54 years ago, the American bicycle industry faced the specter of the federal government regulating bicycles as products sold to consumers. The reaction of the industry, through its trade association the Bicycle Manufacturers Association (BMA), was to resist and fight the government by advancing the manufacturing standard it had developed in the face of growing imports.
Schwinn, the company I worked for, had left the BMA in the late 1960s in a dispute over promoting chain store bikes. Sears was the largest retailer of bicycles at the time, and held sway over Murray-Ohio and Huffy, the domestic sources of its bicycles, making it the largest financial contributor to the industry association.
Our marketing department continued to cooperate with the industry association, and coordinated our full-time bicycling advocate activities and financial support for the League of American Wheelmen and Bicycle Institute of America (BIA), the umbrella bicycle industry association under which the BMA operated.
When it became obvious that Congress was going to pass, and the President was going to sign, the Consumer Product Safety Act creating the Consumer Product Safety Commission (CPSC), and that the CPSC was going to develop a mandatory bicycle safety regulation as its very first standard-setting activity, the BMA collected funding to work in opposition, and to lobby both the Congress and the new federal agency.
The BMA approached Schwinn for its help. Frank V. Schwinn, the third generation president of the company, discussed the request with his management team. He made the decision that his company was going to cooperate with CPSC and BMA to craft the best possible bicycle safety regulation for the whole of the American industry, including domestic producers and importers, and for the consumers who purchased bicycle products for themselves and their children.
Some of Mr. Schwinn’s management team felt the accident cases documented by CPSC and its predecessor agency, the Bureau of Product Safety, “wasn’t our problem” because Schwinn’s manufacturing and quality standards were far better than those of the rest of the bicycle manufacturers and brands.
Mr. Schwinn responded that it was indeed our problem, because the public judged all of us, all of the bicycle manufactures and brands, as the same when it comes to their safety, and the safety of their children.
I was one of the young managers who had been working with the Bureau of Product Safety, and was engaged on behalf of Schwinn with the newly formed CPSC. I reported to Ray Burch, vice president of marketing. He made sure I understood Mr. Schwinn’s meaning and intent. I acted accordingly, including cooperating with BMA when our aims and objectives were mutually compatible, and to opposing BMA when they were not. When in doubt, Ray advised, “do the right thing, and Mr. Schwinn will understand.”
As representatives of the Schwinn Bicycle Company and the Schwinn family, we didn’t impose or recommend Schwinn standards. We used those standards as examples of what could be done, how to do it, and how to measure it. In some cases, we learned from what CPSC developed, and from what BMA members and importers were doing.
The point is that we worked for at least half a decade on achieving the best possible federal mandatory bicycle safety standard that in turn provided safe bicycles to American consumers.
When the mandatory bicycle safety regulations became effective January 1, 1975, there was a two-year requirement for a label stating: “Meets U.S. Consumer Product Safety Commission Safety Regulations for Bicycles.” In Schwinn’s case, this was a yellow hang-tag that went on the handlebar with the owner’s manual. It served to inform and educate American consumers.
I realize this is history, and that many in today’s bicycle business are not interested in the history of either the business, or what is now an old and tired CPSC bicycle safety standard. I still feel there is a lesson to be learned about not denying responsibility by saying “it’s not our problem,” just as Frank V. Schwinn said 53 years ago.
There are those among the multi-national bicycle brands with headquarters in the U.S. that advocate for making international bicycle safety standards, and specifically ISO4210-10, the U.S. mandatory standard replacing the CPSC standard.
I for one think this is an excellent idea! ISO4210 was developed as the CPSC was developing the first mandatory bicycle safety standard, with the same participation through the American National Standards Institute (ANSI), CPSC, BMA and Schwinn.
Don McKay, an engineer who was with the Bureau of Product Safety and transferred to CPSC, was contacted by the International Organization for Standardization (ISO) and ANSI about the formation of a standards committee under ISO to create an international bicycle safety standard that would be as compatible as possible with the mandatory U.S. standard being developed by CPSC. The purpose was to ensure foreign-manufactured bicycles would be able to enter the U.S. market by meeting the mandatory federal standard.
When Don McKay asked Schwinn to participate, Frank V. Schwinn approved because he saw it as part of “our problem.” His company had been importing components from Europe and Asia since the end of World War II, and became a significant importer of complete bicycles during the 1971-1974 “bicycle boom.”
