WATERLOO, Wis. (BRAIN) — Trek president John Burke says he and his company have been through several recessions and other crises, but nothing is comparable to the COVID-19 pandemic. That leaves him hesitant to make predictions about the coming months and years.
In a BRAIN interview Wednesday, Burke said we'll all know a lot more by the end of June, when the worst of the pandemic has passed in the U.S. But Burke said he's convinced the bike industry's best days are ahead because the pandemic has shown that bikes are needed more than ever.
The interview has been edited for length and clarity.
Good morning, John. Are you working at home today?
"No, I'm at the office. There are two people at the office and I'm one of the two."
Just two people in the entire building?
"Well actually we are running manufacturing here, so the manufacturing crew is here and then just a couple people in the office."
I'm curious about what you are seeing from your perspective about the state of U.S. bike retail right now. It seems like there are a lot of mixed reports.
"This is the biggest crisis that I've seen. There are some stores that are open in areas where the government deemed bikes shops to be essential and there are other areas where stores are closed where the government has told people to close so it's kind of a mixed bag.
"At the stores that are open it's not business as usual. We live in a different world today and we're dealing with that at retail. We're seeing some stores just open for service while other people are having good sales."
How many Trek-owned stores are operating, versus closed?
"I would say 80% of them are open and I would say of those, 30% are running service only according to what the government wants to see, and then 50% are running the restaurant play (with a host and one-to-one sales service). Nobody is running (in a traditional way)."
Is that about the same for independent Trek dealers?
"I'd bet it's really close to that."
What are you seeing internationally? I imagine the situation is very different in Europe.
"Europe is way worse. In Europe you are closed down in France, Spain, Italy. Really limited in what you can do in Germany. It's a different game in Europe right now."
Even with some shops operating in some capacity, the bottom line has to be that the industry is taking a big hit. Would you be willing to share an estimate of how big?
"I see our numbers and I think that the bike business was really good through the middle of March then we woke up to a different world. I think that the industry is going to be down significantly in April and then significantly again in May. If I had to guess I'd say the industry is going to be down 40% in April. Maybe more. Then, May I think will be better than April but not by a lot. Then hopefully June ... we have different plans around here but our belief is that by June you're going to have huge changes at retail just in the way you interact with customers. But in our plan, bike shops will be open by June and doing business. It won't be back to normal, but people will be doing business.
"If I had to guess I'd say the industry is going to be down 40% in April. Maybe more. Then, May I think will be better than April but not by a lot."
"Before the government came in and told people to stay at home the bike business was super strong, then all of a sudden the stay-at-home orders came out and there was actually a mini bike boom. And we also know anecdotally from everyone that more and more people are riding bikes. And is that something that was the flavor of the month or is that something that, as time passes, is going to stay? Is that going to be one of the changes? And for a variety of reasons I hope that it is one of the changes: that Americans fall in love with the bicycle again.
"We've been saying for a long time that the bicycle is a simple solution to complex problems. This is a complex problem, this is a global pandemic and the bicycle isn't going to solve all of it. But in its own small way ... they are predicting that 50% of Americans by 2030 are going to be obese. Americans need to be more active and the bicycle can play a role there. Take a look at public transit and the crowded buses and trains and the bicycle is a simple solution there. Look at people not going to sporting events with 50,000 people and what can they do with their time? What can they do with family time? There's nothing better than the bicycle. The big question for the industry — and I have a meeting right after this one on this very topic — is: What's going to happen as we exit this, from the standpoint of the bicycle. We're going to find out."
From a business point of view, this recent interest in bikes might go a long way toward offsetting the global economic situation that's going to follow this.
"That's part of the big question as we come out of this health pandemic and we go into what's left of the economy. Does the consumer have money in their pocket and are they going to spend it on bicycles? You're going to be looking at this massive unemployment rate ... there's a new world."
What do you think the industry can do to help keep bikes part of that new world?
"Tip O'Neill said all politics is local. I really believe that if you have great leadership at a local bike shop and you can be a leader in the community you are going to see more and more people get on bikes. I think the biggest thing that bike shops can do is reintroduce customers to bicycles and tell people how and where can they ride and that bicycles are a simple solution. And you already see people doing that, so that's one plan.
"Another plan is making sure you have a safe area to shop in for your customer and you have a really safe environment for your employees to work in.
"And then the third thing is, and we see this all the time, is there's a big difference in the results from people who run a good business and people who don't. And coming out of the pandemic and going into a super-difficult economic situation is going to put a premium on who can operate the business."
Do you see Trek coming out of this with more company-owned stores?
"That's one of those unknown things. We are going to see what happens. We've never seen a time like this. If you told me, 'we have a recession,' I could say, 'I've been here a long time and I've seen three or four of them and I can tell you what's going to happen.' But I can't tell you what's going to happen now."
