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Statistics Paint a Mixed Picture for 2008

Published April 19, 2009

MONTEREY, CA (BRAIN)—There’s been much hand wringing over inventory issues this season, and it will continue. But when Chris Speyer looks at 2008’s ending inventory level, he notes that it’s much closer to year’s past than most realize.

Speyer, who chairs the Bicycle Product Suppliers Association’s statistics committee, said 2008 ended with 747,000 units on hand, but that number’s not so far off inventory levels in 2005 and 2006.

It also reflects unusual patterns set in 2007 and an economic whirlwind that caught much of the industry by surprise as consumers, starting last September, stashed their wallets in the proverbial “lockbox."

Still, the industry is selling-through that inventory even as 2010 model bicycles make their way through Asian factories, onto container ships, and into American ports. And some suppliers and retailers worry they will run out of certain models as the season progresses because many suppliers cancelled, cut back or put orders on hold.

Yet anecdotal reporting from retailers indicates that sales are positive in regions enjoying good spring weather. And retailers like Erik Saltvold, owner of 16 stores in Minnesota and Wisconsin, said sales this season—so far—appear strong.

But sparking much of the inventory discussion was 2007’s low level of inventory-on-hand as the books were closed for the year—only 488,000 units were available as the 2008 selling season began. You have to go back to 2004 to find a lower inventory level.

On the other hand, the industry had stockpiled 718,000 units in 2005 (4 percent fewer than 2008) and 615,000 units in 2006 (21 percent fewer than 2008.) As for inventory value, 2008’s inventory, valued at $191.3 million, was only 11 percent higher than in 2005 and 18 percent higher than 2006.

But driving last year’s inventory value was a major spike in commodity prices for metal, rubber and shipping. The average wholesale selling price per unit leapt 8.6 percent from $299 in 2007 to $325 last year. If transportation and commodity price increases are factored in, inventory value as 2008 ended is much closer to year’s past.

Several factors also caught the industry by surprise, including Speyer, Raleigh America’s vice president of product and marketing. As gas prices began to spike in the spring suppliers upped their orders expecting a robust sell-through in the fall.

That didn’t happen as financial markets froze, unemployment rose and the press offered a steady drumbeat of sour economic news. And the nation was caught up in a pivotal presidential campaign.

So how did the industry fare in 2008? It’s a mixed bag of numbers but here are some highlights:

-Bicycle sales were up 1.8 percent to $812.4 million over 2007. However that modest increase was tempered by higher commodity costs and currency fluctuations.
-Total unit sales dropped 6.1 percent from 2.7 million units in 2007 to 2.5 million units last year. That’s not good news.
-Only one category of bikes posted strong growth last year—pavement bikes of all types—up 57 percent. However, 24-inch juvenile bikes showed a modest 2 percent increase to 94,842 units.
-Mountain bike units overall fell 11 percent from 2007 with dual suspension bikes declining 19 percent to 698,093 units. However, front-suspension bikes posted only a 9 percent unit decline to 607,837 units.
-Mountain bikes made up 28 percent of inventory-on-hand at the end of 2008 while pavement bikes accounted for 52 percent of on-hand inventory.
-Cruisers and 700c wheel pavement bikes were the big winners last year. Cruisers saw a 123 percent hike in unit sales, while hybrids jumped 62 percent over 2007.

—Marc Sani

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