July 29 “A Dangerous Combination: Teenagers’ Accidents Expose E-Bike Risks.” The New York Times: “The e-bike industry is booming, but many vehicles are not legal for teenagers, and accidents are on the rise. On a Thursday evening in late June, Clarissa Champlain learned that her 15-year-old son Brodee had been in a terrible crash, the latest teen victim of an e-bike accident. He had been riding from home to shot-putting practice. The e-bike, a model made by Rad Power, had a top speed of 20 miles per hour, but his route took him on a busy road with a 55-mile-per-hour limit. While turning left, he was clipped by a Nissan van and thrown violently. Ms. Champlain rushed to the hospital and was taken to Brodee’s room. She could see the marks left by the chin strap of his bike helmet. ‘I went to grab his head and kiss him,’ she recalled. ‘But there was no back of his head. It wasn’t the skull, it was just mush.’ Three days later, another teenage boy was taken to the same hospital after the e-bike he was riding collided with a car, leaving him sprawled beneath a BMW, hurt but alive. In the days following, the town of Encinitas, where both incidents occurred, declared a state of emergency for e-bike safety.” HPS Analysis:There is much more to this New York Times article, and I urge you to read every word. I you cannot find it, let me know and I will email it to you. While there is a good argument to be made for our society ignoring the real problems of our car culture, the very real accidents, injuries and fatalities associated with bicycles and e-bikes are growing, and our industry needs to immediately reevaluate and reconsider everything it knows, and become aggressively proactive about all aspects of safety. There are two federal agencies currently evaluating how to best address the safety of electric bicycles: the Consumer Product Safety Commission (CPSC), and the National Highway Traffic Safety Administration (NHTSA), as well as New York City, the State of New York, and the State of California. In addition, CPSC is also evaluating how to best address the safety of pedal-only bicycles. Last month, HPS recommended PeopleForBikes take immediate action to form a Standards and Safety Committee to focus the resources of the American bicycle industry on all the issues associated with product safety and user safety. We are burning daylight people.
July 30 “The New York Times Attacks E-bikes While Ignoring the Real Dangers All Around Us.” elecrtrek: “The New York Times published a pair of articles this weekend highlighting the rising number of deaths of cyclists riding electric bikes. However, in one of the most impressive feats of victim-blaming I’ve seen from the publication in some time, the NYT lays the onus on e-bikes instead of on the things killing their riders: cars. The first article lays out a number of recent tragic deaths of e-bike riders, including that of a 15-year-old boy in Encinitas, California. The article even explicitly lists the biggest danger that played a role in that crash, explaining that the boy’s bike ‘had a top speed of 20 miles per hour, but his route took him on a busy road with a 55-mile-per-hour limit.’Yet the article seems to imply that the e-bike’s presence was the compounding issue, instead of reading into the author’s very own sentence to realize that the true problem was that the road didn’t have anywhere safe for cyclists to ride. There was no protected bike lane.” HPS Analysis: Here again, I urge you to read the whole article in electrek by Micah Toll, and if you cannot find it, please let me know and I will e-mail it to you. The city of Encinitas declared a state of emergency for e-bike safety, but did it really mandate safer roads for all of its citizens including walkers, joggers, bicyclists, and vehicular operators? Or, did it put band-aids on the problem to satisfy the public outcry? And, what role did the American bicycle business play in working with federal, state, and local government, as well as schools, user groups, and NGO’s, to stay engaged for the long term to bring safe streets, education, and protected bike lanes to the community? This is what HPS means by the American bicycle industry becoming aggressively proactive about all aspects of safety.
July 30: “E-bike Battery Fires Prompt Call for Better Regulation.” BBC: “Batteries for e-bikes should be regulated in the same way as fireworks, heavy machinery or medical devices, because of the fires risk they pose, a charity has said. In June a woman and two children died in a fire linked to an e-bike battery. Currently, manufacturers can self-declare that e-bike and e-scooter batteries meet safety standards. But campaigners Electrical Safety First says the batteries should require third-party approval before sale. Cambridgeshire Fire Service said the bike was the ‘most probable cause’ of the fatal blaze in June, and it is investigating the e-bike that was left charging in the flat. Meanwhile, the London Fire Brigade said it has been called to a fire caused by e-bike batteries on average once every two days in 2023.” HPS Analysis: This BBC article is confirmation that the UK, where e-bikes have been popular and sold in greater quantities before, during, and after the pandemic, is now experiencing e-bike-associated lithium-ion battery fires, and is seeking regulatory safety standards and related solutions. This article quotes Electrical Safety First CEO Lesley Rudd as saying: “The UK should adopt regulations similar to rules introduced in New York City in March 2023.” While we do know the primary origin of the hazard present in the UK is different than that in New York City, the net effect is, sadly, the same. This shows the importance of lithium-ion batteries being manufactured, tested and certified to UL 2271, e-bikes manufactured, tested and certified to UL 2849, along with education of retailers, including DTC sellers, and consumers concerning the proper management of lithium-ion batteries supplied with e-bikes and other micromobility devices.
