September 1: “Industry Needs to be Louder and Clearer About E-bike Fires.” Cycling Industry News: “Today see the London Fire Brigade reveal e-bike and e-scooter fires are at a record high in London, with more fires in London in 2023 than there were in the whole of 2022.” HPS Analysis: This is London calling! There seems to be this misconception that the e-bike lithium-ion battery fire problem is isolated to one big city in the U.S., and that it isn’t a problem where e-bikes have been established market leaders since before the pandemic. HPS talks regularly to an industry expert in Europe, and variations of the e-bike battery cause and effect are occurring across the Atlantic with the same tragic results. HPS will do everything it possibly can to encourage and facilitate communication between the U.S. and Europe about both causes and more importantly preventative solutions. While the UK may be off the back on this, the EU is about to promulgate Digital Product Portfolio legislation that will, in the opinion of HPS, greatly improve manufacturer, brand, importer and retailers tracking of bicycles, e-bikes and lithium-ion batteries through the circular economy all the way to recycling and disposal.
September 1: “West Coast Port Dockworkers Ratify Six-Year Contract.” Sourcing Journal: “Two months after striking a tentative six-year contract agreement with their maritime employers, West Coast union dockworkers officially gave the deal a stamp of approval.” HPS Analysis: The International Longshore and Warehouse Union (ILWU) voted 75 percent in favor of ratifying the new agreement. The contract is retroactive to July 1, 2022, and runs through July 1, 2028. We know this is old news, but it took until September 1 for the trade press to publish this news. Since this contract was such a big, looming issue that could have made the overall bicycle product shortage much worse during the pandemic, HPS wanted to make sure the American bicycle business is made aware for planning purposes that a labor issue at U.S. West Coast ports has a low probability over the next four to five years.
September 1: “Fayetteville to Consider New E-bike Rules on City Trails.” Fayetteville Flyer: “The City Council will soon consider some new rules about which types of e-bikes are allowed on the city’s trails. The new regulations are partially aimed at aligning Fayetteville’s rules with state laws that define the different classes of e-bikes, but also will address what types of bikes are allowed on both paved and soft-surface trails.” HPS Analysis: We include the Fayetteville Flyer in our weekly media scanning because this newspaper also covers Bentonville and what is happening locally with the region’s largest employer, Walmart, the Walton Foundation, and other regional businesses including The Ledger. Also, the Northwest region of Arkansas has emerged as a cycling trail-based ecosystem that is part of what HPS sees as the future “gentrification” of bicycling in large regions of the country going forward. The state of Arkansas has adopted the PeopleForBike three-class definition for the use of e-bikes on state roadways, which the Fayetteville City Council will be considering when shaping its proposed paved trail rules.
September 5: “Pon Holdings and Volkswagen Combining to Expand Company E-bike Leasing.” Bicycle Retailer and Industry News: “Pon Holdings and Volkswagen Financial Services will collaborate to expand e-bike leasing for employees and commercial customers in the U.S. and Europe. Volkswagen Financial Services acquired a 49 percent stake in Pon’s bike leasing subsidiary Bike Mobility Services (BMS). The partnership became official September 5 when the agreement was signed at the IAA Mobility motor show in Munich.” HPS Analysis: BMS provides company bikes to more than 600,000 employees in 65,000 companies in Europe, with 90 percent of the bikes being e-bikes. BMS just opened an office in San Francisco, and is bringing the company bicycle lease business model to the U.S. This business model is economically large enough to function with or without bike shops in the delivery and service chain, and time will tell (1) if this business model gains traction in the U.S. and (2) whether it will include bike shops or not.
