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December 20, 2023
For the past few years, the bike industry has gone through highs and lows. There was steady growth for these companies prior to 2020. Soon after, however, COVID hit the world and everybody was locked indoors. Interestingly, people sought out bikes more and more despite not being able to go outdoors. As a result, there was less and less stock but more and more demand as people were rapidly gaining interest during a time when manufacturers were unable to supply. This “Bullwhip Effect” caused these manufacturers to overstock on bikes during 2021 and raise prices on newer models higher and higher until 2023. Contrary to their predictions, demand has been lower than expected this year, while there is still a significant excess in products in warehouses and bike shops. It may be because the people who wanted bikes in 2020 bought their bikes before 2023, thus the drop in sales. This lowered demand has turned into what analysts argue is a crisis for the industry as a whole.
Brand Trends
Companies are in financial trouble during 2023. The biggest brands such as Shimano (Biggest manufacturer of groupsets, or the gearing system) have sales 25% down compared to last year. Fox Factory (Suspension manufacturer) is in a similar position with Shimano in this context, with 41% lower sales after the second quarter. The Fox Sports Group (Includes Fox Factory along with other brands) sees a 58% decrease since last year.
Not only component manufacturers are being affected, but also those who manufacture bikes such as Specialized, Trek, and GIANT. In January, Specialized layed off 8% of its workforce for a company “transformation”, while SIGNA SPORTS (Parent company of Nukeproof, Vitus, Chain Reaction Cycles and Wiggle) was forced into closing all their divisions in North America, meaning that beloved brands such as Nukeproof are no longer available here in the US.
Specialized Bikes at a significant discount (Photo credit: Specialized.com Accessed December 11 2023))
Pricing
For the end user the excess stock and lowered demand mean that almost everything these brands sell is at a significant discount. As seen in the above image of Specialized’s website, the bike on the left is a little less than 50% its original MSRP while it was released last year. Oddly enough, this makes it the same price as the latter, which has cheaper components. Other brands are finding themselves doing the same; giving significant discounts despite Black Friday having passed.
Some brands like Nukeproof are not even available in North America anymore primarily because the demand is too low. This is good for people looking for a new ride, but devastating to those who make it as profit margins have become lower and lower. Interestingly, the used bike market is in a predicament as well. There are a lot of used bikes that are being sold for significantly more than what they may be worth. In the local area, Craigslist has posts such as this and this. The former is a 2020 Yeti for ~$3,200 while the latter is a 2019 Trek for ~$4,000 as of the writing of this article. Each year has a slight change in bike geometry such as the angle of the front fork relative to the ground to become more “aggressive” or “relaxed”, which will change how the bike handles. These slight changes make each model better than the last, which is why value may be lost quickly. The reason why recent prices on used bikes are higher may be because of their inflated cost during COVID. The sellers may want to get more of a deal today where the price for a new bike is cheaper than what they got their bike during COVID.
Conclusion
The bike industry is in trouble. From lower profit margins to layoffs and closings, 2023 has been a struggle for these companies. The understock during COVID and the overstock after has caused these brands to significantly discount their prices year-round to stay afloat as much as possible. Interestingly, used bikes are being valued higher than what they should be despite the lower cost for a new equivalent. To the consumer, this crisis may be a blessing because the prices for a good bike are now cheaper than the past few years. This same blessing may be a curse as these brands may collapse or become inaccessible in certain regions. 2024 will determine if the bike industry further collapses or recovers.
Sources:
Input and fact checking from Nathan Fuller, MBHS student
www.youtube.com/watch?v=v3rw8JP_-vU
trends.google.com/trends/explore?date=2018-01-01%202023-12-10&geo=US&q=%2Fm%2F0199g&hl=en
www.statista.com/outlook/mmo/bicycles/worldwide#revenue
www.bicycleretailer.com/industry-news/2023/08/03/fox-factory-bike-related-sales-down-41-quarter
www.bicycleretailer.com/industry-news/2023/01/11/specialized-announces-8-staff-reduction
www.specialized.com/us/en/c/mountain?drivetrain=1x&page=3&sortBy=ss_price&sortDirection=asc
www.mbr.co.uk/reviews/hardtail/nukeproof-scout-290-elite-review
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