July 30: “Trucking Giant Yellow Shuts Down Operations.” The Wall Street Journal Business: “The 99-year-old company, with 22,000 Teamsters employees, advises customers and workers of shutdown. Yellow, one of the oldest and biggest U.S. trucking businesses, shut down on July 30, wrecked by a string of mergers that left it saddled with debt, and stalled by a standoff with the Teamsters union. The 99-year-old- company is known for its cut-rate prices, and has more than 12,000 trucks moving freight across the country for Walmart, Home Depot and many other smaller businesses. What Yellow couldn’t deliver, despite swallowing rivals, getting union concessions, and securing a government bailout, was consistent service for customers or profits for investors.” “A failure imperils nearly 30,000 jobs, including around 22,000 Teamsters members, and hundreds of its nonunion employees were laid off July 28 after the company stopped taking in new shipments from customers. It would be the biggest collapse in terms of revenue and jobs for the fickle U.S. trucking industry, though customers say disruptions should be limited. Manyu shifted their cargoes to rivals in recent weeks, hastening Yellow’s demise.” HPS Analysis: Two-years ago, the collapse of Yellow would have been a disaster for the U.S. economy and the bicycle business. Even 12-months ago, it would have been a major disruption to American commerce. Today, not so much. The U.S. economy has cooled enough, and consumer demand has ebbed, to the point where rival domestic trucking firms have picked up all the freight Yellow could no longer take. Unemployment spiked the two weeks after Yellow shut down operations, but dropped back to previous levels as the non-union workers and union drivers found work. Domestic freight continued to flow, and there was no discernable disruption to shipments of bicycle business merchandise. While this bankruptcy ended up having no real impact on the U.S. economy, it did leave the American people with about a one-third ownership in Yellow as the result of the terms of the financial bailout negotiated by the previous Administration.
August 2: “Columbia Has Too Much Footwear While Prana Sales Plunge 32 Percent.” Sourcing Journal: “In a Nutshell: Columbia Sportswear chairman and CEO Tim Boyle told investors in a second quarter earnings conference call that “elevated inventory levels, particularly in footwear,” contributed to higher clearance and promotional activity in the quarter. Getting rid of excess stock has been a priority for several months now. Boyle said the Sorel owner is taking a more ‘conservative approach to planning the balance of the year,’ such as managing expenses and looking for growth opportunities.” “U.S. e-commerce net sales were down mid-single-digit percent. The online environment has become more competitive and promotional, as consumers seek out value in the marketplace, Boyle said. Columbia Sportswear got a boost from lower inbound freight costs. However, higher clearance and promotional activity, as well as higher distributorship, which generally carries lower gross margins, didn’t help.” “We continue to anticipate that China will be one of our fastest-growing markets in 2023, Boyle said.” HPS Analysis: Athletic and sports footwear appears to be tracking along the same arch as the bicycle business, and too much inventory and too few sales are the primary issues. Columbia, like the top bicycle brands, reports second-quarter sales declines in Canada and the U.S., and increased sales in China. Columbia also reports e-commerce net sales were down in the second quarter.
August 3: “Industry Makes its Point, but Can the CPSC Regulate Lithium-ion Batteries?” Bicycle Retailer and Industry News: BETHESDA, Maryland: “Mike Fritz left last week’s Consumer Product Safety Commission public hearing on lithium-ion battery safety confident he and other industry representatives convinced the agency that mandatory regulations are needed. ‘Whether they have the resources to take effective action in the short term remains to be seen,’ said Fritz, Human Powered Solutions’ chief technology officer, who has worked with the National Bicycle Dealers Association to educate retailers about safe storage and handling of batteries. Matt Moore, PeopleForBikes’ policy counsel, agreed. ‘That was part of my testimony, that they don’t currently have the resources to effectively enforce regulations for various reasons, one of them being the de minimis exemption, and the difficulty inspecting those shipments,’ Moore said. Whether they have the resources to do the rulemaking, is really dependent on their budget and budget priorities. The current climate in the House is not good for additional appropriations. In fact, they’re looking to cut what has been allocated for agencies across the board.” HPS Analysis: I sat in the audience through all the testimony presented July 27, and participated in the conversations during the breaks, lunch, and over beer after the public meeting. The summary of the day was that the need is urgent because of the fires and deaths in New York City and elsewhere in the country; there is agreement that mandatory federal standards are required; that harmonization and merging with European and UL lithium-ion battery and bicycle/e-bike regulations and standards is eminently possible; and immediate action is required by the Consumer Product Safety Commission. What surprised the Chairman of the CPSC was the general unanimity of all the presentations. He also warned that the CPSC mandatory standards and regulatory process is arduous and difficult, and made more so by the oversight exercised by the House Commerce Committee. The future of standards and regulation of lithium-ion batteries, e-bikes, and bicycles, is going to be up to the fortitude of the American bicycle business and the global industry to rally around and fight for safety.
August 7: “WFSGI Postpones 2023 World Cycling Forum.” Bicycle Retailer and Industry News: “The World Federation of the Sporting Goods Industry has postponed its World Cycling Forum 2023 to a later date. The Forum had been scheduled to take place during the IAA Mobility conference in Munich, Germany, next month. ‘In discussion with senior leaders of the industry, and seeing the ongoing economic challenges within the bicycle industry, we have made the decision to postpone the World Cycling Forum 2023, the WFSGI announced Monday. While we know this is disappointing, our first priority is to listen to the bicycle industry’s current situation. The new date will be communicated in due course,” the group added.” HPS Analysis: Scheduled for September 5-6, this would have been the fourth year for the World Cycling Forum, initiated by the WFSGI in 2020, the first year of what has become known as the Pandemic Bicycle Boom in the U.S. “…Seeing the ongoing economic challenges within the bicycle industry” is cited as a major reason for postponing the event, which we respectfully opine is the wrong reason. If anything, this should be the driving force in going ahead with the scheduled gathering of global leaders in the bicycle/e-bike industry, including PeopleForBikes as the leading U.S. industry association. What is the global bicycle industry so afraid of discussing out in the open?
