoosh the human foot– your foot, to be precise– into unnatural and highly stressed positions. The more cyclage (or cycling) , the more smooshage (or smooshing).

Slipping into a more comfortable pair of shoes afterwards lets everything realign footwise, releasing a nice little dopamine chaser to follow that endorphin cocktail you earned with your workout. So picture some blissed-out running shoe product manager a few years back, looking down fondly at his or her battered, flip-flop-clad feet after a hard session and saying, Dammit, Jim, there has to be a buck in these things someplace.

And thus the Recovery Shoe category was born. You want to know more about it, here’s a thoughtful article on that very topic by a woman named Cara Griffin in Footwear Insight magazine (yes, there really is such a thing). More recently, our friends in the walking shoe industry seem to think there’s a buck in it too, according to this article from the folks at SNews, newsletter for the outdoor/fitness markets.

And if it’s good enough for the hiking folks to rip off from the running market, it ought to be good enough for us cycling folks to rip it off from the both of them. So what I want to know is, which bike industry footwear supplier will be first to market?

After all, there’s already a(n admittedly arcane) category called Podios, which as insiders know, are short-term shoes originally designed for race winners to wear atop the podium. Since cycling shoes are notoriously difficult to walk in,  and since nothing makes your race winner look worse than falling on his culattone in front of all his sponsors, Sidi founder Dino Signori (and doubtlessly others) pulled standard racing shoes off the line before the cleats and other hardware were put on, grafted a rubber outsoles to the bottoms, and—Ecco!—the Podio was born.

The results weren’t especially comfortable, but they looked pretty good and just about any alternative is a heck of a lot easier to walk around in than the real cleated thing…as every cyclist who’s ever tried to walk into a coffee shop can personally attest.

So why didn’t some smart person from Sidi (or  Giro or Specialized or Shimano or Bontrager, for that matter) think of making Podios, you know,  actually feel comfortable years ago? Then they could sell the living dog biscuits out of ‘em—to the same fanatics who cheerfully spend $400 for a pair of road shoes and $150 for a wool sweater with their favorite brand embroidered across the chest—and retire, rich and adored, to live happily ever after?

Because, dammit Jim, that’s just not the way we do things in the bike business, that’s why.

But what we are really good at  is finding a bandwagon that’s only a couple years old and looks like it might still have some life in it, and hopping aboard. Which means that, as an industry, we’re right on schedule for this one.

Here’s an interesting question, especially coming so close to that national monument to the benefits of ruthless colonialism known as Columbus Day. It goes something like this: The nascent Chinese recession notwithstanding, the cost of manufacturing bicycles in China will only continue to rise over time. So where will America’s next generation of affordable bikes come from?

As I say, it’s an interesting question. And an increasingly timely one, for three reasons:

• The first is that every bike company I’m aware of is already asking it, at least internally…but not one of them is discussing the answers publically.

• The second reason is, that may be because nobody seems to be coming up with very good answers.

• And the third reason we should be talking about the next generation of cheap bikes is that Chinese labor costs are already rising faster than we collectively think.

Of course bike companies aren’t dumb; they know this stuff already. Bikes are a low-margin business at every phase of the global supply chain, and some of the smartest people in any bike company are often its buyers and inventory planners. And prices on low-end Chinese bikes are already 10-15% higher in 2012 than they were in 2011.

The 中文 is already on the wall, so to speak, and even if it isn’t, the Pinyin ain’t too far behind it.

So maybe it’s time for a public discussion on the topic. Here are just three of the possible scenarios:

1. U-S-A! U-S-A! The New York Times article I cited a couple of paragraphs ago (here’s another link in case you missed the first one) suggests that rising Chinese labor costs may trigger a renaissance in USA-based manufacturing. Well, it might be pretty to think so for high-end, high-profit items like consumer electronics or even exotic carbon frames, maybe, but don’t expect if for mild steel cruisers or entry-level IBD aluminum frames any time soon.

2. The Mexican Connection. A more practical solution would be the establishment of Mexican framebuilding maquilladoras, which then assemble Mexican frames with world-sourced components. In addition to an increasingly affordable labor source, Mexico offers the twin benefits of being both duty-free thanks to NAFTA and above all, close. Which means any incremental labor costs might be easily offset by savings in duty (0 versus 10-15%), freight (on the order of hundreds of dollars per container), and time (a couple days versus 3-4 weeks depending on delay in US Customs).

The good news on this scenario is that there is has been significant bicycle-making infrastructure in place for years in Mexico, with some fourteen facilities currently in production of mostly low-end, affordable model for the domestic and Central/South American markets.

The not-so-good news is that Mexican bicycle production has also been on the ropes for years, as fabrication shifted inexorably to—you guessed it—Asia, and specifically China. The smart folks at Bike Europe did a couple of good pieces about the demise of Mexican production capacity under the asphyxiating effects of ever-cheaper Asian product a few years back, which you can see here and here, respectively.