September 5: “Retailer Roll: Bicycle Company Files for Chapter 11.” Bicycle Retailer and Industry News: “Roll: Bicycle Company filed for Chapter 11 bankruptcy protection on August 31. Roll has three retail stores and its own bike brand that it sells wholesale and to consumers. In a filing with the U.S. Bankruptcy Court for Southern Ohio, Roll listed total assets of $1.7 million, including $480,000 in inventory. Liabilities are $2.1 million.” HPS Analysis: As Bill Austin said: “inventory is evil!” I have known the owner of roll: Cycling since he started his first specialty bicycle retail store in Columbus, Ohio, and he is a professional retailer. I do not know the details of the roll: Cycling business or financial situation that led to the decision to file for Chapter 11 protection, but the fact that it became necessary is of concern as the American bicycle business heads into the uncertainty of the fourth quarter of 2023.
September 6: “Trek to Sell Used Bikes Through its Red Barn Refresh Program.” Bicycle Retailer and Industry News:“Despite the marketplace awash with new bike inventory, Trek Bicycle is encouraging cyclists to buy used in the name of sustainability through its new Red Barn Refresh program. Launched September 4, Trek says the program is the industry’s first manufacturer-led bike-certified trade-in and refurbishment program that is at the heart of Trek’s circular-economy mission statement.” HPS Analysis: Trek has taken leadership in advocating for the circular economy within the bicycle business. Embracing used bicycles is a very sound economic strategy as evidenced by the latest NBDA Cost of Doing Business Study showing that used bicycles, which includes e-bikes, is the highest gross margin product category, at an average of 50 percent. The NBDA has been actively educating bike shops about establishing used bicycle departments for their businesses. The circular economy will shortly receive a major boost when the EU promulgates a new Digital Product Passport (DPP) law with attendant regulations. U.S. regulatory agencies and Congress are tracking the new EU DPP for law for applicability.
September 7: “China Exports Fall Again as Economy Struggles.” BBC Business: “China’s exports have dropped for fourth month in a row, as the ‘world’s factory’ struggles with weak demand at home and abroad. Exports fell 8.8 percent in August compared with a year earlier, while imports dropped 7.3 percent, official figures show. However, those declines were not as bad as expected, and were an improvement on the previous month. China is facing several post-pandemic challenges, including a property crisis and weak consumer spending.” HPS Analysis: Based on the published financials from Giant Group through the first half of 2023. HPS is projecting that all of the American and European multinational bicycle brands are selling at wholesale and/or retail in the Chinese consumer marketplace. While Giant Group was down substantially in Europe and North America, in global total revenue it was down just 5 percent, because of a substantial increase in gross revenue in China, 6-month YTD 2023. We may be wrong in whole or part, but HPS opines that all of the multinationals in the bicycle business are generating enough revenue from the Chinese consumer market that a downturn has the probability of dragging down their total global revenue and profitability. Since Giant Group is the largest of the multinationals that is public, we will base future assumptions on the Group’s third quarter and second half financial disclosures.
September 7: “USTR Extends Tariff Exclusions Until Year’s End.” See the entire article HERE.
September 7: “Blaupunkt Achieves Prestigious UL-2849 Certification for its Electric Folding Bicycles.” Bicycle Retailer and Industry News: “Blaupunkt, a revered global brand with a rich 100-year-old heritage of product excellence, is proud to announce the successful completion of the UL 2849 certification by UL Solutions for its range of electric foldable bicycles. This achievement signifies Blaupunkt’ s commitment to meeting the highest safety and performance standards, tailored specifically for the U.S. market.” HPS Analysis: Despite the public relations hyperbole, the core message is important for the American bicycle business. UL 2849 testing and certification for electric bicycles marketed and sold in the U.S., is the product safety standard that retailers and consumers should look for and rely on. UL 2849 is now officially recognized and supported by the American bicycle industry trade association, and the National Bicycle Dealers Association.
