Electrified and Fully Cushioned: The German Bicycle Industry and the Rose Bikes Case Study

Dr. Frings, you're a Partner and Head of Strategy at enomyc in Cologne, with more than 25 years of consulting experience — primarily in B2B sectors: automotive and suppliers, machinery and plant engineering, transport and logistics. Today, though, we're talking about an industry that, unlike most of your usual clients, makes a B2C product: bicycles. What role do they play?

Bicycles today are a lifestyle product. A sports instrument — think road bikes, mountain bikes, gravel bikes. But they're also high-tech: we're seeing a trend here that people in the automotive world call “democratization.” Innovative features are initially reserved for the premium segment, but over time they make their way into the mid-range and compact classes as well.

Such as?

Belt-driven bikes: completely maintenance-free and low-wear. Or bikes with automatic gearing that maintains a set cadence. Safety has also been stepped up significantly — from disc brakes to much better lighting, to equipment like helmets, some of which now come with Bluetooth connections to smartphones.

Why do you think bicycles keep growing in popularity?

I think the health movement is a strong driver. The broader trend toward more physical activity and healthier living also means people tend to cycle more. On top of that, there's growing environmental awareness and incentives from the shift in mobility policy — infrastructure projects that expand cycling-lane networks, for example.

The pandemic was a driver too.

Exactly — the pandemic also drove increased bicycle use. People felt safer on a bike than on public transport. And today, more than ever, I notice that people who would otherwise drive are simply fed up — with grinding traffic, poor parking in city centers, or high fuel prices.

With ROSE Bikes, you're advising a client in the lifestyle segment — and it's a B2C product you use yourself. What effect does that have on your work as a consultant?

It has several effects. If you have an affinity for a product, you're naturally much closer to it. As a user, you also bring a completely different ability to judge it — you can put yourself in the target group's shoes much more easily. Of course, the engineering behind something like an electron welding machine is fascinating in its own right, but as an end customer who used to ride road bikes a lot myself, I have a different kind of familiarity, a different way in to both the products and the company.

You've worked on many projects in the automotive and supplier industry. Do you see parallels with the bicycle industry, or is it more about its own particularities?

When it comes to parts and sourcing, there are certainly many parallels. What sets the industries apart is that the bicycle industry is very heavily dependent on suppliers from Asia. Manufacturers work with a small number of very large suppliers who, in turn, hold significant market power. Ultimately, the supplier side amounts to a fairly tight oligopoly, which means manufacturers don't necessarily get to choose who they work with. The industry has traditionally had a few large players focused on areas like frame-building or components. Frames are a major component, and they've long been built primarily in Taiwan. Shimano, as a supplier of essential components, is essentially a given. That's one of the industry's distinctive features.

What has happened in the German bicycle industry in recent years? How has it changed?

Completely. If you think back to the 1990s, higher-end road bikes were still configured to order and assembled at the dealer's. The Italian road bike was the ultimate status symbol in the scene back then. With the mountain bike boom that followed, a certain Americanization set in. Bike geometry changed dramatically — as did the accessories. New players entered the market, which also shifted distribution to some extent. The move went from configured bikes to complete bikes: today, almost exclusively complete bikes are sold — even in the higher-end and premium segments. I recently visited bike boutiques in Girona, the road-cycling mecca in Spain, and saw complete road bikes worth upwards of €10,000 displayed in the shop windows. That's now standard practice, and it runs across every price segment.

Lately the industry presents a mixed picture: overall it's doing very well, yet at the same time there are full-blown discount wars. How does that fit together?

The industry had strong tailwinds for a long time. It was a pandemic winner. The real break came afterward, in 2021 and 2022: the supply chain crisis hit the industry extremely hard. Demand for goods was high, but there were supply shortfalls, delays and extremely expensive freight rates.

A quick follow-up: did these events trigger a rethink in the industry? We talked a while back about local versus global sourcing. Does something like “Bike Value” in Portugal make a decisive difference, for example?

There is a push toward more near- and reshoring, that's true. But in practice, it's impossible to do without sourcing and producing components in Asia altogether — Shimano being the obvious example. Bicycle assembly is a different story, though. Taiwan, Japan and the US remain among the largest bicycle exporters, but in Europe, Portugal is clearly emerging as a serious player in assembly and innovation. Eastern European countries are also coming into play as assembly locations, thanks to their cost advantages.

