Between COVID Boom and Demand Slump: What Does the Future Hold for the Bicycle Industry?
Interview von Anette von Löwenstern
April 6, 2023
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Like hardly any other industry, the bicycle industry has known only one direction in recent years: up. Revenue from bicycles, bicycle parts and accessories more than doubled between 2014 and 2020. The same applies to the average price of the bikes sold. On closer inspection, however, there are definitely winners and losers. Who belongs to which group, and which measures are the right ones now, is what we discussed with enomyc Partner Stefan Frings.
Mr. Frings, since COVID at the latest, the share of bicycles on the streets has seemingly multiplied. Yet many manufacturers are apparently struggling economically. How does that fit together?
The bicycle business has been booming for a few years now. Revenue more than doubled between 2014 and 2020. Average prices have also risen, from 1,400 euros in 2021 to 1,800 euros now. COVID, attractive leasing models such as Jobrad, but also technical innovation gave the industry an additional boost in demand. From today's perspective, this was both a curse and a blessing. Because of missing parts, many bikes could not be built and could not be sold during the pandemic. In addition, in response to the problems with parts supply, most manufacturers built up large inventories and exhausted their liquidity reserves. That is exactly what is now catching up with them.
How will things go on for these companies now? The first manufacturers have cut prices…
A distinction needs to be made here. Price reductions occur mainly in the low-price segment, that is, bikes up to 1,000 euros, where demand has fallen sharply. In the upper segment there are a few promotions to boost sales, but these are generally customary retail sales campaigns.
Does that mean the crisis mainly hits the low-price segment?
Exactly. These are mostly manufacturers without their own sales channel that sell their products through retail or online platforms, or manufacturers that produce promotional goods for discounters or private labels, predominantly in the mid and lower price segments. These companies are currently in a very difficult situation because they feel the consumer reluctance most strongly.
How about providers in the luxury segment?
They mostly have their own sales channels, whether stationary or online, and well-positioned brands, such as Canyon and Rose in the sporty and higher-value city segments, respectively, or Riese + Müller for e-bikes. Thanks to their innovations, these companies are often opinion leaders or pacesetters in the industry and set the trends. Although entry prices here are not infrequently around 3,000 euros, business is still going well even now.
What is the situation in retail?
Brick-and-mortar retail and specialist dealers or dealer chains are also under heavy pressure. The main causes are the high inventories and consumer reluctance. At the same time, it must be noted that many providers have major assortment weaknesses, for example in accessories or clothing. Online retail is simply superior there.
What would need to be done to improve the situation?
Manufacturers in the upper price segment generally still have efficiency reserves. So here it is about optimizing production processes or logistics, but also about putting costs under scrutiny in general. At the same time, the supply chain must be optimized and it must be examined what can be sourced better in Europe than in Asia – even though this is particularly challenging in this industry because of the given supplier structure. One thing is clear: if the seatpost is missing in the end, the bike cannot be finished.
In the lower segment, by contrast, in my assessment there is often not much left to save. A wave of consolidation will definitely come here. Companies should now primarily focus on selling off their goods in order to generate liquidity. Here the restructuring mantra applies: “Liquidity beats earnings”, in other words “Cash is king”.