BY MATT WIEBE
PHILADELPHIA, PA—The good news for bicycle suppliers is that bikes sold better than cars last year. The bad news is that when gas crossed the $4 a gallon threshold in June, bike sales tanked.
According to the Bicycle Product Suppliers Association’s December report, members saw sales drop 13 percent in the fourth quarter of last year.
The numbers for the full year were better. Sales grew 2 percent for the full year compared with 2007, though the number of bicycles shipped to bike dealers and sporting goods stores dropped 6 percent.
These results may not have been what bike suppliers hoped for given $4 gas and a growing green consciousness, but at least they fared better than other suppliers. The auto industry saw unit shipments tumble 24 percent to 13 million units last year, down from about a 17-million-unit annual average.
“We were going great into June, but when high gas prices hit we saw our sales immediately die off. Wall Street is not an issue for my customers, but any extra they pay at the pump skims off any money they have for play,” said David Turner, owner of Turner Bikes.
Turner does not report sales numbers to the BPSA, however its sales experience is reflected in the BPSA report.
BPSA members sold 296,000 units last June, a 13 percent jump over 2007, but shipments dropped in July and stayed down for the remainder of the year.
Expensive gas may not have increased specialty retail’s overall sales, but it did realign the market. Pavement bikes picked up market share; now they make up 64 percent of the overall market. And that doesn’t include entry-level front-suspension bikes bought for commuting purposes.
Market Detail. Many suppliers were short on bikes during the first quarter. In addition to rapidly rising raw material prices and scarcity, China’s Blue Sky initiative shuttered polluting steel mills to allow Beijing Olympians a chance to breath.
Couple scarce raw materials with a strong bike demand from Europe and it’s not surprising Asian suppliers could not keep up with market demand.
“It was a very unusual year starting off with poor supply in the first quarter, which slowed shipments enough that we never caught up,” said Chris Speyer, chairman of the BPSA’s statistics committee and vice president of product and marketing for Raleigh.
Supplier sales were well under 2007’s numbers until May, when they began to move ahead and continued to gain ground well into June. But in July sales slowed back to 2007 levels. Apart from a small bump in September, sales continued to lag behind 2007.
The quick downturn in fourth quarter sales caught suppliers flatfooted, and inventory climbed to historic levels in December. The only other time suppliers were saddled with more bikes at year’s end was at the end of the mountain bike boom in 1995.
Suppliers had 58 percent more dollar inventory on hand and total units were up 53 percent. Heading into January BPSA members had 746,578 units in warehouses, about a four-month supply if 2009 tracks close to 2008 in sales.
“People are slowing down their orders. The big increase in juvenile inventory is linked to slow fall and holiday sales. I expect suppliers brought in bikes expecting a repeat of the 2007 holiday season,” Speyer said.
“Inventory is a significant problem. Either you run with what you have until you have sold down, or you take an aggressive pricing position to move inventory out. Neither suggests a good economic situation for suppliers,” Speyer added.
Category Breakdown. Hybrid sales took off last year. The category saw a 7 percent gain, by far the greatest success story. The gain supports a market shift toward utility bikes, further corroborated by strong sales of lights, fenders and racks.
Road bikes picked up 1 percent in market share, though suppliers are noticing a shift in buying habits.
Pat Cunnane, president of Advanced Sports, Inc., said that the company’s brands, which include Fuji, Kestrel, SE and Breezer, had an extremely good year. But he noted a few changes taking place in the market.
“The very high end of the road market has softened considerably. However, the value price points are still selling well,” Cunnane said.
If the return to welded aluminum road bikes the last few months is anything to go by, this year the mantra may be show me your best value road bike.
The largest sales drop last year was in full-suspension bikes, marking the category’s first loss in five years. Sales fell 17 percent and unit shipments were off 19 percent. And suppliers are sitting on 50 percent more inventory than in 2007.
Juvenile sales as a group also saw big losses. Suppliers speculate this is an easy purchase for parents to skip in favor of cheaper entertainment options.
Surprisingly, cruisers and comfort bikes lost unit sales last year when hybrids picked up large sales gains.