Day: January 2, 2023

The following is taken from The Outer Line, December 14, 2022. While the audience is primarily adult enthusiast cyclists, HPS found the author’s observations compelling as related to the overall American bicycle and e-bike business. We edited the original article for easier reading.

A few weeks ago, we commented on the turmoil and downsizing occurring in the cycling and other niche sports media platforms. As economic headwinds and uncertainties continue, this trend continues to intensify – in both the overall media business as well as the broader bicycle industry. With declining ad revenue and more hesitant subscribers, media platforms across the board are tightening their belts.

Substantial cuts have more recently been made at mainstream media firms like CNN, the Washington Post and USA Today. As former CNN host Brian Stelter put it in an essay for The Atlantic, “Media Winter is here once more, and it is getting ugly.” 

It seems that a “prerequisite for working in media in the 21st century is a tolerance for turmoil and constant change, continuing consolidation and ownership change; politicians and CEOs like Elon Musk fighting about coverage, AI threatening to replace writers, and not to mention that the pay is often terrible.” And it may be tougher in smaller niche media markets like individual sports verticals.

Another observer summarized it more concisely, saying, “Media is one of the worst businesses known to man.”  And it’s not just in the media. Layoffs have spread far beyond the editorial side in the cycling world, just two years after the historic “COVID boom.”

This retrenchment was best illustrated by COVID-darling Wahoo reportedly laying off at least 15 percent of its staff – likely largely due to over-extending itself after incorrectly assuming pandemic consumer habits would remain even after things returned to normal.

In addition, its partner turned competitor, Zwift, released a smart trainer significantly undercutting Wahoo’s indoor riding products. Strava has also reportedly laid off about 15 percent of its staff, as did The Pro’s Closet. And Specialized just discontinued its special ambassador program.

Beyond being a reflection of the current economic and financial headwinds, all of these recent developments also suggest that rather than COVID causing a boom in consumer spending, it may have just brought forward several years of spending. Hence, because of this over-optimistic forecasting, we will likely see the industry enter a prolonged lean time.

If you find this as interesting as we did, let me know: jay@humanpoweredsolutions.com

On January 4, 2023 Human Powered Solutions will attend a virtual public meeting between the United States Consumer Product Safety Commission (CPSC) and PeopleForBikes (PFB) that Erika Jones, PFB counsel, requested.

This virtual meeting will last 60 minutes. It will be devoted to questions that PFB will ask CPSC about the December 19, 2022, memorandum from Robert S. Kaye, Director CPSC Office of Compliance and Field Operations, to 2000 manufacturers, importers, distributors, and retailers of micromobility devices, including e-bikes, for consumer use.

Below we have provided a chronology of events from December 8, 2022 through December 31, 2022 covering some of the most important communications we are aware of relative to the January 4 public meeting.

HPS will continue to keep our clients and TMR readers informed and up to date on events involving and affecting e-bikes, lithium-ion batteries, voluntary standards, testing and certification.

Please contact me you have any questions or require copies of any of the communications, articles or documents listed below at jay@humapoweredsolutions.com

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Chronology of events: e-bikes, lithium-ion batteries and UL2849

December 8, 2022: Consumer Reports investigative article by Stephanie Clifford: “Fire! Fire! Fire!” The Perplexing, Deadly Electric Bike Problem.

December 8, 2022: PeopleForBikes Zoom meeting of electric bicycle sub-committee.

December 9, 2022: Press release: commissioner Mary T. Boyle statement on lithium-ion battery fires and e-bikes

December 18, 2022: Letter from Heather Mason, president of the National Bicycle Dealers Association (NBDA), to chair Alexander Hoehn-Saric, U.S. Consumer Product Safety Commission re: electric bicycle (e-bike) certification to UL 2849.

December 19, 2022: Memorandum from Robert S. Kaye, director CPSC Office of Compliance and Field Operations to manufacturers, importers, distributors, and retailers of micromobility devices for consumer use.

December 20, 2022: Statement from chair Alexander Hoehn-Saric on CPSC letters regarding micromobility battery safety.

December 20, 2022: Letter from Heather Mason, president of the National Bicycle Dealers Association (NBDA) to NBDA members to share an update regarding e-bicycles, certification, and safety.

December 20, 2022: Bicycle Retailer and Industry News online article titled: Dealer association asked CPSC to make statement on e-bike standards.

December 21, 2022: E-mail from PeopleForBikes to members: Update: CPSC letter on micromobility devices. This e-mail announced “…an upcoming meeting to discuss” the implications of the CPSC memorandum of December 19 scheduled to take place January 4.

December 23, 2022: Public notice that Joel Recht and other CPSC staff will meet with Erika Jones, counsel, and representatives from PeopleforBikes to discuss lithium battery safety on micromobility products January 4, 2023.

December 23, 2022: Jay Townley received a return phone call in the afternoon from Joel Recht, CPSC deputy director for Hazard Identification and Reduction, requesting an e-mail address and stating that he would e-mail instructions January 3, 2023, for linking via Webex to observe the scheduled January 4, 2023 public meeting with PeopleForBikes. Recht stated this will be a virtual meeting.

December 29, 2022: Why Taking Leadership In E-Bike Safety Is Essential by Claudia Wasko, VP at Bosch E-bike Systems Americas, Forbes Business Development Council Post.

December 31, 2022: E-bike batteries raise safety concerns amid rise in fires: “Very hard to examine” article by Peter Charalambous, ABC News.

There are several things going on relative to this headline, including the fact that COVID-19 and its variants are still with us after almost three years. For the American bicycle business, COVID-19 has been turned loose in epidemic proportions on our largest supply source of bicycles and e-bikes.

