Bicycle brands, suppliers, and retailers gathering at key industry events - uncertainty and optimism

Ryan Atkinson has continued his travels and brings us the latest in how brands, suppliers, and merchants in bicycle retail are feeling during some uncertain times. There are bright spots and some optimism, particularly among retailers. 

Themes from industry events

1. Bicycle Leadership Conference (suppliers)
2. NBDA Retailer Summit (both) - join the Midwest event in Bentonville in May
3. CABDA West (both)

• Uncertainty among suppliers, optimism with dealers
• Tariff confusion and frustration
• Throttle electric bikes
• Used and pre-owned
• Tap into health/beauty, active lifestyle, prioritize health
• Profitability
• Ecommerce

March online sales performance

• US sales +9% and orders +7%
• CA sales -18% and orders -32% (sporting goods generally -6.9%)
• Dollar growth was fueled by road and mountain bikes, plus the surprise performance of comfort and commuter bikes. Electric bikes had a surprising slump.
• CA non-essential discretionary down, calls from concerned clients
• US consumers getting ahead of tariffs

Cyclingnews article on DeMinimis (Ryan’s rant)

• Bummed how they characterized Bob Margevicius’ testimony
• Bob is a VP for Specialized
• He’s an exceptional representative for our industry on trade issues
• Nobody knows EU, Asian, and US manufacturing/trade as well
• Tireless contributor and just awarded PFB lifetime achievement award
• Author conflated legitimate tariff frustration with DeMinimis
• DeMinimus exemption increased to $800 in 2016
• PFB has lobbied for change since
• Reason for so much cheap product disrupting IBD market
• Cheap D2C electric bikes, cheap helmets and lights on Temu, etc
• Unsafe for consumers, erodes value proposition for retailers, takes away high margin retail sales
• I want to encourage listeners not to spread click bait rumors just because they think the headline gets attention

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Transcript

[0:03] Welcome around the work stand good morning good morning it's that time again here's ryan mr uh not world traveler but certainly a continental u.s traveler i tell you what i was i covered some ground over a couple of weeks you know i had the two like work events but then i i don't know if If it was selfish, yeah, it was selfishly. I did a whole camping trip through Arizona, Southern California, Nevada, between the two events. It was fantastic. I highly recommend between intense conferences to go into the middle of nowhere at camp. I think going to the middle of nowhere would be good advice for lots of people occasionally. Yeah, yeah. Generally. It's hard to find nowhere these days. Yeah, it is. I tell you what, that's a cool part of the country. uh uh mojave death valley uh death valley in particular it's a long ways away but i'll be going back it's epic terrain when you say death valley to somebody from sec football country we just think about baton rouge louisiana where lsu plays their football games i'm not lsu fan i'm pretty sure that's it anyway you uh should have some good information relative to um the suppliers and the brands and some retailers after these conferences and visits. So, you know, let us know what's going on with that.

[1:28] Yeah, I had a lot of conversations and, oh boy, I've had 20 seminars over the course of two weeks. But yeah, I was at Bicycle Leadership Conference in Tucson, which is the kind of supplier-focused trade show. I think there was only one retailer there, Eric, who runs Eric's Bike and Board, I think is what it's called. Um and then there was the mbda retailer summit in vegas and then cab to west in vegas um it was great i mean it was just really nice to connect with people and figure out kind of what's their sense of the market what are they excited about what are they worried about um i definitely walked away with a few themes uh it's not going to be a surprise to anybody that uncertainty was the the word of the day among suppliers because that's the side of the business that It tends to need to – tariffs have the most direct impact. I mean, the tariffs impact everybody, but they're the ones who have to figure out how do they budget for it? When do they pay it? How do they need to adjust ordering, logistics, pricing? I mean, that's the one that I think a lot of our listeners are going to care about the most is how is it going to impact their wholesale and retail pricing. And I'll tell you what, there was, well, A, you're not allowed to kind of talk too much about pricing at those events.

