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Pandemic Check-in: Specialized's founder, Mike Sinyard

Published April 28, 2020

MORGAN HILL, Calif. (BRAIN) – Mike Sinyard was in his mid-20s when he founded Specialized Bicycle Components in 1974, selling his old Volkswagen van for $1,500 and leaving for Europe. He came back selling hard-to-find Italian components and two years later launched a Specialized tire for the touring market. The rest, they say, is history.

Sinyard, in an interview from his home in Capitola, California, a beach community near Santa Cruz, said he's seen nothing like the COVID-19 pandemic in his 46 years in the industry. But Specialized, a billion-dollar company (more or less) is taking a financial hit like all businesses, he acknowledged, but especially in its overseas operations with so many nations under lockdown.

Still, Sinyard remains optimistic about the future. He said he believes this pandemic could spark a rebirth of interest in cycling as more parents with kids in tow return to bicycles for fun and exercise. And it could spark a resurgence in commuting.

But he's also moving to restructure the company's far-flung operations to reflect the warp-speed change in consumer buying habits, putting new focus on digital sales, marketing and operations. And he's vowed that Specialized will be a leader in the e-bike market.

"There is no escaping the reality that these changes will be disruptive for a while," he said, forcing Specialized and other businesses to be more flexible and challenge the way they have done business in the past.

Recently, the company laid off 46 people and more cost-cutting is on the table. Sinyard has forfeited his base salary and senior leaders are taking a 30 percent haircut on their salaries. (This Q&A has been edited for length and clarity.)

As we move through this pandemic, what are dealers telling you?

One of things I hear is that Americans are learning to ride again. People are getting out on their bikes; they are bringing their old bikes out. One dealer said a guy pulled up in his car and said, "I've got $2,000 and I want two mountain bikes." We're seeing a lot (of sales) in kids bikes and entry-level bikes so I think that speaks well for the future. March was the biggest month we've had in kids bikes. It's just going gangbusters. You can see it with people out riding their bikes here, but the biggest issue I see right now (with dealers) is getting staff just to work in the store. It's a big one.

At the moment, how do you assess the financial condition of Specialized dealers?

Overall, I'd say we've done a good job supporting them and, for the most part, they are paying us quite well. And, I'd say for the most part, (Specialized) retailers are quite healthy. There are some saying retail sales are up 30 percent this year. That's quite a positive thing and these are sometimes mature stores. So, if you ask retailers, "Are you in a bike boom?" they say, "Yes, we are!" And we've seen this before. Remember after 9/11? People stayed home, not traveling so much; they stayed at home, right, and got focused on their bikes. And it's even more that way now. People don't want to go to spin class or a hot yoga class; they want to return to nature.

Do you see inventory issues developing as the season develops?

That's what we keep asking ourselves. I think it's a bit too early to tell. In some areas the inventory could be short. I haven't looked at all the data, but I think the year is going to be better than we think — but there will be shortages. As for retailers, I would say for the most part they are taking their planned business and, in some cases, where there's been a surge in sales, they are jumping on it and increasing orders especially for bikes in the $1,200 to $1,500 range.

Do you foresee a consolidation at retail as we move through this pandemic?

I think it probably will (consolidate). Anytime that things happen in the world, like this virus, the strong find innovative ways to do better and others do not. We have been doing web calls with retailers every week and we see some who are finding completely new ways to operate and they're thriving. And others are just sitting there saying let's wait to see what the government does.

While you believe there will be some consolidation at retail, will a new generation of retailers return to the market in the future?

I think there will be new energy and the smart retailers — in that they are older — could also empower younger staff to give their stores more energy. I would say the cycling industry, right now, has a massive tailwind, more than we've ever had. Why? This crisis has made people return to the basics, and cycling is at the center of that with new people riding and, for sure, the electrification of cycling. There are analysts saying that the most important EV (electric vehicle) isn't cars but bicycles. Electrification, like we've seen in Europe, has taken (European) retailers to a much higher level. So, I say to our retailers, collectively, it's your stores and our brand that need to be the leaders in electrification, not the car companies. I see more people have adopted electric mountain bikes, and we're fortunate that our retailers are doing a good job of getting people on them. So, I see that (segment) continuing to grow.

Will we see consolidation on the supplier side as smaller companies find it more difficult to compete in a new environment?

I have my own personal philosophy on this: It's not how big you are, it's how relevant you are. So, there could be big brands that are no longer relevant, but there could also be smaller brands that become wildly relevant. I like the analogy of a restaurant. You don't care how big it is; you care how good it is. I think it depends upon how important they (brands) are to their culture, to the retailers and the riders. When we talk about brands, remember Schwinn, GT and, more recently, Fuji? They weren't small but their relevance (to consumers) wasn't there.

Digital sales technology and online sales are moving fast, much faster than many experts predicted six months ago. Has click-and-collect, which has had mixed results, finding its place in this new market?

This is an area where we've been behind and we have stepped up our game significantly with click-and-collect and with digitally connecting with our retailers on sell-through. Our click-and-collect orders are way up — hugely up. And we're helping them (retailers) go online as well. Click-and-collect is a game changer now. We see that as the best model working forward with our retailers, but we've had the program for less than two years. As for accessories, retailers are empowered to sell directly and we do so as well. With the COVID, everybody is ordering more online, including myself. It's definitely jumped for us and, for our retailers, it's jumped even more. The future for retailers who are working it (digital sales) is good and most I think would say this time year-to-date has been the best in a long time (for digital sales.)

So far, it seems, business has been better than many would have expected given the impact of this virus. How do you think the industry will end the year?

That's really a good question. We're just not so sure. But we see a lot of good activity now and we see a lot of people riding. On the high end, and what I hear from some retailers, is that it's down right now. But I'm not so sure it will stay that way. People are riding more than ever and I remember 2008, and everyone said it would be a terrible year, but sales were booming. Still, I think the risk is a little more on the high end. But some people have the money and say, "I'm going to reward myself."

Specialized does a significant amount of business overseas. How have nationwide shutdowns effected business?

It is a worrisome part of the business right now. It's like martial law over there (in Europe). In Italy, you just don't come out of the house, and that's happening in Spain and France. There's no bike repair or sales, but when it opens up it will explode. So, we're hopeful. Germany opened up last week and retailers are saying their stores are swamped, that business is quite good, and they're seeing a lot of new riders who haven't ridden much before.

What's your take on the pro tour this year?

It's definitely frozen so far. That's been really tough. We've got the Tour de France going in August and the Giro d'Italia going in October. I think the Tour will happen and there will be spectators out in the countryside, but at the conclusion of the day, around the podium, there won't be any spectators. Personally, I believe once this (racing) gets going people will be excited to watch. Families have been cocooned together right now, with no sports to watch, so it could be good for racing.

Specialized gets relatively little product from China with Taiwan companies as your main suppliers. Has that helped with supply chain issues?

First, I would say the only thing that's an issue (for suppliers) is to move very quickly. We have. There's always a bit of a time lag, a gap. We've always been very Taiwan-based and don't do much in China. A few equipment items, but not much, and that's been our program for some time. But a lot of people talk about on-shoring, and it's an interesting topic. But when we ask ourselves where can we make the best product, it usually doesn't end up being the USA. I think there could be some more assembly that could be done here, but there's just not that much infrastructure here to support it.

 

Mike Sinyard. Courtesy photo.

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