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Product Shortages Plague Bike Shops

Published July 22, 2008

BY NICOLE FORMOSA

PALO ALTO, CA—As a longtime retailer, Palo Alto Bicycles general manager Jeff Selzer knows to expect leaner product availability during the summer as suppliers phase out current model year products and start delivering new versions.

But this summer, supplies are slimmer than usual, and not only with complete bikes.

“Since the beginning of March to the beginning of June, I have probably lost easily somewhere between $8,000 and $10,000 in shoe sales because I don’t have them and can’t get them,” Selzer said.

Because business is booming, the shortages haven’t taken a bite out of profits. Last year, Palo Alto Bicycles had its best year in 78 years of business and is on track to match that success this year.

But, it’s not easy. Selzer’s buyer is doing three times the work sourcing and invoicing because he’s had to order from additional vendors to fill in the gaps. Also, Selzer hasn’t been able to stock a consistent line, especially with clothing, one of his shop’s primary goals.

“I’m chasing my tail and it’s an incredible challenge for us,” Selzer said.

Retailers across the country are grappling with short supplies at a time when high gas prices and media buzz about commuting by bike is driving more consumers to local shops.

In Portland, Oregon, River City Bicycles owner David Guettler has been out of some of his most popular commuter-style bikes for weeks, including the Specialized Globe and several Gary Fisher models.

His sales staff has been making do with the bikes they do have in stock. “You can’t talk about stuff you don’t have. You may know they’d be perfectly suited for another bike, but it’s summertime, you have to scramble and come up with something that works,” Guettler said.

Elysa Walk, general manager of Giant Bicycles, acknowledges that supplies are limited this year, particularly of “hot” models like the Tran Send lifestyle bikes, Trance X series mountain bikes and FCR flat bar road bikes.

“We did not anticipate just how robust the market is this year in certain hot segments,” Walk said. “We’ve increased production and we sell every bike we get, but the cooler segments sit longer than they have in years past.”

This, along with anticipated price increases for the 2009 bikes, has caused dealers to hoard price-point bikes, added Patrick VanHorn, corporate communications manager for Giant.

“We have dealers buying hundreds of bikes now to stock up for the remainder of the year,” he said.

Chris Speyer, vice president of product and marketing for Raleigh America and a member of the BPSA board, said the biggest challenge most suppliers are facing is longer lead times out of Asia, which caused lower inventories in March, April and May.

However, inventory levels should rise in June and July as the backlogged bikes arrive late, Speyer said.

Another issue is the sheer demand for 700c performance/hybrid-style bikes. “It’s just beyond the trends that any of us could see, and that’s a difficult thing to [account for] in the forecasting,” Speyer said.

Even if suppliers attempt to order more, it would take at least five months to receive the shipment from Asia, he added.

Some retailers, like Guettler, think the supply bind they find themselves in every summer could be avoided if suppliers launched new models later in the year.

While that isn’t likely to change industry-wide, some suppliers have pushed back introductions. Raleigh will release its 2009 bikes in August instead of June due to the inventory challenges it’s had this year, Speyer said. Since 2008 models have taken so long to come in, Raleigh wants to make sure they sell through before introducing new bikes.

Speyer said the later introduction had originally been an adjustment made just for this season, but the company has heard some positive feedback from dealers and may consider sticking with it.

Haro Bikes got rid of model years in 2006 and now operates on a dual launch system to stay innovative and to eliminate shortages, said Joe Hawk, chief operating officer of Haro.

“In an industry that doesn’t have a lot of gross margin to begin with on the bike side, there’s little room for error. We felt it was necessary to eliminate that piece to try to recreate our product line and to stabilize it over time,” Hawk said.

Haro introduces new products in the fall, then follows up in the spring with simple changes, like color or graphics updates. It’s more work producing two catalogs, and dealers can get confused on which products they’re getting when, but so far, the program has gone well. Sales in April, May and June were up 50 percent in dollars and 25 to 30 percent in units.

Giant ran a dual launch for four seasons—from spring 2004 to spring 2007—but switched back to a single release this year, largely due to dealer feedback, Giant’s VanHorn said.

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