ISO4210 has its origin in the original CPSC bicycle safety standard. The significant difference now is that the CPSC standard has aged, basically frozen in time, while the ISO4210 international standard has been updated frequently as the products have evolved over the years.
Again, this is history that many in the industry today have no interest in. However, there should be an immediate interest in the public perception of an industry that is concerned about the safety of the consumers that purchase and use their products.
The consumer doesn’t know, or care, if the lithium-ion battery that powers the e-bike they own is from a “member” of a trade association or not. What they care about and expect is that the product they purchased, whether from an online seller or a bike shop, is safe to own and use.
They are also naïve, demanding and wanting both the lowest price and safe products. It is our problem, as an industry, to provide this in the best way possible for them. It is also an opportunity just waiting to be discovered.
As many of you already know, Human Powered Solutions (HPS) supports the National Bicycle Dealers Association (NBDA) in advocating for UL2849, a voluntary third-party testing and certification e-bike electrical power systems standard.
UL 2849 was developed under the auspices of Underwriters Laboratory (UL) pre-COVID, with the active participation of three members of the bicycle industry: Trek, Bosch and SRAM. The committee that developed UL2849 is still active, and has already amended this voluntary standard once since it was promulgated January, 2020. I can let you know who sits on the UL2849 development committee on request.
Brands can have their e-bike electrical propulsion systems third-party tested, certified, and listed with UL, which gives them the right to use the UL sticker on their products.
HPS has reviewed the cost associated with testing, compliance and listing to UL2849, and shared our findings with Bicycle Retailer and Industry News. The costs of compliance and listing, like insurance and shipping, are amortized over the cost of each complete product, or stock-keeping-unit, utilizing that complete electric drive system.
For some brands this will spread the cost over an appreciable quantity of units. Depending on annual unit volume, the compliance cost can have a wide range that with most brands will not have an appreciable effect on retail pricing.
With this said, HPS feels this is the time for an e-bike brand to promote its products’ compliance and listing to UL2849 with retailers and consumers, and is an opportunity to enhance and build brand integrity and share of mind with all.
Contact Jay Townley: email@example.com
All the news and factual bits and pieces that float to the surface indicate the American bicycle business is in an uncertain place, as our primary supply chain shuts down from January 20 until about February 6 for Chinese New Year, and we wait to see how many workers are able to come back to factories, desks, CAD stations, trucks, warehouses and ocean ports.
So much of the global and U.S. bicycle business is privately-held, or in the hands of private equity and venture capital, that very little public information is available about layoffs, order cancellations, inventory, and the financial condition of the supply chain.
With that said, here are a baker’s dozen headlines from U.S. and European news sources, bicycle trade and consumer publications that shed some light on the currents and winds of the bicycle business during the month of January 2023.
1. Peloton agrees to pay a $19 million fine for delay in disclosing treadmill defects. This story is taken from National Public Radio and, goes on to report:
“Peloton had received more than 150 reports of incidents involving people, pets or objects being pulled under and entrapped at the rear of the treadmill, by the time the company informed regulators, the CPSC said.
“Those reported incidents included the death of a child and 13 injuries, including broken bones, lacerations, abrasions and friction burns, the agency said.
“After initial resistance from the fitness company, Peloton and the CPSC jointly announced the recall of the Tread+ treadmill in May 2021.”
HPS thinks this is significant because it shows that the greatly-weakened CPSC, often portrayed as “toothless” by the bicycle industry, does indeed have fangs that bite, and when it gets the support of Congress, can and will enforce section 15(b) of the Consumer Product Safety Act.
The bicycle industry association, in HPS’s opinion, should pay careful attention to CPSC going forward.
2. Both Merida and Ideal Bike announce top management changes. The story appeared in Bike Europe, and reports:
“Merida CEO Michael Tseng will step down as president of Merida. His son, Vansen Tseng, will assume this position following an approval by Merida’s board of directors effective 1 February.
“Ideal Bike general manager Tim Lin already stepped down on 31 December 2022, but will remain with the company as special assistant to the chairman. At the turn of the year the vice president of Ideal China, Frank Chen, was appointed as Lin’s successor at Ideal Bike.”
Merida is the number two bicycle and e-bike Original Equipment Manufacturer (OEM) in Taiwan, with manufacturing facilities in mainland China and Europe. The U.S. brand most associated with Merida is Specialized. Merida also owns a percentage of Specialized.