Assembly is an easier nut to crack, and might be a good first step, but bringing quality frame production back to Mexico—even at mass market or entry-level IBD price points—would require significant investment by the Mexican government, USA-based bike brands, or both.

But it’s nowhere near impossible. The Chinese learned to make world-class bikes from the Taiwanese, after all, who learned it from the Japanese and Americans, and all in the last thirty years or so. The even better news is that American product managers provided much of the oversight and QC effort that made the whole Asian shift possible in the first place.

If the Mountain Bike Boom of the ‘80s was about anything it all, it was about the globalization of fabrication technology as much as it was about the change in bikes and riding styles worldwide. And if the current generation of American bike companies learned anything at all from it, they learned how to demand—and consistently achieve—world-class results under some of the toughest working conditions the global market has to offer.

Besides, ask a bike business PM whether he (or increasingly, she) would rather fly to Jiangsu Province again or take the much shorter jaunt to the sunny states of Nuevo León or Jalisco and see what kind of answer you get. Baijiu or Tequila? Holdala or Y Pa’ Dentro?

3. Digging Deeper Into Asia. The third—and frankly, most likely—possibility is to continue sourcing eastward in search of ever-cheaper labor.

I say “most likely” because workers in places like Bangladesh and Thailand are still a heck of a lot cheaper than they are in Mexico; because global containerized freight rates seem relatively stable for the time being; and mostly because the increasingly keiretsu-style involvement and investment/ownership of Asian bike manufacturers with respect to US bike brands makes it the most convenient solution currently on the table.

Oh—and I almost forgot— because our friends in the European Union are already building infrastructure there for us.

A thorough explanation of how this situation came about is beyond both my personal expertise and my patience. But the bottom line comes down to the EU’s longstanding anti-dumping duties of close to 50% (!) on Chinese bikes and the fact that European bike brands (not to mention USA-based bike brands that sell products into EU nations) have been quietly building up infrastructure in other Asian countries for years as a result.

This has freed up a significant amount of Chinese production capacity which American brands are happy to take advantage of, at least in the short- to middle-term.

Then there’s the whole arcane question of whether Chinese bike makers have been secretly gray-marketing product into the EU via third-party countries to avoid the duties, and how the outcome will impact product availability in Europe (and elsewhere) for years to come.

But for our typically xenophobic Columbus Day American purposes, let’s just say our cousins across the Atlantic are spending a lot time, money, and effort to develop manufacturing capacity in places like The Philippines, Bangladesh, and above all, Cambodia. (For the full story, check out this post from Bike Europe.)

And that means big opportunities for American bike brands to manufacture there in the years to come.

To read Part One, click here.

That Was Then, This Is Now. Fortunately, those 240-day lead times from back in the early 2000s are a thing of the past. As discussed previously, it’s more like half that nowadays. Marketing communications can be developed and deployed at internet speed. Plus components haven’t changed every year anymore since the early 1990s; nowadays they change every three years, on average.

And while this year’s latest-and-greatest equipment may be a big deal on thousand-dollar-plus high-performance machines, it’s hard to believe the typical $500 bread-and-butter consumer really cares whether his shift levers are gray or black this season.

But we still find ourselves stuck with every-year model years at every price point, not to mention the bulimic pricing mentality that accompanies them: Binge and purge. Force more inventory into the channel, then puke it up at discount and start all over again.

All of which brings us to the second pincer of the Model Year Trap: when it comes to preseason “risk sharing,” the lion’s share of the “risk” almost always devolves onto the last person left holding the inventory: the retailer. (In really bad years, like 2009, the distributors take a hit too, but only as needed to move their excess inventory along the supply chain.)

So here’s where the model year concept remains so important: it forces retailers to blow out existing inventory, often at a loss, to make room for the new stuff coming down the line.

And that’s the real reason we still have model years: they’re a way of forcing inventory through the supply chain. But as I said way back at the beginning of the previous post, that’s a false benefit, especially when compared to the very real advantages of acting like a grown-up industry and actually making our supply chain more responsive in the first place.

So what should we do about the problem? Four simple things:

1. Eliminate model years, at least on sub-thousand-dollar bikes.
2. Time the introduction of model changes to minimize obsolescence and allow the existing stuff to move through the distribution system and out retailers’ doors with minimal price disruption.
3. We’ll still have to build a lot of inventory in the third and fourth quarters of each year, to level-load factory production and to have enough product to supply demand through the spring and summer months. But the total amount of that early-season product should be significantly less, because it’s now easier to just order more in-season.
4. Without the artificial deadline of the new model year forcing unnecessary obsolescence into the market right in the middle of each summer, seasonal adjustments for consumer demand can be made more easily and gradually, with less disruption of production schedules. And that means huge savings for the entire industry.

Build For Refreshment, Not Obsolescence. Elimination of model years will still leave four months of lead time “daylight” between the time when new products are ordered and when they’re available to consumers…plenty of time to see seasonal changes coming, make adjustments, and keep the right amount of supply flowing into the market.

