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Vosper: What’s new — and not so new — about Bike 4.0

Published September 11, 2023

Way back in May of 2022, I wrote a piece about the three “ages” of the U.S. bicycle market since World War 2, which I labeled Bike 1.0, Bike 2.0, and Bike 3.0, respectively. To review:

  • Bike 1.0, roughly 1950 – 1975, when the specialty retail market was dominated by a single brand, Schwinn, creating an era of relative stability at both the supplier and retailer levels.
  • Bike 2.0, extending from the end of the bike boom and the introduction of the mountain bike through the late 1990s and early 2000s. This period was governed by the phenomenon of Perfect Competition, where no particular brand or brands could accrue enough market share or competitive advantage to gain control of the market. 
  • Bike 3.0, starting near the turn of the current millennium. That era featured a few dominant players, a group of four companies: Trek, Specialized, Giant and the Pon brands (formerly just Cannondale, but now with the addition of Santa Cruz, Cervélo, and others). I labeled these four brands The Quadrumvirate, and they each tried — and failed — to overcome the forces of Perfect Competition.

    Part of the Quadrumvirate’s strategy behind Bike 3.0 was to control key retailers in each market by tying them as closely to a single brand as possible, locking competing brands out of those dealers. The strategy met with limited success as many of the largest dealers ended up representing more than one Quadrumvirate brand. 

Then, about seven months ago, I wrote that Bike 4.0 had arrived. The new dynamic differed from the 3.0 version in four fundamental ways: 

  • Dilution of the IBD and the proliferation of alternate retailing models; specifically, direct-to-consumer sales by brands like Canyon and many e-bike labels.
  • The traditional sales channel is replaced by an omnichannel sales "ecosystem" where buyers can purchase bikes through any channel they choose.
  • Complementary to the previous two points, we now have direct sales to consumers by traditional bike suppliers (either through D2C or Click & Collect dealer fulfillment), and 
  • Vertical integration of suppliers and retailers (bike brands buying bike shops) by at least some of the largest industry players, as we’ve seen with Trek, Specialized and the Pon group.

Welcome to Bike 4.0

Instead of highlighting the very real added value bike shops bring to traditional brands, the Quadrumvirate has striven to make the dealer as invisible — and even irrelevant — as possible. 

In some ways, Bike 4.0 carries on the 3.0 dynamic. There are relatively few large brands trying to escape the forces of Perfect Competition — the same four players, in fact, as in Bike 3.0 — and many dozens of smaller brands trying to stay afloat and turn a profit. What’s different about Bike 4.0 is not the fish in the ocean, but the water in which they swim.

The biggest single change is that traditional bike shop brands are now in direct competition with D2C brands (see dilution of the IBD and the omnichannel sales "ecosystem" previous). That change is reflected both in lower product pricing (pandemic-era “greedflation” prices notwithstanding) and in reduced margins for both suppliers and dealers. 

What I find most remarkable about this is that instead of highlighting the very real added value bike shops bring to traditional brands in the form of service before and after the sale, the Quadrumvirate has striven to make the dealer as invisible — and even irrelevant — as possible. To hear the brands’ websites tell it, a bike shop is merely a pick-up point for their assembled products, and nothing more than this. By failing to point out this critical point of differentiation, bike brands are playing the sales game according to the D2C brands’ rules. To put it bluntly, this is not a winning strategy in any game, anytime, anywhere … and it never has been.  

“Independent” bike shops that aren’t

Taken together, company-owned stores now represent more than a tenth of all bike shops selling the Trek and Specialized brands.

At the same time as they seek to minimize the role of the dealer to the bike-buying public, three of the Quadrumvirate brands — Trek, Specialized and, to a lesser extent, Pon — are simultaneously stepping up their retail involvement by buying up bike shops in key markets to ensure their brands are represented there as they might prefer. 

Industry insiders who claim to know such things put the total number of company-owned stores at more than 300 locations nationwide, with the lion’s share of these belonging to Trek. Taken as a group, Trek’s flotilla of company-owned stores constitutes the largest chain of single-owner bike shops in American history. Taken together, company-owned stores now represent more than a tenth of all retail businesses selling the Trek and Specialized brands … a very significant number, especially considering those shops tend to be located in the country’s largest and most strategically important markets. 

For all our immediate and wholly justified concerns about the current high inventory/low sales quandary, that situation will resolve itself over time. (A longer time than we might have hoped, perhaps, but some finite amount of time nonetheless.) But the harsh realities of Bike 4.0 will be with us for years to come, including the omnichannel sales ecosystem and the accompanying erosion of the traditional independent dealer base. And the sooner we accept those realities and find skillful ways to deal with them, the better off we’ll all be.

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