Ideal is the number three bicycle and e-bike OEM in Taiwan, with manufacturing facilities in mainland China, and is the source for a variety of U.S. and European brands.
Merida is a public company traded on the Taipei stock exchange, and we believe Ideal is as well. HPS finds the timing a bit odd given the uncertainty of 2023 and what we believe is the mounting financial pressure on all the top-tier Taiwanese bicycle industry OEMs that also own and control manufacturing facilities in China.
3. The US bike manufacturer Specialized announced last week that it was laying off 8% of its employees, or some 125 people. This headline comes from the January 17 issue of The Outer Line, a cycling enthusiast newsletter. It goes on to report: “This comes just a few weeks after discontinuation of its ambassador program. While severe economic challenges have impacted companies both across the bike industry (Outside, Zwift, Wahoo, Strava, Pearl Izumi, The Pro’s Closet, etc.), and the wider economy in recent months, Specialized’s pullback signals a significant retrenchment from their early COVID-era aggressive expansion plans, which included purchasing and opening their own retail network and even starting a consumer-direct sales pipeline.
“Outside of the simple fact that the era of cheap capital is over, this retreat confirms that the COVID bike boom was an aberration that pulled future years of consumption forward. The initial misread of the trend by the industry’s major brands, and ensuing production bottlenecks and product shortages, triggered a whiplash effect where there are now too few customers and too little money chasing too much product. Ironically, the industry has come full cycle: the next few years will likely look a lot like the landscape before COVID hit in early 2020.”
This enthusiast cyclist newsletter offers the opinion to affluent consumers that: “…the COVID bike boom was an aberration that pulled future years of consumption forward.” HPS finds this a plausible theory as relates to the market for high-end acoustic bicycles, and worth considering from a consumer research standpoint.
4. Specialized re-organization also impacts European operations. This headline is taken from a January 19 Bike Europe article that reports: “Citing a changing global economy and faster than anticipated changes within cycling, Specialized announced the job losses on January 11. The press release stated that an organisational adjustment will allow the brand to be adaptive and continue to invest in innovation. Giant is another manufacturer taking extreme measures to future-proof itself. In December the company wrote to its suppliers asking for payment postponement.
The article shows a picture of the new Specialized European headquarters located in Arnhem, the Netherlands, and also says: “A representative of the European operations, confirmed to Bike Europe that employees in Europe are also affected by the layoffs, but no further details were given than what was in the press release coming out of Morgan Hill. It leaves the question, who will be the next big brand to announce strategic repositioning this winter? Watch this space.”
HPS agrees with Bike Europe, and is also watching for who will be the next big brand to announce strategic repositioning this winter.
5. 2023 may be a rollercoaster for e-bike prices. For those of you who follow electrek, you know Micah Toll writes an article almost every day. This one ran in the January online consumer newsletter, and offered the opinion that:
“Prices in the electric bike industry spent years with relative stability until the pandemic’s many ripple effects wreaked havoc on the industry. Over the last few years we’ve watched prices rocket up and then plunge back down again in a matter of months, only to repeat. Many riders had hoped to see 2023 bring with it a return to normalcy in the industry. Based on the several recent price changes across many companies, that doesn’t appear to be the case.”
The article ends: “With only a week into 2023 and no stability in sight, don’t expect to count on this being the year that prices drop back to normal for good.”
From what HPS has seen since this article posted, 2023 will be a rollercoaster for e-bike prices, primarily DTC, but spilling over into specialty retail.
6. “Global e-bike brands gather in Las Vegas for back to normal CES.” This is taken from a January 17 Bike Europe article. HPS attended the Consumer Electronics Show in Las Vegas, but came away thinking this headline is slightly overstated.
The stringer who wrote the Bike Europe article states: “Held from 5-8 January, the event attracted more than 115,000 visitors and 3,000 exhibitors. For the 2023 edition, organiser Consumer Technology Association still focused on electric mobility with a growing number of car manufacturers, but also a multitude of e-bikes brands. A hot topic this year was vehicle-to-everything (V2X) technology, which continues to catch the attention of more companies.”
HPS agrees that V2X technology will be a hot topic in the bicycle market going forward, as was shown and demonstrated at the PeopleForBikes SHIFT-22 Conference. However, a “multitude of e-bikes brands” is an overstatement. The brands identified in the rest of the article are Komda, Invanti, LUL, Vinfast, Cake, and RCA.
