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Vosper: Nearly half of US bike shops don't carry any of the Big Four brands

Published October 16, 2023

According to September data from Georger Data Services, some 45% of the approximately 7,000 U.S. bike shops do not carry any of the industry's four biggest brands — Trek, Specialized, Giant or the Pon group (Cannondale, Santa Cruz, Cervélo, et al).

It's an interesting fact, and one that calls into question the supposed hegemony of the group I like call The Quadrumvirate. After all, if they're so dominant, why don't they have greater market penetration, which is to say, why aren't those four brands in a higher percentage of dealers — a combined 70 or 80 percent, as is typical in other mature industries?

To find out, I spent time talking with non-aligned business owners and learned some intriguing things about how they keep their businesses profitable during some of the toughest financial times since the bike boom went bust nearly 50 years ago.

Keep it small, keep it lean

"Brands want an opening order for 20-30 bikes and there's no way I can do that. I can't see why there's a benefit for me as a shop to stock bikes my customers can buy consumer direct." 
—Tom Martin, Tomcat Bikes

Chris Kelly owns Topanga Creek Outpost, a high-end but small (less than a 1,000 square feet) business. The operation is housed in a literal cabin close to the bike trails of Topanga Canyon above Malibu in Southern California.

"Business is a little sluggish," Kelly admits, "but overall, we're plugging away." His bike brands include Surly, Pivot, BMC and Esker, although, "Since the pandemic, I've wound down the other brands and concentrate mostly on Surly."

One of the secrets of Kelly's success is keeping inventory lean, a 180° shift from the large amounts of product (and the associated risk) assumed by most aligned dealers.

"Inventory is back down to what I want it to be," he says. "We've always done a just-in-time inventory and this helps me push back against the larger brands. Given the cost of retail space here, there's no mathematical way I could hold as much product as they want, and I don't see how other shops [in affluent areas] can afford to do that, either. He concludes, "But that's the Big Four's choice. They squeezed themselves out, it wasn't the other way around."

Tom Martin, owner of Tomcat Bikes in Portland, Oregon, agrees. His operation is even smaller than Kelly's. "I have a 300-square-foot shop and I mostly sell used bikes and quietly make money," he says. "Most of my money comes from doing service on D2C bikes: Rad Power, Aventon, Priority, Radio Flyer, pretty much anything from Beeline. Most shops in Portland won't work on bikes they don't sell, whereas I will. There's a lot of money to be made in D2C stuff."

Martin continues, "The other story is, the Big Four want us to be stocking dealers and I just don't have the space or the capital. Brands want an opening order for 20-30 bikes and there's no way I can do that. I can't see why there's a benefit for me as a shop to stock bikes my customers can buy consumer direct. But when they do, I charge them for the assembly, and that's where the money is. Business is really good. Locally, six shops within a mile of me have gone out of business in the past year, but I had to hire people in September and October when other shops were letting staff go."

But not all successful non-aligned dealers are operating out of holes in the wall. Ryan Barber owns a more traditional business, the 5,000-square-foot Kzoo Swift in Kalamazoo, MI. He sells Surly, Reid and Denago bikes currently, although in the past he's carried SE, Fuji and Bianchi.

"I've always chosen not to do the top five," he says. "Prices on new bikes across the board have gone up 25% or more in the past few years. And with brands discounting so much product, they really screw the dealer. But service doesn't change. We also do rentals and lots of used bikes. In 2013 when I started, I was one of ten bike shops in the area; now I'm one of two."

Barber also credits his shop's attitude in getting and keeping customers. He says, "Given today's economy, people are turned off by name brands [and prices] that seem overinflated. Customers come in and complain about other shops being 'Spandex Branded.' They're turned off by the sticker prices and eventually make it down here. We do a lot of used bikes; 70% used, 30% new. With used bikes, you're looking at 40-60% margins and we throw in after-sale service and a lifetime discount on tune-ups."

Know your limits

"In 2019, I decided to quit selling bicycles altogether. When we stopped selling bikes, there was no loss of income." — Tom Michowski, Bike Garage, Port Angeles, Wash.

Some shops have gotten out of the low-margin/high-inventory bicycle trap entirely. Tom Michowski owns Bike Garage, a sub-thousand-foot storefront in Port Angeles, Washington.

"Back in 2019, I decided to quit selling bicycles altogether," he recalls. "When e-bikes took off, I realized I didn't have to concentrate on selling bikes at all, that there was much more money to be made in fixing them. When we stopped selling bikes, there was no loss of income.

"The repair business in our little town is pretty good; we average just shy of a thousand dollars a day in income. One of the services I offer is assembly and adjustment of bikes bought online. The customer has the bike shipped to me, I do the service and they pay me and ride off a happy camper."

Rounding out the non-aligned dealers I spoke with, Doug Davis is the owner of Bicycle Evolution in Dallas [disclaimer: Bicycle Evolution is a former client]. The dealership is just under 7,000 square feet, making it the largest operation I talked to in connection with this piece.

"Reid is a big brand for us, says Davis, "and Litespeed, and we've had Fuji, Batch, GT and other brands. At one time we had Bianchi, but we ended up parting ways over the buy-in agreement. Most of the people walking in my door have what I call Covid bikes, and we're repairing them and cleaning them up and that's about it, but nobody's buying new bikes."

The shop also sells a mix of nontraditional bicycles: recumbents mostly, but also trikes and handcycles. "The people wanting those bikes are the same trickle we had before Covid," Davis says.

Things are tough in the Dallas market, he adds. "We've had two of the largest dealers in our area go out of business in the past few years and a bunch of the smaller ones." Yet Bicycle Evolution remains.

One way Davis has kept afloat is by not incurring debt, which is to say, not carrying excess stock. In addition to parting ways with Bianchi over stocking requirements, "I thinned out my inventory and we have one or two of any of the higher-selling products and sometimes just one of the lower sellers," he says. "Some things I've decided to run out of, shoes for instance. But I couldn't do that with one of the big four brands with their minimum order quantities. By not getting into debt, we've been able to keep all of our people [while other shops in town are letting theirs go]. We've had to have heavy management control in order to survive."

Play by your rules, not theirs

As we've seen over the past decade of consistent product oversupply, excess stock is an integral part of the Quadrumvirate business strategy.

To answer the question I put forth at the top of this piece about why the Quadrumvirate brands aren't in an overwhelming percentage of US bike shops, the first selector seems to be shop size: Quadrumvirate brands just aren't set up to deal with small shops and their limited floor space. Remember, the Bike 3.0 and 4.0 strategies are both based on locking competing brands out dealers' showrooms, and to do that, the dominant brands need to keep dealers filled up with inventory so there's no room for other suppliers.

The Quad brands' whole business model is based on turning a certain number of units per location per year, and the population of smaller, boutique-style bike shops just doesn't fit into that model.

Of course there's more to the picture than just shop size. Every dealer I spoke to, regardless of size, has built their own business model, one that works for them and revolves around keeping inventories lean and avoiding the crippling financial burden that comes with being stuck with excess stock.

But as we've seen over the past decade (excluding the COVID years) of consistent product oversupply, excess stock is an integral part of the Quadrumvirate business strategy. That's the real reason 45% of retailers don't carry any of the Big Four brands. And it may be one reason why those shops are surviving and even prospering while other, larger competitors are being driven out of business.

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