One of the interesting things about our quirky little industry is that the only things that change year to year — and even decade to decade — are its products. The actual mechanics of how those products get from factory to supplier to dealer and ultimately, to the bike-riding public, have remained essentially unchanged since the end of the Bike Boom in the early '70s and the rise of the Bike 2.0 era.
Initially modeled on the old Schwinn distribution network, the Bike 2.0 version was rooted in the industry’s migration to Asian manufacturers, the rise of the current dominant Quadumvirate of the Trek, Specialized, Giant and Cannondale brands, and the resulting increased lead times that resulted from having bikes designed in the US but manufactured literally half a world away.
The chain looked something like this: US-based brands sourced bicycle production in Japanese, and later Taiwanese, Chinese and South East Asian countries, which offered the hard-to-beat combination of much better quality with much lower prices compared to traditional domestic or European sources (although some European brands are currently challenging this model with near-shoring initiatives). Brands paid for those bikes with letters of credit drawn largely on U.S. banks, with occasional assistance from “business-friendly” Asian governments (more about that another time, maybe) and shipped them to the States via ocean freight.
On arrival stateside, bikes were transferred to suppliers’ domestic warehouses and from there to a network of participating — or “authorized” — dealers, who had pre-ordered them on extended credit terms. During that time, retailers were expected to sell the bikes to their customers and then apply the proceeds to paying their suppliers. If they were particularly successful in this, dealers could take advantage of anticipation discounts to boost their realized margins. Within the constraints of perfect competition, business was generally good. All parties in the supply chain made at least a modest profit on the result, especially the banks who financed all that credit in the first place.
The formula worked like a charm, until it didn’t.
Which brings us to the post-Covid reality of Bike 4.0. Dealers’ margins — both nominal and realized — are at all-time lows, virtually all bike brands compete directly with their retailers via D2C and click & collect operations, and, with a few notable regional exceptions, store traffic since 2003 has been in the dumps. Yet we’re still using the same basic Rube Goldberg supply chain system we’ve had in place for 50 years. It’s long, it’s clumsy, it’s expensive to maintain, and it’s increasingly outdated in the face of market reality.
Fortunately, we’re finally starting to see the first glimmers of potential changes to much or part of traditional supply chain mechanics. These ideas may offer some relief for dealers and suppliers alike. At this point these they’re still in their infancy, but they may be a sign of things yet to come. And there will be more.
Let’s have a look at two of them.
Bob Lickton’s “slotting” model
“This [proposal] may seem radical — but the current economic and market conditions call for changes in inventory turnover and merchandising.” —Jay Townley, Human Powered Solutions
No one has ever accused retailer Bob Lickton of thinking small. His family-owned retail operation, Lickton Cycle Corporation, has been in the Chicago area since 1929. Lickton himself has been active in the bike biz for more than 60 years, which makes him a veteran going all the way back to the Bike 1.0 era when he was a Schwinn dealer. More about this in a minute.
In 1979s, Lickton started one of the industry’s first catalog-driven mail order bike parts companies, Lickton's Cycle City. In 1995, he invented the bicycle shipping niche with his AirCaddy transport boxes and ShipBikes.com shipping service. And just last month (February), he proposed a market-disrupting change to the industry supply chain, with his BRAIN guest editorial, “It's time for bike companies to pay you to sell their bikes.”
In its broadest outlines, Lickton’s editorial states, “You must look at the big box retailers like Best Buy, Walmart and Target to see the solution to this terrible financial and inventory problem. They call it slotting, which means the manufacturer pays a fee to put their toaster or flat-screen TV in your store for a monthly or yearly fee. The manufacturer provides point of sales supplies or video displays and pays you a fee for the floor space (slot), which is deducted from your purchases or paid up front. As an agent for this company the dealer carries a small inventory for people to touch or buy.” The dealer would slot one or more of the manufacturer's bikes which they pay for in 30 to 90 days, Lickton told me in an email exchange. Moreover, “This system will work for the big companies and great for innovative or start-up manufacturers with handicap bikes for kids, special type electric bikes, cargo bikes, tri bikes and even tandems.”
