Little over five years ago and just a few months in since Cycling Industry News’ launch our editor went out on a limb over the course of just over 3,000 words to predict what next for the bike industry. Today he recaps on what hit, surpassed or fell short of the mark and takes another stab at what the next five years may hold with a little guidance from CyclingIndustry.News’ forward-looking market reports.
At the time of writing (2016) the bike industry had a very different stock crisis to that experienced today. At the time it was surplus of stock causing bottlenecks in the industry rather than short supply. As many would find out having too much stock can be just as lethal to a business as too little. In fact, until the pandemic rolled along the industry had endured many years of falling imports and a decline in shop numbers. Over saturation was a problem.
Yet now the reverse is true. Or is it?
Certainly the lack of stock is a problem existing presently or on the horizon for all, no arguments there. We are, for the time being, largely all in the same boat, give or take a bit of sway with suppliers that may be based on your appetite for upfront risk and in some cases, influence.
Back in 2016 the size of the pie was, by most accounts, too large, despite the over supply. Has it got any smaller? Almost certainly not in brand terms, in particular since electric bikes have in the past five years accelerated at the pace everybody with an open mind to slinging a leg over said they would. Europe has led the northern hemisphere’s charge, but the initially sceptical U.S. market is now rallying fast.
On ths note of scepticism in the face of change, my hunch is that history is now repeating with the electric scooter, albeit with fiercer press headwinds convincing consumers micromobility is a bad thing. A visit to any European city will confirm the horse has bolted on keeping this transport form down; the Government has seemingly even admitted as much. At this stage, CI.N’s retail study has 49% of indie retailers stating they will not explore this sector, with the other half open to or already engaged in carrying stock.
Meandering quickly back to market size, CyclingIndustry.News did note a spike in business openings during the early days of the pandemic. Whether it was lay offs, or people with more time on their hands to plan going solo, we now fear for those upstarts as they will be joining the back of a very large and well established queue on supply. Certainly our trade-forum is awash with panicked calls for repair spares from retailers old and new.
All things considered, the upstarts that will stand a greater chance of sustaining will be those with low overheads and agility, but more than that a USP and ability to attract and adapt to customers of all demographics in a changing world is crucial. A digital edge helps not only in efficiency terms when it comes to booking, but because almost unanimously we are glued to phones and laptops, more so than even five years ago – convenience is king and many are capitalising on exactly that.
The potential customer base is, now more than ever, every person passing outside of your shopfront (or glossing past you marketing efforts). Is there a certain demographic not engaging. Why? A long supressed message of inclusion and diversity has been thrust into the spotlight in recent years and finally this bid to attract previously under-served demographics is reflected in our studies of bike retail attitudes.
Given the backlog of service work seemingly available it’s unsurprising that 11% of frontline indie cycling businesses identified their structure as ‘mobile mechanic’ and 15% ‘workshop only’ in our data – that’s a quarter of the market in the UK now focused on repairs. To back this notion of tool-driven growth we are hearing from the training schools that courses are fully booked for some time yet, albeit physical capacity issues persist for now.
The net result of tracking market size will be tricky to measure until the pandemic passes and supply settles, but it’s safe to say the workshop – already a shop floor space winner of recent years – remains vitally important to the trade’s front line; again this is borne out in our research as one area where cash flow is being diverted.
As is to be expected with new businesses touting for customers, especially those with lower overheads, complaints exist in the trade that new entrants are devaluing the work of mechanics with low prices at a time when the skillset has never been more advanced. Thus, there is a danger of perpetuating a cycle of sub-standard wages for skilled workers, argue the experts.
Many bike shops are recruiting to reduce their lead times in the face of continued demand.
A final note on supply; we will not know whether the size of our correction is appropriate probably until it is too late, which could pivot us from one extreme back to where we started this article. Certainly electric bike makers, in particular, are investing in production, but it’s safe to say the trend is rising here and so this feels appropriate. Word has it some key e-bike OEMs are not taking new customers for the time being, so a lid does exist, yet the rate at which new brands are joining the race is only accelerating.
E-mobility and the addressable market
The question is, which will grow faster, consumer appetite for e-bikes or manufacturer’s targets? At the present time e-bikes are outselling electric cars by some margin, so for now the hype is to be believed. E-bikes are now 17% of all EU bicycle sales and growing.
Another question – can the industry keep up with only a few horses in the race to kit so many bikes?
In Shimano’s first quarter results it announced a 64% increase in sales, which if you think about the size of this company’s production is quite something. Tagged to the back of that stat was a dampener, admitting “the continued inability of supply to keep up with demand”, particularly affecting near term inventories in Europe and North America.
