The bubble is upon us?
 

For those that don't already know - yes I am in the industry. Most of us have been talking about the impending bubble of inventory that is coming. You see when the shortages first hit just about everyone everywhere started placing panic buys. Some because they thought the demand would last (or the inventory would actually show before it dissolved) and some because they didn't know what else to do.

In the meantime the industry has successfully run all of the streams out of parts. if there was ever a time to eliminate margin loss points or grey market goods - this is it.

All of us knew though that at some point the tides would shift. The product would eventually start coming through and be met with cancelled orders from customers or lower than anticipated demand. At the OE side there would be smaller bike brands all over that placed large orders just to get on Shimano's OE build list who now know they aren't going to produce that many bikes and have piles of components they now need to get rid of (grey market).

I have emails and discussions about this going back to 2020. We all knew it was coming but many thought they would have another year or two of the current state. it looks like maybe the time has already come. Demand is markedly down at every dealer I have been talking to. The same ones who were a 3 week wait last year this time are saying they are completely dead.

https://www.bicycleretailer.com/opin...g#.Ydx8_mjMKUk

This can go in many directions.
1. Much to most of your (you guys used generally) delight you may now be able to find product all over again and at the same wholesale or below wholesale pricing you came to love (semi likely)
2. Most of these OEM's will use this as an opportunity to complete their efforts to go consumer direct (SRAM has taken huge strides in that regard, same with Giant, Trek, and Specialized to name a few) in order to maintain pricing integrity and prevent margin erosion.

Honestly I am starting to feel like the OE's will dump product on dealers if they end up having overages. Shimano product will absolutely make it into the aftermarket as OE and it's value will be decimated in short order. Most companies will institute some form of consumer direct sales. Those that already have consumer direct will step further (Trek buying up every store they can that makes sense for example). All of these things will absolutely spell disaster for what remaining independent dealers there are left (you guys refer to them as LBSs). Couple this with the theft rings that have been going around to every metropolitan area and hitting shops shops with smash and grab and destroying them financially - it's a bleak outlook for your local.

I get that most here don't care 1 bit about the industry or who is involved in it ("I want my bike parts now and I want them at prices that make me question whether they are legit parts" and all) but I wonder how many of you realize this ultimately screws over the customer? Trek isn't making deals or giving away product. SRAM has cut all factory and "pro" deals. Guys that helped build the company can't even get parts let alone a discount on them. Shimano is actually getting retail prices and higher for the first time since the internet was invented. None of these guys will want to walk away from that margin...

I feel the temporary used market insanity of 5 year old bikes with 25k miles on them going for same as brand new msrp (of the year they originally sold) will be over also.

Especially if new prices plummet also (why buy a used bike within $100 of new?).

So, c'mon cross bike before the 2022 season!

I literally have seen lower spec 2015 Giant Propels going used for same as what I paid new in 2015 for mine. Bonkers.

You'd hope but it will still take a year or two for all this to start settling down. Even if everything was back in stock tomorrow it takes months to get out to all the end places in the stream.

The amount of rim brake wheels I have built in the last two years is staggering. Everyone wanting to keep their old gear running until there was enough supply to buy a new disc bike at non-highway robbery prices. I have a feeling all those people will eventually give up and pay highway robbery prices. Business 101 - don't give up the prices you just got out of the market. Used market should bounce this year though. Maybe late in the year though.

(Trying to figure out what this means for my plans to buy used 6800 and r8000 bits off Ebay and Craigs List to build up the 1995 Litespeed frame I have.....)

You should do a podcast on this. Its been over 3 months since the last one. Dance Monkey!
Seriously though, it would be a super interesting podcast- a handful of in the business people(shop owners, ex-component managers, etc) talking about it.


If the bubble has already come, like you suggest in your post, then it is letting out air slowly like when you hold a balloon by the opening and make it squeal in an annoying way. It definitely isnt a quick pop. Components are largely still not available, bikes are still largely in short supply, and used parts are still largely priced high.

HAHAHAHA - I was all over the what'sapp this morning trying to figure out a better podcasting calendar. We know we need steady content but it's like wrangling cats. Used to be easier when people were stopping into the shop and we did them spur of the moment. Now it's coordinating, etc. Cross season got in the way this year. Just exhausted.

For sure on the bubble as you're describing. To Vosper's point in the article it really is just demand side movement at the moment. So we are definitely seeing the demand drop. That said there is still so much pent up unmet demand that is still in the queue that the parts showing up for a long time will already be spoken for. I think the point of his article is that all indications are that we have crossed the tipping point. I would have to agree with that assessment. People's fatigue of dealing with life as it is now is also resulting in them casting off all the good for them habits they have picked up in the last 2 years.

What threw me for a loop was a particular passage you linked in the OP.