Since you mentioned the supply chain crisis: today, supply chain issues have largely been resolved. What are some manufacturers and retailers still struggling with?

Overcrowded inventories. A lack of parts availability led many companies across the industry to build up excess stock, creating significant liquidity pressure. Even though parts availability has normalized again, the industry is still feeling the effects of the supply chain crisis from three years ago. Manufacturers' parts inventories are now running down, and in some cases dealers are being flooded with bicycles. The result is falling prices and outright discount wars — something we're seeing particularly in segments that are currently also seeing lower demand. While expensive road bikes and higher-end e-bikes are trending, the mid and lower price segments — classic mechanical bicycles — are seeing buyer reluctance. Sports enthusiasts and recreational mountain bikers are now drawn to very appealing e-mountain bikes and e-trail bikes. Gravel bikes are also scoring points in the “sport” category, and we're now seeing specialization emerge for different use cases within that segment.

Let's talk about two trends: first, the electrification of the bicycle — in 2023, e-bikes outsold mechanical bicycles for the first time — and second, the financing option of company-bike leasing. The 2024 industry study by Zukunft Fahrrad e.V. calls both of these “gamechangers” for usage and the market. How do you see it? What effects have you observed?

“Gamechanger” is the right word — for many people, cycling became attractive again, or for the first time, thanks to e-bikes. The e-bike has had a major impact on many people's quality of life. I personally cycle much more since I got an e-bike myself. It's incredibly practical — for the commute, for errands, on holiday. For families, the e-cargo bike in particular has made a real difference. Compared to the mechanical “bio-bike,” e-bikes are simply much less strenuous and a good alternative to the car. Think of older people: with an e-bike, most of them can take part in life so much more. They can stay mobile gently and without exertion — and keep up with the younger people in their lives. It's easy to see why the e-bike manufacturing sector is experiencing a huge boom as a result. And it's not just that sector — the industries around it are benefiting strongly too: the range of e-bike tours and travel packages, for instance, has become much more diverse.

Okay, let's turn to “gamechanger No. 2”: company-bike leasing. What effect does that have on the bicycle industry?

For manufacturers, it's a highly lucrative business. Good terms naturally lead to greater demand, new target groups and higher sales volumes. Customers, in turn, benefit from tax advantages, which also makes them more willing to lease pricier models — and that brings manufacturers better margins. With steady sales, they can also plan demand much more reliably. There's no risk for them either, since leasing providers sit in between. On top of that, manufacturers benefit from customer loyalty that lasts several years — at least 36 months — while service and accessory sales generate additional profit. It's essentially the same principle as leasing a car.

With the ROSE Bikes case, you gained an inside view of a manufacturer. How did you see these two trends play out there?

At ROSE Bikes, I observed that both trends — the e-bike business and the leasing business — were used as strong drivers of innovation. ROSE, for example, launched several new e-bike models that also qualify as company bikes. In doing so, the company struck a chord and was able to tap into important new target groups.

The company started back in 1907 as a bicycle shop in Bocholt. It then built a mail-order business and published order catalogs running up to 1,000 pages. Have you ever held one of those catalogs in your hands?

Of course. The company already had a very strong standing in Germany back in the 1970s. Its mail-order business stood out in the industry at the time, and the catalogs were highly sought after. Later, the company began producing its own bicycle brand. Much like Canyon, ROSE managed to start out as a traditional bicycle company and then, with its own brand, grow into the market leader in its segment. A real success story.

Today the company describes itself as a “growing omnichannel retailer.” ROSE sells its products through its website and its own stores in Germany and Switzerland. What's appealing about this concept?

I think it's the customer journey — and the successful players in this industry have really mastered it. At its best, the customer journey is mapped across different channels and media in a way that makes the brand present, approachable and likeable to its target groups — whether offline or online, as long as it's embedded in people's everyday lives. It starts with the idea that you need a bike, moves through research to the purchase, and ideally leads to many further store visits for new accessories.

Building a customer journey like that requires really strong knowledge of your target group — essentially profiling.

