Styles: Forecasting the next ten years of the bicycle trade, part one

By John Styles, bike industry sales agent and Cyconomist founder

In the UK, I believe we will see e-Bikes accounting for 50% of sales by value within three years. Thereafter, I’d suggest 50% by volume within eight years. You just have to look at Europe and anybody could guess that may happen.

But I’ve come at it from a different angle, studying the demographics of the UK and our bike buying habits at different stages of our lives. And I have some worrying news. I suspect it won’t just be about the growth in e-Bikes, it will also be about a steadily accelerating decline in conventional bike sales.

There may be a bit of cliff edge waiting for the unwary and it’s not too far down the road. Already the industry isn’t coping too well in some respects. I suspect the transition will not be easy. Least of all because of the inherent inflexibility and lag in our supply chain. If we are not careful we will all be chasing the game for the next five or ten years.

In many ways, 50/50 will be a good place, if and when we get there. Fewer PDIs for a higher average basket price. However, there will be some pain along the way. I keep hearing from stores that bicycle supply in many categories is pretty poor – yet in others there are overstocks. This appears to be across much of the industry and across multiple bike brands. Three months for this, four months for that, sold out for the season after just two months in production.

Some stores keep a log of their lost sales and they are not insubstantial. When one brand is out of supply, other brands just pick up the slack. When multiple brands are out, consumers just don’t purchase. This means more stores close. Lack of reliable supply may be a bigger problem than show-rooming nowadays? Certainly CI.N’s own Independent Retail Channel Study suggests this problem exists.

Part of the issue is supply chain lag when assembling bikes so far (in both time and distance) from their end user. Another issue is manufacturing capacity. Organisations with locally based flexible manufacturing, especially those who are expanding those facilities, should be well placed to succeed in this more dynamic market place.

However, fundamentally, whatever part of the chain we work in and whatever our manufacturing set-up, what we all need is a better way of forecasting consumer demand. And that starts with the right questions, research and mind-set. Industry Veterans, let’s ask ourselves a searching question. Does most of our industry dialogue (between stores, reps, importers, media and brands) consist of this:

  1. Look! We made this amazing new Bike, isn’t it shiny (95% of the chat – wow I’m excited)
  2. It’s for this type of consumer (5% – yawn, that’s obvious, I lost interest and stopped here)
  3. The numbers of consumers like this are growing/declining so….
  4. Their disposable income is growing/declining so….
  5. Their propensity to spend that income on Bikes is growing/declining so…
  6. So….this year we will need lots more of Bike (a) and much less of Bike (b).

How often do we “as an industry” talk about steps three through six?

Granular, sector by sector, data and behavioural driven demographic forecasting.

Be honest, it’s not happening very much anywhere is it? Otherwise we wouldn’t have such a large number of big (and small) names in trouble. Otherwise I wouldn’t be getting calls from institutional investors who say: We are disappointed in the dividends we are receiving from the cycle sector during the last 2 years, what is the earnings potential of OEM Manufacturer (A), will it recover or should we liquidate our position and invest the portfolio in Brand (B)?”. And no, I can’t tell you what I told them.

Are we all just looking at the last three years numbers and trying to draw a line that simply extrapolates what went before? That may have worked in years gone by, in a “steady state market equilibrium”. The current climate and indeed the next five years will be anything but that and the industry is going to need to adapt, otherwise there will be multiple business failures at every level in the supply chain. Size and scale will be no defence against the ocean swell of rapidly shifting tides in consumer demand.

Is the road ahead paved with enthusiast cash, or does the industry need to rethink its strategy?

Don’t get me wrong, we’re not completely hopeless. The industry is great and engaging with the pro peloton, Danny McAskill and weekend warrior Enduro types. We are there, we feel it, we get it. We constantly create new and exciting categories of cycle sport. We even re-invent the wheel, frequently. But outside of that, how many of us really get what commuters, retired motor-homers or kids are really about? How about how many there are or how their lifestyles are changing? Maybe somewhere deep in the industry this research or conversation is going on.

Forecasting is no easy job and I don’t envy those who have to do it. It’s a bit of a rock and a hard place type activity. Organisations may need to devote more (and different) resource to this business critical area as the market becomes less predictable. Big business is already looking to AI to better forecast future demand for goods as you can read here.

Industry statistics are notoriously tricky, fragmented and in many cases need a large dose of salt.

So, what follows is my current best guess where sales in the UK cycle industry are going (Ceteris Paribus). Of course any sort of forecast or prediction is by no means guaranteed. Even I’m no expert. After 20 years in the industry, I still have much to learn and am always meeting people who have more or different experience to me. So, this is just a first step, opening the conversation, prompting debate on the subject matter.

Where I welcome the help of other industry veterans is in fact-checking and verifying my initial forecast. If you have a piece of data, research or statistics that either supports or contradicts this forecast, can you share it with me?

I like joining up the dots. It’s a hobby, a passion, an interest that keeps my brain occupied on evenings and weekends. Usually when Bake-off is on the telly. If it can also be useful to others, so much the better. Just drop me a line at info@cyconomist.com if you have anything to share. Or, if you want to chat (confidentially or even anonymously) you can reach me via GLGs London Office.

Footnote and “Health Warning”:

My last article dealt with what quite definitely has happened in the cycle trade as a result of the 5th Kondratiev Wave. In this article, I have discussed what may happen in the next 10 years due the Demographic wave. Which reminds me: Economists deal with what may happen, in general, with everyone’s money. As opposed to Accountants, who deal with exactly what has happened with your money. Which is why every business has an Accountant but very few have an Economist. So, my predictions come with a health warning: Make up your own damned mind!

In part two we will explore a segment by segment break down of likely trends in the marketplace, stay tuned to CI.N for that piece later this week.