E-BIKE HATE, LEGISLATION, AND LIABILITY FOR AMAZON?

01-30-24: “Congress finally agrees on electric bike bill – but not the one everyone wanted.” electrek: “Republicans and Democrats rarely agree on anything in the highly divided U.S. House of Representatives. But one thing they have agreed on – unanimously this time – is electric bikes. Just not the way we all hoped. The importance of the issue has arisen partly due to an actual increase in e-bike fires, but also largely due to a media frenzy that has blown the issue out of proportion. While e-bike fires do occur in the U.S., they represent one of the lowest risks of all forms of transportation. Many more cyclists are killed by cars than people who are killed by e-bike batteries occasionally catching fire. As we’ve pointed out before, despite NYC being seen as the epicenter of e-bike fire deaths, New Yorkers are 5x more likely to die on the subway than from an e-bike fire. But why let a little logic and proportion ruin a rare chance for bipartisanship in divided Washington? In this case, the bill giving the CPSC a directive to mandate e-bike batteries has already passed in its subcommittee and regular committee, each time with unanimous support from Republican and Democratic lawmakers. The next step, and the hardest yet, will see it passed by the entire House of Representatives. If passed in the House, the bill would still be far from becoming law. It would then have to pass the Senate – which is perhaps even more divided than the House. If any changes or amendments are made, the bill would have to return to the House to be passed again in its updated form. Then, if finally approved by both sides of Congress, it would head to President Biden to be signed into law.” HPS Analysis: This article represents the opinions of electrek in presenting what HPS considers a slightly biased editorial view of the subject legislation that, as the article states, captured the support of both sides of the aisle in a fractious House of Representatives. The bill, H.R. 1797, the “Setting Consumer Standards for Lithium-Ion Batteries Act” is simple and would require the Consumer Product Safety Commission (CPSC) to fast-track the mandatory lithium-ion battery safety standards it is currently working on, and finish development and promulgate within one year of the legislation being signed into law. This House bill has garnered almost universal support, to the point that it is moving through the House under “unanimous consent.” While not yet scheduled by the Speaker, the sponsors, including the subcommittee and committee chairs, are pushing for its passage. This article, unfortunately, misrepresents the bill’s changes in the Senate, because it has the full and active support of Senator Schumer, the majority leader and senior Democratic senator from New York, who resides in Brooklyn. Unlike the House, the Senate has a very slim Democratic majority, and this bill has attracted bipartisan support from across the aisle. HPS has talked to House and Senate staff involved and confirms this is the real deal. While it represents one piece of the multi-piece mandatory federal safety standard CPSC is in the process of developing for e-bikes, lithium-ion batteries for micromobility devices, and a complete update of the mechanical standards for bicycles, it is supported by CPSC and fast-tracks one important step in the overall federal regulatory process. It will also be a big deal to have bragging rights to being a part of the signing into law of one of the few pieces of legislation passed and this session of Congress.

01-31-24: “UPS to cut 12,000 jobs and mandate return to offices five days a week.” The Wall Street Journal: “United Parcel Service said it planned to shed about 12,000 jobs this year, and mandated staff work from offices five days a week starting March 4, as the package-delivery company seeks to boost productivity amid a protracted slowdown in business. The cuts are primarily targeted at management staff worldwide as well as contract workers, UPS executives said Tuesday, adding that those jobs weren’t likely to return even when business picks up. The company has around 85,000 management employees. It predicted revenue in 2024 of between $92 billion and $94.5 billion, which was below analysts’ forecasts. Profits would be lower than year-earlier levels as well. FedEx in December cut its full-year revenue outlook amid weakness in delivery volumes.” “UPS’s financial results often serve as a barometer for the U.S. and the global economy. The carrier delivers parcels for retailers looking to fulfill consumer demand, and it also offers insights on industrial production in its handling of transportation and logistics for manufacturers.” HPS Analysis: Too many layoffs are knee-jerk cost-cutting moves with no thought given to either near-term or far-term ramifications, but that doesn’t appear to be the case with UPS. In response to the fall-off in volume and revenue, UPS has crafted what they say is a “Fit to Serve” business strategy that will save the company about $1 billion in overhead while enhancing customer service. The layoffs are exclusively white-collar jobs. Unionized package handling and transportation workers account for the majority of UPS’s 495,000 employees and aren’t affected by the job cuts. In addition, UPS is eliminating remote work at home and in so doing removing a bone of contention between drivers, warehouse staff and office staffers. Lastly, UPS is utilizing artificial intelligence and automation to handle more tasks handled by white-collar workers. While UPS may be among the companies that went too far in expanding their workforce during the pandemic, they are leading in responding strategically to the downturn in business.    

