By Matt Wiebe
OKLAHOMA CITY, OK—If preseason orders are any indication of retailers’ expectations for 2011, they’re bracing for conservative consumer spending while keeping a tight grip on margins.
John Wright, owner of Probike in Oklahoma City, Oklahoma, stepped up his preorder commitments for next year, but not for 2011 bikes. “Instead I bought a bunch of Marin closeouts. With the discounts so deep on Marin, I’m sure I can sell them all at a healthy margin,” Wright said.
Over at Moore’s Bicycle Shop in Hattiesburg, Mississippi, owner James Moore took a similar approach. Though last year was his best in 27 years in business, that success was driven by sales of reconditioned bikes, he said.
For next year Moore lowered his preseason commitment on 2011 bikes and is stocking up on as many used bikes as he can find. “And the margins on used bike sales are great. Sell a $350 bike and pocket $250. Those margins keep us strong,” Moore said.
“Our repair business has been nonstop this year. I don’t know that people are looking to replace a bike as much as keep it going,” Moore added.
Wright and Moore’s take on next year is different around the edges, but the core is the same—customers are shopping value and dealers need to protect margins.
Overall, retailers reported feeling more pressure from suppliers to preorder deeper and earlier than in the past. While they hated the pressure, fear of being caught without bikes, parts and accessories when they most need them made them buckle and commit.
“I didn’t appreciate the pressure at all,” said Greg Thielmeyer, owner of Team Cycling and Fitness in Cincinnati, Ohio. “I understand they need to be able to forecast, but they have more stats about the market than I do. That they are even less sure of 2011’s business than I am is worrying.”
Thielmeyer said he was surprised to see a drop-off in his mountain bike sales last year. He could understand sluggish 26-inch sales, but after years of robust 29er growth, he was disheartened to see that the category may have seen its peak.
“I’ve been doing this 40 years, but I’m still very anxious about all I’ve committed to next year even though it’s lower price point bikes,” he said.
Retailers voiced concern over the high-pressure tactics bike suppliers used in light of so much economic uncertainty in the market. They said it made them take a more conservative stance on preorders, thinking if suppliers are so in the dark about what to expect next year, maybe the situation is worse than they thought.
But what drove suppliers to get bike orders in early this year had less to do with the North American economy, fickle consumer tastes or wanting to control more of their dealers’ business. Lead times in many cases have extended from six weeks to six months due to higher demand from Asian markets (see related story, page 28).
Suppliers had to place bigger and earlier orders than past years because assemblers in Taiwanese factories are running at full capacity, leaving them with a limited ability to tweak volume. As a result, the pressure bike builders have applied to suppliers has trickled down to dealers.
And other factors are also affecting the supply chain. Late shipments of tires and other small components are delaying bike production, according to suppliers who attended Taichung Bike Week in December. A component that misses its delivery date could hold up production at factories for weeks.
As consumer confidence rises and falls in response to unemployment, foreclosures and market turns, it’s more important than ever for retailers to be close to customers yet the bike supply chain is longer than ever, without accounting for container shortages, slow boats and customs clearance, which tack on more time.
With factories tied up with business from markets outside of North America, preseason inevitably plays a bigger role in ensuring that retailers and suppliers have product to satisfy demand as they may not have the luxury of ordering extra bikes mid-season.