September 11: “U.S. Partners Ready Trade Corridor.” The Wall Street Journal Logistics Report: “The U.S. and its allies are trying to build new trade infrastructure to match shifting geopolitics. Washington and partners in Europe, the Middle East and Asia are completing plans to build a trade corridor linking the regions, the WSJ’s Stephen Kalin and Laurance Norman report, a massive initiative that could undercut China’s inroads in a key global trade route. The project aims to connect Saudi Arabia, the United Arab Emirates, and potentially Israel, by freight rail, then use sea transport to reach India and Europe. The U.S. and its European partners have stepped up plans to finance global infrastructure projects in a bid to counter China’s influence through its Belt and Road Initiative. Beijing’s overseas ambitions for that $1 trillion rail, road, and ports plan, have been fading more recently. The new U.S. effort would have all signatories commit financing, but details won’t be hashed out for several months.” HPS Analysis: Why are we even mentioning this? In addition to highlighting the extent to which the drive for decoupling from China is driving U.S. trade policy, what it potentially means for the American bicycle business is ocean freight volume, along traditional trade routes for bicycles being reduced, which will also reduce sailings and could drive up ocean freight costs.
September 11: “Vosper: What’s New – and Not So New – About Bike 4.0.” Bicycle Retailer and Industry News: “Way back in May of 2022, I wrote a piece about the three ‘ages’ of the U.S. bicycle market since World War II, which I labeled Bike 1.0, Bike 2.0 and Bike 3.0, respectively. To review,
- “Bike 1.0, roughly 1950–1975, when the specialty retail market was dominated by a single brand, Schwinn, creating an era of relative stability at both the supplier and retailer levels.
- “Bike 2.0, extending from the end of the bike boom and the introduction of the mountain bike through the late 1990s and the early 2000s. This period was governed by the phenomenon of Perfect Competition, where no particular brand or brands could accrue enough market share or competitive advantage to gain control of the market.
- “Bike 3.0, starting near the turn of the current millennium. That era featured a few dominant players, a group of four companies: Trek, Specialized, Giant and the Pon brands (formerly just Cannondale, but now with the addition of Santa Cruz, Cervelo, and others). I labeled these four brands The Quadrumvirate, and they each tried, and failed, to overcome the forces of Perfect Competition. Part of the Quadrumvirate’s strategy behind Bike 3.0 was to control key retailers in each market by tying them as closely to a single brand as possible, locking competing brands out of those dealers. The strategy met with limited success as many of the largest dealers ended up representing more than one Quadrumvirate brand.
“Then, about seven months ago, I wrote that Bike 4.0 had arrived. The new dynamic differed from the 3.0 version in four fundamental ways:
- “Dilution of the IBD and the proliferation of alternate retailing models, specifically, direct-to-consumer sales by brands like Canyon and many e-bike labels.
- “The traditional sales channel is replaced by an omnichannel sales‘ecosystem’ where buyers can purchase bikes through any channel they choose.
- “Complementary to the previous two points, we now have direct sales to consumers by traditional bike suppliers (either through D2C or Click & Collect dealer fulfillment), and
- “Vertical integration of suppliers and retailers (bike bands buying bike shops) by at least some of the largest industry players, as we’ve seen with Trek, Specialized and the Pon Group.”
HPS Analysis: I started working for a bike shop in 1957, went to work for Schwinn in 1966, left in 1990 and worked for Giant in the mid-1990s, Browning Components in the late 1990s, and as a consultant from 2000 forward to today. My point is that I have experienced all four of the “ages” Rick Vosper describes in his article. Overall, I agree with Rick’s analysis as it pertains to the specialty bicycle retail channel of trade. However, I suggest it can benefit from the addition of one key component, the American Consumer, both the non-cyclist and the cyclist. As Marc Sani recently said in his September 2023 Grapevine column in BRAIN: “This isn’t your father’s industry anymore. The industry is undergoing profound change.” From Vosper’s recently-arrived Bike 4.0, to the gentrification of cycling, to the rapid growth of e-bikes that has brought new people to cycling riding new moped, step-through and cargo styles, to advocates of the Circular Economy who want to purchase, and ride used bicycles and e-bikes. The NBDA has delivered a consumer study conducted by an internationally-recognized research firm that I suggest everyone in the American bicycle business should read (www.nbda.com), and which Rick Vosper may want to dovetail into the next chapter of his excellent specialty bicycle retail channel analysis.
