Tuesday, February 3, 2009

Economic Effects On The Bicycle Business : Part II

In one post in October last year, I described how the cycling trade works and posed some vital questions of what would happen at the lowest levels of the business chain in the economic turmoil. Click here to read it if you missed it.

So is the bike biz really recession proof or is it a myth? Well, you decide. Meanwhile, I've been wanting to pass on these industry related pollination to you for a while now. Consider this a followup to the post I linked above. Lets see who didn't make it and read some other capturing news of these trying times.

1. A large French mutual bank named Groupe Caisse d’Épargne (popular team sponsor) suffered hundreds of millions worth of dollar losses due to bad bets on derivatives linked to the direction of the CAC-40, the French equivalent of the Dow Jones industrial average. Competitive Cyclist described the implosion of the global economy on race sponsorship.

2. Take a look at the NBDA U.S Bicycle Industry statistics. Do you spot a trend is declining sales? Keep this thought in mind. Explore point 5 below.

3. China is the largest bicycle manufacturer in the world. But the whole economic situation also hit home in China hard. According to sources, the Chinese central government no longer considers the bicycle industry as priority. Great! Is this how you bolster economic growth? For all those of you who visited China (eg James, Bicycle Design) and wondered where all the bicycles went, well - looks like you have a couple of idiots sitting in big positions up there.

4. In stark contrast to the shameful Chinese, Taiwanese manufacturers only seem to be heavily investing in cycling's future. Taiwan’s 22-member A-Team, a consortium of suppliers, is continuing to make improvements in R&D, quality control, employee training, marketing and just-in-time delivery. Oh and if this is any interesting to you : FSA recently bought and installed an $80,000 X-ray machine so two employees could check every single hollow-arm carbon-crank it sells. “It’s 100 percent quality control,” said Douglas Chiang, the company’s managing director. Impressive! So are we going to see some high quality products from FSA in stores?

5. BRAIN wrote in August last year that "between January 2001 and January 2008, the number of specialty bike retailers fell from 6,259 to 4,394, which equals an average attrition of 266 storefronts per year. Beginning in 2006, these numbers include specialty ski shops, camping and outdoor shops that sell bikes." Researcher Jay Towley, of Gluskin Towley group, tries to explain these statistics. Good read.

6. Burke, President of TREK, had a perspective on the economy last year. Was his cautioning statements about second and third-tier suppliers a form of fear mongering?

7. Rivendell bike hates the strong Yen/weak dollar combo. At the time they wrote it, it was 105 Yen to a buck. They remarked that such a scenario is "nervous time, edgy time, bad mood, grumpy silence time."

8. Slowtwitch wrote about the nearing demise of Blackwell Research, a bicycle wheel and component company. Blackwell products always had a cult following, it seems, and their small brand status made it difficult for them to push for more space in retail stores. So is this why its Product Designer, John Cobb, decided to go solo and start his own saddle business (Cobb Cycling)?

9. CGI (Competitor Group Inc) sold Velogear in just an 8 month timeframe because it did not find it a "good fit". And late last month, Mid West Velo acquired it. Whats the real story behind this one?

10. In Bike Hugger's Huggacast 51, Jeremy Sycip, a custom builder, and Rod Jewett, president of Bianchi USA, talked about the effects of rising petrol prices and the shakey economy on the bike industry. Again, this video was made in about the middle of 2008. So do these two individuals still hold the same perspectives now, a half year later?

11. The owner of Worksman Cycles talks in this video about the hard realities of keeping business alive in bad economic times.

12. Jonny Cycles LLC closed their business, blaming most of it on the economy. Check out this revelation from Jon, the owner :
"Like most other bicycle related businesses I usually see a big slow down from fall to early in the year (usually Feb). Typically I get 5 or 6 orders in the winter months and it picks up again in the spring. This winter I took in one order. Add to that several people dropping off the list (most due to loss of employment) and my waiting list has shrunk considerably. I'm a bit of a pessimist and I really don't trust the economy to rebound by this summer. My lease is up in April. The last place I want to be is dead in the water mid summer with no orders and no frames to build while incurring huge debt trying to pay all the bills. With the waiting list at its lowest point ever it seemed like the perfect time to opt out to me."

13. Switchback Cyclery, another bike shop, had to close down due to declining sales. Sad.

14. Yale Bike shop, yet another shop near the Yale campus in New Haven CT, sold off all inventory and closed their shops. So how bad is it when you don't know how to manage in times of a crisis? Hear it from the shop owner himself :
“I’m not a business man,” Feiner admitted. “I’m just a bike rider who opened a bicycle shop in a town that really needed bike culture. I’m learning lessons as I go. This was definitely the biggest one.”

15. In perhaps the strangest news in this pollination, Wells Fargo started screwing around with Team Evomo for not using their corporate credit card more often! Some donkeys really want others to be in debt! What a joke! Wells Fargo, you officially suck in my books.

16. This just in. On March 2 2009, the Iron Horse Bicycle Company filed for bankruptcy. According to this report, East Coast Cycle Supply was formed on Feb. 1, the day after the group of employees in IH was fired as the company went belly up. Iron Horse Bicycle Company went into bankruptcy on March 2 when three of its primary Asian suppliers filed a petition for Chapter 7 bankruptcy relief in an attempt to recoup more than $5 million allegedly owed to them by Iron Horse.

17. High Gear Cyclery in Longmont, Colorado calls it quits after almost 23 years of service. According to owner Buzz Feldman, the economy had "battered" them and he had no choice but to liquidate.

18. For Taiwan's bicycle industry in 2009, flat is the new way up.

19. Looks like due to the economy and people's financial situations, high end cycling is losing ground in Manhattan.

20. Bike Europe reports that during the first quarter of 2009, the bike industry was hit pretty hard. Check it out.

21. Finally, can anything be learned out of Clif Bar's successful startup in the 90's in a recession? Read this.

Do you have news to submit for bike shop closures, or good news or any other perspectives to share on staying alive in the bad economy? As a consumer, what will you do? Continue your high spending cycling life or will you be happier keeping your wallet in your pants? Join the discussion!

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Anonymous said...

Just to add a little fuel to the anti- Wells Fargo fire:


Ron said...

Anon @ 4:30 : Getting bailed out is one thing. Using bailout money to go partying in Las Vegas..wow! That just escaped me. And Wells Fargo was mentioned as 'Great' in the "Timeless" business bestseller, "Good to Great?"


Anonymous said...

Thats nice of Giant to share the wealth. I'll take the money.

Anonymous said...

Velib is asking for money