Best of all, minor changes in colors or spec become just part of the ongoing model refreshment process, not a looming inventory crisis and potential sales disaster each time they happen.

At its heart, the elimination of model years acts as a safety valve, a gentle buffer on a constantly fluctuating supply/demand dynamic:

• In good seasons, the system can respond in enough time to supply product without having to sit idle waiting for the next model year’s components to become available. More bikes get sold to more happy cyclists, and everyone in the supply chain ends up with more dollars in their pockets.
• In lean years, product can move through the system in accordance with demand and without the necessity for slash-and-burn discounts and market disruption.

Which brings me to the Bottom Line. Once we’re off the model year treadmill, we can focus our efforts as an industry on making the entire supply chain more responsive to the real needs of consumers. And that’s a very good thing. For everyone involved.

This renewed focus becomes a huge win-win. Without model years creating arbitrary deadlines that obstruct the entire supply chain, component suppliers and bike factories still have plenty of time to plan their production; suppliers will have less product to warehouse (or store at retailers and subsidize with extended dating terms); and retailers have a more flexible, responsive, and reliable supply of product at more consistent pricing and profitability. Consumers win too, because bikes are available when they want to buy and because industry-wide savings can be reinvested in offering them better bikes at a better value.

This two-part entry is actually the second half of  my previous post about why there weren’t nearly enough bikes in model year 2012 and why we don’t seem to be able to do anything about the chronic under- or over-supply of product in our parochial little industry.

One of the big reasons we don’t just order more fill-in product in-season and/or hold off on introducing new models until the previous year’s inventory is sold through at retail is the existence of what I call the Model Year Trap.

On the one hand, the planned obsolescence which lies at the root of the whole Model Year concept theoretically drives more sales. But a number of people in the bike business (you know who you are) are starting to publicly question whether revenue lost from the discounting of old models and the forced introduction of new ones ends up being a net loss for the industry, not to mention the consumers who buy and ride our products.

But before we start slicing that particular pie, let’s back up almost a hundred years, all the way 1920s, with stops along the way at the Eisenhower and the Nixon administrations.

Welcome Aboard The Model Year Treadmill. The basic premise of model years—for hard goods, anyway—comes from the automobile industry back in the 1920’s, when the General Motors prez Alfred P Sloane swiped the whole idea of fashion industry seasonality and applied it to cars. Good idea, although it didn’t do much towards preventing the great Depression.

Bicycles, of course, are even more seasonal than cars. So when Schwinn legends Ray Burch (EVP Marketing and himself a product of the Detroit auto industry) and Al Fritz (VP Engineering) first brought the model year concept to their Krate series in 1968, it’s easy to understand how it became such a huge hit.

The initiative was successful partly because it combated a general move away from Fair Trade pricing nationwide, and more specifically because it prevented price erosion for Schwinn and its retailers. Both concerns came at a time when Schwinn’s grueling, multi-decade antitrust battle with the US Department of Justice was finally grinding to a halt and the company was being forced to give up the kind of absolute price controls over relatively long product life cycles it had long enjoyed. (Our current period of relative in-season pricing stability has only been effectively in place since the 2000s.)

Model years worked well for a bunch of other reasons, too. Dealers could be brought together for a single meeting (or in Schwinn’s case, a series of regional meetings) and be shown a whole year’s worth of products at once. Catalogs could be printed just once annually (remember this was back when millions of very expensive catalogs were a both a must-have marketing tool and a huge chunk of budget for bike companies).

Best of all, dealers could be encouraged (some retailers prefer words like “coerced,” “forced,” or even “extorted”) to forecast a entire year’s worth of bicycle sales at once, weather and markets be damned. And of course, if they ended up with a bunch of unsold inventory left over and had to take a margin hit to move those units out the door, well, that was their problem.

Which brings us to the first pincer of the Model Year Trap: we’re a weather-based industry and no one can predict the weather a year ahead of time.

Duh. But weather’s the main reason we end up with not enough inventory at the end of model years when the weather’s been good (like 2012) and discounting excess inventory in years when it’s not (like 2009, when the weather and the economy dealt the entire industry a massive one-two punch). But instead of adjusting our supply chain model to make it more responsive to this kind of seasonal variance, we’ve done precisely the opposite.

Pre-Season Ordering = Risk-Sharing. Sort Of. Back when Schwinn Ruled The Earth, factories were domestic, which meant bikes could be fabricated much closer to when they would be needed, and that adjusting production to meet seasonal demands was relatively simple. (Schwinn, old-timers tell me, also deliberately under-produced to about 80% of forecast in order to prevent inventory buildup and keep prices stable.)

But beginning in the 1980s with the shift to offshore production, the need evolved to build up large amounts of inventory in order to level-load production at Asian factories (discussed in more detail in my previous post).