I just assumed that the demand had increased along the COVID shortages (production etc.) and had exacerbated the current predicament. But it seems that the demand wasn't historically any higher (sans e-bikes). Unless I misunderstood?

One of my LBS's had stated that they were on back order by thousands of bikes, and I was thinking it had to be panic buying. I just couldn't fathom that a "medium" size shop could normally have that kind of demand.

Wow.

The article is pointing out that demand for the last few months is back to the levels it was pre-pandemic for these same winter months. The demand in the last few years was about an order of magnitude larger than it had been so seeing a return in the last few months to a "normal" level indicates a huge drop.

Thousands of bikes is a bit extreme and indicates a bit of panic buying but it's not unreal. A "medium" shop should be doing a thousand or over bikes every year. Small shops I would say are under 1,000 a year. I know of some shops that have a couple thousand kids bikes on back order who are starting to see them show up and they're freaking out because they no longer have that demand and "forgot to cancel" their pre-orders. I have always been like, "why put in a pre-order if you don't intend to take the bikes" and have been shocked to find out that everyone says, "because that's how we have always done it". mind boggling and major problem inducing. Another reason OEM's need to move away from dealers.

So the blingie Hope CL rotors that I've been pining after for the last 18 months aren't going to see a discount any time soon? :(

I also think the LBSs are hurting themselves by continuing to support brands that are working against them. Trek has opened up 3 shops locally and yet they're also one of the more stocked brands at shops in between. One shop sold one of their two locations to trek and agreed to not drop the brand, and the day they closed the sold location trek brought in an entire truckload of bikes while their second location was practically empty since trek isn't delivering. So within 15 miles of me there are 3 shops I visit and trek is their biggest stocking brand but within the same 15 miles is 2 trek shops. I get Trek sells; but how many customers come in, learn what they want, and get it at the trek shop which actually has stock. And why compete with the brand, the only one winning is the brand. Yet this is what the shops are allowing to happen. If trek, specialized, or whoever opened a shop and every shop within the region dropped the brand they would lose market share and have to start backing up.

All of the Bike Barn locations in the Houston area have just turned into Trek factory stores. That’s 4 or 5 shops at least.
I really hope whatever is going to happen happens fast and returns prices of components back to non-insanity.

It’s a shame how the manufacturers are hurting their dealers with the consumer direct model. Sometimes it’s a convenient option but how convenient is it when the buyer needs a wheel trued or can’t figure out a creaky bottom bracket from a worn chain.

I'm projecting that the industry here in North America will be indelibly-marred from all of this. Its plain to see how much has already shifted, such as OEM's buying out LBS's. I'm thinking that there will be a new dawn of bike shops. You'll have those shops that are owned by OEMs, and shops that are non-dealerships, and sell only used bikes. I run a small LLC for repairs and restorations. I build wheels and restore bikes. Its been hell getting parts, especially tires, and I've had to rely heavily on my inventory of take-off parts, but it is starting to loosen up now. I'm seeing, from my small perspective, an easing of the availability of parts, so I am getting a feel for where we are in the middle of this. From where I stand, supplies ebb and flow, and if I stay out of the surf, I can survive the tide.

Hold on, this new round of covid has put everything back into a guessing game. Delaware just re-mandated the mask law for most indoor places and activities. Grocery stores are being emptied of various goods almost as soon as they are re-stocked. The climbing inflation is just adding another layer of angst, leading to even more stocking up of what consumers deem to be vital or important to them.

I was looking at a couple of different types of components this morning, curiosity more than need. The amount of out "of stock" is really disappointing. The price of some items is almost unbelievable. For me, this has a good side to it. It makes it easier for me to not hit the purchase button due to the cost or the item being unavailable. It also makes it easier for me to accept that I do not need the item, that the cost negates whatever gain might have been achieved, and that "Just Say No!" was the right decision.

"If trek, specialized, or whoever opened a shop and every shop within the region dropped the brand they would lose market share and have to start backing up."

Noble thought, however impractical. Shops rely upon a certain brand to stay alive. If you have the big T or S on your door, then you are very reliant upon the brand name to drive sales. Trek could slap their name on a Walmart bike and it would sell well because their name is on it. Schwinn successfully did this for years using Giant bikes. As a Giant dealer we had to fight consumer bias for the Schwinn brand, and it took a long time to finally start winning consistently.

If you have T or S on the door the sales revenue from these brands is quite a huge chunk and to just drop them and start building a brand name such as Diamond Back or Jamis is a major endeavor. Revenue will surely decrease, which affects everything else in the operation, including payroll.

I suppose it is simply a matter of time when all good things must come to an end. Businesses come and go, the cycle of life continues on. Eventually Trek and Specialized and whomever else will see their own demise when they are out-flanked or fail to respond to market forces such as Schhwinn did back in the 90's.

