Stats: 29ers, Internet sales shake up market

SANTA FE, NM (BRAIN) Tuesday August 7 2012 8:24 AM MT—Big-wheel mountain bikes, 29ers, saved the industry last year, and Internet sales set tills ringing, but the recession’s impact altered the landscape.

Imports were lower than they have been in more than a decade, and it’s looking like the market permanently shed 1.7 million bikes’ worth of business during the recession.

“Without 29ers, this year sales would be down,” said Bob Margevicius, Specialized’s executive vice president of the bike group.

Margevicius noted that the road market remains tough, but sales are strong with new bike designs. Overall, however, there are not many gains, he added.

“Carbon is still king. This is where we are seeing bicycle unit and dollar sales gains in the road market,” Margevicius said.

Members of the Bicycle Product and Supplier Association (BPSA) shipped 100,000 more 29ers to shops in 2011 than they did in 2010, representing a $50.4 million increase in sales, more than 90 percent of last year’s sales gain.

The 9 percent jump in average unit value for 700c imports reflects the increasing number of high-value 29ers that are included in this category. But few expect the 29er golden goose to continue laying; going forward, it’s doubtful 29ers will continue commanding a $500 premium over 26-inch bikes.

“The average selling price of 29er hardtails is down so far this year. This is the most significant market segment. I don’t expect there will be a big gap between 26-inch and 29er in full suspension, as components are now readily available for either wheel size,” Margevicius said.

Though the average value of 26-inch imports jumped 20 percent, the number of units imported fell by 17 percent. The shortfall was mostly in low-value comfort and cruiser bikes, where customers are most acutely affected by the recession. The absence of low-value bikes in the import mix is probably responsible for the rise in average value.

Internet retail arrived as a substantial player in the market: The Gluskin Townley Group estimates Internet sales of new bikes and parts hit $1.2 billion in 2011, about 20 percent of all bicycle-related sales.

Gluskin Townley further estimates sales of used bikes from such retailers as eBay, Craigslist and Amazon hit $816 million last year. Internet purchases of new and used product represent more than a third of the overall bike market.

“Since we’ve been working for the past few years trying to hammer out these numbers, I’m not that surprised Internet sales are this substantial. I am surprised that the industry seems oblivious to a series of changes in the retail landscape that is totally reshaping the market,” said Jay Townley, principal with Gluskin Townley.

Internet retail

In a recent consumer survey evaluated by Gluskin Townley, when asked which Internet retailer received their business, consumers said 37 percent of their purchases were made through a bike shop’s website.

But what has captured industry attention are sales that U.K. Internet retailers such as Chain Reaction Cycles and Wiggle are ringing up in North America.

“I still think the industry under-appreciates the consumer appetite for Internet commerce,” said Brendan Quirk, general manager of Backcountry.com’s bike division and founder of Competitive Cyclist.

“We saw phenomenal growth last year—maybe not mind-blowing growth because of the inroads Chain Reaction and Wiggle made. If suppliers don’t take a concerted stand on minimum advertised pricing, the retail landscape is going to quickly change,” he said.

European retailers do not conform to minimum advertised pricing, and their low prices are attracting customers in the U.S.

Chain Reaction Cycles made its first trip to Sea Otter this spring, a reflection of how strongly the retailer’s business grew last year.

“The USA is a strong market for us which has seen steady year-on-year growth over the last three years. We are already signed up to be at Sea Otter next year and look forward to once again meeting our North American customers,” said Simon Cordner, Chain Reaction Cycles’ public relations manager.

In 2010, Chain Reaction Cycles’ most recent public filing, the company’s sales hit 109 million pounds ($167 million), up from 23.9 million pounds in 2007. Its sales have been growing 66 percent annually, and 37 percent of its sales—or $61.8 million—were outside the European Union.

Wiggle reported 2011 sales of 141 million euros ($175 million). Its largest international markets are Australia and Japan, and its international business represents 60 percent of sales, or $105 million.

Together these two European retailers could do more than $50 million in business in the U.S. That is less than 1 percent of the $6 billion total U.S. bike market, but sales are growing quickly.

European companies buy U.S. suppliers


Internet retailing is not the only place Europeans are making inroads in the U.S. market.

Last year saw the purchase of iconic bike brand Titus by the U.K.’s Planet X. Swiss company Scott Sports bought Syncros, and this year Dutch company Pon Holdings purchased Cervélo. Accell Group, also Dutch, bought Seattle Bike Supply a few years ago and purchased e-bike maker Currie late last year.

“There are now a lot of very distressed bicycle companies in Europe, but equally American companies seem under great pressure,” said Dave Loughran, Planet X’s founder. “I think the entire marketplace is going through massive changes, and it’s basically hard now for a midsize brand to compete.”

Despite tough conditions at home in Europe, Loughran is making further investment in America. Planet X will be consolidating its mountain and road operations—Titus and Planet X—in Portland, Oregon. Currently a distributor in Gap, Pennsylvania, runs Planet X USA under contract.

Yet in spite of new investment in the U.S. market, the numbers are clear. The average number of bikes imported in the five years leading up to the recession, 2002 to 2006, is 18,798,025. The five-year import average since the 2007 recession is 17,100,241, a shortfall of 1.7 million units. Last year’s imports totaled 14,567,348, an additional 2.5 million units below this average.

Asian direct business growing

Last year was certainly a watershed for consumers buying composite frames directly from Asian suppliers. Two years ago comments on forums about buying carbon frames directly from Asian factories raised reservations about the quality of the frames and after-sale support.

Today, bike buyers ask which catalog number was ordered—and any anxiety about buying direct is lessened by a growing number of happy riders.

“Overall, I get the feeling we’re right on the brink of the factory-direct wholesale option being relatively mainstream in the U.S. The wholesalers just have to take care of a few rough edges—web-based ordering interface—and it will be just like buying a frame from Competitive Cyclist,” wrote “Hiro11” on a Roadbikereview.com thread titled “Chinese Carbon Thread and eBay direct version 6.0.”

Ebay sellers “A_Baygoods,” “Carbon Bicycle,” “Carbonzone” and “Oemitem” are based in Hong Kong, and all offer a carbon 29er hardtail—including a carbon fork, seatpost, handlebar, stem and saddle—for $599, as well as other carbon frames from $389 to $700.

The sellers may have sold close to 14,000 frames over the last 12 months, according to eBay data.

And this is just the tip of the iceberg: There are more China-based eBay sellers of carbon frames and plenty of factories with consumer-direct websites like Gotobike.com, Dengfubikes.com and Greatkeenbike.com.