August 7: “China Property Giant Country Garden Warns of up to $7.6 Billion Loss.” BBC Business: “Country Garden, which is one of China’s biggest property developers, has warned that it could see a loss for the first six months of the year of up to $7.6 billion (€6bn). The announcement is the latest signal of the major issues facing the world’s second-largest economy. This week official figures showed China had slipped into deflation for the first time in more than two years. Exports have also fallen sharply, while youth unemployment is at a record high.” HPS Analysis: China remains the largest source country for bicycles and related finished goods imported into the U.S., and while the problems of the Chinese economy have so far represented manageable issues for importers into the U.S., the looming problem is for multinationals selling bicycles and related products in China. Over the past three decades it has become conventional wisdom in the global bicycle business that Giant taught Trek how to successfully enter the Chinese home market, Merida taught Specialized, and so on. China has proven to be a significant OEM market for international publicly-owned brands like Shimano. For all the multinational bicycle, component, and accessory brands selling in the Chinese market, they are conducting local business in what is a domestic, or home market. With the European and North American bicycle markets declining, the Chinese home market has become very important to some, and perhaps many, of the multinational brands. A decline in Chinese demand for components and finished goods will only add to the sales and profit woes for multinationals.
August 7: “Strong Sales in China Help Keep Giant Group Revenue Decline to 5 Percent.” Bicycle Retailer and Industry News: TAIPEI, Taiwan – “Giant Group’s first-half revenue was NT$42.6 billion ($1.34 billion US) in its first fiscal half, down 5.4 percent from the same period last year. But the company said strong sales in the China market helped. The domestic China market’s interest in performance cycling drove a 70 percent sales increase in the half there. However, sales for Giant-branded products in Europe were down 12 percent in the half, and in the U.S., they were down 44 percent, the company reported. First half e-bike sales supplied 35 percent of the Group’s revenues in the half, up 6 percent from the year prior.” “Overall the Group’s gross margin rate decreased to 21.3 percent, and net profit before tax came in at NT$3.35 billion, a decline of 32.9 percent. Net profit after tax came in at NT$2.02 million, a decline of 44.3 percent. First-half earnings per share were NT$5.15. HPS Analysis: Giant Group is a publicly-traded company on the Taipei Stock Exchange, and as such is obligated to publish its quarterly financials, as are Merida and Shimano, which is traded on the Tokyo exchange. Giant Group is only down 5 percent in revenue for the first half of this year because of a 70 percent sales increase in the Chinese domestic bicycle market. While this is a relatively small loss overall, the U.S. was down 44 percent, and Europe was down 12 percent, meaning any significant decline in the Chinese home market during the second half of this year will serve to increase the negative revenue for Giant Group. There is a definite link between Giant Group’s financial results and the Chinese home market, and this link may exist between other multinationals in the global bicycle business and the Chinese consumer goods market.
August 8: “Moody’s Downgraded the Credit of Several Regional Banks, Citing Rising Costs and Troubled Commercial Real Estate Sector.” Marketplace: “It’s been about five months since Silicon Valley Bank and Signature Bank collapsed. Shortly afterward, First Republic folded. But since then, things have been relatively calm in the banking world. That is, until this week. The ratings agency Moody’s announced that it downgraded the credit rating of several regional banks, citing problems related to rising interest rates and troubled loan portfolios. A lot of the problems in the banking sector that emerged earlier this year haven’t gone away.’ ‘Generally speaking, you don’t want to force banks to undergo significant and costly changes during periods of time when credit is less available,’ Kathryn Judge, a law professor at Columbia, is quoted as saying. ‘Judge went on to say: ‘…this week’s downgrades are a sign that that period of time is going to last a while, even though dramatic bank failures, like those earlier this year, are likely behind us. That means regional banks will keep paying more interest to depositors, and lending out less of their deposits.” HPS Analysis: HPS Senior Advisor Steve Bina’s related article covers Moody’s downgrading the credit ratings of several regional banks, and the potential impact on the availability of loans to small businesses, and the cost of that money from lending institutions. This is the issue that has been most important to the bicycle business and the specialty bicycle channel of trade since Silicon Valley Bank and Signature Bank collapsed: the overall availability and tightening of lending on the part of the remaining banks. The inventory that got financed during the pandemic bicycle sales surge that has not been sold is going to have to be turned into cash or refinanced at a higher interest rate, if banks are willing to refinance it.
August 8: “Bike Imports Plummet as Average Value Climbs.” Bicycle Retailer and Industry News: WASHINGTON – “Bike imports were down steeply in the first half of the year compared to the year prior, even as the average import value of bikes increased significantly. The U.S. imported about 1.4 million adult non-electric bikes through June, down 62 percent from the same period in 2022, when the U.S. imported 3.6 million. In dollar value at port, the imports were worth $504 million, down 38 percent from last year’s first-half value. The figures are from Department of Commerce USA Trade data released August 8. E-bikes lack a unique product code at import (they share a code with electric motorcycles and other electric cycles), making it difficult to include them in the totals. All the numbers in this article are for non-electric bikes. The average value of an adult bike at import in the first half this year was $360, up 60 percent from a year prior. HPS Analysis: First, let me say this is a great article. I went back over the tables and charts a dozen times. As many of you know, I am a data junky, and the five detailed tables and pie-charts are well worth examining carefully, and absorbing the story they have to tell. However, as the author Steve Frothingham makes clear: “All the numbers in this article are for non-electric bikes.” Electric bikes are not included because: “E-bikes lack a unique product code at import,” making it impossible to include the hottest category with the greatest growth potential for the industry in the data and the totals. While this is a great report, it highlights what we, as an industry, do not know. And there is agreement that what we do not know is very vitally important to the future of our industry. And yet, we do not seem capable of creating and rallying around a solution that provides the data we need about imports, domestic assembly, and manufacturing of e-bikes, to define and plan our future.
