This piece you are currently reading began in April of this year, the day after Income Tax Day, in fact, with the regular Wednesday NBDA letter to its members (including me, although I’m just a lowly Individual Member) from Heather Mason, the group’s president and sometime fellow BRAIN contributor.
I’ve always enjoyed Mason’s writing, which tends to present new and sometimes controversial ideas in spare, thoughtful, and tightly reasoned sentences, three things I (and probably you) wish my own sentences had more of. See previous paragraph.
Her April 16th Wednesday Words issue was no exception.
In it, along with the usual opening chitchat, was a section provocatively entitled The New Era: Conservationism vs. Consumerism in the Bicycle World, and a nice subhead: How repair, reuse, and shared mobility could reshape the ride ahead.
“Looking forward,” Mason wrote, “both traditional bicycles and e-bikes are poised to play a defining role in the conversation between two opposing forces: consumerism, which pushes constant upgrades and disposability, and conservationism, rooted in longevity, stewardship, and shared value.”
She then went on to develop her thesis with a six-point exposition:
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External Forces: How Tariffs Could Spark Innovation
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From Ownership to Stewardship
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Shared Mobility and the Rise of Access
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Designing for Circularity
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A Cultural Reboot — Centered on Meaning
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Conclusion: Moving Forward with Purpose
Clocking in at just under 600 words, it’s an absolute humdinger of a piece, and I strongly encourage you to read the whole thing. So much so that I’ve posted the section in its entirety on my personal website (astonishingly, the NBDA does not archive its newsletters; what the heck, guys?), which you can read here. And I highly recommend you do so.
You may or may not agree with all (or even any) of Mason’s piece. And that’s fine. The important thing, I think, is the conversation it can stimulate, which is one the industry desperately needs to have as we collectively try to figure out how we move forward out of the bleak post-COVID morass we’ve created for ourselves.
I was so impressed with Mason’s editorial that I immediately emailed her and asked if we could do a phone interview together. I may have actually used the word “visionary.”
Initially she declined, but ongoing suasion (well, maybe more like whining) on my part led her to finally give in.
Nearly a month later, the result was an hour-plus, freeform, intense and rapid-fire conversation which left my hands cramped from trying to type fast enough to get it all down. More importantly, in it, Mason sketched out her vision for how traditional retail bike shops — and with them, retailer/supplier relations — might survive and even prosper together in the coming years, regardless of the vagaries of our current economic reality and the increasingly fraught mechanics of the relatively-new-but-already-battered Bike 4.0 industry model.
(Warning: unfortunately, the following conversation strayed far from Mason’s original NBDA piece. Which is just one more reason to take a break here and read the whole thing your ownself.)
“It’s going to change, and it has to. We need a more value-driven, long-term approach.”
“Overall margins have to increase, and this can only happen if suppliers really want to be partners with their retailers. We have to help each other.
— NBDA President Heather Mason
Q: As bike shops pivot to some of the changes you envision, what do you see happening to the traditional IBD business model?
A: I talked to Jay Townley the other day, and asked him in a podcast recording if we had ever gone through times like this in the past. He told me, “This is a time literally unlike any other.”
It’s going to change, and it has to. We need a more value-driven, long-term approach. I think (the IBD business model) still plays an important part, maybe a more important part because of the services the SBR (Specialty Bicycle Retailer, her preferred term) brings to the picture.
Every brand that has gone D2C has had to move back to the SBR to get their products serviced.
Q: What will this do to existing suppliers?
A: I’m seeing a huge desire for suppliers to deepen their partnership with dealers. I think suppliers will get a little savvier about what consumers are asking for, and as suppliers get more creative they need to get closer to their retailers. Potentially, we will see some reduction in SKUs. We should see more suppliers offering rental and leasing programs for retailers.
I was at the BLC and connected with Linda Crivello from Lease A Bike, which has connected with Pon and is starting state-by-state leasing programs. (Of course Pon is already familiar with the power of leasing programs from its many decades of experience in the automobile business, both in Europe and now the USA —RV).
Q: Are you suggesting that as they transition from consumerism to conservationism, bike shops scale down or eliminate inventory from traditional bike brands?