September 12: “Rad Power Bikes Announces Major Update to its Entire E-bike Lineup.” Electrek: “Seattle-based electrek bike maker Rad Power Bikes has just announced the biggest update to its entire product lineup while promising full UL compliance for its batteries and e-bikes. The move comes as UL listing is seen as an increasingly popular issue among e-bike makers, customers, and local governments seeking ways to regulate e-bike safety.” HPS Analysis: According to Rad Power Bikes, all of their e-bikes moving forward will be compliant with UL 2849, and all the company’s lithium-ion batteries will be compliant with UL 2271. More e-bike brands are announcing their testing, compliance and certification to UL 2849 and UL 2271, but the top tier of the bike shop channel of trade, Trek, Specialized, Giant and the Pon.Bike Group including Cannondale, are not among them, at least not yet. Also, the October 2023 issue of BRAIN published the results of a recent survey of bike shops on page three showing that only 41 percent of the e-bike suppliers asked if their products were UL certified said yes, 31 percent reported e-bike suppliers had not even responded to their inquiries about UL certification, 6 percent reported e-bike suppliers said no and 40 percent of the bike shops surveyed said they have not even asked their e-bike suppliers about compliance with or certification to UL standards.
September 12: “European Pre-owned Bike Marketplace Buycycle Makes Move Into U.S.” Cycling Industry News: “(The) marketplace for high value, pre-owned bikes buycycle is making a move across the Atlantic to reach the U.S. cycle market from its German HQ. Launched in 2021, buycycle said it guarantees buyer protection, insurance, and provides a safe space for cycling enthusiasts to buy and sell their bikes. CEO and co-founder Theo Golditchuk explained: ‘Since we launched buycycle in 2021, we have grown super-fast across Europe. The strong demand in the U.S. took us by surprise. We noticed an uptick in organic sales which showed us that there is a big interest in pre-owned bikes and the need for a platform where people can buy and sell them safely and conveniently. We have built a dedicated U.S. team to launch in the market, and are incredibly excited to expand the success we have witnessed in Europe.’” HPS Analysis: HPS doesn’t buy into most press releases, but this one got our attention because it talks about the opportunity a European pre-owned bike marketplace sees in the U.S. Also the comment that “… strong demand in the U.S. took us by surprise” reinforces a high probability of both demand and potential success. HPS has felt strongly about the positive business potential for bike shops in the previously owned segment, and urges investigation of expanding bike shop business plans to include a used bicycle department, including e-bikes.
September 14: “New York City Council Approves City-funded E-bike and Lithium-ion Battery Trade-in Program.” Bicycle Retailer and Industry News: “The City Council on September 14 approved a two-year city-funded trade-in program to get uncertified e-bikes and lithium-ion batteries off the streets in the latest legislative action to reduce the growing number of fires that have averaged four a week. The program will provide a new certified e-bike and/or replacement battery and charger at reduced or no cost after trade-in. Beginning September 16, the city will require all e-bikes, as well as other powered mobility devices, and lithium-ion batteries, to meet certification like UL to be sold in the city. The new city law does not prohibit the use of non-certified bikes or batteries.” HPS Analysis: We understand applications for the trade-in program are off to a slow start, and that the city of New York is making changes in the details of the program as quickly as possible to make it both accessible, easy, and affordable to apply for by as many delivery workers as possible. This is just the beginning of the positive steps needed to get the population of potentially dangerous lithium-ion batteries now part of e-bike propulsion systems and equally dangerous replacements, out of circulation and use. If a trade-in program proves too slow, the City of New York has additional options, including asking the U.S. Consumer Product Safety Commission to step in.