August 9: “Radio Flyer to Open its First-Ever Store at Woodfield Mall.” Chain Store Age: “The maker of the iconic ‘Original Little Red Wagon’ is entering brick-and-mortar. The 106-year-old Radio Flyer will open its first-ever retail store in November, at Woodfield Mall in Schaumburg, Ill. The store will offer the company’s full product lineup, including stroller wagons, scooters, tricycles, go-karts, bikes, and more, along its new line of electric bikes and ‘unique’ gift items for the holiday season. The store is designed to offer customers the ‘ultimate Radio Flyer experience.’ The attractions will include a test track where kids can get in the driver’s seat for rides and hands-on experience in products such as go-karts and scooters. Shoppers will be able to customize wagons and other items. In addition, an in-store bike shop will offer free rides for kids’ bikes and adult electric bikes, along with services that include professional assembly, custom bikes, accessory fittings, and more. HPS Analysis: Heather Mason, president of the NBDA, told us the news about the first Radio Flyer retail store before this CSA article, and before it was published in BRAIN. Heather had interviewed `Robert Pasin, chief “wagon” officer and CEO at Radio Flyer, for a Podcast. Pasin, is the third-generation CEO of this 107-year-old Chicago company. Radio Flyer recently entered the electric bicycle market with its Flyer line, and is expanding its dealer network in the U.S. HPS is looking forward to visiting the new Radio Flyer retail store after it opens in November of this year.
August 10: “China’s Economic Shocks Have Thrown the World Off Balance.” Bloomberg Opinion: “Trade is plunging and prices are sliding. How much disappointment can the global economy bear? In the later year of the epic U.S. growth stretch that ended with COVID-19, a phrase began to catch on to describe the buoyant conditions spreading across the globe. The world was said to be on the cusp of an unusually synchronized expansion. Few people still spoke of a jobless recovery in America, and China, after some rare stumbles, appeared to be returning to its old robust self. Inflation was off the floor, seen as a good thing. HPS Analysis: The question at the beginning of this article is factious, but nonetheless has deep meaning for those of us who have been practitioners importing bicycle products into the U.S. from Japan, Taiwan, and China over the last five decades. From 1973 to 2019, the business of efficiently manufacturing and shipping bicycles to the U.S. evolved into Standard Operating Procedure, cost-efficient, predictable, and reliably repeatable month in and month out. During the disruptions of the pandemic, a protectionist attitude rose up about Chinese high-tech products like computer chips during a time of shortages and surging consumer demand. This, coupled with the false premise that punitive import tariffs of up to 25 percent on top of regular tariffs would force China to the bargaining table to import more American goods like corn and pork, has evolved over the past five years to the point where a recent survey shows that 66 percent of Americans would support a pro-tariff presidential candidate, despite the fact that it is the American importer of record, and eventually the consumer, that pays the total cost of tariffs. Decoupling is very hard, in large measure because the Chinese have become vertically integrated and very good at what they do. Despite the bicycle business moving production to Cambodia and Vietnam, China remains the largest source of units, supplying 83 percent of all sizes and types of non-electric bicycles imported into the U.S. six-months year-to-date 2023. Politicians and governments want one thing, while consumers want another, and on the supply side buyers and sellers are doing their best to deal with the reality of market demand. If that isn’t “Off Balance” I don’t know what is.
August 10: “Shifting Trade Winds.” The Wall Street Journal Logistics Report: “A persistent downturn in world trade raises questions about whether deeper changes are underway that will alter long-term patterns of good flows. Weak global economic growth, high interest rates, and geopolitical tensions are weighing on goods trade, the WSJ’s Marcus Walker and Yuks Hayashi write, even as trade in services gets a boost from rebounding Chinese exports, suggesting decades of global integration may be unwinding. Instead, shifting supply chains suggest trade is entering a new era in which the West and China do more business with their political friends and less with each other. The change toward more fragmented trade patterns would have significant implications for a shipping sector that has supported far-flung supply chains. For now, forecasters are projecting only meager global trade growth this year, and a recovery next year well short of average yearly growth.” HPS Analysis: Yes, there is a definite and pronounced downturn in the flow of goods from China and other Asian source countries, as evidenced by regular bicycle imports into the U.S. being down 62 percent in units and 38 percent in value six months year-to-date. Consumer demand in Europe and North America has been declining steadily since the last half of 2022, and now consumer demand in China is starting to decline. Computer chips and other high-tech products like cell phones are shifting their sourcing, as the article indicates, but decoupling and resourcing for the relatively low-tech bicycle business, including e-bikes, is proving much more difficult, and will be years behind the high-tech sector. What this means from a geo-political standpoint relative to manufacturing, and from a logistics standpoint as pieces of the longstanding global integration unwinds and shifts, represents a series of near-term issues the bicycle business is going to have to face and manage to craft modified patterns for the flow of goods to the markets outside of China and Asia.