If there is a price reduction by a manufacturer online, Lickton said, this price must be the same for the bicycle shop and any cost difference must be credited for bikes they have already purchased. If not, he emphasized, “the relationship would be broken.”
Finally, all inventory held by the supplier must be transparent and available to retailers, with nothing held back, as some brands currently do. “Independent bicycle dealers cannot spend time showing and explaining a bicycle and then the customer goes on line and buys it from the dealer's manufacturer,” Lickton insisted. “That is totally nuts. This is why manufacturers need to pay for the slot (space) in the dealer's store, just like the big box stores do.”
My mentor and colleague Jay Townley has this to say about the proposal in his current Human Powered Solutions newsletter (scroll way down to find the article or search the page for the word “Lickton”): “This may seem radical — but the current economic and market conditions call for changes in inventory turnover and merchandising.”
As BRAIN editorials go, Lickton’s is outrageous in concept, absolutely disruptive in its potential impact on the entire specialty retail channel, and fairly short on details.
I reached out to him to find out more.
“The way we’ve inventoried bikes has changed,” Lickton told me in a long, rambling, rapid-fire phone conversation. “Back in the '70s [during the bike boom], Schwinn told us we had to take 300 to 500 bikes at a time when they were finally available, so we warehoused them at $5 a month. The best we ever sold of a preseason order was eight out of 10 before they came due.
"But you can’t do that nowadays. When you get a bike that’s, $3,000, $5,000 and it’s just sitting, you go crazy. And that has to change. My dealer friends say that in 2025, if you bought 10 preseason bikes you were likely to sell six or seven before they needed to be paid. And of course, the 2025 bikes are far more expensive.”
In its most basic form, the mechanics of Lickton’s proposal go like this: Bike shops slot one or several of each model the brand offers for display purposes, suppliers pay them for that privilege, and actual sales of those models are shipped by the supplier to the shop (for assembly) or direct to consumer, and the dealer receives (an unspecified) piece of profit on each bike sold.
That’s the bare-bones outline of the proposal. But the larger-scale implications of the process are downright earth shaking. For instance, in the long term, dealers’ store footprints will have to get smaller to reduce operating expenses, since they’re no longer displaying (much less inventorying) so much product. Since suppliers will now be carrying the lion’s share of the inventory, they will have to open additional warehouse/shipping locations so dealers can receive bikes 1–2 days from order date (Lickton suggests that instead of building more warehouses, suppliers simply lease bonded warehouse space for this purpose).
For myself as an industry observer, I don’t believe Lickton’s plan will come to fruition anytime soon, and for one overriding reason: The current supply chain ends up placing the huge majority of inventory risk squarely on dealers’ shoulders. (Of course suppliers carry a financial risk, on their own inventory too, not to mention the financial risk that at least some dealers might not pay them. But that’s a whole different order of exposure).
The Lickton proposal would transfer almost all that risk to suppliers. And there’s no way suppliers are going to willingly accept it. The idea might work for boutique brands, but there’s no way the Quadrumvirate or even the smaller bike brands are going to go along with it. An exception to this will be addressed in the next section of this piece.
I’ll leave the last word to Bob Lickton, who said, “The end game is, there’s no way we can continue on the current basis. The system has to change. I don’t see how the independent bike store can handle this level of inventory. I think it’s coming to a crunch; these things [as they are now] are not sustainable. It’s not just slotting: We need an overhaul of the entire channel model. All the brands that sell direct, like Canyon, would like to have representation in dealers’ stores. And this is the way they could do it.”
Intense/QBP Frame First initiative
“It's not just a different way to sell bikes, but a completely different way for dealers to operate. It’s a highly consultative sales process with the dealer at the center of everything.” —Mike Carr, Intense VP of sales & marketing
Announced in this press release last week, Intense Cycles and Quality Bicycle Products have teamed up to offer dealers the ability to build up Intense frames with a curated selection of high-end parts, sourced by the dealer via a special section of QBP’s website. But don’t call it another custom build program. According to Intense VP of sales and marketing Mike Carr, the preferred term is “optimized” or “personalized.”
