The industry is currently in an era I’ve labeled Bike 4.0. (For more on the three preceding eras, click here). Unlike the 3.0 era, approximately 1998-2020, in which suppliers attempted to control floor space in dealers’ shops through inventory-intensive ordering programs, the 4.0 era is fundamentally different in three important ways:
- Replacement of the traditional bike shop distribution system by an omnichannel sales "ecosystem" where buyers can purchase bikes through any channel they choose — consumer-direct, click and collect, or through a traditional bike shop.
- The rise of powerful consumer-direct brands like Canyon, Rad Power (well, until recently), Aventon, and others. I further note that many of these brands are also trying to integrate themselves into the traditional dealer channel as well.
- Vertical integration of the channel by large suppliers (primarily Trek, but also Specialized and Pon), buying and running local bike shops.
To this list, I now propose adding two more separate but inextricably linked items:
- Record-low dealer margins versus MAP/SRP.
- Reduced inventory by independent bicycle dealers. Dealers are starting to carry less of everything, especially bikes.
Why are these two new items so important, and fundamentally characteristic of the Bike 4.0 era? I think they represent a coming seismic shift in how the industry does business.
Making the best of a bad situation
But what about all those bikes sitting on the dealer’s floor? They’re no longer a money-making proposition, that’s what.
To be sure, retail margins have been shrinking throughout the 3.0 era. Partly this is in response to brands trying to maintain, if not parity, then at least proximity to consumer-direct brands’ prices. Partly it’s in response to post-COVID consumer lethargy and resultant discounting. And partly it’s just because one of the effects of the internet’s property of disintermediation is to drive prices to rock bottom. If you won’t sell it cheaper, finding someone who will is just a click away.
Be all that as it may, lower margins are here, and if history is any indicator, they’re here to stay.
Profitability-wise, bicycles have long been a borderline proposition for bike shops. For at least ten years, according to the NBDA’s Cost Of Doing Business studies, retailers have barely broken even on selling bikes after overhead and expenses are figured in. And at today’s eroded margins, that’s more true than ever.
But that was OK, they told us. Sell the bike, the logic went, and you can bring the customer back into the shop for higher-margin equipment and service purchases.
But that logic doesn’t hold up in the face of current reality. Customers increasingly buy equipment online, often enough at prices lower than the dealer’s wholesale. Even if the customer buys in the shop, margins on equipment aren’t what they once were. And when consumers do come into the store, they do so with phone in hand, expecting dealers to match the lowest price available online.
Oh well. At least service is still profitable.
But what about all those bikes sitting on the dealer’s floor? They’re no longer a money-making proposition, that’s what. And increasingly, dealers are doing something about it.
In response to a question in the cycling industry Facebook group, dealers overwhelmingly told me they were cutting back on in-store inventory, some by as much as 40%. When asked why, they told me the bikes didn’t make enough profit to justify keeping so many them on the shop floor. Easier to just stock a representative selection and if necessary, order in a particular size or color. And brands are now maintaining inventories year-round to accommodate their D2C/C&C customers, so why shouldn’t dealers take advantage of that inventory too?
Makes sense, right? Absolutely. But only on two conditions: the absence of tiered preseason ordering programs and the presence of year-round stock availability.
Playing the preseason game
Will bike shops eventually become “catalog showrooms” with just a few representative floor models on display?
As cleverly foreshadowed way back at the beginning of this piece, in the Bike 3.0 era, suppliers focused on controlling floor space in dealers’ shops. This was done through the then-ubiquitous preseason ordering program. Order a bunch of bikes up front, dealers were told, and lock in your pricing level for the year. And besides, if you don’t order all or most of your bikes preseason, you may not get any at all when demand is high.
Preseason programs did a lot of good things for suppliers. For one thing, they could use the resulting orders as security when negotiating credit with their banks. For another, early deliveries — which started long before the actual selling season — shifted inventory risk onto dealers. But the most important thing preseason ordering programs did, at least in theory, was lock down dealers’ floor space, denying entry to competitors because the dealers had already committed all their open-to-buy dollars to a single, dominant brand.
Trouble is, that strategy didn’t work, especially with the larger, more successful shops that brands envisioned as their anchor stores in hotly contested markets.
Successful dealers didn’t get that way by being dumb. They used their market pull to bring in additional brands to supplement their primary lines. In 2020, according to Georger Data Services, fully 30% of dealers selling one of the Quadrumvirate brands — Trek, Specialized, Giant and Cannondale/Pon — also sold at least one other Quadrumvirate brand as well.
Big stores did enough business to lock in top-tier pricing and still have buying power left over to bring in other, competing, brands. In fact, this is one of the things that led to the essential Bike 4.0 feature of bike brands buying retail shops and running them themselves ... as single-brand outlets, of course. By 2025, that GDS number of shops carrying multiple Quadrumvirate brands had shrunk to 26% as hundreds of brand-owned stores popped up in major markets.
And more and more dealers are placing reduced preseason orders, or none at all. Trek has no mention of a preseason plan in its 2026 dealer book, and I’m told this has been the case for the past three or four years. Instead, dealer are required to give estimates for their total sales for the year and then receive price incentives and rebates for meeting them. Each season’s order is expected to show at least a 10% increase from the previous year, a prospect that seems dubious at best in our present flat-to-down market, but we’ll deal with that another time.
Giant has a preseason program, but I’m told it’s more of a suggestion than a requirement. Specialized and Cannondale both have preseason ordering, but Cannondale’s is not mandatory, according to Nick Hage, the company’s SVP and general manager for North America & Japan.
Also, there’s no word how many dealers are actually pre-booking into the plans, and, if so, for how much. “They were less pushy for big growth,” one dealer told me about the Specialized program. “I think they are aware dealers need a bit more room to breathe this year.”
But at the end of the stock-fewer-products road lies a troubling question: for more than a century, bike shops have prided themselves in being able to provide riders with ready-to-ride bicycles the same day the customer comes into the store. Will bike shops eventually become “catalog showrooms” with just a few representative floor models on display and actual purchases primarily available after a 1–2 day wait for shipment from the distributor?
It's not a simple question and, as usual, there are no easy answers. But between the erosion of dealer margins and resultant reduced profitability on bikes on the one hand and the availability of year-long inventory from distributors on the other, it’s clear that something’s gotta give.
Let’s just hope it’s not the traditional bike shop.
