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'Where's my bike?': The inside story on the industry stock crisis

In-depth
1 Apr 2021
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Last year saw bike supply dwindle just as demand began to skyrocket. What caused this perfect storm, and is the worst yet to come?

Words: Mark Sutton Lead image: Tapestry Illustrations: Neil Stevens

For years we never knew how good we had it. Internet leviathans drove prices low and kept stocks high; tyres cost peanuts and the new helmet you bought online showed up in 24 hours with a little pack of Haribo. But then Covid happened.

Factory whistles blew to usher in the Chinese New Year holidays, then the country’s government stepped in and ordered employers not to reopen in a bid to contain the viral spread. In the biggest bike-producing nation on the planet, production had ground to a halt overnight.

Yet for a while the cheap inner tubes still flowed, while here in the UK bike retailers couldn’t believe their luck. Sales, which had been plateauing for a number of years, went through the roof as demand hit an all-time high. Chris Boardman was even building bikes at his local shop in the Wirral to keep up with demand.

Fast-forward to autumn, however, and things were looking a little less rosy. Wait times for bikes had risen to months, and those three dreaded words ‘out of stock’ were being heard more and more at retailers across the country.

Was this the crash many people had forecast, the Covid lag in manufacturing coming to bear? Or was there more to it than just a disruption to the supply chain in early 2020? Most importantly of all, when would it all end?

In a state

‘The key problem is the sheer short supply of raw material a long way down the food chain,’ says Decathlon’s UK commercial leader in cycling, Peter Lazarus. ‘This is leading to difficulties in manufacturing the required quantities, and yet demand for bikes is up four-fold. We are catching up from months of zero to low and reduced manufacturing capacity across the industry.

‘Every major producer and retailer – of which Decathlon is one of the biggest – is ordering as much stock as it can lay its hands on, which in turn puts more stress on the supply chain. Manufacturers are in a bind. Is this just a flash in the pan or should they be building more factories and adding production lines?’

In another world perhaps the industry could have absorbed such disruption but, as Lazarus alludes to, the problem wasn’t just on the supply side. With UK workers stuck at home during the first lockdown the Government encouraged daily – albeit limited – exercise, and the demand for bikes rose sharply.

Thanks to industry lobbying, bike retailers were allowed to go about business as semi-usual under the banner of being ‘essential services’. But this situation needs some context.

In 2019 bicycle imports were at their lowest for more than a decade, down nearly a third from 3.9 million units in 2010 to 2.7 million in a saturated market. This forced retailers into early discounting, which in turn made it harder for bike shops to maintain enough of a margin to stay profitable. Many of them shut as a result of being stuck with too many bikes, ageing and going out of season.

Concurrently there had been significant diversion of investment into electric bike stock, and with this surfeit of availability a chicken-and-egg scenario ensued that saw mid-2020 e-bike sales rise by 88% over the previous year.

In short, even before the pandemic hit there had been a steady diversion of import spend away from pedal-powered bikes. However, we need to reach beyond our own national fishbowl to fully understand our conundrum.

Pat Hus is the CEO of Bianchi USA and explains that companies ‘living hand to mouth with deliveries’ is ultimately why the supply dilemma accelerated so abruptly.

‘Many would like to point the finger at one or two key suppliers [read: big groupset manufacturers] as the root of the problem, but when you dive deeper you discover that it is much more complex,’ Hus says.

‘Some manufacturers are now telling us they have a 365-day lead-time for something as simple as a saddle. Tyres, tubes, brakes and more are also now being pushed out to almost one-year leads. Throw in massive shipping delays and tariff increases and you have a formula for disaster.

‘Price increases across the board are inevitable as every single company in the bike industry is dealing with the same challenges.’

Hus’s advice is to get in line, and he doesn’t just mean consumers. Despite Bianchi’s global presence he says the company is completely sold out on all incoming shipments through to June, with ‘every bike allocated to a particular dealer as soon as it hits our warehouses’.

And this isn’t all about entry to mid-level bikes either. Bianchi released its latest flagship, the Specialissima last year, and of course Cyclist was bashing down the UK distributor’s door to get a test bike. But despite the pricetag comfortably hitting five figures, demand was such that every bike was snapped up direct from the assembly line.

Down the local

On the front line of bicycle retail in the UK is Neil Holman, a partner at George Halls Cycle Centre in Market Harborough. Like many local bike shops he finds himself at the mercy of limited spending power compared to chains and online retailers, yet still has the inescapable need to forecast sales.

‘The sales team at the main bike brand we sell had only allotted us 20 bikes for the 2021 season, so in August, September and October I placed orders totalling about 100 bikes, projected to be 18 months’ worth of sales for us for this brand alone.

‘At the beginning of December I downloaded my entire back orders. I was allocated just two bikes in December and a few in January. The bulk of my bikes, over 40 of them, weren’t due in until at least mid-October 2021, running through to January 2022.’

Holman had little choice but to cancel the entire order for anything due after October 2021, citing the conundrum of model years. Those 40 bikes would constitute around £20,000 of stock, and given brands tend to release new bikes annually, that could leave Holman with just a few months to sell the bikes before they became ‘last year’s models’, which is not a phrase bike shops like.