September 14: “Retail Sales Notch Small Gain in August Despite Slowing Economy.” Chain Store Age CSA: “Core retail sales in August inched up 0.1 percent from July, and were up 3.3 percent year-over-year, reported the National Retail Federation, whose calculation excludes automobile dealers, gasoline stations, and restaurants, to focus on core retail. In July, sales rose 0.3 percent month-over-month, and increased 3.3 percent year-over-year. ‘NRF’s numbers show the pace of retail growth cooled from July but that consumers are still active even as they continue to be selective and price sensitive,’ NRF chief economist Jack Kleinhenz said. ‘Households have the capacity to spend, but momentum is slowing, in part because savings built up during the pandemic are running lower and credit costs are rising.’” HPS Analysis: We remain less optimistic about a U.S. bicycle market recovery during the end of 2023 than the industry trade association does, because of our analysis of reports from the economists at NRF, Bloomberg, and the FED. Keep in mind that the bicycle business and the overall sporting goods sectors are underperforming the rest of the economy, and have to post relatively significant gains to pull even with the performance of the rest of the consumer economy. We readily admit that the U.S. consumer demand side of the economy is uncertain and sending mixed signals, but our team does not see a high enough probability for an optimistic outlook for the fourth quarter of 2023, at least not yet. There are still three more months of the year. For now, we are advising clients to plan for continued contraction and slowing sales and revenue going into Q1 of 2024.
September 14: “NYC Council to Weigh Making Delivery Apps Pay for Drivers’ E-bikes.” Gothamist: “The bill – which is set to be introduced on September 14, is the latest attempt to quell the hundreds of e-bike related fires that occur each year in the city, and hold the delivery apps more responsible for the safety of their drivers. HPS Analysis: If this legislation gains traction, or becomes law, it is sure to face strong opposition and backlash from the apps who will, in all probability, launch well-funded legal challenges. The members of the New York City Council are concerned about the safety and lives of their constituents, while the apps seem mostly concerned about continuing to make a profit.
September 17: “The Rise of Surge Pricing: ‘It Will Eventually be Everywhere.’” Financial Times: “’‘Dynamic’ pricing, as many in industry call it, or ‘surge’ pricing as it is more widely known by consumers, is when businesses flex prices at particular times in response to shifts in supply and demand, and is not a new phenomenon. It has been used by airlines in the U.S, for instance, since 1983 when the U.S. government relinquished the power to set domestic airfares. When booking flights and hotel rooms, consumers have become accustomed to the rhythms of the dynamic pricing model: book early or during the shoulder season and get a good deal, book last-minute or during the busy holiday periods and get penalized. However, powered by algorithms and artificial intelligence, it is being introduced at a rapid pace by a growing number of consumer industries. Amazon changes the price of its products on average every 10 minutes, using millions of real-time data points to benchmark against competitors and track demand surges. ’It will eventually be everywhere,’ says Robert Cross, who created a computerized dynamic pricing model for Delta Air Lines in the early 1980s, before doing the same for hotel giants Marriott, Hyatt and InterContinental Hotels Group.’” HPS Analysis: We believe the brick-and-mortar specialty bicycle retail business has remained largely untouched by dynamic or surge pricing until a mismatch between suggested retail prices, inventory, and demand created a situation ripe for dynamic pricing in the form of discounting and sales that started during Q4 2022, has lasted through Q3 2023, and may well cascade into Q1 2024. Whether dynamic pricing will remain an operating feature of the bike shop business in the U.S. remains to be seen, but the rapid growth of cloud POS systems and the deployment of AI, will make it much easier to implement and manage going forward.
