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BPSA: Excess Inventory Still Clogs Pipeline

Published March 15, 2010


PHILADELPHIA, PA—As bike suppliers closed their books on 2009, over supply of inventory seemed to be following them into the new decade.

Most dropped pricing and managed to move a lot of product in the fourth quarter of last year, but record snowfall and rain in certain parts of the country early this year means retailers could be sitting on product heading into spring.

“Dealers are carrying more inventory than normal for this time of year as they took advantage of the great pricing at the end of last year,” said Chris Speyer, chairman of the Bicycle Product Suppliers Association, and Raleigh’s vice president of product and marketing.

“Given the snow and rain, I think it could be a while before retailers order again. I expect supplier shipments may be down for the first quarter,” Speyer added.

According to the BPSA’s year-end report, bicycle shipments to dealers fell 9 percent in 2009, while dollar sales fell a comparatively mild 4 percent.

Since the beginning of the current recession in late 2007, BPSA members have shipped 200,541 fewer bikes to dealers. In 2008 the BPSA reported a 6 percent drop in shipments.

If suppliers indeed worked to sell down their inventory backlog in 2009, the numbers show they were unsuccessful. Overall adult inventory at the end of 2009 was virtually unchanged from the year before.

Suppliers sat on four to five months of inventory on hand in most adult categories; juvenile bikes were the only categories successfully sold down. December on December numbers, however, show a 15 percent drop in sales and only a 1 percent drop in shipments.

Road and hybrid inventory ended up 11 and 30 percent, respectively, over already-high December 2008 levels.

“Emotionally the industry believes commuter customers are out there in numbers—the high road and hybrid inventory shows this,” Speyer said. “I know at Raleigh we believed in a growing commuter market.

Most major bicycle suppliers released new styles and SKUs last year showing their commitment to the segment as well.

“However there were not the customers for commuter or utility bikes we hoped for. I think customers were reluctant to make any major investment and may have stuck with their existing bicycle,” Speyer continued.

Only two categories showed growth over 2008: 24-inch juvenile and road. Each was up 5 percent. All other categories declined, with 26-inch categories posting the sharpest downturn. Suppliers shipped 159,867 fewer cruiser, comfort and mountain bikes last year.

“The decline of 26-inch wheel mountain bikes is not new,” said Elysa Walk, Giant Bicycle’s general manager. “It’s been happening for a while as consumers turn to 29-inch wheels, which is why Giant is about to launch three brand new sport hardtail 29er bicycles.”

The BPSA currently doesn’t track 29er shipments and sales as a standalone category so they get mixed in with 26-inch mountain bikes, hybrid and miscellaneous depending on the supplier. But, as Walk pointed out, 29ers may be cannibalizing 26-inch sales.

Walk also noted that suppliers are spec’ing hybrids with wider 700c tires, which encourages consumers who were attracted to wide tire 26-inch cruiser and comfort bikes to buy a hybrid instead.

In terms of pricing, December’s unit price drop—from an average value of $386 to $331—reflects deep closeout pricing as suppliers worked to reduce inventory levels.

And retailers don’t appear to be taking advantage to get good deals on high-end product. Instead, most are working to lower the average selling prices on their floors, a downward shift that’s having a major impact on the market.

Walk noted that retailers are realizing a shift in consumer spending patterns that have resulted from the current recession. And those spending pattern changes are going to be long term.

“Without question, consumers are more price sensitive. Whether it’s buying a bike, buying apparel or eating out—whatever involves their discretionary dollars, consumers know they are in control with most retailers,” Walk said.

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