01-31-24: “Revelyst sales down 10 percent in most recent quarter.” Bicycle Retailer and Industry News: “Sales in Vista Outdoor’s Revelyst business unit, formerly its Outdoor Products segment, decreased 10 percent in the company’s fiscal third quarter, which ended December 24. Revelyst contains bike industry brands Giro, Bell, Fox Racing, QuietKat and others. Revelyst’s quarterly sales were $317 million. The company said the decrease from the same period last year was due to ‘increased discounting, lower volume, and unfavorable mix as consumers are pressured by high interest rates and other short-term factors affecting their purchases of consumer durable goods.’ The unit’s gross profit decreased 17 percent to $85 million. Gross margin decreased 228 basis points to 26.7 percent. Adjusted EBITDA decreased 53 percent to $15 million. Adjusted EBITDA margins decreased 416 points to 4.6 percent.” HPS Analysis: We have covered Vista Outdoors and its spin-off Revelyst over the past year. Large investors rolled up multiple brands in the bicycle business and the industry, including the bike shop channel, and didn’t pay much attention. Today, brands like Giro, Bell, and Fox Racing are part of large corporate structures with little or no ownership connection to the business or the cycling community. Now it’s all about the cash flow and EBITDA.

02-01-24: “Should Amazon be responsible for everything it sells and ships? A U.S. agency will soon decide.” The Wall Street Journal: “An order from the Consumer Product Safety Commission could classify the company as a distributor, making it liable for third-party products. Amazon has argued that it is a marketplace and a third-party logistics provider, rather than a distributor. Amazon.com is facing a government order that could make it responsible for the safety of goods that it sells to outside vendors on its website and ships for them through its logistic network. The U.S. Consumer Product Safety Commission is preparing an order that could classify Amazon’s online retail business as a distributor of goods, according to people familiar with the matter. That designation could give Amazon the same safety responsibilities as traditional retailers, and potentially open Amazon up to lawsuits and extensive recalls over items sold through its website. Amazon accounts for nearly 40 percent of all e-commerce in the U.S., according to eMarketer, a research firm. Amazon has fought the distributor designation because of the nature of its online marketplace. The company sells some items from its own inventory, as bricks-and-mortar stores do, but more than 60 percent of sales on Amazon.com are by outside vendors, known as third-party sellers.” “In 2021, the commission sued Amazon for distributing unsafe products from sellers on its website through Fulfillment by Amazon, which handles logistics for third-party sellers. The agency cited three specific products in that suit.” “Amazon responded to the commission’s suit by saying that the agency didn’t have the legal power to make such claims against the company because it was acting as a marketplace and a “third-party logistics provider” rather than a distributor. An administrative law judge determined that Amazon did have distributor status and responsibility. Amazon appealed, setting the stage for the commission’s impending vote.” HPS Analysis: This article points out that “A majority of the agency’s four current commissioners would have to vote in favor of the order for it to advance.” The bicycle business in the U.S. is very aware that the annual volume of faulty, dangerous or mislabeled items sold by Amazon third-party sellers, including lithium-ion batteries for micromobility devices and complete e-bikes and e-scooters, is much more extensive than the three items in the agency’s suit, and an order from the agency would likely make the company susceptible to customer lawsuits and more rigorous enforcement from the federal government across all consumer products and the City of New York. In the view of HPS and many IBD’s, this is long overdue. Amazon should have the same safety responsibilities as traditional retailers, including American bike shops.