CI.N has now written a series of articles asking whether what is essentially a two horse race can sustain our e-bike and cycling ambition. Answers vary, depending on who you ask. One factor not yet considered could, theoretically, tilt opinion in a negative direction for a positive reason; that’s our long overdue addressing of the general public.
For a long time (too long) the bike industry has been chasing the enthusiast, marketing an image of svelte athleticism that was enough to make joe public bring up their breakfast and send the Daily Mail into a frenzy about mythical taxes for using the roads. Now the industry is hitting the streets, literally, with a breath of fresh air – as portrayed by Cannondale’s major city campaigns, which are now also present on the London underground.
This addressable market is enormous. In the UK our cycling modal share has barely moved in decades, aside from where investment in infrastructure has begun to make it safe and appealing for everyone, not just a few brave souls. CI.N’s data has three quarters of bike shops now calling for industry marketing spend to be squarely aimed at those not yet cycling and in an encouraging sign to welcome more women in store, 45% wish to see campaigns targeted at creating more female cyclists.
One of the most notable, but under-reported changes in the UK is the fact that after years of ambiguity, the UK now has National design standards for cycling infrastructure and only those projects aligning to these are apparently eligible for funding. That’s absolutely crucial for encouraging the masses to cycle. Lack of safe infrastructure is, in fact, where 77% of UK bike retailers perceive the greatest obstacle to growing cycling levels to be.
Infrastructure and politics
Infrastructure is not just cycle paths, however. For a true end-to-end journey to become viable by bike things like cycle parking must be factored in, employers will have to begin to cater and even incentivise non-car travel (property with showers and cycle friendly access are now worth more) and residential areas will have to be linked to arteries. People won’t take that first step if the view outside their door is terrifying. Bike share too may play a big part, but more on that later.
All of this will take political will and that is certainly something that five years ago we could not have predicted would move in the right direction, but the general consensus, even with opposition politicians, is that seeds are being sown. (Slowly and without funding that is meaningful).
While £2 billion may sound like a lot, the mathematics haven’t added up with the rhetoric at any point during the current Government’s term, yet we are now beyond the ‘warm words’ stage and into the realms of progress. What’s driving the change? Surprisingly, it might have been Covid. Who knew it would take a pandemic for countries to reimagine city spaces around active transportation, effectively accelerating talk into action in a matter of months, rather than years?
The eventually diluted Emergency Active Travel Fund was the UK’s response and notoriously not all work laid down to promote active transport has survived, despite overwhelming evidence of its positive effect. Over in Paris things went a little better and the French capital is reaping the benefits of active travel and its subsequent afterglow of health, pollution and social benefits.
Citizens weren’t the only ones to benefit from the investment too. Studies have now shown everything from local property prices to retailers adjacent to cycle lanes to have been beneficiaries, something that should lend further weight to an argument for more provision for safe cycing lanes.
Follow the money
Whether your country stuck with the programme, or is consulting some more only to return to the unavoidable issue later, one things is certain – heads have turned – and not just any heads, investor heads.
Money talks, as the saying goes and all of a sudden lots of people in very high up places are talking. The VP of the European Commission has now described cycle lanes as “a no regret investment” and since that time has been a rare ear available to an industry that until recently did not have quite the same influence nor lobbying might. In the past five years we have got our act together, collecting data, forging links and making friends. The importance of that work cannot be understated, it is in part why the eyes of the investment world is now firmly fixed on the micromobility world, in particular the electric bike.
“I’ve had some remarkable conversations with investment bankers who would like to put money in to the cycling industry but are unable to choose where to start,” Cycling Industries Europe CEO Kevin Mayne told CI.N late last year.
Since that time we have seen with increasing regularity the reference play out in a series of acquisitions, IPOs and raises. To name a few from the past year alone – Wiggle, Canyon, BluBrake, Stromer, MateBike, RadPower Bikes, NS Bikes/Rondo, Whyte, Wattbike, Bike24, hGears, BikeExchange, Donkey Republic, Peloton, Bafang… okay, it’s more than a few. In a sign of the volume of cash ready to enter the bike world we now even have a stock exchange index tracker for the first time.
According to those behind the Canyon deal it is the “active living segments, all sustainability driven markets and micromobility” that most has investors placing big bets.
There are perhaps even larger undeclared reasons too. The climate change discussion is now firmly on the agenda, with politicians arriving fashionably late to consult further this November at the 26th UN Climate meet. I suspect that’s a mere fraction of the interest in bikes, however; a reduction in transport emissions alone, while now high on the agenda, is only a small part of a much broader problem.
Perhaps it’s that we are on the fringes of the now fashionable and seemingly mandated drive toward electrification of all transport. Cycling can now be deemed cool, enjoyable and accessible to a much, much wider demographic.