A December 28, 2022 article in the Economist Weekly edition states, “After nearly three years of self-imposed isolation, China is opening up again. The domestic travel restrictions, mass-testing requirements and draconian lockdowns of the ‘zero-COVID’ policy were scrapped in early December. On January 8 China will reopen its borders too. People arriving from abroad will no longer have to quarantine. More flights into China will be allowed. Visas will be granted to business travelers and students (though not yet to tourists). And Chinese nationals will be allowed to travel abroad without needing to provide the authorities with a reason.”

There are no accurate figures on how many Chinese people have been and will be infected, but it is clear the government will not report the real numbers. It is now estimated by sources outside of China that as many as 250 million Chinese have come down with COVID-19, and that 1.5 million will die as the urban wave peaks in January, just as the Lunar New Year begins.

On January 20 factories shut down and workers in the urban areas of China leave for their home villages in the rural provinces, some taking COVID-19 with them.

The human suffering and loss of life is tragic. It also means the disruptions to bicycle and e-bike manufacturing will continue after the Lunar New Year into February and March as COVID-19 closes manufacturing facilities and workers become ill and are delayed returning to work.

We have not seen the final import data for 2022 yet, but based on 2021 import data China was the source country for 86.8 percent of all the bicycles and e-bikes imported into the U.S. (See the NBDA U.S. Bicycle Market Overview 2021 Report, Table 22, page 45: www.nbda.com)  

This also means the brands will have difficulty balancing their inventory of finished goods because of the Q-1 2023 disruptions to their Chinese-based supply chains.

The only good news is the disruptions to the Chinese supply chain will mean a Q-1 slowing of imports of low-cost e-bikes under the de minimis rule.

If you have questions, contact me at: jay@humanpoweredsolutions.com

I am writing this on the last day of 2022, a year that literally went from a supply chain nightmare of scarcity to the discomfort of surplus.  

From what I have been reading in the trade press in Europe and the U.S., there has been a tendency in the bicycle business to not acknowledge this excess inventory. When its existence does slip out, as it did recently with Giant, there is an uneasiness about the financial implications of the surplus.

In general, the sentiment seems to be that good sales this coming spring will ease the situation and bring inventory levels back to what is referred to as “normal circumstances.”

This to me is the big if: IF consumer demand results in good sales this coming spring. This also smacks of management by hope.

I realize the bicycle business in the U.S. is trying to be as proactive as it can relative to attracting consumers to bicycles and bicycling, including e-bikes. However, I fear the mainstream bicycle business doesn’t have all the customers and potential customers in focus, and as the result isn’t able to connect with and sway enough of them.

My premise is based on the excellent consumer research done by Sports Marketing Surveys, now known as Sporting Insights, for the NBDA in Q-4 2021 and published Q-1 2022 by the NBDA: www.nbda.com/store

This consumer research uncovered the fact that approximately 30 percent of adult cyclists were new to cycling, depending on the category, and a higher percentage were female compared to historic demographics. In the case of e-bikes, many wanted throttles and “BMX” styles.

You can dig deeper into this detailed consumer research study, but one of my take-aways was the bicycle business had attracted new and different adult purchasers during the pandemic in 2020 and 2021, but before we could study them, many quit walking into and purchasing from bike shops.

Consumer demand drives everything in our world, sales, forecasts, production, shipping, and inventory of components and finished goods. Everything! When consumer demand drops off so does everything else. When too much inventory is in the bicycle supply chain when consumer demand slows, an overhang of surplus inventory results, like a blockage in a pipeline.

In the case of the bicycle business in the U.S., we don’t really know why consumer demand slowed during Q-3 of 2022, or why it continued to drop below pre-pandemic levels of sales during Q-4.

Some additional consumer research focused on the e-bike segment has been done recently, but I believe the panel size was too small. Although I am not privy to the methodology or results, I don’t believe it captured consumer purchase information or future intent from a group that may represent both the problem and the solution.

What I am speaking about are the American consumers who have purchased directly from e-bike sources in China under the so called de minimis rule.

While this is direct-to-consumer (DTC), it is a piece of the American bicycle business that is mostly not being tracked, although DTC purchasers and riders were included in the NBDA consumer research I have referenced.

The fact that they are not tracked is because de minimis import transactions are not recorded by U.S. Customs, and do not show up in the statistics followed by everyone in the business, including the trade associations, Ed Benjamin at LEVA, and Human Powered Solutions.

American consumers purchasing an e-bike or regular bicycle valued at $800 FOB or less can have it shipped directly to their home addresses with no duty, tax or inspection, and no record of the transaction.

If you are wondering if there are a lot of these transactions, the U.S. Congress reports there are 2 million of them in the U.S. every day. We have provided detail about why America has de minimis transactions and the attempts to stop them in previous articles. Contact me if you would like to know more.

From the buzz we have been picking up from advocates and bicycle riders, the number of adults and teenagers passing them on unrecognizable no-name e-bikes has increased in recent months. Bike shops are also reporting more of this type of e-bike being brought in for service.

Bottom line: we will not know until the NBDA conducts the same type of consumer research as it did during Q-4 of 2021 with the same robust panel of 2,500 adults, using the same methodology as the previous study, which included DTC purchasers like those buying under the de minimis rule.

Meanwhile U.S. inflation hit a 40-year high at 9.1 percent at the end of 2022, and the economic picture does not present a high probability of consumers coming back to bike shops to make purchases this spring, although the unemployment rate is at 3.5 percent, tied for the lowest since 1969.

So combined with other economic factors, we will have to wait to see IF consumer demand and sales this spring will reduce the current excess inventory to “normal circumstances.”

HPS will continue to report on this situation, and I welcome your comments. You can contact me at: jay@jayhumanpoweredsolutions.com