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Vosper: By eliminating midseason model years, Cannondale rewrites the Bike 3.0 playbook

Published July 13, 2020

It's an idea that's been around for decades: get rid of midseason model years and promote a smoother distribution channel with less in-season discounting and forced end-of-season obsolescence.

I wrote about this topic back in 2012, claiming here and here that model years were an idea whose time had come and gone, brought on by 240-day lead times and the need to level-load factory production.

Model years not only forced unneeded obsolescence into the channel, I said, the timing also forced unneeded peak-season discounting midseason model years also forced retailers to commit to an entire year's worth of inventory, half a year ahead of time. In a weather-driven industry, I pointed out, these massive pre-season commitments put dealers literally at the mercy of the elements.

When it comes to preseason "risk sharing," I wrote, the lion's share of the "risk" almost always devolves onto the last person left holding the inventory: the retailer.

Now a major player and Quadrumvirate member, Cannondale, has announced that both it and sister brand GT will end midseason model years, effective forthwith. Replacing them will be what it calls "collections," which are linked to calendar years. The collections also focus on more colorways with fewer incremental price points, and models that carry over from year to year, with updates as needed, including for new component releases from Shimano and other vendors.

If you haven't read Steve Frothingham's treatment of the announcement, I recommend you do so here.

To be sure, the move away from midseason introductions and even the larger concept of ending model years is hardly an original idea. Cervélo hasn't used them in years. Felt, among others, experimented with change in the 2010s, and Trek briefly moved to calendar year production in 2018. But, with the exception of Cervélo, these attempts have been short-lived, and brands soon found themselves back to business as usual.

Upsetting the Nash Equilibrium

In game theory, a Nash Equilibrium is one where all players adhere to the same strategy because none of them see an advantage to changing.

Ultimately, what changed was not the players, but the playing field itself, and with it, the very nature of the 3.0 game.

In the case of Bike 3.0, the midseason model year worked because it was consistent with the overarching goal of locking down selling space at key dealers and denying competing brands access to retailers' sales floors.

But what every other brand in the industry failed to see was that this model year strategy (and its accompanying preseason and other components) really only benefitted the very largest players—Trek, Specialized and perhaps Giant. Despite this, virtually all brands remained chained to the midseason introduction/preseason binge-and-purge treadmill, because it generated the most orders and sold the most product, at least in theory.

What it did to retailers' realized margins wasn't their problem.

Ultimately, what changed was not the players, but the playing field itself, and with it, the very nature of the 3.0 game. Lead times for factory orders got shorter. Margins on bikes continued to shrink, making the entire category less profitable. And climate change made predicting the weather six months in advance even more of a fool's errand than it always had been.

At the same time, "micro-niching"— creating more and more models and sub-models at smaller and smaller price increments — made it impossible for all but the very largest dealers to stock every model a major brand offered. And the very largest and most powerful retailers (as we saw in my piece on shifting brand loyalties among Quadrumvirate dealers) have became increasingly unwilling to put all their eggs in a single brand basket and surrender that much floor space to any one supplier.

For Cannondale, the writing was on the wall. And so was the end to the Nash Equilibrium.

"What we've said is we will realign model years, but we're also going to be smarter about how we handle the transitions from year to year," says Cannondale's general manager for North America and Japan, Nick Hage.

"There were two driving reasons," he continues. "One, it's just not a healthy business process for us or for retailers to be stuck in this cycle. The second part is that being easier to do business with — being a better partner to our dealers — should be a competitive advantage. And not just in North America: this will be in every [Dorel Cycling] division, every brand worldwide."

New devil, new details

To be fair, the Cannondale/GT model doesn't so much abolish model years as shifts them to a calendar-year basis. New models will arrive at dealers just in time for prime selling season, and after the competitions' midseason model-year bikes have gathered six months worth of dust.

“You want my honest answer? I don’t care. Our position in the market gives us the flexibility to do things a little differently. We’re not going to sit around and wait.”

That means fresh inventory just when customers are most interested in buying. And the move away from long-term preseason commitments means there's less likelihood of in-season overstock that leads to discounting. If there's excess inventory that needs to be cleared out, Hage says, that can come in the fall when it doesn't risk cannibalizing profitable in-season sales.

The big question industry-watchers are asking is how Cannondale's move will impact Quadrumvirate leaders Trek and Specialized, if at all. Hage's assessment is both candid and refreshing:

"You want my honest answer? I don't care. Our position in the market gives us the flexibility to do things a little differently. We're not going to sit around and wait. If you're trying to run a business for healthy, profitable growth, you make decisions one way; if you're just trying to steal market share you make decisions differently."

The question is fraught with implications, not least of which being the fact that Cannondale shares 143 dealers with Trek, 139 with Specialized, and 40 with both, according to Georger Data Services' count of dealer listings for the three companies.

That's a full third of the Cannondale retail base potentially at risk ... and a total of 322 mission-critical reasons to be either very concerned or very optimistic about the strategy.

But the bottom line, Hage says, is that the move is the right one for the Cannondale brand, and one that comes at a unique moment in industry history, certainly in the post-Bike Boom era.

"The majority of IBD retailers will be coming out of this 'boom' in a very strong position," says Hage. "Many of them have been able to clean up balances with suppliers and are not dealing with the same level of debt hanging over their heads. Retailers should now feel empowered to take back control of their businesses and reset relationships to be more mutually beneficial. More choice in the market will only lead to a healthier industry."

Rick Vosper has been helping companies in the bicycle business solve marketing problems since 1989. Email for a free consultation. Disclaimer: Cannondale has purchased marketing services from RVMS.

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