A: Yes. The exact information I’m giving to retailers is that they should have a stocking plan just like large consumer retail brands do, and make sure they have a great relationship with those suppliers, including keystone-plus margins on equipment. We’d love to see bike margins that will cover OpEx, which we know needs to be 38-42% on bikes. That’s a win-win for all. E-bikes are currently in the mid-20s, and that’s a joke; our P2 dealers are currently averaging only about 35% on bikes and hard goods (PAR) combined.
We also have look at freight and assembly fees. And brands are starting to show those fees on their website, including battery recycling fees, which is a big step forward. We’re the only industry where the retailer is charged a fee for the battery (although Giant helps with this). We need to look at every tiny expense, but the bottom line is that retailers are really challenged with the current margin structure.
Q: You mention that suppliers are starting to reach out to retailers, wanting to partner more closely. Can you give examples? What about The Quadrumvirate, for instance?
A: A number of industry leaders joined us at our Summit in Bentonville: Nick Hague, GM for North America Japan at Cannondale, Angelo Mascelli, GM for business at Giant, and executive VP Bob Margevicius from Specialized. Pon CEO Marco Kind as well. (Note Pon is not a member of The Quadrumvirate, but they’re certainly an industry leader — RV) And Trek does such a great job of educating retailers. I think they all want to form great relationships with retailers.
Q: What specific changes do you see happening right now?
A: It’s finally happening. Dealers are starting to offer annual service package plans, which are focused on creating retained service revenue, allow extra margin and keeps the customer committed to the shop.
Dealers are starting to take on new brands, like Aventon, Rad, Velotrek, at lower margins just for their marketing power, their ability to pull new customers into the shop. But overall margins have to increase, and this can only happen if suppliers really want to be partners with their retailers. We have to help each other.
Of course we want brands to survive too. But there are still some big obstacles. Brands who say you have to stock every single SKU or every product category, for instance. Brands need to become more strategic in their stocking plans.
Then brands go on discount and that eats into dealer margins too. We need pricing protection in addition to enforcing MSRP and MAP online. Every day I get emails from dealers asking for help. And I also get emails from suppliers asking how they can help.
We can’t keep going the way we are in this industry. We have to get more strategic and more aligned, and that way everyone can do better together. We need to think long term, too, looking at things like rentals and community building.
The goal here is not inventorying less product, but more turns. Our turn rates for equipment and bikes are showing 1.2 turns per year. If we can get to four or five, it’s not less annually, it’s more reorders. That means the communication has to improve and there has to be better planning. And I think that’s good for both retailers and suppliers.
Q: What does this mean for the traditional bike shop’s physical workplace? Will it get smaller, reducing rent and OpEx?
A: A couple years ago, I was really telling retailers they have to look at their footprints, their floorspace, and if they have multiple locations, close the ones where the revenues are not coming in to pay for that floorspace.
Retailers will need to see that income potential in their footprint and ensure that stocking items are carefully selected to meet customer needs, while meeting the back-of-house stocking plan financial needs. SKU reduction on floor may lead to smaller showrooms with space given to expanded service areas and designated space for e-bike repair areas with lifts.
Outside spaces may expand with some retailers choosing to create spaces outside for pick up/drop off after hours in locked access cabinets, or bike rental leasing centers accessible from the outside. Outside gathering areas, test ride tracks and community spaces may expand.
Bottom line is that the old way of showing hundreds of SKUs in large stores with tons of slatwall will move to a more simplified stock plan, larger service areas and all overhead expenses refined to allow for maximum profit potential, and outdoor spaces capitalized on.
The birds-eye lowdown on the dealer margins caper
Suppliers are still —still! — choking on industry-record levels of inventory, five years after behaving like a bunch of drunken adolescents at an all-night kegger.
Mason, of course, speaks for herself and, presumably, the NBDA, in delivering an exceptionally thorough and articulate interview. But there’s one point I feel the need to respond to.
Dealer margins are emphatically not going to go up much if at all, and certainly not to the keystone-on-PAR/low-forties-on-bikes averages Mason says are the NBDA’s goal.
Sorry, kids, it ain’t gonna happen. And that’s just the way it is.