Lead times got longer as a function of geography and global parts sourcing, up to four months between order and stateside delivery, which is where they stand today. But at the same time came the notion of the component model year, itself a direct result of the Shimano’s unprecedented technical development program of the same decade. At one point in the early 2000s, product managers had a six-month (!) wait just to get Shimano kits to their factories so they could start building bikes. So 6 months for kits plus a month to assemble and package plus another month to ship and bring bikes through customs and into warehouses meant an effective 8-month lead time.

With delays like these, year-long forecasts from retailers became a necessity to spread the risk associated with suppliers committing to half-a year’s worth of inventory at a time.

Watch this space for Part Two, which goes live Tuesday, August 21^st.

Ask any retailer. We were blessed with great spring weather in North America this year, and now there aren’t nearly enough bikes in the channel to meet demand.

Dealers blame suppliers for not building the right number. Suppliers blame retailers for not ordering the right number. But guess what? This is a seasonal business. The number of bikes consumers want to buy each year is varies enormously depending on the weather. And until someone figures out how to predict the weather nine months ahead of time, we have to guess about the number of bikes.

This year we didn’t order or build nearly enough. And the whole industry is going to lose tens of millions of dollars in retail sales as a result.

Other years, the weather is bad (rainy weekends are an especially effective sales-killer) and we have way too much inventory. It ends up being discounted to make it go away and make room for next year’s models…and the whole industry loses tens of millions of dollars in retail sales as a result.

Now this may sound simplistic, but it’s one large reason for the fact that our sales (at least as measured in units) are so consistent year after year. It’s also one reason the profit margins at every point in the bicycle supply chain are so modest.

Too much, not enough, it doesn’t matter. We sell the same number of units each year, and each year we leave tens of millions of dollars on the table in exchange for the privilege.

Now as it happens, the lead time between when suppliers place a purchase order for more product and when those bikes actually show up in retailers’ showrooms is about four months. (Yes, I know it varies, but let’s keep this simple.)

So why do we order and make bikes as much as nine months before anyone wants to buy them? Can’t we get off of this merry-go-round and into a 4-month supply cycle?

Short answer: no.

Longer answer? Read on.

Reason #1: It’s The Money, Stupid

 Even back in the day, when brands like Schwinn and Raleigh had their own factories in the USA, the industry had to balance seasonal demand with availability of frames and the stuff to put on them.

Currently there are four classes of players in complex mating dance that has to take place before a bike ever gets to a consumer, and they all have very different—and often directly competing—interests.

Moving upstream along the supply chain from the end consumer, we have retailers, the bike brands themselves, the Asian factories that supply them, and the equipment and materials suppliers who supply the factories.

You want to smooth out the product timing issues in the bike industry, you’re going to have to get all four of these players working together for the greater good. And for a variety of reasons, that ain’t likely to happen any time soon.

Risk and ordering flexibility. At the source-end of the supply chain, the people who actually make stuff—component suppliers, frame factories, and assembly plants—all want to level-load their production throughout the year for reasons of efficiency and cost savings.

Moving downstream along the channel, bike brands, retailers, and, ultimately, consumers all want product to magically appear in response to seasonal demand. And in between, no one wants to be left holding the inventory build-up that’s a necessary compromise to reconcile these competing interests.

But it’s not just the physical inventory that becomes complex to handle (although it is; more about that in Reason #2). even more arcane is the flow of money arrangements that pays for it all.

Follow the money. Generally, frames and assembly are paid for with letters of credit, where a bike brand’s bank pays factories (or the factories’ banks) for their products or services while the brand makes payment arrangements with its bank.

Arrangements among various fame and assembly factories typically follow the Japanese Keirestsu model: even for smaller players, a  specific assembler almost always has at least some shared ownership with a framebuilder. The formerly keiretsu-based Asian component/equipment brands have become increasingly independent over the past 25 years with the longtime dominance of an ever-more-diversified Shimano leading the way, followed by the rise of the multinational SRAM collection of brands and the more recent high-end resurgent of Campagnolo.

Large bike brands have enough clout to deal directly with equipment vendors, while smaller brands most often handle those arrangements through their builder/assemblers.

As The Bike World turns. While components and equipment are becoming more economically independent, the organization of bike brands and the factories that make them has become increasingly keiretsu-like.

Giant wholly owns the Giant brand, of course. A significant investment by Merida in Specialized was announced in 1999. Following that announcement, Giant gradually stopped manufacturing Specialized bikes brand and grew increasingly close to Trek brand. Outside of the Big Three, outright vertical integration (ownership of brands and distribution organizations by factories) has become starting in about 2000.

So Giant’s factory builds for Giant and Trek brands; Merida and a few others build for Specialized, and there’s a complex patchwork of lesser players on all sides of the game. For a more complete picture of who makes what for whom, see Bicycle Retailer’s reasonably-accurate-but-by-no-means-definitive annual map, reproduced at right.

The point of this whole soap-operatic patchwork of ownership and relationships is that bike brands can’t just make bikes as they’re needed, even though there is, in theory, enough Asian production capacity for it. The spiderweb of investment and alliances just won’t permit it.