[2:54] But –, There's just, it's unknown, you know, that uncertainty thing comes in of you don't know what's going to stick, what's not going to stick. You know, it just changes so much and all anybody wants is some sort of clarity and it's just not, I mean, obviously some clarity came out late last week, but, you know, still really in flux. And for the suppliers, I mean, it's an immediate and unplanned requirement of cash, right? Absolutely. Yeah, they got to write a check. Some importers that own small tariff things will help with terms, but generally they got to stroke checks real quick. Yeah, exactly. And a lot of the industry over the last several years moved production out of China and into Vietnam. And Vietnam's dramatically impacted. Taiwan's impacted. Japan's impacted.

[3:45] There's separate tariffs on steel and aluminum, which can include some finished goods. The tariffs stack on each other. There's this deal where there's an additional surcharge on containers that are imported either on a cargo ship that was manufactured in China or owned by a Chinese company. And so keeping it all straight is just nearly impossible. And then, of course, you're dealing with inflation on their end as well in terms of the inputs that they put into their business. So just a really tough time, you know, at a time when the bike industry is still trying to find its footing. Yeah. So, how did that seem to carry over with the retailers? Is there still some sense of, you know, when it gets here, it gets here? Or is there real trepidation? Are they talking about how quick can we pull some sales forward just in case this lasts long? What is the sentiment amongst our clients, the merchants? You know, it was a pretty diverse group.

[4:48] I would say the primary sentiment is not paying a lot of attention to it. You know, I think that there's the concept of tariffs, there's the concept of inflation, but I didn't hear many dealers talking about it. And the only things that I heard were largely based on anticipatory frustration with suppliers raising prices. I think that the supply side of the business, you know, there's a big opportunity for transparency in terms of like what goes into the price of a product. Because amongst dealers, there was a general frustration that it was going to be a game of not it in terms of who takes a margin hit.

[5:38] But, you know, and I think, and the same came out of Cabda, too, of like, I think dealers are just focused on the positive. You know, where can we find some success? But I don't think that they can necessarily afford from their own morale standpoint or their employees' morale to be too, you know, lost in the kind of challenges that sit for business. I think they need to go into the spring with vigor and enthusiasm. And so that's likely what, you know, kind of clouding what I picked up from the conversations.

[6:08] Yeah. Yeah. But I'll tell you, I think we're just going to have to expect that there's going to be a pricing impact for consumers on bike product. But I've said this before, but the bike product is a secondary concern for me. The primary concern is how it's going to impact everyday purchases for consumers and what that's going to do for discretionary budgets. And so we're going to be keeping a close eye. I mean, it's going to be a day-by-day, week-by-week thing to try and see when does that show up at the Walmarts of the world and that sort of thing. Because there is a bit of a delay for, I don't remember the exact rules, but things in transit. If they've gotten to a certain point, then they're free of the new tariff. If they're not at that point, it's inclusive. And I've read some articles where there's suppliers asking manufacturers to hold up. You know if it can't make it by x date hold that so i guess we have to work our way through that before we know exactly when these things make it to the retail floor yep yeah and then there's been you know uh, I'd say intentional front-loading in kind of the general retail segment.

[7:21] Walmart might bring in 30% more big-screen TVs than they would have otherwise. On the bike industry side, I think there's some carryover overstock, and sales velocity wasn't great last year. And so there's inventory that won't directly be impacted, but the suppliers are going to need to cost average. So it's not like a bike that if import tariffs are impacting new deliveries, those prices are going to be applied to existing inventory as well. But it might let them moderate it to some extent. But then I think things like back to the consumer side, it's going to show up at the grocery store really quickly because you can't front load vegetables. Vegetables, yeah. Yeah, so it's, you know, and, you know, if you look at things like meats, you know, the farmer's inputs costs are going to go up. And so they're, you know, that even though you don't import the cow, you might import the feed or the, you know, the things you need in order to raise the livestock. And so it's just going to be a really confusing time.