After all, if a consumer is faced with ‘latest versus last’ for near the same price, they are likely to plump for the latest. Yet if a retailer discounts older stock in the face of newer stock in order to shift it, then suddenly ‘last year’s’ can start looking appealing, and thus the newer stock remains unsold until it has to be discounted the following year for the same reasons, and so the cycle starts again.

This is one of the main reasons why bike brands hate the so-called ‘grey market’, and you won’t see certain brands sold in those giant online retailers: it devalues newer products, making margins hard to keep.

The shipping forecast

At the time of writing, shipping costs are averaging around four times the usual rates. This is primarily put down to the impact of Covid, but trade negotiations surrounding Brexit have compounded matters. Ports being snarled up with lorries has been well documented and there are reports of container ships floating off-shore, unable to land cargo until terms have been agreed.

This all means additional cost, which brands, retailers and indeed consumers struggle to swallow. One solution is to remove as many links in the supply chain as possible (see below), and as such a number of high-profile brands have cut out the distributor in favour of direct sales routes.

Darren Mabbott is owner of UK distributor Silverfish and has felt the impact of such importing challenges first hand.

‘Last year saw crazy levels of interest in cycling and spikes in demand for specific lines,’ he says. ‘Coupled with disruption of factory production and fewer ships and aircraft available for transport, the result was that continuous replenishment of supply was at times challenging.’

So when can we expect such challenges to abate? In the opinion of Bianchi’s Hus, we need to look to the bigger guns. ‘Once the larger suppliers [the likes of Trek, Specialized and Giant] begin to catch up and start to re-stock bike retailers again, we should begin to see a return to some normality.’

A way out?

A romantic notion that is being championed in many corners of the local bike industry is the idea that we could avoid – or at least drastically reduce – such situations in the future by manufacturing everything in the UK, reviving our nation’s once mighty bike-making capabilities.

Back in the 1920s, Raleigh of Nottingham was the world leader in bike production, manufacturing 100,000 units annually. Even now manufacturers such as Brompton are flying the country’s high-volume bicycle-building flag.

But UK manufacturing comes at a premium due to labour costs, and at any rate that doesn’t solve the problem of where the raw materials needed to build frames will come from, never mind all the other components to turn that frame into a complete bike.

‘Last year saw a global cycling boom largely due to the Covid-19 crisis,’ says Shimano’s PR and communications specialist, Ben Hillsdon. ‘But it’s also in part due to the positive trajectory witnessed in most European markets in previous years. This huge upswing in demand in 2020 has led to customers [that is, bike brands, retailers and distributors] selling more bikes and placing far more orders with us than we would usually expect.

‘The current demand is dependent on the development of the Covid-19 situation and the resulting initiatives by governments, and long-term trends that may result from consumers switching to cycling as a result of reduced reliance on public transport.’

As for the million dollar question of when the market might settle back down, Hillsdon is cautious about making any bold predictions: ‘Incoming orders are extremely positive but future demand is difficult to predict in the current climate so we cannot say much that’s concrete at present. However we strongly believe in the future growth of the bicycle market and will prepare our factories for it.’

Commanding around a 70% market share of the bike industry’s supply of gears and brakes, it is of course incredibly hard to panic a business the size of Shimano.

But the message is clear no matter who you talk to: like the times we live in, the situation in the bike industry is unprecedented and no one really knows when things will return to ‘normal’ – if indeed it ever will. The one positive we can at least be sure of is that more people than ever want to be riding a bike.

We’ll give the final word to Neil Holman from George Halls Cycle Centre.

‘Two years. I think it could take two years before we see any kind of continuity return to the bicycle industry, and the only way to get there is to scrap two years’ worth of range changes.’

In other words, drop the idea of product supersedence, sell existing stock while the supply chain finds its feet again, and we’ll all see each other astride the latest bikes again in 2023.

The weakest link

How the supply chain works

Picture your average Taiwanese assembly line. On the wall is a big clock with numbers alongside: target output and current output. Wheel builders are picking up handfuls of spokes and dropping them into hubs; pneumatic tools rev in sync with the passing of frames on a conveyor belt.

Everyone is trying to beat yesterday’s ‘score’, which is ultimately governed by global demand. Bikes are being assembled from parts that may or may not have been made here. There are factories behind this factory.

At the end of the assembly line the bike is packed into a box and that box is then loaded into a shipping container. That container is driven to a port where tariff codes are checked to ensure the container holds what is listed. After a journey of many miles across the ocean, the container is landed.

At this point customs officers scrutinise the contents again to ensure duties have been paid. The container is then taken to a distributor or retailer, or in a handful of cases its contents are separated and delivered directly to the consumer.

In an ideal world all of this happens smoothly and on time, and even if that wheel bearing shipment is late, for example, it’s no problem as there are alternative suppliers.

But then something like a pandemic hits and all bearing suppliers cease activity. Suddenly the hub is late so the wheel is late so the bike is late so the shipment of everything in that container is late so… you get the picture.