September 18: “Why More High-end Bike Companies are Making Budget-level Electric Bikes.” Electrek: “An increasing number of premium bicycle companies have thrown their hats in the budget-minded electric bike ring lately, resulting in lower prices than ever before from major bike shop brands. So what’s behind this move? … One of the reasons for this focus on more entry-level bikes is quite likely a mere numbers game. While profit margins aren’t as high on lower-priced e-bikes, they sell in much higher numbers in the U.S. Compared to Europeans that often buy e-bikes as car replacement vehicles, and thus are prepared to spend many thousands of dollars for a higher-end model, a much larger percentage of American e-bike riders use their bikes either to supplement car trips or purely for sport/recreation.” HPS Analysis: America isn’t Europe, and HPS keeps bringing the differences to clients’ attention when they point to Europe as the example of why and how the e-bike market will grow in the U.S. Micah Toll is a knowledgeable observer of the European and North American e-bike market dynamics, and in this electrek article he makes the important point that Europeans “often buy e-bikes as car replacement vehicles and thus are prepared to spend many thousands of dollars for a higher end model.” He goes on to opine that Americans use their e-bikes “either to supplement car trips or purely for sport/recreation.” The NBDA Consumer Research Study (www.nbda.com) conducted during the pandemic, also found that adults who had never ridden a bicycle before purchased and rode an e-bike because it represented a new type and style of bicycle. The increasing number of premium bicycle brands introducing lower-priced e-bikes is in recognition of American consumers embracing e-bikes as upgraded replacements for regular bicycles. This is something that many of the new D2C e-bike brands recognized and targeted when entering the U.S. market during the pandemic.
September 18: “American Business Confidence in China Slumps to Lowest in Decades.” The Wall Street Journal: “U.S. companies are painting the bleakest picture in decades over doing business in China, as tensions between Beijing and the West are compounded by a deteriorating environment for their operations. HPS Analysis: Decoupling is proving to be very, difficult for many U.S. and European companies, and this article covers the things the PRC is pilling on to increase the difficulty, and adding to the risk, of continuing to conduct business in China. The American bicycle business is primarily guided by the Taiwanese bicycle companies that have taken the Americans by the hand into China, starting some 40 years ago. Essentially Americans know how to design a bicycle but lack the knowledge and expertise to make a bicycle. That skill set rests with the Taiwanese, Chinese, and Europeans. As we caution our clients, this makes mitigating risk difficult, and is a major challenge to reshoring, although it doesn’t mean it cannot be done.
September 19: “NBDA Bicycle Industry E Bike Safety & Standards Panel Unites to Propel Safe E-Bike Adoption in the U.S.” Bicycle Retailer and Industry News: “The National Bicycle Dealers Association (NBDA) Bicycle Industry E-bike Safety and Standards Panel convened on September 12 to address critical concerns regarding e-bikes in the United States. This panel’s discussions revolved around de minimis reform, the implementation of a three-class e-bike classification system, the best way to accelerate the proliferation of safe and regulated devices in U.S. markets, and the challenges faced by commercial and multifamily building owners, particularly in New York City (NYC), in managing e-bike usage. HPS Analysis: This NBDA E-bike Safety & Standards Panel was a two-hour Zoom meeting open to anyone in the global bicycle business. The four questions discussed during the panel were selected from questions submitted to the NBDA. Panel members notified the moderator if they wanted to speak about one or more of the questions, and each discussion was summarized, along with actions that will be taken. The next panel meeting is scheduled for Tuesday, December 12 from 10:00 a.m. to Noon Pacific. The follow-up action items will be circulated to panel members prior to the meeting when they will be reviewed. Four additional questions will be presented for discussion. HPS urges you to contact the NBDA (www.nbda.com) to submit a question for discussion, to participate, or to listen.
September 20: “Fed Officials Take a Pause to Assess as Inflation Cools.” The New York Times: “Federal Reserve officials left interest rates unchanged on September 20, a decision that gives policymakers more time to assess whether they have raised interest rates enough over the past 18 months to fully wrestle inflation under control. But policymakers also released a fresh set of economic projections suggesting that they still expect to make another rate increase before the end of 2023, and that borrowing costs are likely to remain higher than officials had previously expected in 2024.” HPS Analysis: Inflation is still with us, and the Federal Reserve has steadily raised interest rates to record highs in its fight to moderate and pull down the rate of inflation. None of this is the friend of bike shops or other small businesses. Inflation drives up retail prices and reduces consumer demand, and higher interest rates increase the cost of credit card debt and borrowing. Keeping in mind that economic data continues to suggest the high probability of at least one more interest rate increase before the end of this year, HPS continues to be pessimistic about a rebound in the American bicycle market and business during Q4 of 2023.