Why don’t property developers want us to own cars?
Perhaps investors have done the maths. That is the mathematics of inevitability, alongside anticipated returns. Some may have noticed a trend of property developers encouraging home owners to shift away from car ownership, or being mandated to think about active travel in design. Are they virtue signalling to encourage go green, or do they know something most people do not about use of space?
Urban spaces feasibly cannot get larger without engulfing a wider radius. The populations inside that perimeter naturally grows, filling the space exponentially with acquired ‘things’. The most inefficient of these are our largest possessions, the ones that spill out of our own individual spaces and on to public land, where in theory they have no real right to be. Cars are said to be parked 97% of the time and the other 3% of the time consume a mobile space equivalent to a sofa and two armchairs.
As illustrated brilliantly in the latest BikeIsBest campaign video, often just one seat is occupied and the other brought along for the ride. 60% of 1 to 2 mile trips are driven. The net effect of this is an average speed in central London of 7.1 mph; not quite what the automotive world’s advertising depicts, as pointed out by a now banned Vanmoof counter advert.
Fill a funnel full of marbles and then top that up with sand – which filters through the bottleneck? Size and efficient use of space matters and city planners now understand this thanks to the wealth of data at our fingertips. Why are cycle lanes empty, many ask? Because they’re efficient movers of people, traffic jams only ever occur at the lights. For those looking on from the traffic, an Imperial College London study shows that no, the cycling lane is not the reason you’re sat at a standstill.
For this reason, painful as it is to admit to this lifelong bike fan, the e-scooter may well become equally important in the transport ecosystem, should the necessary safety hurdles be overcome. Should these vehicles become legalised the soundbites from Government already seem to suggest we will need to get used to sharing cycle paths. Angry? Don’t be. As demonstrated in Vienna, this means more cycling infrastructure will have to be built, theoretically making transport safer for everyone. It’d do wonders for school run traffic too in the perhaps unlikely scenario that youth restrictions lift.
Ownership versus usership – a one way trend?
E-bikes and e-scooters are a lot cheaper than buying an electric car too and that’s where the cycling industry stands to chalk up another almost inevitable win. Car ownership requires somewhere to park and charge the car. Younger generations, often on comparatively lower wages than their parents’ generation, are less likely to own property of size, thus limiting the scope of car ownership further. Short of a vast generational transfer of wealth this looks unlikely to change. Bikes and other shared transport remain accessible and, arguably, are becoming the more attractive option. The Department for Transport’s own study into the subject reaches the same conclusion.
There is a pronounced trend in younger generations to rent, subscribe or lease, rather than go to the often prohibitive lengths of ownership. Now accessible in our pockets think Spotify for Music, Netflix for music, Uber if you do need a car but live in a car park space free flat, or Donkey Republic if you need to hire a bike in any number of European cities. Some in the bike world are even predicting a full shift away from bike ownership to rental. Vanmoof and Brompton, for example, offer both. As uncomfortable as that last point may feel, subscribing is the trend – the youth increasingly do not feel the need to own and often cannot afford, that is if they have the space to store. Once more, if you cannot expand your ceilings, size matters.
Both cycling and scooters as transport forms require only light infrastructure on the street and more than likely it will be conversion of existing space nabbed from inefficient transport, rather than new infrastructure needed, lowering the cost and upping the appeal to planners. You can fit multiple bike parking racks in a single car parking space. Then there’s the consideration of charging infrastructure, something that at present appears to be coming at the expense of pavement space – can that sustain?
Car go for cargo
In a case of the aforementioned consumer shopping trends helping the bike industry we have a hero that in our summary five years ago would have been considered unlikely – the cargo bike.
“Electrification has made all the difference,” Raleigh’s Edward Pegram told CI.N this week in reference to what has seen the cargo bike’s fortunes go from niche to high curiosity for even the biggest in business.
As good as proven to be more efficient in urban spaces and thus quite the cost saver for firms reliant on logistics, including many postal services, cargo bike sales are now increasing at over 50% each year and outselling electric cars in Germany.
Something else that has prompted serious consideration about moving goods is the statistics that van traffic is the fastest growing of any vehicle type, something spurred on further by a Covid-induced boom in online retail. Even in the years prior van traffic grew by 71% over the last 20 years, compared to growth of 13% for cars and 2.1% for HGVs.
So convinced by the data are some that we are now seeing medical packages being delivered by cargo bike, rather than motor vehicle much thanks to the lowered delivery times and greater reliability.