According to the joint press release, the Frame First process works like this: The dealer helps their customer choose from among the Intense frames offering. If not in the dealer’s inventory, the frame is ordered from the Intense B2B site and is shipped to the dealer. At the same time, the dealer consults with the customer and orders a customizable build kit from the QBP website, which is shipped to the dealer from that company’s network of U.S. distribution centers. When the parts arrive, the dealer builds the bike, capturing the assembly profitability and delivering a unique and customized bike for the rider. The press release calls this “a premium purchase experience at a value price.”
So how is this initiative different from other brands’ custom build programs, and why am I writing about it in a piece about disrupting the industry’s supply chain? Two reasons. The first is that the entire initiative is dealer-centric from the get-go. The second is that the process eliminates the role of the assembly factory and essentially turns (a portion of ) those costs into profit for the retailer, who stands to make money on the frame sale, the parts kit, and the bike buildup. As Carr emphasizes, the program “is designed to empower IBDs and disrupt the broken industry model."
“We believe that this will still produce a bike that is cost-competitive with other brands’ models,” he said. “Also, for tariff reasons, we’ll get some savings by bringing in frames and parts rather than assembled bikes, and this will help us keep pricing competitive.”
The net-net on all of this is “Not just a different way to sell bikes, but a completely different way for dealers to operate. It’s a highly consultative sales process with the dealer at the center of everything, delivering significant margin with little to no working capital burden,” Carr said.
The program will initially be available on Intense’s M1 Tracer, Primer, and “a new platform I can’t talk about yet,” Carr said, “as well as the brand’s dirt jump bike, all starting in model year 2026 at the end of March. We’ll also have Frame First on new e-bike models we’ll be introducing later this year,” he added.
“Because of the collaboration with our product managers and QBP's category business managers,” Carr said, “this program allows the dealer and the rider to select exactly the right products and they’re absolutely going to be compatible. Historically, other customization programs have been aimed at the very highest-end customers, while Intense now has it available throughout the line, and it’s the primary focus of the Intense offering. IBD profitability is central to the purchase journey. We’re even doing time studies showing how long it will take to do the various assemblies, which we will share with our retailers.”
I also reached out to QBP VP of sales Bill Schouman. “Mike and I had worked together previously at Specialized,” he told me in a phone conversation, “and we’ve stayed in touch. As the industry has evolved coming out of the pandemic, we agreed there are some real problems that need to be resolved. If you think about the sheer amount of discounting going on, it’s just not sustainable for anyone in the industry. So Mike and I started thinking about ways we could change the overall business model and offer an alternative.
“Instead of leaving the rider or the dealer to fend for themselves,” he continued, “we could combine our strengths to make it easier for dealer to do business in a way that they can make a sustainable margin. Now the dealer is able to offer a concierge experience that the high-end customer can’t get from any other brand.”
Schouman also noted that QBP may be able to scale and extend the curated build kit model to other brands, but there is a tremendous amount of engagement required to build a program like this successfully. “Conservatively, it’s a six-month process to get everything aligned,” he said, “both from the brand’s product manager to optimize the build list, to us [QBP] making sure we have the right parts available on a timely basis.”
The Frame First initiative is available through the Intense dealer network, Carr said, but also to any QBP customer interested in participating … which is yet another disruption of the traditional model.
Carr hastened to point out, though, that existing dealers will get preferred pricing and that “We reserve the right to accept or deny any prospective dealer, and we certainly have no intention of abusing our dealer network.”
As foreshadowed earlier, while they’re based on very different mechanisms, both Lickton’s and Intense/QBP’s initiatives would work by transferring (most) inventory risk from retailers to suppliers. That alone is a huge change from our current, half-century-old distribution model. But each concept achieves this result by entirely different means.
Moreover, these are just the first two attempts we’ve seen. As the Bike 4.0 model continues to evolve and if the market continues to be as challenging as it has been in recent years, I predict we’ll be seeing plenty more. And in the long view, that’s a good thing if our quirky little industry is to survive and, ultimately, to rebuild itself.