HPS’s Mike Fritz advises anyone wishing to attend CES in the future to study the hall layouts and attendees and make a plan for efficiently navigating and visiting exhibiters. Otherwise, the size of the show is overwhelming.
7. VanMoof asks investors for additional funding to continue operations. A January 24 Bike Europe article announced: “The trendy Amsterdam-based brand VanMoof has seen its turn-over hike since 2017. A strong global branding made it an attractive investment for private equity. But VanMoof has also experienced the back side of the current supply chain problems, just like many others in the industry.
“Without a capital injection, the company warned its future was in danger within two months,” reported the Dutch financial newspaper FD yesterday. The preliminary annual report for 2021, which was filed just after the turn of the year, stated that the e-bike manufacturer was discussing with investors and suppliers to pay between €10 and €40 million. It now appears that only existing investors participated in the latest capital injection. These include London-based investment firms Balderton and China’s Hillhouse.”
HPS notes that this situation may be attributable to the company’s original business plan, and not reaching the revenue required to cover expenses in the face of declining sales.
8. Amprio confirms take-over by SRAM. On January 5 Bike Europe reported: “This week Amprio confirmed the take-over of the e-bike components business of Rheinmetall by SRAM. Bike Europe learned from industry insiders that SRAM is now taking serious action to join the e-bike boom.
“SRAM is late coming to the e-bike electric propulsion system party, and any acquisition in Europe now has a higher risk attached to it because of the economic conditions brought on by the Ukrainian war. With this said, SRAM has a good solid reputation as a drive train and system source, and a European supply base will be beneficial against established competitors in the EU.”
9. McKinsey-WFSGI study reports industry braces for headwinds. On January 26 Bike Europe announced the WFSGI and McKinsey annual report “Sporting Goods 2023 – The need for resilience in a world in disarray.”
“ZURICH, Switzerland – Rising costs, the looming threat of larger recession, low consumer confidence and continuing operational challenges are set to create headwinds, according to sports and bicycle the industry executives. This is one of the key findings from the WFSGI (World Federation of the Sporting Goods Industry) and McKinsey latest annual report.
“In 2022 consumer sentiment was improving month-on-month, reflecting looser COVID-19 restrictions in most markets, companies were placing large orders, both in anticipation of demand and to avoid the supply chain challenges of 2021, and performance in the first half of the year was widely positive. However, inflation was picking up due to the impacts of the war in Ukraine, with higher raw material and energy costs prompting some companies to raise prices. In the meantime, consumer sentiment showed signs of deterioration with -40% consumer’s net intent to purchase sporting goods items, and discretionary spending declined. Supply chains gradually became more reliable, but the sudden increase in available product in destination countries paired with declines in spending led to widespread overstocking.
“According to the WFSGI and McKinsey, 2023 is expected to be a challenging economic environment with continuing subdued consumer sentiment. This will require a holistic approach from sporting goods companies to focus both on preserving demand and building resilience. WFSGI and McKinsey write that in 2023, four key themes will shape the industry:
“Brand relevance: Sporting goods companies are among the most effective brand builders in the world. As consumer expectations rise and brand relevance deepens, brand building is expected to become more important.
“Sustainability: Accelerating decarbonization and scaling circular business models will be key for sporting goods companies to meet their aspirational sustainability targets.
“Nearshoring: In an era of supply chain disruption, more companies are likely to turn to nearshoring as an element of de-risking and speeding up their supply chain strategies.
“Industry is profitable growth for private investments: The success of sporting goods brands has attracted a wave of private investment. This is especially true for complementary brands, brands with an elevated digital interaction with consumers, and analytics at scale.
HPS will study and analyze this report in detail, and advise clients of its findings. Clients and interested companies and individuals should obtain the report and conduct their own review, keeping in mind that the U.S. bicycle business stands apart from the European bicycle business, and both are subsets of the sporting goods markets in Europe and the U.S.
10. Council member’s bill would ban e-bikes, e-scooters in NYC. This is from a January 26 Bicycle Retailer and Industry News (BRAIN) online article that reports: “A New York City council member introduced legislation a week ago to ban e-bikes and e-scooters until they can be made safer and called for them to be treated like motor vehicles.
“The bill, put forth by Robert Holden on Jan. 19, would repeal the 2020 law that made e-bikes and e-scooters legal in the city and calls for a $500 fine. It would not include electric wheelchairs or other mobility devices designed for those with disabilities.”