[8:43] Well, what about the products and the sales that are going on? Did you hear about trends? I mean, let's review. At some point, we know our numbers for the last month. What are you seeing in our platform and then out larger? Yeah, I mean, there's good news on both fronts, meaning there's a lot of optimism on where some potential growth might come from for the industry. I think a lot of attention is going towards throttle e-bikes, and language around this category is shifting. I think traditionally we've said class two e-bikes, but I think for better or for worse, um, the market has pulled a lot of the, a lot of consumers into out of class product. Um, and, uh, so throttle e-bikes are really where there's expected to be some growth. There's a lot of product information, a lot of, um, high quality product that's coming in at lower retail prices with high margins. And so dealers, you know, they're very attracted to where's the consumer demand and where are the good margins at.

[9:51] You know, as dealers were looking at possible recessionary conditions ahead or really across the board, there was talk about the impact that used or pre-owned can have on helping find success in that market. So I think you're going to see a lot more attention paid there.

[10:12] A lot of attention from dealers on just focusing on profitability. What are the things that they're going to stock that are going to give us the highest turns? It was really flattering that at the MBDA Retailer Summit, there was a block of retailers that presented on profitability and unsolicited. Each of them talked about the impact that WorkStand IQ has on their business, which is the service we have that's open to buy planning and helps them maximize profitability on inventory. Yeah. So that, you know, a lot of attention going towards that. I think there were a lot of, I saw a lot of note-taking happening in the room. A lot of interest in e-commerce, you know, I've been kind of going back and forth on what's the primary impact of our application on our customers. And as we've all talked about, foot traffic tends to be the piece that gets the most attention right now. But there was a lot more openness in terms of diversifying revenue streams. You know, it's not just how do I get in front of customers on Google to drive floor traffic, But increasingly, I'd love to pick up some e-commerce sales. And so that's another area where it's hard to pin down, from our point of view, the market, the retailers, what they're looking for. Yeah. Speaking of e-commerce, we've got some, I think, March numbers across our platform.

[11:31] Yeah. Let's go talk about that. Yeah. Yeah, U.S. did great in March. Up 9% in sales. Order volume was up. Different story in Canada, unfortunately. The Canadian market on our platform has really suffered in March. It was down 18% in dollars, but order volume is down over 30%.

[11:54] The overall retail numbers, just outside of bikes, also have come out for March. And Canadian retail overall was down, I think, 0.2% to 0.5%. But a lot of that was bolstered by auto sales. And we see that happening in the U.S. too, consumers really trying to get ahead of any sort of tariff impact on pricing. And so we're going to see auto sales be really strong in April here. But sporting goods, when you kind of drill into the data in Canada, sporting goods were down 6% or about 7%. Yeah.

[12:29] So it looks like bike are being impacted slightly more, but in general, that's that kind of discretionary area. But in the U.S., great growth in mountain and road, road in those price bands we've talked about before, kind of the mid-priced aluminum road bikes, wider tires, whether it's classified as a gravel or an all-road. Um but then also somewhat shockingly comfort and commuter bikes were strong which is a category that has been just tanking in the last two years because that's i think as much as anything like those two categories kind of fall into that pull forward class um but it but maybe you know some of that inventory that's been or some of the bikes that have been sitting in garages are, buried behind other things at this point so they're not hitting the used market and you got kind of a new wave of consumers coming into bike shops. So some good news on those fronts.

[13:27] Do you think, because I have heard from a few Canadian merchants who sell primarily American bike brands, that there's been some localized pushback on those brands, which I would imagine would be a temporary, you know, knee jerk reflex. But have you heard, or could that, could that be contributing to the fact that bikes maybe are down a little more than other sporting goods areas of that? I think that is a possibility.

[13:55] I've had a number of conversations, either both at Cabda, but also I've placed some phone calls to suppliers and retailers in the Canadian market just because I'm worried about the same thing. And, you know, I have heard that consumers aren't wanting to buy a U.S. made or a U.S. Brand product. Yeah. But that isn't across the board. Most of the dealers that I called are not experiencing that, and neither are suppliers. While at the same time, they say that the Buy Canadian sentiment is growing.