02-02-24: “New York starts state-wide lithium-ion battery safety campaign.” Bicycle Retailer and Industry News: “A month after saying she would propose a state-wide ban on the sale of uncertified lithium-ion batteries, New York Governor Kathy Hochul announced the state of a safety campaign to raise awareness of consumer products that use cells. The Buy Safe, Charge Safe campaign started Thursday and includes display, search and social media ads directed to consumers purchasing lithium-ion battery powered items like e-bikes and e-scooters. Focusing on what to look for when buying lithium-ion battery products, safe usage and disposal, the ads will be paired with an educational video. Clicking on the ads or video will link to the Charge Safe website. In addition, the New York Department of State’s Division of Consumer Protection and the Division of Homeland Security and Emergency Services created a Lithium-Ion Battery Consumer Safety Guide.” HPS Analysis: Every bike shop in the State of New York should lend wholehearted support to this state-wide lithium-ion battery safety campaign that is aimed at consumer education and awareness, and is helping market-tested and certified lithium-ion powered e-bikes. Buy Safe, Charge Safe should be picked up by the whole of the bicycle industry at a time when the media is spreading fear-mongering, and there is a need for sound advice about preventing lithium-ion battery fires by understanding this wonderful, environmentally-friendly energy source while using it safely and ensuring households are protected to enjoy the benefits of e-bikes.

02-02-24: “Merida 2023 sales shifted down sharply in line with market trend.” Bike europe: “The preliminary 2023 results of Taiwan’s second largest bicycle manufacturer Merida Industry Inc. published this week represent the current developments on the global market. Unfortunately, no unit figures were published, but the 2023 revenue development clearly marks the market trend. Merida reported total sales of TWD 27.16 billion (€798 million) in 2023. Compared to the previous year, this represents a double-digit 26.4% drop.” “Giant sales follow a similar trend, but less dramatic. Also, for Taiwan’s biggest bicycle manufacturer 2023 was a very difficult year. Still, it looks like Giant managed to keep the sales decline better under control.” “For the whole of 2023, Giant reports a revenue decline of 16.4 percent from TWD 92.04 billion (€2.70 billion) in 2022, to TWD 76.95 billion (€2.25 million) in 2023.” HPS Analysis: For whatever reason, it still seems too hard to get a real handle on the health of the larger brands and corporations in the bicycle industry. This Bike europe article is a good example of financial reporting on the two largest OEMs providing complete bicycles and e-bikes to the American market. Giant certainly markets and sells its own brand in the U.S. However, it is also one of the largest Original Equipment Manufacturers (OEM) of customers’ brand-name bicycles and e-bikes to the U.S. that does not have manufacturing capability in-country. Merida does not market or sell its brand in the U.S. but remains a significant manufacturing source for other brand names marketed and sold in this country. It is of note that none of this information as reported by Bike europe has appeared in any American trade publications. The bottom line: the two largest OEM suppliers of brand-name bicycles and e-bikes to the U.S. market in 2023 experienced significantly difficult years that correspond to U.S. domestic market conditions.

02-03-24: “The college professor who got a weird year for the economy right.” The Wall Street Journal: “In a year where the economy was unusually hard to forecast, it seems fitting that The Wall Street Journal’s most accurate forecaster hailed not from a big financial house, but rather a small, Catholic liberal-arts university in Texas. Belinda Roman, associate professor of economics at St. Mary’s University in San Antonio, topped a panel of 71 business, academic and financial economists who participated in the Journal’s quarterly economic forecasting survey in January 2023. A set of her forecasts ranked closest to the actual values reported at year’s end by the federal government.” “Her forecast methodology? Roman said she relies on moving averages and trend lines rather than models, and asks herself what story the data is telling, a tactic she often relays to her students at St. Mary’s, the oldest Catholic university in the Southwest. ‘A lot of students, they get lost in the technical, the mathematical, and they forget that there’s a story with humans involved,’ she said.” HPS Analysis: There is something to be said for trend lines rather than models as a forecast methodology, not the least of which is Dr. Roman’s forecast topping a panel of 71 fellow economists with her forecasts ranking closest to the actuals reported by the federal government. HPS has recommended trend lines to the industry association in the past, and has been told they have data only back to 2015, which is not sufficient for the task. At the time HPS pointed out that accurate annual data is available well earlier than 1990, and that data has been published several times in the recent past by the NBDA. Perhaps it is time to revisit moving averages and trend lines as a bicycle industry forecast methodology?