This is serious and immediate. The Micromobility Reporter (TMR) lead story this month, “It Is Our Problem!” focuses on the importance of the American bicycle industry trade association recognizing that all e-bikes sold in the U.S., and all lithium-ion batteries used to power e-bike propulsion systems, are within their purview and responsibility.
The National Bicycle Dealers Association (NBDA) has actively engaged with the New York City Council and the Fire Department of New York City, along with UL and CPSC, to find solutions to the New York City e-bike lithium-ion battery fire problem, and do so in a manner that will not result in the banning of e-bikes.
11. Rad Power CEO: “We recognize that we have made mistakes.” Several trade publications, consumer publications, and new media reported this, and the latest is a January 27 article published online in BRAIN.
“Rad Power Bikes CEO Phil Molyneux said in an e-mail to customers this week that the company has made mistakes and will learn from them. In the past year, the direct-to-consumer brand had three lawsuits filed against it, including one for a wrongful death of a girl riding as a passenger on one of its bikes.
“As a young company, we recognize that we have made mistakes. Now we are dedicated to learning from them,” said Molyneux, who succeeded founder Mike Radenbaugh in November. “The culmination of these efforts represents the ‘New Rad,’ one that combines the forward-thinking innovation of our early years with the knowledge and resources to make us more customer-focused than ever before.
“In October 2021, Rad Power announced that its latest $154 million financing round brought in a total of $329 million in investments since its inception in 2006. The company claimed then it was the world’s best-funded e-bike brand, at least in the direct-to-consumer market.”
Micah Toll of electrek is fond of referring to Rad Power Bikes as the largest e-bike brand in North America, and he bases this in large measure on the $329 million in investment since 2006. True, the Rad DTC sales figures are impressive, but as the title of this article states: Confronting Shrinking Sales After a Pandemic Driven Boom.
HPS would not have advised the president of Rad Power Bikes to make the statement about a “New Rad,” but we were not asked either. Watch Rad carefully from this point forward as the market and financial pressure rises.
12. Giant Group buys minority share in Stages Cycling in $20 million deal. This article was also in several trade publications, and this is from a BRAIN January 27 online article:
”Giant Group has made a $20 million investment in Stages Cycling, acquiring 32.5% of the company’s common stock according to a filing with the Taiwan stock exchange.
“Stages, based in Portland, Oregon, makes stationary smart bikes for the commercial gym and home markets, crankarm-based power meters, and GPS bike computers. Giant has manufactured some of Stages smart and commercial indoor bikes for several years, and Giant also distributes some Giant-branded Stages GPS computers to its dealers globally.
“According to the announcement in Taiwan, on Jan. 20 Giant’s board approved the purchase of 32.5% of Stages Cycling Inc. common stock for $6.5 million and Stages Cycling’s convertible corporate bonds for $13.5 million. Giant made the investment through its subsidiary Gaiwin US I Investment Inc.
“Giant said its strategy is to expand Giant Group’s presence within the indoor cycling market and to build Giant’s ‘cycling ecosystem.’”
Even in good times, this would have been an unusual acquisition. Giant just bought about one-third interest in a large customer for not a lot of money, depending on what the financials of Stages Cycling Inc. look like.
The convertible corporate bonds will convert to stock, in which the value of the 32.5% common stock convert to over another 64%. We may be wrong, but HPS analysis is that Giant just pulled a relatively large OEM customer of its fitness plant out of a financial crisis for now.
13. What tracking one Walmart store’s prices for years taught us about the economy. This last article is from a January 26 NPR article that shops a Walmart store in Georgia, in Liberty County, just south of Savannah that was shopped in 2019, before the pandemic and inflation. This normally wouldn’t make our newsletter, but out of the hundreds of items NPR put in its shopping cart for comparison, one was a bicycle!
Note that the last item above is a “Girls bicycle with training wheels.” The brand is Kent, and the Package Price in August, 2019, was $68.00. The Package Price December 2022 is $98.00, an increase of 44%.
We don’t know any more about the bicycle itself, or whether it was imported or assembled at the Kent-owned Bicycle Corporation of America plant in South Carolina. What we do know is the retail price leader, Walmart, had an inflationary price increase of 44% from the summer of 2019 to the winter of 2022 in the retail price.
While HPS is not aware of any similar retail price tracking in the industry, this one example may explain, at least in part, why the American bicycle business is confronting shrinking sales after a pandemic driven “boom.”
Contact Jay Townley:firstname.lastname@example.org.