Chinese New Year. Yes, Really. OK, we have to build up inventory. But have you ever wondered why all those bikes end up at retailers’ in November through January rather than, say March through April? It’s because production in Taiwan and China pretty much comes to a standstill for a couple weeks during the Lunar New Year, and it takes a couple weeks after that for everything to get back to normal.

So for an entire month starting sometime between January 21st and February 20^th, bicycle production comes to a grinding halt for an entire month. which just happens to be about the worst possible time in terms of shipping bikes from Asia to the United States in time for Spring in the Western Hemisphere.

The same is true for every other warm-weather industry in the USA, too, but bicycles have the added double-whammy of being both bulky (and therefore expensive to ship and store) and low-profit items from the get-go.

And if you think the entire Chinese culture is going to reschedule a millennia-old holiday just to make things more convenient for a bunch of cyclists, well, good luck with that.

Next time, Reason #2: We Shoot Ourselves In The Foot With Model Years

How does Electra Bicycles turn a tidy profit marketing products to a nonenthusiast customer base the rest of the industry is largely content to ignore? Electra Marketing Director Elayne Fowler knows. But aside from a few tantalizing hints, she’s not telling.

Elayne Fowler is one smart cookie. While the rest of the industry has been telling itself that it really needs to get around to addressing the needs on non-enthusiast riders one of these days, she and her colleagues at the “Official Bike Of Nothing Official” have been doing exactly that for almost twenty years.

And taking the results straight to the bank.

Fowler is not your typical bike geek, but she’s not all that atypical, either. Like so many of industry veterans, she knew early on that her heart lay in the outdoors and later found her calling in the bike world. Sound familiar? But unlike a lot of her colleagues, she honed her professional chops in the ad agency world first, starting in the big apple (NYC) at creative powerhouse Ammirati & Puris and then with San Francisco branding pillars like Young & Rubicam and Saatchi & Saatchi.

A college (UCSD) lacrosse player and triathlete in the early ‘80s, Fowler wanted to channel her drive and competitive spirit client-side into a company with a strong brand identity. She found that opportunity In 2006, in the form of an Electra marketing gig reporting to founders Benno Baenziger and Jeano Erforth.

“I had not heard of Electra before getting hired,” Fowler recalls, “but I immediately knew what to do to take this exciting and dynamic brand to the next level. The Townie had already come out, but there wasn’t a whole lot of continuity anchoring the brand under the Electra name.” Her tenure began with the launch of the company’s Eurostyle town bike, the Amsterdam, and she was challenged to bring the company’s growing pack of collections to heel under the Electra marque. Including, she says, “ how to keep the brand message as the technical intelligence ramps up” and new patents come onboard.”

Hint: It’s All About The Bike…Just Like Everyone Else.

What makes Electra products different than its competitors’? It’s about time and attention, and innovation, Fowler says. “It’s the same time and attention and innovation other guys pour into their race bikes, [but] bringing it to more recreational riders so we can invite more people into the sport,” she says. “We pay attention the details, attention to the ride; we push the envelope on style and fashion themes,  basically paying attention to the complete everyday cycling experience without making it intimidating.”

Apparently they were doing something right, too. After sixteen ?years of largely flying under the industry radar, Electra came out in 2009 with a assumption-shattering full-page ad in the Interbike issue of Bicycle Retailer, masterminded by newly hired Electra CEO Skip Hess. (Note: neither I nor Electra nor BR&IN seems to have a copy of the ad. –rv)

Using point-of-sale data capture from Leisure Trends, Electra candidly compared its dealer sell-through stats and margins to its competitors in the enthusiast niche. “We support all types of cycling,” Fowler insists. “But we were starting to see some comments and questions coming from our competitors about Electra’s products and position in the market that were not accurate.” So Electra showed the rest of the industry where we stood, which was comfortably toe-to-toe with (and maybe slightly ahead of) any number of traditional brands.

“Our Owners Become Evangelists”

“I think it comes back to appealing to a broad population, from ages 6-96— we appeal to enthusiasts as their pleasure bikes, and then to all those who don’t plan to race in a peloton or bounce off boulders…which is to say, most of the general population,” Fowler says. “We also respect our customers; we present a wide variety of options and let them choose which products match their needs and sense of style. As we make products and share the word, our owners become evangelists; it becomes an organic perpetuating system driving a lot of Electra love.”

It’s a difference of approach, she explains. While other companies are chasing Pro Tour and UCI Cup racers, Electra is putting bikes out for attendees at the TED conference, and Fowler has “a whole bunch” of similar partnership programs with other glitterati-studded events.

“We do broad-based PR,” she says, “and we’re working directly with our dealers to support them as they become more sophisticated in social media and other forms of local community involvement. Our biggest goal is to connect the consumer into the store, and that’s something we’ve never wavered in.”

Of course this is still the bike business; she doesn’t have the resources of say, Procter and Gamble. But “we find ways to use our funds effectively,”  Fowler says confidently.