Do you see Trek and the industry refocusing on the entry level and the transportation market instead of high end?
"I think that's going to be determined by what the consumer wants. There are certain companies that are well-positioned if the consumer wants to buy kids bikes or fitness bikes or commuter bikes. If the consumer wants to buy e-bikes we're there. If the consumer wants to buy high-end mountain bikes to get back to nature, we're ready for that as well. This is what is interesting, and I think we're going to know a lot more at the end of June."
"If you told me, 'we have a recession,' I can tell you what's going to happen. But I can't tell you what's going to happen now."
So you are a wait-and-see on that?
"I am wait-and-see. There's no question there's been a surge in kids bikes and there's been a surge in entry-level bikes. But I think mountain bikes are a huge opportunity. I think e-bikes continue to be a massive opportunity for U.S. retailers. You're going to have to be flexible and you're going to have to be able to pivot. And you're going to have to rethink your business. If you want to do business the way you want to do business, those days are over. This is a new world and the customer and the economy are going to influence how you play the game.
"I want to be really clear: we're optimistic. You tell me someone else who has a product that can help with social distancing, can help with the health crisis, and is good for the environment. That's a really good space to be in. And I think one thing COVID-19 has taught people is we live in a small world. I think more people are going to be interested in the environment. People are seeing the environmental benefit of not having our streets clogged with cars all day long."
Besides good sales of entry-level bikes and kids bikes, we're also seeing more and more people buying online. Do you think this crisis is going to accelerate the move to online sales?
"That's another one of those things where you are going to see what's going to happen on June 30. I do know people want to test ride a bike, people want a bike that is professionally assembled, people want advice. And I'll tell you the good bicycle stores are doing better and better. People want to talk doom and gloom. They say bike shops are going out of business and the internet is going to kill everybody, and I don't believe it. I believe there is a great future for well-run bicycle stores because they provide value to the customer.
"The bicycle store needs to be in a better position digitally to be able to service their customers online. One of the things we turned on or re-emphasized on the website was the ability for Trek consumers to be able to buy online and have products delivered to their home. We've seen a massive surge in that business in the last 15 days. I think (after the pandemic) the consumer is going to want bike shops to be able to offer more variety in how they take care of them."
Is Trek advising dealers on whether they they should stay open or not?
"We are super clear on that: you should do what you think is right and you should follow the law. This a different kind of crisis and one of the things we try to do is put down our priorities here, and the number one priority was safety.
"If you take a look at what we did in our retail stores, we made sure employees who wanted to work could. And if they don't want to, they didn't need to. If they were full-time people and they didn't want to work they were still paid, they kept their benefits. We implemented an entirely new way of doing business, the restaurant way, where you are greeted by a host and we take care of people one at a time. And then we took all that information and we pushed it out to our retailers.
"There's a massive effort at Trek to help our retailers through this process."
"If you take a look at all the information that Trek has provided on how to survive in a COVID-19 world, you've got everything from how to run your business, what the Trek retail team is learning, how to run efficient and safe curbside and home delivery, five steps for running safer service, six steps for financial survival. ...
"We have gone out of our way to make sure that we are supporting our retailers so that they can survive in the COVID-19 world. We have a hotline set up here in our financial services department for retailers to call in if they need help applying for government assistance. We've been reaching out to dealers on how to apply for that. We have a whole team digging into those programs to figure out what was applicable to bike dealers and what isn't. There's a lot that is and we made sure to share that with all our customers. And we're helping people through that situation right now. There's a massive effort at Trek to help our retailers through this process."
Speaking of government assistance, I imagine Trek doesn't qualify for the small business loans, are you applying for any kind of government assistance?
"I think I asked that question here. I don't think we apply for very much. Somehow if you are an airline or you are a small business there's a lot, but I don't think there's a lot for medium-sized businesses."
I know you've communicated a lot to Trek dealers, but do you have a message for the industry outside your dealers and partners?
"These are unprecedented times, so there's nothing for sure, but I'm an optimist. I go back to the point that we have a product that helps with the climate and can help with global health and those two issues are massive issues. I think more people are going to be interested in the environment and in health and I believe our best days are ahead of us. I really do. I just can't tell you when that is going to be and it might be really rocky for a time. And it also might be really good. It's so hard to say.
"But the last pitch I'd make is: there's never been a time where PeopleForBikes was more important than it is now. If you take a look around the globe the U.S. bike industry is so lucky to have the most competent bike advocacy organization in the world. These are people who are lobbying the government every year for money for bike trails, who are lobbying the government on issues like tariffs. This is the organization that has been lobbying state by state on e-bike legislation so retailers can sell e-bikes. More than ever it's important of the industry to wake up to the fact there we have the most competent industry organization in the world and we should support it."