September 23: “Biking to Work Isn’t Gaining Any Ground in the U.S.” Bloomberg: “After increased investments in bicycle infrastructure, big experiments with urban bike sharing, an explosion in electric bike sales, and an overall pandemic bike-buying boom, the latest news on bike commuting in the U.S. from the Census Bureau’s annual American Community Survey is not impressive. An estimated 731,272 Americans used bicycles as their chief means of transportation to work in 2022, up from 2021 but down almost 75,000 from before the pandemic, and 175,000 from the peak year of 2014. The big rise in working from home during the pandemic means that fewer people need any transportation to get to work, of course. But redo the statistics as a percentage of those commuting, and they don’t look much better. The 0.54 percent of U.S. commuters who usually made the trip by bike in 2022 was the same as in 2019, but well down from 2014 and not far above the 0.5 percent measured in the decennial census way back in 1980. Many people ride bicycles for other reasons, of course, with a survey conducted for the advocacy group PeopleforBikes finding that 34 percent of Americans rode one outside at least once in 2022. But that share, while up from 33 percent in 2020, is the same found in the group’s first survey in 2014.” HPS Analysis: There is a collective reluctance within the American bicycle community to recognize and embrace the changes brought about by the pandemic and shifting demographics as they impact bicycling advocacy. There is good news here, if we take the time to examine all the facts and data, and realize that bicycling advocates need to get organized and develop the collective planning required to take on the automobile and trucking lobby, the federal agencies that regulate them, and the Congress. Right now we play around the edges, but back away when it comes to the heavy lifting. The author of this Bloomberg piece is essentially correct. What we are missing is the collective wisdom of all of the bicycling and pedestrian advocacy non-profits and what they have learned and know about DOT, NHTSA, and other regulatory agencies, and the committees in Congress that have budget authority and oversight. Instead of fighting with each other for membership and foundation funding. we simply need to work together.
September 26: “New Cars are Supposed to be Getting safer. So Why are Fatalities on the rise?” AP News: “Roadway deaths in the U.S. are mounting despite government test data showing vehicles have been getting safer. While the number of all car-related fatalities has trended upward over the last decade, pedestrians and cyclists have seen the sharpest rise: over 60 percent between 2011 and 2022. It coincides with a steep increase in the sale of SUVs, pickup trucks, and vans, which accounted for 78 percent of new U.S. vehicle sales in 2022, according to Motorintelligence.com. Current U.S. ratings only consider the safety of the people inside the vehicle. The National Association of City Transportation Officials is leading an effort asking U.S. transportation officials to begin factoring the safety of those outside of vehicles into their 5-star ratings.” HPS Analysis: As the pandemic was starting and government checks were sent out, Americans had money to spend, and many purchased pickup trucks and the biggest SUVs they could find. When I asked older folks why, many responded that they needed the “protection” a bigger vehicle provided. Whatever the reason, you can see the data above, and when the pandemic ended and these big vehicles got back on the roadways, they created unsafe conditions for pedestrians and cyclists, and fatalities went up. This, we feel, is a contributing factor to the decline in bicycle sales starting during the second half of 2022, and why biking to work has been flat or declining throughout the country. The League of American Bicyclists has initiated a lobbying campaign aimed at NHTSA, urging side guards on delivery trucks and trailers, and asking DOT to reduce traffic speeds on roadways. All aspects of bicycle (inclusive of e-bikes) and bicycling safety is the overarching issue that needs to be aggressively lobbied if we, as an industry, expect to ever see America reach its full potential as a bicycling country focused on sustainability.