New Markets All Around Us

Ask Fowler about reaching out to new markets and she can barely contain her enthusiasm: “Because of the playfulness and quality of the product, we’re always finding new markets. It’s easy to get someone excited about the products; our focus  then, is getting them into our retailers. That’s why our dealer locator is such a robust system. We’ve also got a powerful B2B portal and some other interesting new IT systems, I can’t divulge yet. We’re working on every point of contact, from reps to retailers to consumers. And it’s paying off as we see dealers utilizing more and more of our business support tools and providing better representation of the broad Electra offering.”

Fowler also receives lot of PR outreach from the fashion and design media— photographers and art directors (who love the Electra’s style and fashion appeal),. “So we appear in noneditorial contexts — our bikes show up in photoshoots and videos and all kinds of lifestyle pieces. And the end result is, we’ve become a celebrity lifestyle product. To name just one of many, Miley Cyrus has a whole collection of our bikes, and when people see pictures of her riding her Electra, that makes a connection you can’t get anywhere else. It works because it’s inspiring to a lot of people.”

But the bottom line for Fowler—and Electra—is that it’s all just bikes and marketing…same as for any other bike brand. “The secret is to be authentic,” she insists. “The same tools and systems are available to everyone; it’s just a question of using them in a effective ways.”

Amen to that, Sister.

Conventional wisdom is, the Big Three bike brands—Trek, Giant, and Specialized—control the lion’s share of the US bike market. Actual numbers in this business are almost impossible to come by, but you’d be hard put to find an industry insider who’d disagree with that statement.

And in terms of total unit sales, that wisdom is probably right. But when you look a little deeper, from the viewpoint of an individual consumer going into an individual local bike shop, the picture changes pretty significantly.

Turns out there’s a total of 143 bike brands active in the US market (down from 150 last year). Moreover, in terms of which brands are tops in which shops and/or markets, it’s not Trek, Giant, or Specialized that leads the pack. Not Raleigh or Cannondale or Haro or Diamondback or Schwinn, or any of the top brands we’d all expect.

On a purely representative basis, the leading brand in the country is…”Other.” And it has been for years.

The bottom line is that in terms or retail representation, anyway, none of the top ten brands is anywhere near as big as those bottom 130 combined. You’d have to merge Trek and Giant to equal those little guys in aggregate.

So individually, the smaller brands don’t pack much of a punch, market-impact-wise. But put them all together, and they’re a force to be reckoned with. Which has some very powerful implications for the bike-buying, consumer, for retailers, and for the industry as a whole. More about that in just a minute.

Source data for this claim is the just-released National Bicycle Dealer Association (NBDA) report, US Bicycle Market 2011, written by our friends at the Gluskin-Townley group. You can pick up your own copy for $299 from the NBDA, or save a hundred bucks if you’re a member there.

The results are based on a survey of more than 300 independent bike shops, and “the basic question,” according to author Jay Townley, “was to write in their bestselling bicycle brands, not numbers, but bestselling brands based on unit volume. So with Trek, for instance, 12% of retailers surveyed said it was their bestselling brand.”

Even more interesting is how the representation shakes out by shop size, says Townley. “At $300,000 or less, Trek is #7; Redline is #1. At $3000-5000, Trek is #2,Raleighis #1. Where Trek has its hold is in the million-plus-dollar retailers. Trek is not #1 in all regions of the country, nor are they #1 in all size stores. It varies.”

But wait, there’s more.

“Trek, Giant, And Specialized pretty much control the top 3 spots,” Townley continues. For the others, it’s very dynamic, depending on a lot of things, including who’s got inventory that year and how good it is in the eyes of the dealers. The only brand which held its position over the past four years is Cannondale at #8. Schwinn held the #11 slot from 2008-2010, then jumped up to the #10 slot in 2011.”

Makes sense, right? To maximize sales, the most powerful brands make it their business to be in the most powerful (generally = biggest) retailers. But not all bike shops represent all brands, and there’s plenty of excellent not-so-big retailers (and bike brands) in this country…which means there’s a huge number of bike shops representing non-top-10 brands. And neither those retailers nor those brands are going away anytime soon.

So What’s Your Point?

What does all this mean for the bike-buying consumer…or the bike-selling retailer, for that matter, or the bike-supplying manufacturer or distributor? Plenty.

For one thing, it’s a classic representation of the Long Tail Effect, and it’s one of any number of business-school phenomena that help make the bike business so interesting…or completely frustrating, depending on your point of view.

For another, it means that the doom-and-gloom scenario we’ve been hearing for years in this industry is a bunch of baloney. You know, the one where a few monolithic bike brands and a relatively small number of high-volume retailers effectively control the entire bike market. Well, that stuff ain’t likely to happen any time soon, at least not without some huge shifts in the market.

So what will happen over the next 5-10 years? Glad you asked. Stay tuned.

I finally got my hands on the National Sporting Goods Administration’s (NSGA) 2010 report on the US Bicycle Market.