August 11: “Cycle Industry’s Collapse After Bike Boom Ends This Year, Say Analysts.” Forbes: “Bicycles may be greener than cars and globally outsell them, but the $61 billion bike biz isn’t as healthy as many might assume. Periodic surges, such as the emergence of mountain biking in the 1980s or the stellar demand driven by COVID lockdowns, hide the industry’s low margins. According to an analysis by Yahoo in Taiwan, the bicycle industry is facing a ‘super cold winter’ of falling demand. Asian suppliers of cycles and cycle components have yet to recover from the inevitable market crash that followed the COVID bike boom, and still carry high inventory levels … Industry analysts believe 2023 will be a trough year, with sales recovering through 2024 and beyond, and at a more sustainable level than the heights of the COVID bike boom.” HPS Analysis: This article is by Carlton Reid, a long-time bicycle advocate and writer, and senior contributor to Forbes. The HPS Analysis is that he is generally correct concerning the “super cold winter.” We agree with the pre-pandemic industry generated universally low margins. However, we are of the opinion that overall prices increased during the pandemic, which also increased gross margins. These increases are baked into costs in the tiers of distribution, and have not yet all stripped out by discounting and price reductions. 2023 is definitely a “trough year,” but we are not as confident in the prediction for 2024 because of the new bicycle riding and purchaser demographics.
August 13: “Multinationals turn to generative AI to manage supply chains.” Financial Times: “Some of the world’s biggest companies are turning to artificial intelligence to navigate increasingly complex supply chains as they face the impact of geopolitical tensions and pressure to eliminate links to environmental and human rights abuses. Unilever, Siemens, and Maersk are among those using AI to negotiate contracts, find new suppliers, or help identify those connected to issues including the alleged repression of Uyghur Muslims and China’s Xinjiang region. Although AI support in supply chain management has been used for years, and the development of so-called chain management has been used for years, the development of so-called generative AI technology has been offering more opportunities to further automate the process … Up to 96 percent of supply chain professionals are planning to use AI technology, according to a survey this month of 55 executives by logistics group Freightos, although only 14 percent were already using it.” HPS Analysis: All of the major bicycle brands selling in the bike shop and specialty retail channels are multinational at $1 billion or more in sales revenue. The top-tier OEMs and component brands are also multinational, with sales revenue of $1 billion or more. HPS believes the top-tier multinationals in the bicycle industry, including the large mass merchants in North America and Europe, are turning to generative Artificial Intelligence (AI) to manage their supply chains. Generative AI means the process of analysis, tracking, mapping, generating contracts, letters of credit, purchase orders, tracking shipments, and more, are either totally automated or partially so. As the survey indicates, almost all plan to employ generative AI systems to manage their supply chains, but only a minority are currently doing so. Big changes are coming in supply chain management, and the bicycle industry needs to both adopt the new methodologies, and openly share the data and information generated with every touch point in the supply chains.
August 14: “Vosper: Midsummer Blues for the Specialty Retail Channel.” Bicycle Retailer and Industry News: “It’s been a long, tough spring, and now it’s shaping up to be an even longer, tougher summer. Not only has the weather across most of the United States been terrible for business – unprecedented heatwaves plus massive rains, and even tornadoes and flooding, depending on what part of the country you’re in – but consumer demand continues to be weak in many product categories, not just bicycles. As a result, bike industry sales are way down, and the massive inventories we carried into 2023 are still with us. If anything, the product oversupply has increased each spring. Although there are still shortages at some high-end price points, many of the bread-and-butter bikes we took on in Q4 of 2022, and the beginning of 2023, are still with us. HPS Analysis: Rick Vosper does his usual thorough job of logically presenting the details, and in this case the grim facts, of where the American specialty retail channel is, and where it is probably headed. This article is a must-read, and Rick is quite right in that the specialty bicycle channel is really good at shooting itself in the foot, in this case by unnecessarily introducing 2024 models when 2023 merchandise is still available, and heavily discounting direct to consumers, and devaluing the finished goods inventory still in retail inventory. This is not all, but covers the highlights. One point that I believe needs to be made relates to climate change and “… the weather across most of the United States” being terrible for business. While absolutely true, the bad weather that will be terrible for our business and all outdoor-related businesses has become the new normal, and our industry needs to plan climate and weather-related disruptions into our annual planning and forecasting going forward, including communicating with customers.
August 14: “China’s Worsening Economy Is Hurting Corporate America.” The Wall Street Journal Business: HONG KONG – “China’s deepening economic slump is damaging the fortunes of big American companies deeply rooted there, with some growing increasingly pessimistic that the country’s long-awaited post-pandemic boom will materialize. Companies embedded in China’s ailing manufacturing, construction, and export industries are reporting weaker sales. In some cases, they are warning of further trouble to come as growth grinds to a near halt, and economic readings are dour.” HPS Analysis: We have subscribed to the conventional wisdom that the top-tier bike shop brands established distribution and retail stores in China starting in the 1980s. We do know that the top-tier OEMs like Giant, Merida, and Ideal have large manufacturing footprints in China, as do most of the component manufacturers. While none of them are of the size in terms of revenue as the American companies named in this article, we believe they all have distribution established inside China, and they will be adversely impacted by a worsening Chinese economy. The ripple effect will be felt during the last half of 2023 and into 2024.
August 14: “Is the Bike Industry in Trouble – Or Is It Making Another Comeback?” Bicycling: “Between the COVID-19 bike boom, and the slump in sales that followed, the cycling industry has been on a wild ride for the last four years. But industry experts say that by 2024, the business of bikes may finally stabilize. Admittedly, it’s hard to see an end in sight now, with brands like Van Moof declaring bankruptcy, All City Cycles announcing their closure, Bell announcing layoffs, and bike behemoths like SRAM and Shimano still taking hits to profits quarter after quarter. According to a recent Forbes article, major players in the cycling space in Taiwan are going so far as to call this moment in time a ‘super cold winter’ due to falling demand but huge overstock. HPS Analysis: This is the bicycling consumer press covering what the bicycle industry trade press seems reluctant to come to terms with, i.e. the bike industry is in trouble. The editors at Bicycling see the sales and discounts, and also the shifting ad revenue, and as the article acknowledges, read the international press coverage. It is interesting that the Forbes article is an authoritative source, and neither the bicycle industry association nor the industry trade publication.