For the record, those would be my preferred goals, too. But as I say, I just don’t think that’s likely to happen. Certainly not in the next few years, and — barring some sort of seismic change in the way our supply chain works, not to mention consumer markets overall — almost certainly not anytime in the next couple of decades.
There are two very big reasons for this, because there are only two ways the kind of margins Mason is talking about can possibly come about:
First, suppliers can significantly raise retail prices. Of course, suppliers can set retail prices anywhere they want, but such a move would ultimately prove disastrous. Here’s why:
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Competition among brands won’t permit it. Price competition among both bike and equipment suppliers at every incremental price point is so intense that higher prices by one brand can only come at the expense of its market-wide sales volume. No brand can afford that now and ultimately, both the brand and its dealers would suffer.
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More specifically, higher MSRPs would further widen the delta between brands and their exclusively D2C competitors, further eroding their — and their retailers’ — market share.
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Consumers won’t pay it. We’ve been training consumers for literally the past quarter-century to expect huge in-season discounts on bikes and equipment and it would (or will) take many years for them to unlearn that lesson.
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And by the way, the same thing goes in the short term for passing on the costs of whatever tariffs we may end up with, whether you’re Team Surcharge or Team Price Increase. To paraphrase the sitting U.S. President, “EAT THE TARIFFS”! (caps in original, exclamation mine).
How any of us in this industry are supposed to remain in business under this scenario is way above my pay grade.
Second, brands can “simply” allocate a significantly larger share of their own margin to retailer partners.
I mean, sure, why the heck not? Many retailers I’ve talked with over the years, as well as industry people in general, are under the assumption that bike and equipment suppliers are the industry fat cats. And to be sure, most suppliers are financially larger than most retailers. But remember, I’ve been a senior executive at a number of large and midsized industry brands, and consulted with many more. In some of those cases, I’ve literally seen the books. And I’m here to tell you that even reasonably successful industry suppliers are operating on about the same realized margins as reasonably successful retailers, and most are struggling to get by on far less.
Except that right now, supplier margins all across the industry have been in the toilet for the past half-decade, due to record discounts in an attempt to move record amounts of inventory.
Wait a minute. Did I really say “struggling to get by” a couple paragraphs ago?” Pardon the living dog biscuits out of me. I should have said “struggling to keep their noses above water.”
In the past five years, suppliers have literally put themselves into the worst financial position in the history of the bike business, certainly since the Bike Boom went bust in the late ‘60s, and in all probability, since the original invention of the very bicycle itself. To service their mountains of excess inventory, many of them have taken on mountains of debt. Someday soon, that particular piper is going to have to be paid. And the results won’t be pretty, either for those suppliers, or for the global bicycle industry all the way up and down the supply chain.
I put this proposition to industry boffin and longtime personal mentor Jay Townley, and he responded this way: “My gut, based on the numbers I recall seeing,” he told me in an email, “tells me that the bike brands were left with more unit inventory post-Bike Boom and much more constant-dollar value in inventory post-COVID.”
Now it’s halfway through 2025 and suppliers are still —still! — choking on industry-record levels of inventory, five years after behaving like a bunch of drunken adolescents at an all-night kegger.
It’s hard to overemphasize this next point, but I’ll do my best.
Based on a single data point representing less than a year’s worth consumer demand hearsay from retailers (I won’t even say data, because there literally wasn’t any) during a once-in-a-lifetime pandemic, they looked around, saw that “all the other kids were doing it,” and promptly placed tens of billions of dollars in aggregate factory orders … more than enough, in fact, to alter not just the course, but ultimately, perhaps, the fate of an entire industry.
If you’ve ever been the parent of teenagers — or ever been a teenager yourself, for that matter — no doubt you’ve seen this type of behavior before. But witnessing brands representing something on the order of a hundred billion dollars in retail sales over the 2000–2025 time period doing it like they’re at the controls of a slo-mo trainwreck … well, as we say here in the South, that takes a special kind of stupid.
More — much more — on this topic next month. Stay tuned. And keep in mind, as Jay Townley was quoted a couple thousand words earlier in this piece, that we have never, ever, been through anything like this before.