In addition to being some of the most exciting news we’ve seen in 20 years (more about that in a minute), it’s also by far the easiest to interpret…mostly because instead of digesting the whole report, I got a pre-release copy of the Gluskin Townley Group’s analysis, as written by Brad Edmundson. Even better, you can get your own copy for free: just scroll down to the bottom of the post for ordering information.

So what makes the 2010 report so exciting? Simple: it looks like maybe, just maybe, all the hard work we’ve been doing as an industry to grow the market for enthusiast cyclists might actually be paying off.

Or maybe not.

To quote from the report:

Over the last decade, bicycling has become less popular, but more visible. The bicycle market in the US is not growing, yet it has the potential to become far more profitable.  What made this happen?  Simple. While bicycling faded as a pastime, it grew as a sport.

 Or to put it another way, evidence to shows that the US bike business has succeeded in cultivating—and actually growing— a European-style class of enthusiast cyclists. That’s pretty darned good news.

The bad news, of course, is that, unlike our colleagues on the other side of the Atlantic, we’ve accomplished this growth by largely ignoring all the other people, the ones who might want to ride bicycles on a more causal basis. But more about that in another post.

Here’s the bottom line— and as a note, while the numbers are verbatim from the folks at GTG, the interpretations are my own.

The Good News

• Cycling participation among adults is up slightly, by a modest but encouraging 2%. In fact, the overall number of cyclists has posted small gains on a yearly basis since 2000. So does this mean that ten years of advocacy is starting to turn things around for the industry? Maybe— see the following section.
• Cycling participation among adult men is up a very healthy 16% overall.
• Frequent adult riders—those who ride at least 110 days per year—increased by 12%. Men were up 15%, and while women’s participation decreased overall, the number of women who ride frequently is up by 8% over the past decade. To me, that’s one indication that our efforts to market women’s cycling may be starting to succeed.

The Not-So-Good News

• Kids’ participation continues to decline alarmingly. While the number of adult cyclists is increasing slightly, Only 20% of children ages 7-17 are riding bikes even six times per year, versus 25% in 2000.
• Women’s participation continues to decline. While the number of frequent women riders has increased (see above), the overall number is down a net 10%…which means the number of casual (infrequent) women riders is down by even more, by 14%. As the reports says, The number of women who ride frequently increased by more than 100,000 between 2000 and 2010, even as the total number of women riders decreased by almost 1.3 million.
• Overall participation continues to decline. While the number of adults riding bikes is up slightly, the exodus of kids and causal women riders means the overall number of folks riding bikes is down 8% overall in the past decade, and it’s driven by women and, to a lesser extent, kids leaving the sport.
• On a per capita basis, it’s worse than that. When you correct for the fact that the US population overall has grown 10% in the past decade, the overall decline is more like 18%.
  My Note: This is a lot more than just fear-mongering; statistically, the distinction is important. If we’re trying to measure the gross output of the industry, we should look at the base numbers. If we’re trying to measure our ability to penetrate the market, we should look at per capita. Both are important metrics, but they measure very different things.

So What’s It Mean?

Like a lot of reports, you can make the 2010 NSGA numbers mean pretty much anything you want them to. Advocacy types will point to the steady growth of the number of cyclists over time, and with some justification. Enthusiasts and bike brands will look at the growth of their core “Frequents” group— and especially the growing adoption of frequent cycling by women— as a selling point.

Here’s what the report has to say:

 As the cycling universe shrank around the edges, its core got harder.  Over the last decade, the industry has benefitted from rapid growth in groups that promote “bicycle culture,” which integrates bicycling into daily patterns of work and play. Groups like the Rails to Trails Conservancy have become effective advocates for cycle touring, while the International Mountain Bike Association and other groups are giving people better ways to plug into performance-oriented cycling. Meanwhile, urban activists have formed organizations in virtually every metropolitan area in the US, such as Transportation Alternatives in New York City, to promote bicycling as a form of daily transportation and exercise. 

These groups have re-defined American bicyclists as a special interest group.  They are the main reason why the numbers of American adults who ride a bicycle at least 110 days a year increased 12 percent during the decade, even as the total number of adult riders was essentially flat (see table 2).  And in a particularly important finding, women appear to be sharing in the growth of bicycling culture.  The number of women who ride frequently increased by more than 100,000 between 2000 and 2010, even as the total number of women riders decreased by almost 1.3 million.

 I really like that phrase, These groups have re-defined American bicyclists as a special interest group. For me, that’s the biggest single takeaway of the entire report. And depending on how you read it, it’s either a good thing or a serious threat to our future as an industry.

But these are just the highlights. (Well, that plus some snarky comments from me.) The report itself is eight well-written pages, packed with a lot more information than I’ve been able to touch on here, including a number hard-hitting conclusions which I’ll leave for another post. It’s very well presented, too, and best of all, the folks at GTG are giving the whole thing away, for free.

To get your copy just drop Jay Townley a line at Jay (at-sign) gluskintownleygroup (dot) com …and tell him I sent ya.