August 14: “NBDA to Host Special Industry Supplier Update with Guest Expert Bob Margevicius.” Bicycle Retailer and Industry News: “The National Bicycle Dealers Association (NBDA) is excited to announce an upcoming informative webinar titled: ‘NBDA Special Industry Supply Update’ featuring guest expert Bob Margevicius, executive vice president of Specialized Bicycle Components.” HPS Analysis: Over 300 folks from the bicycle business signed in, and stayed for this amazing webinar that logically explained the current status of the bicycle supply chain using Bob Margevicius’ insightful analysis of the most current data available. Here is the link to the recording of the webinar, and HPS urges everyone who receives this newsletter to watch and listen carefully, even if you have already seen it.
August 15: “Pacific Northwest Heat Wave Could Break Temperature Records through Thursday.” National Public Radio Weather: “Numerous heat-related warnings and advisories are being issued for a dangerous heat wave blanketing the Pacific Northwest to the northern Rocky Mountains this week. High and low temperatures could tie or break records. The National Weather Service (NWS) urged people in parts of Washington, Idaho, Oregon, Montana, and Northern California to prepare for dangerous triple-digit temperatures this week, with little reprieve due to record-warming overnight temperatures until Thursday.” HPS Analysis: We are going to keep hammering on this – bad weather that will affect the ability to get outside to ride a bicycle is a here-and-now, recurring issue in all regions of the country. The bicycle business needs to get ahead of managing this issue, and invest in and develop a “bicycling weather channel” that retailers and consumers can access 24-7 in-store and online, to help bicyclists plan when and where they can get outdoors. Developing and stocking bad-weather riding gear and emergency kits opens new opportunities.
August 15: “The 10 Brands with the Most ‘Influential’ Branding Are…” Chain Store Age: “The controversial OnlyFans platform topped the list, with an average of 147,736 combined monthly searches, according to Web design company Digital Silk, which analyzed search data for more than 200 of the world’s largest brands by combining each name with the terms ‘logo,’ ‘brand,’ and ‘branding,’ to see which brands people are searching for the most in America.” Here are the Top 10 most influential brands, as ranked by Digital Silk: OnlyFans, Instagram, YouTube, Starbucks, TikTok, Facebook, Nike, Amazon, Apple, and Jordan. HPS Analysis: Influential branding is the key takeaway here. What influences average age 65 is far different than what influences average age 25, and when it comes to the bicycle market, the pandemic profoundly changed the “most influential branding,” So has the Internet, and who the influencers are, that sway the brand thinking and preferences. If you want more proof, visit electrek.co and electricbikereport.com, and take a look at the brands they have tested and are recommending, compared to bicycling.com.
August 16: “Heybike Receives UL2849 Safety Certification.” Bicycle Retailer and Industry News: SAN FRANCISCO – “Heybike, a leading e-bike brand, is proud to announce that it has received the UL 2849 battery safety certification. Receiving this certification validates Heybike’s constant pursuit of quality and safety assurances underlined in its design and manufacturing process. Strict quality controls are integrated into every stage of Heybike’s production process, from design conception, down to the finished products that reach consumers.” HPS Analysis: Heybike is a brand of e-bike that you find frequently on Amazon and Walmart.com. However, this DTC second or third-tier e-bike brand has launched UL2849 Safety Certification as a marketing tactic, joining a small but growing number of e-bike brands that are promoting and marketing UL2849 Safety Certification as an important difference between their brands and all the other brands of e-bikes in the American market, including, at least for now, all the top-tier brands. The top-tier complain that testing and compliance with UL2849 is costly, and will take a long time to implement. Heybike and other brands are doing what HPS believes will become a rapidly growing trend of using UL2849 Safety Certification as a marketing tool to differentiate and capture market share in a turbulent consumer marketplace.
August 16: “Target Slashes Full-year Earnings Forecast as Retailer Struggles to Win Over Thrifty Shoppers.” CNBC: “Target on Wednesday missed quarterly sales expectations, and slashed its full-year forecast, as it again had trouble convincing shoppers to buy more than necessities. The big-box retailer cut both its full-year sales and profit expectations. Target offered a gloomier outlook, even as some top economists have scrapped calls for a recession, and government data show signs that inflation is cooling. The company said it now expects comparable sales to decline by about mid-single digits for the full fiscal year, and earnings per share to range from $7 to $8. It previously anticipated comparable sales would range from a low single-digit decline, to a low single-digit increase, and earnings per share would come in between $7.75 and $8.75. HPS Analysis: The second largest U.S. mass merchant retailer of bicycles is having a difficult time as the consumer market continues its shift to lower-priced value. What isn’t included in this article is an additional problem Target is having with theft and shrink. As far as HPS knows, Target has not pursued an aggressive private-label bicycle program. Accordingly, the decline as it impacts the bicycle business falls on suppliers like Pacific Cycles, now owned by PON.