[14:30] It's hard to say whether or not what we're seeing is, you know, are we overrepresented in, say, a Trek and Specialized product versus a Norco Rocky Mountain product in terms of the dealer makeup that we work with. So we might be getting the wrong signal, but it's hard. We don't know. So any other interesting topics or trends that you saw at these meetings? So tying together a couple of things. When I was a part of that data and research panel, and on that panel is a gentleman from Surkana. And Surkana does the primary reporting in the bike industry, but also just broader global retail. And the health and beauty category for them is like that is that is the the driving force for retail sales growth right now and so there's a lot of discussion on like well how do we connect cycling which is fundamentally health driven you know feel better look better fresh air is there any way to tie into some of those underlying consumer wants that are driving the health and beauty segment into cycling?

[15:34] And how do we make cycling cool? Because a lot of the other drivers for health and beauty is that it's such a strong industry on social media. And I think we have the cool factor down for nerds like the three of us. We have plenty of stuff to find in our feeds. But what about the average consumer, like somebody who might be interested in yoga? Are they also seeing cycling uh so there were a lot of questions around how do we how do we market and position cycling to to grow hmm ryan you recently shared i think on a monday email to the team um an article are you you're referring to my rant uh earlier this week yeah i didn't know for like outwardly letting people know that you give us a rant but it's a well it's the ramble but, well there's that but I mean I ranted on LinkedIn too I mean I don't know I tried to stay in the realm of professional but yeah I was super frustrated you know cup of coffee Monday morning and, Jumped on Instagram and started flipping through people's stories and like a number of cycling influencers had this screenshot of a cycling news article that really disparaged specialized and them advocating for tariffs.

[16:50] I read the article and it was just totally misguided. They conflated de minimis reform with tariffs. And even worse, they took the testimony of Bob Markovicius, who is a senior VP for Specialized, just an exceptional representative for the bicycle industry, the person who spends the time with European trade associations, Asian trade associations.

[17:18] Nobody knows production or import, just general trade issues like Bob. Two weeks ago the guy wins the lifetime achievement award for people for bikes and then the cycling news author totally mischaracterized his testimony got just lost in this justifiable frustration with tariff policy and and uh and and really threw bob under the bus and it just incredibly frustrates me um that you know a clickbait article it worked I mean, it got people sharing on social media just as a way to kind of hate on a brand, but Bob's name got dragged through it. And so, you know, I just, so I want our audience to know that like, don't fall for it. You know, it's a compelling headline, but de minimis reform is important for the bike industry. When the, it's a confusing issue, go to my LinkedIn account and you'll see a post that links to a good way to learn more about it. But it basically is just, you know, it sets a price threshold on imports that can bypass tariffs. And so it's an $800 threshold. And that is the whole reason that the company, Timu...

[18:37] Gained traction here. That's the reason that you got unsafe $5 helmets going into consumer hands and, and lights for $2. And, and, and it's the major contributing factor for, you know, super low quality direct consumer e-bikes hitting. And so there's a reason the bike industry is trying to lower that threshold and it's good for our customers. Our customers are having, are losing sales. Their high quality product is being devalued. So just, just be thoughtful and do your research before you share the clickbait because it's sending the wrong signal to consumers. And it just, it really bums me out. And to have such a good guy's name dragged through the mud, it's just, it's shameful. That's tough to see. I think that's a good takeaway. We're real deep in the doom scrolling phase of life. And so maybe just a little check-in. Yeah, yeah, yeah. And now I got to stop with the coffee and calm down again. Yeah. Have you have you eaten yet to balance out that caffeine consumption i have okay just.

[19:46] Well i think we've got some we got some ups and downs right now but excited to see that u.s sales are up hopefully that that continues i think retailers really staying on the gas it's we talk about marketing it's a numbers game do what you can to stay in front of customers stay top of mind, the weather is looking fantastic here in the next couple weeks so i hope to see more people out on bikes same and you know times are stressful and people you know they may flock to the things that bring them joy we may we may have a great bike season and i think we should all be optimistic despite the headwinds yes headwinds oh sorry i'll take a headwind over a crosswind any day though, So anyway, well, I guess we'll see you around the work stand.