02-05-24: “CPSC finally is taking real action on electronic certificates of compliance.” Bicycle Retailer and Industry News by Steve Hansen: “A certificate of compliance requirement was in the original Consumer Product Safety Improvement Act passed in 2008 and signed by George W. Bush. It has taken 16 years for the Consumer Product Safety Commission to finally implement the full intended scope of electronic certificates of compliance as originally envisioned by Congress in 2008.” “Import enforcement currently lacking: The whole rationale for this rule change and disruption is as follows. Currently, CPSC’s import enforcement methodology is labor-intensive and lacks an efficient means of using product-specific data to identify potentially non-compliant products. CPSC co-locates staff alongside Customs and Boarder Protection (CBP) staff at ports of entry to target shipments for examination. Once identified, staff requests that CBP place a shipment on hold and transport it to an examination station for CPSC inspection. An examination hold creates delay that costs businesses and CPSC time and money. Accordingly, stakeholders and CPSC have a common interest in reducing examinations of compliant products, and maximizing examinations of products that are likely to be violative. Currently, certificates are collected only after a shipment is stopped for examination. Certification data are not used to target shipments for examination. Using certificate data for more precise targeting would maximize examination for stakeholders and staff.” HPS Analysis: This is a big deal for the American bicycle business, and HPS is surprised that it has not received a great deal more examination and discussion. HPS highly recommends that you read this article, and if you have questions contact the author, Steven W. Hansen, by visiting www.swhlaw.com or email legal.inquiry@swhlaw.com. The Supplemental Notice of Proposed Rulemaking (SNPR) to amend 16 CFR part 1110 that Hansen writes about was first published on December 8, 2023, and comments had to be received by February 6, 2024. Finished products or substances that are subject to a CPSC rule, ban, standard, or regulation, are required to be tested and certified, and only such finished products that are imported into the United States for consumption or warehousing would be required to e-file certificates with the CBP. Bicycles, as currently defined by CPSC, are regulated under 16 CFR 1512 and accordingly subject to the proposed rule. According to Hansen: “The biggest issue I see right now is that the SNPR proposed a 120-day effective date for a final rule. So that means after comments on this rule are received, I expect that the rule will be final in less than six months, and once that happens, there will be another six months to get ready for enforcement. Hopefully, that will be enough time for the industry to get ready.” While HPS has no doubt PeopleForBikes (PFB) submitted a timely submission on behalf of the American importers, we have not seen any actions, including webinars to assist with compliance, including setting up an account with CPSC and learning the methods for entering all the data required on an ongoing basis.

02-12-24: “Giant agrees to sell kids and mountain bikes at Dick’s-owned specialty stores.” Bicycle Retailer and Industry News: “Giant Group will sell bikes through about 25 specialty stores owned by Dick’s Sporting Goods, including House of Sport, Public Lands, and Moosejaw locations. Giant joins Cannondale, GT, Intense and other brands available at Dick’s specialty stores. Public Lands, which has seven locations, launched in 2021. The retail chain has been seen as Dick’s challenge to REI, and its locations include full-service shops and other specialty store features. According to Giant, Dick’s has pursued the brand for five years. Giant emphasized it remains ‘100 percent’ committed to retailers. Giant said its bikes most likely will be available online from those stores’ online sites.” HPS Analysis: This is an interesting headline, implying a bicycle brand passively agreed to sell kids and mountain bikes to specialty retailers, other than bike shops. While it is possible the brand was passive, and Dick’s was aggressive in wanting to distribute the brands bicycles, HPS tends to think the brand is expanding distribution in the face of holding excessive amounts of finished goods inventory. The American bicycle industry and business are in the third year of a shake-out that started the first quarter of 2022 and isn’t expected by HPS to subside until toward the end of 2024. One of the persistent features of this protracted shake-out are piles of excess inventory of varies values, spread throughout the international supply chain that must be factored into strategies and maneuvered around as-long-as the owners have liquidity and can afford to stay in business to do so. Giant selling to Dick’s owned specialty stores is, in our opinion, one of those strategies.