All of this means big business for a small but growing pool of specialists. In many instances fleets of cargo bikes are sold, rather than single units thanks to their usage. The mathematics are stunning not only on inner city agility, but for retailers making the leap too. That said, likely down to the space constraints many stores have, just 8% of retailers told CI.N this year that they would invest more cash in this space.
Bike design and blurred lines with other markets
While the industry might have you believe bike design has been evolving consistently with each model year, fundamentally we have not evolved as other consumer products have and the concept has remained, until recently pretty much as it was 100 years ago. Keep it simple, nothing wrong with that if it works.
Yet now we have other industries looking over our shoulder and actually in no small way invading for a slice of the pie, largely as a result of the forecasts attached to the electric bike market. The bike industry has been warned to defend its territory, but whether it can against some very well financed competition is a discussion we will perhaps be having in the next round up.
With the integration of technology the era of the smart bike is upon us and thus far it’s shaping up to largely reflect the technology seen in the automotive space – GPS, turn signals, ABS, every kind of data metric measured, smart dashboards etc. The skillsets required to bring these changes to market have been largely imported and with that migration to modernise the bike comes a natural whisper of opportunity now from within our traditionally closed but nonetheless welcoming space.
With the advance in design and technology comes an opportunity for the bike shop to reflect in service prices a service rate card that is more familiar with the automotive world. Of the many hundred bike shops that gave us feedback this year the upper end of the service rate card remained fairly static with only around 15% charging £150 or more for their most comprehensive bike service. The very same percentage charged less than £60, which while reflective of some of our low-overhead workshop only outfit models, is an astonishingly low valuation on hard earned skills.
The future and the cycling industry
Pre-amble on consumer trends and politics aside, the question still remains – what next for the bike retailer and almost by default, those above in the chain?
Notably the past five years have seen the blurring of lines and consolidation of supply links, the latter of which has created a fundamental change in pressures on competition and thus pricing. It has, thus far, been a turbulent process and one that doesn’t yet seem to have found its final form.
There are numerous pros and cons to manufacturers going direct and while this model has accelerated it has not done so without misfires. It is notable that many brands are now seeking to expand a network of supplier owned stores, turning many former independents into non-independents with an independent feel retained.
It is here that the concession exists that brands cannot service the customer directly in quite the same way that the traditional bike shop can. With a network, some consistency is necessary branch to branch, but branded independents have seen varying degrees of success in achieving this over the years. Throw an unprecedented shake up like Covid into the mix and the relationship between owned and non-owned partners might well be getting tested to new extremes with one committed to a brand in a different way to the next. That has pros and cons for both supplier and retailer. Asked what most challenges forward planning in CI.N’s annual study, 71% said that supplier stock miscommunications were presently a leading cause of strain on the relationship.
This quite naturally leads into a change many view as positive in the natural shift away from hard model years. Again, a trend that has built in the past five years, this is a move that CSG hope will give retailers both reliable supply at key times and a sales window with pressures to sell through at a discount alleviated.
Covid has and continues to stress test the cycling industry and it can reasonably be expected that prices on goods will remain higher for the foreseeable future. As luck would have it, just 14% of UK cycling shops told CI.N they perceive cost of entry to be a barrier to enticing new cyclists and average sales prices have been on the increase for years for both pedal and pedal-assisted goods.
In a bid to work around factors often out of their control, many of the better financed or forward-looking brands continue to reshuffle production, assembly and distribution locations. Covid forced the hand of many to expand their sourcing horizons and the mood music seems to be that pleasant surprise in alternative goods has been the consensus. If there were an identifiable trend on the manufacturing front it might be that e-bike firms invested in expansion with greater confidence than those with a lower exposure.
In adapting to the sourcing of drivetrain components brands like SunRace and Gates told CI.N’s latest magazine of an uptick in trade and forward commitment as bike labels adapt to a strained supply of the market leaders. Down the chain, cycling shops report that consumers aren’t really that fussed what is equipped to their bike at this stage, as long as they can get their bike fixed in time for the weekend.
The past years’ ups and downs have left numerous business sat on renewed cash flow, with most signalling to CI.N that this will go toward heavy stock investment wherever possible. As it stands, we know that about £1 billion in extra value went through the cycling economy in 2020, but that business tailed off leading into 2021 as stock levels fell and winter set in. That gave us a value of £2.31 billion for the UK cycling market, which many reasonably expect to dip in 2021 before rebounding with ferocity as supply normalises, likely into 2023.
Have you another take on the topics discussed here? The chat is on CI.N’s trade-only Facebook group and I’m available on firstname.lastname@example.org. For more content like this, subscribe to either Cycling Industry News print or digital here. For those wishing to obtain CI.N’s full market report, you can now purchase at a 25% discount on the original price by emailing the editor your request using the above email..