All this makes sense- a recognized brand has some inherent value that cant just be replaced.
I just chuckled when reading it though because a large LBS with 3 locations in my metro is a Trek and Giant dealer, but recently brought in Jamis to fill in for Giant due to lack of inventory. That move would actually make me consider buying from them, which is the opposite of what you mention. With that said, I recognize I am an outlier in brand preferences. I have 0 interest in a Giant bike from an inspirational perspective or fitment. Jamis?- sure, they have cool branding and geometry that would work for me.

Same for me. As I mentioned above an entire chain in Houston just turned into Trek stores. They used to sell Trek & Specialized. I never bought bikes from them, or really went to their stores because I don’t want Bontrager/Specialized branded everything’s.

Instead I went to the shop that’s further away that stocks Arundel & Tacx & PDW, & Problem Solvers accessories, and sells Jamis, Kona, and a few QBP brands (Salsa/All-City).

I’m thinking about going to Society Cycling. Which one are you talking about?

Handlebar Cyclery & West End Bikes are the 2 places I go when I need tools/accessories. Blue Line Bike Lab is near and dear to my heart because we're friends with the owners and they carry boutique brands, but their selection of accessories declined 80% when they moved to the new building.

I really hope whatever bubble the industry is in, pops, and prices come spiraling back down. The thing about raised prices in any industry due to inflation or supply/demand is that they never ever seem to come back down when it's passed. But prices on various components have jumped $10-60 depending on what it is and that's just not sustainable for me.

This is what I am talking about. not only is trek doing it but Giant as well. Giant and Specialized are doing it through their Direct to Consumer (DTC) web portals. Giant sent out a letter to all their dealers yesterday that made the forums light up. From the just it was a "we're all in this together" letter but they continue to sell models DTC that dealers have had on backorder for going on 2 years. This is all these guys going to war with each other and the dealers are losing.

These guys are buying everyone up so they can preserve their pricing integrity. Prices from them aren't going down. Ever.

This will still be handled.

trek/giant/specialized will take over all the retail space they want. Independent dealers of theirs will either cease to exist or simply exist in territories that the big guys don't see as being profitable but they still want a presence in. Option 2 is full independents - shops that carry lines too small to throw their weight around or support consumers directly - think smaller bike brands. There will be this level of independent shop that is big money and carries a lot of these small lines. They will be a large draw for a large geographic area. Think of how many times you've been like, "Gee I am interested in a ____. Is there someone near me that carries ____? Oh look this shop is listed as a dealer. I know they carry ___ and ___ as well. I know it's a drive but maybe it's worth it so I can at least test ride or put hands on the ____ I am thinking of getting".

Option 3 is service only shops. Mine has been one for 8 years (I do sell Van Dessel technically but they are custom to order and not stocked). We handle everyone's problems and just fix what comes to us. Brands like Cannondale/Cervelo/PON will start to rely on "us" to handle their needs just like how Canyon does.

We get the shaft as a service shop though because our wholesale pricing on components is literally what you guys used to pay for at retail. We have to build our model around that by simply just charging what we are actually worth for the service time. A lot of us just tell people to buy their own parts and bring them in. If it's wrong then you pay me to get the right ones. Don't know what to get then I can get it for a fee or I can sit down with you and tell you what to buy but you're paying me for my time.

So possibly we see component prices coming down. i would guess 20-40% f the shops remaining will disappear in the next few years. I am not alone in that estimate. Any small to mid sized shop that is one of the big brands will be forced out through shortages and competition from that brand in the same market. Many will convert to service only to stay alive. As such while the component prices might come down again your labor prices will absolutely hold to increase. The industry is really beyond caring how much anyone thinks something should cost. We are now at the point where we want to be paid for our labor - just like every other business.

...and none of us are losing sleep over home mechanics doing their own work or helping buddies. If anything they slightly lighten our overload in the busiest times. The reality is that the vast majority of the population has no desire to do their own work and that will never change. In the words of PCad (RIP), "I have people for that".

There's nothing that requires additional COVID waves to inspire people to buy more bikes (which are also, now, hard to get and even more expensive).

I think the first bike-boom was a one-off thing. Maybe, we'll see an uptick but not as big (and tampered by availability and cost).

To me, all of this makes it much more attractive to purchase a custom frame (or a boutique production frame like Crust) and build it up.

The LBSs might be kind-of-stuck. There are a lot of customers looking for Trek. They aren't very likely to get those sales without selling Treks.

Here's the kicker - prices haven't actually "gone up" it's just that we are now able to actually get the MSRP for an item. Those prices are never going back down except for like Shimano with the OE greymarket flood that's coming. So the parts have "always" been that price but no one has been paying it. it's kind of what shops have been complaining about for years

Want to know the really scary thing? All of the OEs are now announcing actual price increases. Not only that but these are coming with MSRP bumps as well. before our costs just went up and they held MSRP.

So not only are your prices not going back down they will keep climbing. Shortage or not.