02-12-24: “Get ready – California’s electric bicycle driver’s license bill is here.” electrek: “Electric bike riders in California who don’t already hold a traditional car driver’s license may soon have a new option (or requirement) on their hands: an electric bike license. California Assemblywoman Tasha Boerner introduced the new bill just before the weekend, designed to help provide more safety and structure around young or unlicensed e-bike riders in the state. The bill would ban children under age 12 from riding electric bikes. Any riders who are at least 12 but don’t have a car driver’s license would be required to complete an online course, pass a written test, and get a state ID to legally operate an electric bicycle. The proposed legislation comes in response to a significant increase in the number of young e-bike riders.” “The increased number of young riders, especially those that have shown either ignorance of or disregard for traffic laws, has become a major issue in many California towns.” HPS Analysis: HPS understands that this is not the only “operator license” legislation being actively considered in the California legislature, and the bike shop channel of trade is going to have to actively engage if it wants to have a voice in what the state of California ultimately signs into law. This is “use” legislation, and is totally different and separate from “product” standards and regulations. The legislative proposals in California also get tangled up in the e-bike class “use” laws that have already passed. Class 3 is currently not within the definitional scope of pending “product” standards and regulations, but the industry trade association has asked that CPSC consider including Class 3 and so called “out-of-class” e-bikes in the scope of the pending mandatory standards and regulations, as opposed to being left out and subject to regulation by NHTSA under U.S. DOT. The product and consumer safety use implications of e-bikes that can achieve ground speeds in excess of 20 miles and hour need to be considered very carefully in both “product” and “user” safety for on-road and off-road e-bikes for riders and pedestrians and the surrounding environment.

02-12-24: “Vosper: What’s in store for 2024, part two.” Bicycle Retailer and Industry News: “Last month I wrote that 2024 would be similar to 2023, just not as miserable, based on PeopleForBikes’ projected retail bicycle sales for the year. This month, I’d like to look a little deeper into the on-the-ground reality behind those numbers and what it means to dealers and suppliers. The bottom line for the bicycle market is that there is still a huge amount of unsold inventory held by suppliers, and that it will take most or all of the coming season to work through it, if not longer. Exactly how long is entirely up to cyclists, their willingness to buy that inventory, and to what effect an ongoing wave of discounts can stimulate their buying behavior. As before, I reached out to PeopleForBikes’ senior research manager Patrick Hogan to help clarify the situation. He provided the following chart, showing dealer sell-in versus supplier inventory from 2016 through the end of 2023.”

Source: PeopleForBikes

“In terms of units, sell-in (to dealers) is as low as it’s been since 2016,” Hogan says. “Dollars are up somewhat as prices have increased. Units on hand are coming down, but in December inventory dollars were still about 60 percent over what they’ve traditionally been, pre-pandemic. Right, there’s a lot of dollars tied up in (supplier) inventory. At the same time, Hogan says, ‘Overall, the estimates we’ve seen from Circana show that 2023 bicycle inventory levels at retailers are around 2019 levels.’ “So, while there’s still a huge amount of inventory sitting in suppliers’ warehouses, dealers’ inventory levels in general are normal and even healthy for this time of year.” HPS Analysis: At press time for this month’s newsletter, March 3, there were a total of five comments posted on BRAIN in response to this Op Ed from Rick Vosper, including one from me. The other four, and my apology to the authors, are not from movers and shakers in the bicycle industry, much less members of the industry trade association board of directors. Patrick Hogan, PeopleForBikes’ senior research manager, does what I consider a very creditable job of presenting the important facts at hand, and Rick Vosper does his usual first-class job of presenting the story. We can only hope that what is presented is both understood and is being acted on, because it seems to be totally ignored by the industry mainstream. What is the American bicycle business doing to improve forecasting, supply chain management, logistics and communication with customers? The brands and manufacturers consider these topics to be private and confidential, when in reality they and others should be topics of industry-wide discussion and improvement, both online and at industry conferences.

02-13-24: “Shimano annual sales down 30 percent in bike division.” Bicycle Retailer and Industry News: “Shimano announced full-year 2023 sales in its bicycle division of 364,679 million yen ($2.42 billion) on Tuesday, a 29.5 percent decrease from the year before. Operating income in the division was down 55 percent, to 65.251 million yen. Although the booming popularity of bicycles cooled down, interest in bicycles continued to be high as a long-term trend. On the other hand, market inventories generally remained high, despite ongoing supply and demand adjustments,” the company said of the global market, “Shimano recorded net income of 62,142 million yen, down 52.3 percent from 2022.”