Disclaimer: Rick Vosper was an Associate of the Gluskin-Townley group from 2008-2010. He is not currently affiliated with them, nor does he especially like referring to himself in the third person. 

My friend and colleague Ray Keener makes a good point in this BR&IN blog post from las week when he asks the question, “ Are flat bike sales for the past 35 years a good thing or a bad thing?”

Among other things, Keener points out  that retailers are experiencing higher equipment and service-category sales, (slightly) increased margins on new bikes, and higher average selling prices on new bikes overall. And those are Good Things, right?

Absolutely.

But there’s a darker and all-to-often overlooked side to the “flat sales” trend which is the real driver behind discussions as to whether the bike industry should be reaching out to new markets.

But First, A Brief History Lesson.

There’s a notion in the industry—as evidenced by the all-to-common “past 35 years” notion—that sales have pretty much always been flat. And a lot of people I’ve talked to seem to believe that. But actually, our current stability has only been in the past 20 years or so, since the end of  of the Mountin Bike Boom in the late 1980′s.

When we look at actual bike sales through all channels, the National Sporting Goods Association (NSGA) numbers show that the all-time record year for bicycle imports was 15.2 million units, way back in 1975 at the height of the Ten-Speed Boom.

By the early 1980′s, sales had shrunk by almost half, and it took the introduction of the mountain bike to pull our bacon out of the fire and usher in the current period of stability. By the way, the folks at the NBDA have a nice page of stats on this sort of thing which makes for highly instructive reading.

Traditionally one of the reasons bike companies give for not advertising to non-enthusiast markets is that they’re just not cost-effective to reach. And while that may be true when advertising is limited to magazine pages and website banners in enthusiast publications, brands willing to market outside the box should have no problem reaching fresh–and potentially very profitable–new audiences.

So why don’t they? Two reasons, in my opinion.

The first is that we’re used to doing what we’re doing, and so far we’ve done pretty well with it. But increasingly, we’re realizing that the industry is going to have to change if it is to survive and prosper (see previous blog post). Well, maybe.

The second is that we’re use to doing what we’re doing and, well, we don’t know how to do much else. No offense, but developing new markets is not something we’re particularly good at in this industry. The flip side, of course, is that there’s lots of opportunity for brands who are willing to get out ahead of the curve and begin investing…just as there were for those who went big with road bikes, or mountain bikes before that. So the upside can be very, very good.

But back to my original point: there are plenty of opportunities in the marketplace to reach non-enthusiasts. Here are just a couple of examples off the top of my head, but there are plenty of others.

MapMyRide co-Founder Robin Thurston spoke to Bicycle Leadership Conference attendees last month about using his company’s product as a way to reach an entire multi-million member community of plugged-in fitness cyclists.

Sure, there’s the usual complement of hardcore enthusiasts grinding out 200-mile training weeks, but Thurston told us that height/weight data indicates more than 80% of members have BMIs showing them to be clinically obese, meaning these people are cycling for fitness, clearly committed to doing something about it, and are therefore exactly the kind of customers we should be directing into specialty bike shops and onto good-quality, properly fitted cycling products that will help them make the most of that commitment. In other words, prime candidates for us to be advertising to.

So what’s the catch? There really isn’t one. Based on my initial research, MapMyRide delivers unique visitors per month comparable to any number of road racing sites or mountain bike forums I could mention, and the company’s media kit says that 70% of visitors come to the site three times a week or more. I haven’t checked CPM (cost per thousand impressions) and the initial buy-in is a bit stiff (but not unreasonable, even by bike biz standards), but assuming they’re in line with industry rates, there’s no reason any number of bike or equipment companies can’t jump on this one and ride it straight to the bank.

Active.com is already well-know to enthusiasts as the go-to place to register for races, but it’s also home to thousands of other cycling events as well, from centuries to charity rides and everything in between. Which also makes it a prime advertising opportunity for brands who want to reach out to those non-enthusiast cyclists, from just plain folks getting ready for their first-ever half-century (and who might be considering upgrading that department-store special) to old hands who might go years at a stretch without watching a bike race, but still are happy to spend thousands on a top quality ride or new wheels.

To a marketer’s eye, these are prime and highly underserved consumers who can be linked very closely to existing retailers because–by the very nature of Active.com– they’re already linked to specific localized events. And this makes them pure gold as advertising opportunities.

I haven’t advertised with Active.com in a few years, but when I did, their rates were quite reasonable and their ability to customize programs extremely impressive.

All of which brings us to an even larger point. MapMyRide and Active are not just new advertising venues for the bike business. They are examples of entirely new ways for us to do the business of marketing; in many ways, they are more different than the move from print to online was ten years ago. We’ll talk about that in another post, but for the time being, the core message is clear: if the bike industry is serious about reaching beyond its enthusiast comfort zone and finding new audiences for its products, there is no shortage of ways for it to do so.

Which also means to say, no excuses for not doing so.