August 17: “Walmart Lifts Profit Outlook Again on Boost From Bargain Seekers.” Bloomberg: “Walmart Inc. raised its annual profit forecast again, but struck a cautious tone on consumers and the U.S. economy. Rising borrowing costs, and the resumption of student loan repayments, will add to the strain on U.S. household budgets in the coming months. After a strong first half of the year, the midpoint of the retailer’s profit forecast for the current quarter slightly trailed analyst estimates. ‘Jobs, wages and pockets of disinflation are helping our customers,’ Chief Executive Officer Doug McMillion said on a conference call with investors and analysts. ‘But rising energy prices, resuming student loan payments, higher borrowing costs, tightening lending standards, and a drawdown in excess savings, mean that household budgets are still under pressure.” HPS Analysis: The largest retailer of bicycles in the mass merchant channel, and in the U.S., is doing well, and better than its leading competitors. As far as HPS knows, Walmart is pursuing an aggressive private-label bicycle program which is resulting in even more reduction in orders to suppliers like Huffy, Pacific Cycle, and Kent. Walmart, through the Walton Foundation and the companies owned by the Walton family, has become heavily involved in bicycling, and is actively funding bicycling infrastructure expansion throughout Northwestern Arkansas. The bicycle industry is gravitating to Bentonville, AK, the epicenter of bicycling activity and global headquarters for Walmart. The Cycle of Influence will be held there in September, followed by the PeopleForBikes SHIFT23 in October.
August 19: “Road Safety Emergency Declaration Yields Promising Results in Carlsbad, California.” SMARTCITIESDIVE: “Injury-causing accidents dropped 19 percent year over year, turning around a trend of growing accidents involving bikes. But ongoing efforts will require a lot more money. HPS Analysis: This is a promising series of events that provides a case study for advocates to take to cities. The declaration of a road safety emergency released funding that allowed education and enforcement that dropped injury-causing bicycle/e-bike accidents by 19 percent year over year. That is the good news. The bad news is that more funding will be required to maintain the program in Carlsbad, and expand it to other municipalities in California, and around the country.
August 18: “The Panama Canal Has Become a Traffic Jam of the Seas.” The Wall Street Journal: “More than 200 vessels are stuck on either side of the waterway as a serious drought cuts crossings. A flotilla of ships is stuck on both sides of the Panama Canal, waiting for weeks to cross after the waterway’s authorities cut transits to conserve water amid a serious drought. Vessel-tracking data shows more than 200 ships currently waiting to transit, a figure that has been climbing since the canal capped daily transits to 32 last month from an average of 36 under normal conditions. The waterway’s entrances on the Pacific and Atlantic oceans are dotted with ships that are backed up for more than 20 days.” HPS Analysis: The steam-ship lines are rerouting ships around South America or North Atlantic routes. This is not the result of too much shipping volume. It is the result of serious drought conditions lowering the water levels. Container ships are being partially unloaded to reduce draft and allow them passage. This is climate change’s impact on global shipping. For the bicycle business there has not been any large amount of shipping dependent on the Panama Canal, and it is common practice to offload container ships at West Coast ports, and put East-bound containers on stack trains to the Midwest and East Coast.
August 18: “Survey: 66% Percent of Americans Would Back Pro-Tariff Presidential Candidate.” Sourcing Journal: “Brands and retailers calling for an end to the Trump-era Section 301 tariffs may be out of step with the views of the typical consumer. New data shows that two-thirds of Americans believe the U.S. government should slap more tariffs on China-made goods.” HPS Analysis: Let’s be clear – the 25 percent punitive Section 301 tariffs, which are in addition to existing tariffs, are paid by the importer of record, not the Chinese manufacturer or shipper. All tariffs are paid by the bicycle brands, and are passed along to retailers who pass them along to consumers. The anti-China sentiment has simply gotten out of hand and been taken too far. HPS believes PeopleForBikes understands this, and is part of the American business community lobbying against the Section 301 punitive tariffs that should be struck down, leaving the regular tariffs on imports from all source countries, including China, that have been in place for almost 50 years.
August 22: “Nike Suffers Record Rout on China Concern, Inventory Woes.” Bloomberg: “Nike Inc. posted a record streak of losses as concern over China’s sluggish consumer recovery builds, and elevated merchandise stockpiles continue to weigh on profitability, according to the activewear industry. The stock slid 1.4 percent to $101.46 on Tuesday, falling for a ninth straight session in its longest losing streak since the company’s initial public offering in December 1980. The latest drop came after retailer and Nike customer Dick’s Sporting Goods Inc. reported disappointing fiscal second-quarter results, and cut its profit outlook for the year, due in part to more theft at its stores. Nike’s weakness coincides with increasing signs of a soft consumer rebound in China, which is a key growth market for the sports gear giant. China’s retail sales growth decelerated to 2.5 percent in July, worse than the median forecast of 4 percent … The rout has wiped out nearly $13 billion of Nike’s market value, which currently stands at $155 billion.” HPS Analysis: We have said before that we think the athletic shoe industry is a close parallel to the bicycle industry as it related to the Bullwhip effect, and the inventory overhang that it created in supply chains, and a slowing of consumer demand beyond the overall slowing in retail sales. Nike is a specific example, although the bicycle business doesn’t have a single brand valued over $150 billion. Of note is Nike’s counting on China as a key growth market, which is also similar to bicycle brands like Giant, and we think others of the multinationals.