HPS Analysis: Shimano is the largest brand entity in the global bicycle industry, and it can be said that as Shimano goes, so goes the industry. I won’t belabor the point, and it is obvious that Shimano, the world’s largest supplier of bicycle components, had a down financial year in 2023, in line with the financial results announced by Giant, Merida and others. What is also obvious is the North American bicycle market has been relegated to “third world” status. Can’t be? Consider the facts. There is no domestic manufacturing of component parts, accessories or complete bicycles/e-bikes in North America. Bicycle Corporation of America (BCA) is a significant assembler but does not manufacture frames or forks, and assembly per year is under 500,000 units in a market that consumes millions of bicycles every year, good or bad, imported from Asia. While there is still some R&D, major brands, including SRAM and Specialized, have moved research and development to Europe, and all top-tier bicycle brands are sponsors of UCI grand tour teams, and do not race in North America. The European and Chinese markets have become more important to U.S.-based brands and companies like Giant and Shimano have managers of their business units in North America, not presidents as they do in other global markets. Shimano spends large amounts annually on market research in Europe and nothing in North America. It is obvious that the U.S. trade association is looked at as the knowledgeable and authoritative industry entity by the global brands, and perhaps this is based on a misunderstanding about the ongoing hold current business practices, policies and governance will have on business and government. It is certainly a miscalculation relative to the North American consumer. We certainly live in interesting times.

02-13-24: “To my fellow cyclists: quit the e-bike hate.” Bicycling by Matt Phillips: “Love Your Fellow Cyclists, No Matter How They Dress Or What They Ride. I just turned 51. Ever since I can remember, cycling has been the biggest part of all parts of my life. When I was a kid, I tagged along with my dad to his bike races. Growing up I worked in bike shops. I chose my university for its proximity to great mountain bike trails. I started working at a cycling magazine as an intern in late 1995 and became full-time in 1997. I’ve been here ever since. I was riding a bike when I met the person I would marry. I was riding a bike when I experience the most physical pain and heartbreak of my life. I am a cyclist because it is how I make a living. And because it brings me the greatest joy in my life. So, I think I qualify as a ‘real’ cyclist. And to many of my fellow ‘real’ cyclists, I say: Knock it off. As long as I’ve been around this sport – again, my entire damn life – I’ve noticed how we tend to ‘us-and-them’ other riders who don’t fit our vision of what a cyclist should look like. We form cliques and freeze out others who we feel don’t fit. With this mindset, a quick glance at another cyclist is supposedly all it takes to know everything about who they are, what they stand for, how strong they are, and their skills. Have I done all this? Yes! But the longer I’m around bikes, the more I’m routinely reminded that equipment should not be used as a basis to judge other riders. I’ve been aboard the very best and latest equipment and been dropped by a rider on an old Centurion with downtube shifters. I’ve seen a guy on a mountain bike dressed in trail gear easily hang with roadies on a group ride. I’ve watched kids on rattletrap 26er mountain bikes send it further than I dare on the most dialed enduro bike. Those are only examples of making assumptions about someone’s fitness or skill based on equipment. It doesn’t even consider how much that person loves the sport or how much they give back to cycling.” HPS Analysis: My compliments to Matt Phillips. I have heard about this provincialism from many different sources over the past several months. Discussions range from “drop the attitude” to “change the attitude of your staff” to “smile at every person that walks through you shop door.” Right now, in a time when the consumer public has chosen to reduce their visits to bike shops, attitude is absolutely everything. Consumer research that HPS has been involved in over the last decade has made it clear that women do not like to visit bike shops because they are, at best, condescended to. Women are 50 percent of the U.S. population and should be respected as such by very bike shop employee. If your staff cannot respect every consumer that walks in your door, fire them and replace them with people that like people and want to serve. 

02-19-24: “San Francisco to set new rules for e-bikes, scooters powered by lithium-ion batteries.” ABC News: “If you own an electric mobility device like an e-bike, electric scooter or skateboard in San Francisco, the way you charge or store those devices is about to change. The city’s Board of Supervisors voted to create safety standards for some devices powered by lithium-ion batteries. Electric bikes and e-scooters continue to be part of San Francisco’s attempt to improve urban mobility. Even the city government is testing a pilot program where food delivery workers are using e-bikes instead of cars in an attempt to reduce emissions and traffic congestion. But with more of them on our streets, it was inevitable that new rules for how they are stored and charged would follow.” “In March, a new set of standards for charging and storing these batteries used to power mobility devices will go into effect. Anyone living in a multi-unit building will now be limited to four lithium-powered mobility devices per household and they must be parked three feet apart when charging. Each one must be plugged into its own electrical outlet, not a power strip. The new rule doesn’t apply to single-family homes.” HPS Analysis: San Francisco is following New York City and will not be the last municipality to implement ordinances in an effort to protect people living in multiple occupancy buildings and multi-use buildings. Bike shops are getting caught up in this as ordinances seek to regulate retail storage and charging of lithium-ion batteries. Unfortunately, so far New York City has ordinances that simply are beyond the financial capability of bike shops to comply with, and HPS and NBDA are working on a viable alternative in the form of December 26, 2023, eBike Lithium-Ion Battery Pack Safe Storage, Use and Care Protocols. The most important of these Protocols is: Only source, store, charge and sell lithium-ion battery packs that have been tested and certified by a Nationally Recognized Testing Laboratory (NRTL) to UL 2271 (or e-bikes that have been certified by an NRTL to UL 2849).  The complete set of 15 protocols is available from HPS or the NBDA, but this first one is the most important, and if adhered to establishes the highest possible level of safety, and reduces the hazard presented by lithium-ion battery packs to the point that HPS is advising the cities of New York and San Francisco that the December 26, 2023, NBDA Protocols should be recognized as a replacement or substitute for the ordinances in place pertaining to bike shops.