September 26: “Target Closes Nine NYC, West Coast Stores to Stop Losses From Rising Theft.” Bloomberg: “Target Corp. is closing nine stores in four states to stem losses from rising retail theft. One Manhattan location will be shuttered, along with two in Seattle, three in Northern California, and three in Portland, Oregon, Target said in a statement September 26. The stores will close Oct. 21.” “Target has been fuming on its earnings calls for more than a year about losses from theft, which are adding pressure on its slender profit margins. The company says organized retail crime is spurring an increase in shrink, an industry term for inventory losses from external and internal theft, damage and administrative error. In May, Chief Financial Officer Michael Fiddelke said the blow from shrink would be $500 million worse this year than last year.” HPS Analysis: The first thing I did when I read this article was contact Heather Mason, president of the NBDA, to ask if “shrink” has become a problem for bike shops. Heather responded that insurance companies are becoming concerned by the volume of theft and fraud claims they are receiving from specialty bicycle retailers, which are both part of the growing shrink problem at retail. Target isn’t the only large brick-and-mortar retailer having a big enough problem with shrink that it is impacting profitability. It has reached a point where the National Retail Federation (NRF), Walmart, Target, Costco, Dicks Sporting Goods, et al, are actively lobbying Congress to introduce legislation to address the problem. HPS isn’t quite sure what legislation can really do, but other preventative measures are in the works that should be helpful and bike shops, depending on the scope of their individual problems, are going to have to adopt what affordable solutions become available.
September 26: “U.S. Consumer Confidence Drops to a Four-Month Low on Outlook.” Bloomberg: “U.S. consumer confidence slumped to a four-month low in September, dampened by a deteriorating outlook for the economy and labor market. The Conference Board’s index declined to 103 this month from an upwardly revised 108.7 in August, data out September 26 showed. The figure fell short of the median estimate of 105.5 in a Bloomberg survey of economists.” HPS Analysis: Consumers are the driving economic force in the U.S. economy. It is consumer spending on goods and service that the FED is targeting, in the hope of cooling that spending when it raises the prime interest rate, which flows down-stream in the form of tighter bank lending, higher interest rates on business loans, and higher credit card fees. A drop in consumer confidence is welcomed by the FED, but is not necessarily the best news for retailers of all sizes and types.
September 28: “Accell Group sees Fitch Rating Drop for Second Time in Months.” BIKE Europe: “Citing ‘limited progress on addressing supply chain challenges, which has eroded liquidity headroom and led to deeply negative free cash flow (FCF) in 2023,’ the international credit rating agency Fitch has revised its outlook for bicycle manufacturer, Accell Group, downwards for the second time in months. Fitch has downgraded the rating to ‘B-’ from ‘B’. The Fitch outlook formally applies to Sprint BidCo BV, the new holding company of Accell Group that delisted the company on August 22, 2022. Accell Group was delisted following the take-over by a KKR-led consortium last year.” HPS Analysis: Accell Group is one of the largest bicycle and e-bike manufacturers and importers in the global marketplace. Headquartered in The Netherlands, Accell Group took an unsuccessful run at the U.S. market before pulling back to Europe, and in being acquired by a KKR-led consortium, was taken private. Too much inventory was a problem after the pandemic and evidently remains a problem that has resulted in the second rating drop from Fitch this year. We are in a protracted shakeout, probably the worst I have seen. One of the features, in addition to business failure and consolidation, is the situation we are witnessing with the Accell Group credit rating being downgraded. If we are correct in our current assumption that there will not be a resurgence in business this year, we can expect more news like this.
September 28: “All Those Pandemic Savings? They Might Already Be Gone.” Marketplace: “Americans saved a lot of money during the early years of the pandemic, more than they normally would. At one point, they had squirreled away an estimated $2.1 trillion dollars work of ‘excess savings.’” “As people squirreled away cash, the savings rate went from about 8 percent in early 2020 to an all-time record high of almost 34 percent later on that year.” Since then, we have been spending down those savings. The saving rate fell to just 2.7 percent in 2022, and right now it’s at 3.5 percent.” HPS Analysis:This is another one of those indicators that HPS watches as relates to consumer ability to spend discretionary funds on bicycles and related products. Some economists believe that all the pandemic savings have already been spent, and others believe the last vestiges of those savings will be spent during Q4 of 2023. Bottom line, the so-called pandemic savings are not available to spend this year.
Contact Jay Townley: email@example.com.