Exactly. It's very resource-intensive. It requires highly customer-centric ways of working and sophisticated online marketing that gathers and analyzes data. We touched on the industry's transformation earlier — and one thing that has changed massively, a really important development, is e-commerce, online sales. ROSE presents its range online and ships it too. At the same time, the company also runs several of its own points of sale and stores, where bikes can be experienced, test-ridden, and then ordered online and received afterward.

Or you can pick it up directly from “BIKETOWN in Bocholt.”

Or that — and that's exactly how the company creates a very special customer experience. When the new bike is wheeled in, it's comparable to picking up a new car directly from the factory. That's the crowning moment of the customer journey.

“enomyc supported us in our strategic and operational development. Our joint project work has helped us sustainably strengthen our competitive position.” — Torsten Heckrath-Rose, Managing Partner, ROSE Bikes

Looking at ROSE Bikes' development, it really does look like a success story. Aside from the tough climb in 2022, the company recently reported record figures again: eight new bike platforms launched in 2023, and the bike segment alone posted a 30% increase in revenue year-on-year.

That's right. ROSE Bikes has stood for pioneering work since the company was founded. The e-bike models, as well as the gravel and road bikes, have really struck a chord. That requires investment in R&D and a strong customer focus — but above all, a genuine innovation mindset.

Customer centricity, tinkering, inspiration: these are the pillars of an innovator — or even an agenda-setter. But what often falls by the wayside? What do companies tend to overlook, in your experience?

What you've just listed covers R&D, marketing and sales — sometimes in beautifully designed stores — all business areas that are genuinely enjoyable to work in. What I observe is that this intense focus on innovation sometimes means other areas get neglected — logistics and assembly processes, for example. That's why I advise even companies that are inherently successful and well positioned in the market to stay alert. It takes entrepreneurial foresight — recognizing needs early — combined with strong execution capability to make adjustments where needed. Take an example from the automotive industry: in the early 1990s, the industry tried applying lean management principles, aiming to build leaner inventories and make assembly organization more efficient and fluid. The goals were higher productivity and even better quality. That's exactly the phase many bicycle manufacturers are in today.

Innovation is certainly a success formula for manufacturers. But how do you innovate in uncertain times like these? The bicycle industry is losing planning certainty too. What makes companies innovative and inventive then — besides necessity?

It may sound like a cliché, but to be innovative, even in uncertain times, every company needs a clear vision, a clear focus and a clear plan — a strategy. What are we really good at? What do we want to stand for in the market? What do we need to do to get there? And what should we focus on? Once a company has defined that for itself, it also knows exactly which products are needed for its specific market segment. That's one part of it.

And the other part?

The other part is taking risks. There's no innovation without risk — and the times we're in now demand innovation. I know entrepreneurs who pursued their vision despite resistance, from banks for example, and have gone on to build extremely successful, globally operating companies today. The Austrian economist Schumpeter said that “innovations are always the opinions of a minority.” That's something you can learn. You shouldn't let yourself be talked out of your own entrepreneurial direction. And that's something we in Germany should find our way back to, at least to some extent — regardless of the economic situation and regardless of structural issues.

If you had to make a general forecast for the German bicycle industry over the next few years, what developments do you consider realistic?

I think we'll continue to see a market shakeout. Unfortunately, it will cost some companies their existence. The genuinely strong manufacturers, on the other hand, will continue to assert themselves and look forward to a thriving future.

And what about the products?

I expect we'll see lighter models. E-bikes will also become even more dominant, but there will be more affordable options too — urban e-bikes with carbon frames, for example.

What makes you say that?

The democratization of products I mentioned earlier. An analogy from the automotive world: ABS, central locking and air conditioning have long been standard in every compact car. I don't think you can even buy a car without AC today. The same thing will happen in the bicycle industry: parts and features from the premium segment will make their way into the mid and lower price segments.

Does that mean the mechanical bicycle will soon be a thing of the past?

I do think the use of mechanical bikes will continue to decline, yes. The focus will be on bikes with even longer range, even smarter features and — very importantly — even greater safety. ABS will eventually become standard in bicycles too. Smart interfaces and connectivity will also play a key role. And I strongly suspect that even bike enthusiasts will increasingly turn to complete bikes in the future.

Thank you for the conversation, Dr. Frings.