02-20-24: “Walmart tops Street as sales, earnings rise on e-commerce growth, holiday traffic.” Chain Store Age CSA: “Walmart reported net income of $5.49 billion, or $2.03 a share, for the quarter ended Jan. 31, from $6.28 billion. Walmart Inc. ended the year on a strong note amid soaring online sales and growth in store and digital traffic. The nation’s largest retailer continued to make inroads outside its core demographic as it noted share gains in grocery and general merchandise, primarily among higher-income households. Walmart also announced it will acquire smart TV maker/streaming platform provider Vizio in a deal worth $2.3 billion as it continues to increase fast-growth advertising and media business, Walmart Connect. In its earning release, Walmart said it raised its annual dividend rate by approximately 9 percent, to $2.49 a share, from the $2.28 per share paid for the last fiscal year. The retailer said the increase is its biggest dividend boost in more than 10 years, and its 51st consecutive year of dividend increases.” “Walmart U.S. same-store sales increased 4 percent, also more than expected. Sales were led by grocery and health & wellness. General merchandise sales declined “modestly” the company said. The number of transactions increased 4.3 percent, but the average ticket inched down 0.3 percent.” “Global e-commerce sales soared 23 percent during the quarter. In the U.S., e-commerce sales rose 17 percent, led by strength in pickup and delivery.” “Walmart has bucked the recent industry trend of cost cutting. In January, it said it would open or expand more than 150 U.S. stores to its larger format during the next five years. Also in January, the company announced an increase in its store managers pay.” HPS Analysis: One of the glaring omissions from the Rick Vosper Op Ed, Patrick Hogan’s data analysis, and the Merida and Giant year-end financial reports, is the mass merchant channel of trade. The previous articles, for the most part, focus on the bike shop, or specialty bicycle retail channel of trade, and totally ignore the rest of the market. The biggest channel left out is mass merchant. Walmart, in addition to being the largest retailer in America, is the largest retailer of bicycles in America. 2023 was a difficult year for mass merchant sell-through of bicycles, but it appears inventory has been stabilized and is under control. What HPS has been able to observe shows Walmart increasing the representation of Ozark Trail, its new proprietary bicycle brand, and higher-priced, fully-equipped children’s bikes. This article also makes it very clear that Walmart is doing better than other retailers, and is going against the trends in regard to expansion, store remodelings, layoffs and manager compensation. The NBDA is holding its second Retailer Summit in Bentonville, Arkansas, May 22-23, 2024, and is the next big American bicycle industry event on the HPS calendar. Representatives from Walmart were in attendance last year and will be in attendance this year. The presentations and round table discussions will include the whole American bicycle business and market. Looking forward to seeing you in Bentonville.

Contact Jay Townley: jay@humanpoweredsolutions.com.

ARE YOU READY FOR THE COMING SEASON?

I have written in previous issues about planning for the coming year and what pitfalls your business might face in 2024. As the year begins, its time to take a look at the overall economy and business environment and how you should be prepared.

Inflation continues to be problematic. My last article noted that inflation has come down considerably from its 40-year high of 18 months ago. However, over the past couple of months it has crept up a bit, again. At the end of 2023 inflation was 3.4 percent. In January inflation checked in at 3.1 percent, down slightly but still above the target set by the Federal Reserve. It’s also being stubborn about getting lower.

