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Vosper: Winter is coming. In fact, it’s been here since July

Published November 14, 2022

Other industry insiders and I have been talking about it since January or before. And now the COVID bike bubble has finally popped, big time: Sales are down and inventories are up, despite rosy-cheeked forecasts from any number of industry suppliers and retailers to the contrary. 

It’s a new Bike Boom, they told us, as recently as a year ago. And besides, our more sophisticated forecasting technology will prevent any inventory oversupply. 

My colleague Jay Townley nailed the reality back in November of 2021. “Absent a resurgence of consumer demand to at least 2021 first-half levels,” he said in his Human Powered Solutions newsletter, “the probable inventory overhang in mid- to low-priced SKU’s will materialize, and the cascading effect will begin around February and spill into the distribution channels the end of the first quarter, just as interest rates will start increasing” … “While the financial fallout will affect both the distribution and supply channels, the financial burden will fall particularly hard on bike shops and small to midsize retailers.” 

Well, instead of happening in Q1 of 2022, sales went flat this summer. And now it’s autumn and the inventory is still pouring in to warehouses at both the retail and wholesale levels. And instead of editorialists making these dire predictions, now there’s hard data behind it. 

Winter in July

“If we look at unit sales for August, there were fewer bikes sold than at any time going back to 2015. Similarly, July was the lowest July we’ve ever seen.”
—Patrick Hogan, PeopleForBikes

PeopleForBikes’ sales and inventory numbers for the year to date through August came out the first week of November, and it looks like an early winter for the bike business. The actual data is only available to PFB members, but I reached out to their senior research manager and self-described “head data guy,” Patrick Hogan, for the highlights. 

“The big picture is that there’s lots of bikes making their way to retail,” Hogan told me. “There’s lots of bikes already in specialty retail, and there’s not a lot of bikes being sold at retail.”

Of course, sales normally drop toward the end of the year, he explained. But at the same time, bikes are just now getting to retailers, an effect of replenishing the COVID-starved supply chain. From simple to complex, simpler bikes — beach cruisers and kids’ bikes — are already in good supply, maybe too much supply. Road bikes are still recovering to pre-COVID levels. Some of the mountain bike categories in the middle of the simple-to-complex spectrum have healthy inventories and those are climbing.

"We’re trying to apply the lessons learned from cruisers and kid bikes and not have an oversupply problem with road and high-end mountain bikes,” Hogan said. (Note these inventory numbers only reflect specialty retailers, not mass or online.) 

“In August, bike sales in dollars compared to 2021 or 2020, it looks like sales are holding their ground, just down a little bit in comparison,” Hogan said. “But if we look at unit sales for August, we see a very different story. There were fewer bikes sold (in August) than at any time going back to 2015. Similarly, July was the lowest July we’ve ever seen.” (Note 2015 was the first year PFB began tracking sales and inventory.)

So why do the sales numbers look so good? Because the bikes are significantly more expensive than in years past, Hogan said. It’s the result of increased supply channel and shipping costs, and these have been growing since the pandemic. And this is true across all industries, not just bicycles.

"There’s a lot of inventory at the supplier side too,” Hogan continued. “Less complex bikes are still warehoused in great number and the more complex bikes are still not there yet.

“Discounting is a normal part of anything related to the Bullwhip Effect,” he said, the amplification and magnification of perceived response, followed by a supply oversupply. And discounting is a normal part of this process.

“But distributors and retailers tell us their margins are constant, and bicycles may very well end up costing the same when discounted post-pandemic as they did at regular retail pre-pandemic.” 

Of course, it’s not clear how much consumer incentive there is in same-as-previous-retail pricing. Only time will tell that tale.

Light at the end of the tunnel

The other good news is electric bikes, which continue to increase in popularity, especially with states and cities creating incentives to make new purchases.

Still, Hogan is upbeat about the industry’s long-term prospects. Retailers will have to be aggressive in how they market, but he’s optimistic we will be able to chew through this inventory in time. “We’re seeing brands offering more favorable terms to retailers that were not available before the pandemic,” he said, “and this flexibility is favorable to the retailer, for sure.”

Of course, retailers will have to decide for themselves how much inventory they’re willing to take on, regardless of how attractive the terms are. And all the price incentives in the world don’t have much effect when there are still no customers coming into the store.

According to Hogan, the ridership gains made during the pandemic may help us turn the current sales slump around. “We just don’t see people who bought during the pandemic being ready to upgrade yet,” he said. “But it seems likely those new cyclists will be ready to upgrade sometime in the future. We do see a lot of folks that plan to stick with (bikes). So that’s good news, long term. The other good news is electric bikes, which continue to increase in popularity, especially in states and cities creating incentives to make new purchases.”

So, in the long cold dark of a prolonged post-COVID winter, there are a few tantalizing glimmers of light in the distance. For sure we’re in a tunnel; we just don’t know how long it is or what happens when we reach the end. In the meantime, the best the industry can hope to do is hunker down, hold on and wait for spring. 

Stay warm, my friends. 


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