August 22: “Ace Hardware Aims for a Total of 170 New Stores in 2023.” Chain Store Age: “Ace Hardware has already cut the ribbons on 100 new stores in the United States in 2023, and the Oak Brook, Illinois-based company promises that 70 more will be in operation by New Year’s Day 2024 … Ace continues to prove that local, service-based hardware stores remain relevant in a segment dominated by Home Depot and Lowe’s. It has opened more than 1,100 locations in the past five years, and last year delivered shareholders a 39 percent return of $345 million. Many of those shareholders are the independent operators of its stores, which now number more than 5,800 in 60 countries and all 50 states. Ace’s sales last year topped $22 billion.” HPS Analysis: Ace Hardware is the largest dealer-owned retail hardware business in, we think, the world, but certainly in the U.S. The point is, as the article notes, Ace “… continues to prove that local, service-based hardware stores remain relevant” with competitors like Home Depot and Lowe’s. For the 15th time in 16 years, Ace was ranked highest for customer satisfaction among home improvement retailers by J.D. Power in 2022, with a score of 869 out of a possible 1000. Lowe’s and Menards tied for second place with scores of 849. At one time in its history, Ace Hardware was a cooperative, which is a business model that has been tried with limited success in the U.S. The supply side has not supported dealer cooperatives in the past, but the times, the channels of trade, and the consumer market demographics all changed during the pandemic. Perhaps it is time for bike shops to revisit the cooperative business model.
August 24: “Merida Reports First Half Year Sales and Profit Decrease.” BIKE europe: CHANGHUA, Taiwan – “The sparse numbers reported by Merida Industry Co. clearly indicate that its 2023 export position is in decline compared to 2022. The bicycle manufacturer posted a single-digit sales decrease, and a double-digit drop in profit, for the first half of 2023 … Merida’s 2023 half-year sales were 6.6 percent down.” The half-year profit was also down 38.8 percent. HPS Analysis: While we will never see the private multinational companies’ financials, at least if they stay out of Chapter 11 or 7, the public multinational companies have to disclose quarterly, as Shimano and Giant have. Merida has now disclosed its Q2 and first-half financials, although as sparsely as it can. It comes as no surprise that Merida’s first-half sales were down 6.6 percent, or that profit was down 38.8 percent. Although it was not mentioned, our concern is the amount of business Merida is doing in China, and the impact a downturn in the Chinese business will have on Q3, and the second half of 2023.
August 25: “Dick’s Sporting Goods, Macy’s Flash Warning Signs on U.S. Consumer Spending.” The Wall Street Journal: “Rising levels of theft, student-loan repayments, and credit-card delinquencies, cloud earnings picture for retailers … The readouts from Dick’s and Macy’s illustrate the economic challenges that persist among sellers of consumer goods. Spending on items such as apparel, electronics, and sporting goods, surged early in the pandemic, but slowed significantly starting last year, causing whiplash among retailers that bet on buying patterns continuing at higher levels.” HPS Analysis: Dick’s Sporting Goods is the largest of the Full Line Sporting Goods Channel bicycle retailers. Slowing sales of sporting goods and theft are dragging down gross sales and profitability.
August 29: “Raimondo Says Business With China Is Key But Increasingly Risky.” Bloomberg: “U.S, Commerce Secretary Gina Raimondo argued that China is driving away American companies by making investments in the world’s second-biggest economy increasingly hazardous.” HPS Analysis: We will have to wait and see if Commerce Secretary Raimondo was able to get this message across to the members of the Chinese government that she met with on her late August trip to the PRC. HPS doesn’t want to belabor this, but Secretary Raimondo has made it very apparent to the PRC leadership that old behavior and new regulations are driving American companies away. The real question is the impact on the established PRC supply chain to the U.S., which is primarily Taiwanese owned.
August 29: Study: “Secondhand Market Will Reach $276 Billion in Five Years.” Chain Store Age: “According to the 2023 Recommerce Report from mobile secondhand marketplace OfferUp, 85 percent of three percent from 2022. In addition, 27 percent of respondents ventured into the secondhand market for the first time within the last year in 2023, there was a 27 percent increase in secondhand sellers compared to the previous year. As a result, the secondhand market is projected to reach $188.5 billion by the end of 2023, and $276 billion by the end of 2028, representing a 58 percent growth rate, outpacing the overall retail market by 4.4 percent.” HPS Analysis: The NBDA conducted a fantastic webinar featuring James Moore, who went through all the detail for a bike shop developing a very profitable previously-owned bicycle and e-bike department of their retail business. The webinar was recorded and is available by contacting the NBDA at www.nbda.com. This article confirms the other articles we have been reporting on, indicating the growth in the circular economy. The NBDA Cost of Doing Business shows that the highest gross margin product segment is used bicycles and e-bikes at 50 percent.
August 30: “Shipping’s Peak Starts Petering Out.” The Wall Street Journal: “Operators brace for a second straight fall with only tepid gains during the typically busy time of the year. Industry experts point to ongoing concerns over consumer demand as a crucial damper on shipping volumes.” HPS Analysis: This is confirming the continued slowing of exports of consumer goods from Asia and China for import into the U.S. Pre-pandemic, there was a late summer/early fall surge of imports to the U.S. of consumer goods for holiday sales. What this article indicates is that whatever shipping peak there was going to be has come, and appears to be petering out.”
August 31: “Ideal Bike Sees Double-digit Revenue Downshift in Q2.” Bike europe: TAICHUNG, Taiwan – “As the third in line after Giant and Merida, Ideal has also reported red figures for this year. While the bicycle manufacturer was still able to keep up its Q1 revenue at a comparable good level with a slight 1.8 percent decrease, Q2 2023 saw a double-digit downshift.” HPS Analysis: All three of the largest Taiwanese bicycle/e-bike OEMs with significant manufacturing footprints in China have now reported Q2 and first half 2023 results. Ideal initially reported downturns that were followed by a report that VanMoof went into Chapter 11 protection, owing Ideal over a million dollars. Ideal’s European manufacturing facility had been previously informed in April of the insolvency of its major German customer Advanced Sports GmbH.
Contact Jay Townley: firstname.lastname@example.org