The primary weapon in fighting inflation is adjusting interest rates.  Over the last two years, interest rate increases have become almost routine. In March 2022, the Federal Reserve interest rate was between 0.25 percent and 0.50 percent. By February 2023, the interest rate had risen to between 4.50 percent and 4.75 percent. July 2023 saw the peak interest rate of 5.25 percent and 5.50 percent. That is where rates are today.

Given the moderation of inflation, the chairman of the Federal Reserve forecasted interest rates could start being reduced in the first calendar quarter of 2024. That was encouraging news which gave the stock market an extra boost for a few days. Then the latest inflation numbers came out, as noted above, and the chairman said rate decreases would likely be pushed off until later in the year.

As much as the possible reduction of rates led to a mini stock market rally, so the comment of rate reduction being pushed led to a minor, though significant, retreat.

I addressed the direct impact of inflation in my last article, and noted that even as inflation came down prices remain elevated. The effect of elevated prices is obvious on many everyday commodities in life, but may be a little less so in your business. Here area a few to consider.

Wages – To get and keep good employees you want to pay a wage that will allow them to maintain more than a subsistence lifestyle. All of the inflationary impacts you’ve seen in your business have impacted your employees individually, too. What are you planning to do and can do with your business pay scales?

Utilities – Many jurisdictions have utility rate boards that need to approve rate increases. Water and electricity rates have been on the rise as utilities have been investing in renewable energy sources that have longer-term payback, but require significant immediate funding. Those costs have been escalating by double digits, causing a couple of very large offshore wind farms to be cancelled because of lack of funding, or because the necessary rates needing to be charged were too high. Have you factored the impact of higher utility costs?

On a different tack, extreme temperature swings, coupled with the retirement of fossil fuel power generation (before sufficient renewable generation comes on-line), have forced some utilities to enforce rolling blackouts. Have you considered the impact of possibly reduced operating hours due to power outages?

Taxes – This is a business cost component that bedevils not only business leaders but those who set tax rates. The double whammy of the escalating government deficit and the rise in interest rates added $184 billion to the cost of servicing the debt in 2023 over 2022. Reducing interest rates will ease the issue somewhat, but the increasing deficit will counteract most of it. As I write this there isn’t a federal budget for fiscal 2024, so the picture is a bit muddled as to what may happen. Because this an election year, it is likely taxes will stay as they are at least at the federal level. The city, county and state levels will be under increased pressure to fund local education, police and fire protection and social services. Already resources are being stretched in major cities around the country because of the influx of migrants across the southern border. Will these local jurisdictions be raising tax rates, or propose special assessments, to stabilize their own operating budgets? Does your business plan include contingencies for higher tax rates?

Cash Flow – Working capital is the life blood of any business. Do you have a credit line established with your local bank/lender? Are you sure? The increase in interest rates has put a lot of pressure on smaller regional banks, forcing them to offer higher interest paying instruments to their customers. They are doing this to hopefully increase deposits, or at least slow down withdrawals. That low interest line of credit you thought was ready when needed may have been cancelled or superseded by one with a rate 2-3 percent higher or with a much shorter term. Already some retailers are finding out their expected credit line has been cancelled or modified, having a very negative impact on their business.

Insurance – Have you had a recent conversation with your insurance broker? If not, you need to do that. Inflation has hit the construction industry with increases beyond the nominal rate. This has put upward pressure on insurance rates for the coming year. Rate increases in the 15 to 20 percent range are not unusual. Rates have risen in some locales enough that politicians are starting to pay attention and asking for justifications.

These rate increases are coupled with more and more jurisdictions issuing regulations on the certification, sales, storage and repair of e-bikes. Insurance companies are taking note of this as well, and will be looking at your business to make sure you are compliant. Will your business pass this scrutiny?     

Operating Hours – When is the last time you did a customer count? Over a period of a couple of months, you should be counting the number of customers that come into your business, noting the day of the week and the time of day. This will help you determine staffing and whether you can/should adjust your business hours to better serve your customers. A corollary is comparing customer counts to sales transactions. That will establish a close rate, a good thing to know to help you understand the impact of your marketing and the efficiency of the sales staff.  

The coming year will be challenging. However, with proper planning and guidance it can still be profitable and lead to better years to come. Are you ready?

Contact Steve Bina: steve@humanpoweredsolutions.com.