By Dirk Sorenson
Sorenson is the executive director and industry analyst for sports at The NPD Group.
The cycling industry is emerging from the swell of unprecedented growth. It closed 2021 with $8.3 billion in U.S. sales, and although revenue declined by 4%, compared to 2020, this figure is still 45% higher than it was in 2019.
Retailers and manufacturers must now set their sights on four critical initiatives that will lead the industry to another banner year in 2022: inventory management, optimizing prices, investing in key categories, and finding additional profit via add-on sales.
1. Managing Inventory Surges
One of the largest bike categories, the electric bike (e-bike) business, grew 39% year over year in 2021, reaching $770 million. To put these numbers in perspective, e-bike sales revenue surpassed road bikes, which fell to $599 million. Mountain bikes and children's bikes each generated more than $1 billion in 2021. However, both categories experienced single-digit sales declines.
It is important to note that some of these sales declines had little to do with demand, and more to do with inventory. Some bike categories simply did not have enough inventory available during critical sales months. Effective inventory management for key bike categories will continue to be a critical area of focus, as the industry navigates its way through the rest of this year.
NPD Retail Tracking Service data, which includes inventory data for independent bike shops, indicates that the industry has enough inventory available to sustain growth in 2022. Some product categories, like front-suspension mountain bikes, are stocked at twice the level that they were in December 2021. Road bikes is the one exception since inventory levels were 9% lower in December 2021 than they were in 2020.
The inventory buildup currently taking place in the cycling market is trending in a way that some economists have described as a bullwhip — initial runs on supply leading to depletion, which leads to an exuberance in re-stocking, which leads to too much inventory.
2. Optimizing Prices
The net effects of the bullwhip, noted above, bring the industry to its second opportunity: pricing. In 2021, retail prices grew by an average of 17% across all bike categories. Given its particular inventory challenges, road bikes posted a 29% average price increase in the calendar year. This increase was certainly expected because lower supply typically results in higher prices.
With a healthy supply of products in the marketplace, and a concurrent consumer interest in cycling as an activity, the industry is poised to promote smartly, strive for optimal prices that maximize profit for both suppliers and retailers, and work to maintain a clean dealer inventory in the future.
3. Trending Categories
Four categories that will benefit from continued investment and focus are e-bikes, gravel bikes, full suspension mountain bikes, and trainers and rollers.
For e-bikes, a category which has posted year-over-year growth since the day I walked through the doors of NPD nearly seven years ago, investment opportunities abound. New designs, lowered component prices and associated lower average selling prices, and a growing and educated consumer base all point to a bike category that will continue to have success.
Gravel and mountain bike designs tap into a different consumer need and may point to a general design philosophy the industry should embrace. Race- or function-specific designs are falling out of favor, as consumers are instead purchasing more versatile bikes they can ride anywhere, and on any surface.
Trainers and rollers provide a different type of opportunity. Consumers have shown less willingness to engage in gym-based activities but are noting in NPD consumer surveys that they do want to be healthier.
Home fitness equipment, including bike trainers and rollers, now provide a more immersive experience in the comfort of our homes, and the convergence of virtual reality and fitness is just around the corner.
These trends all point to long-term growth.
4. Add-on Sales
Finally, NPD data suggests that there is more sales opportunity to be gained by selling add-on products including helmets, bike locks and lights, and other accessories. In 2021, bicycle helmet sales decreased by 12% in revenue— a decline that is three-times greater than the total industry. This signals an opportunity that retailers should be selling helmets hand-in-hand with bikes, which is not currently happening.
As cyclists begin to use bikes once again for commuting purposes, we can anticipate growth in the accessories side of the market.
