4-03-24: “The electric-vehicle supply chain that’s proven so difficult to ramp up now appears to be contracting.” The Wall Street Journal Logistics Report: “Market leader Tesla just reported its first year-over-year decline in quarterly deliveries since 2020, the WSJ’s Rebecca Elliott reports, with 386,810 vehicles globally in the first three months of 2024, down 8.5 percent from a year earlier. Potentially more troubling is that Tesla’s production also declined, to 433,371 vehicles, down from 440,808 in the first quarter of 2023. The gap between production and deliveries suggests there may be demand concerns for a company that was racing to scale up its supply chain just a few years ago. Wavering momentum in the market could ease the urgency to expand in the sprawling market for raw materials and batteries. Rivian Automotive says it delivered 13,588 vehicles in the first quarter, a decline from the previous quarter, as the upstart EV producer resets its supply chain.” HPS Analysis: Electric cars are substantially different in the use of raw materials and the majority of aspects of component requirements, manufacturing, sub-assembly, and assembly, not to mention energy. While the ramp-up in this substantially different global supply chain is still in its early stages, consumer demand has declined as the global economy has shifted in response to two armed conflicts and the pinching of global supply chains. The most direct impact on the global bicycle business is the raw material and manufacturing process for lithium-ion battery cells, which if anything will potentially benefit from a contraction in the electric-vehicle supply chain.

4-04-24: “Bird successfully emerges from bankruptcy as a stronger company and will operate as the global anchor brand of newly established Third Lane Mobility Inc.” bw business wire:Bird today announced that the company has successfully emerged from Chapter 11 proceedings under a newly-organized private parent company called Third Lane Mobility Inc. With a strengthened balance sheet, reduced operating expenses, and right-sized capital structure, the transaction included the sale of Bird’s assets to Third Lane Mobility, which encompasses both the Bird and Spin Brands. Bird and Spin will continue to operate in and serve cities across the globe, and are well-positioned for long-term, sustainable growth as they maintain and expand operations across North America, Europe, the Middle East, and Asia. Over the last three months, both Bird and Spin have won multiple new competitive bids and announced the launch of service in several new cities, including Corpus Christi, Texas; Greensboro, North Carolina; the University of Illinois; Surrey and Mississauga, Canada; Naples and Torino, Italy; as well as competitive renewals of service in Gap, France and Zaragoza, Spain.” HPS Analysis: Bankruptcy isn’t always the end of either a company or a brand. HPS reported that Bird went into Chapter 11 protection in order to emerge as a financially stronger global entity. The new company will continue to operate and has grown some of its global operations while in bankruptcy protection. Whether the new Third Lane Mobility will grow, financially thrive, and survive is still an open question, but bicycle ride share has, if anything, grown in usage as the global bicycle market has been struggling with ebbing consumer demand.

4-05-24: “Walmart leads annual ranking of top 50 global retailers.” Chain Store Age CSA: “The annual ranking is based on retailers’ operational performance as of the start of 2023. Two U.S.-based retail giants took the top spots in an annual ranking of the top 50 global retailers based on their operational performance as of the start of 2023. HPS Analysis: Walmart and Amazon were number one and two on the global retailer list based on operational performance in 2023. Walmart is the largest retailer of bicycles in the U.S. and, also represents a change in interest and commitment to bicycling, including all aspects of the family activity. This includes off-road riding and competition. Walmart, through the influence of the third-generation owners, has set out to make the Northwest region of Arkansas, in the foothills of the Ozarks, the mountain bike capital of the United States. Amazon, while the number two retailer in the world, is still fighting to not have any of the responsibilities of a distributor or retailer, like a bike shop when it comes to product safety. While HPS doesn’t know exactly how many bicycles and e-bikes Amazon sells or facilitates the sale of, we do feel this very large DTC retailer has to have the same responsibilities as a distributor and a retailer, like bike shops and Walmart.

4-08-24: “Consumer confidence continues to increase.” Chain Store Age CSA:The March Consumer Confidence Score was 57.3, an increase of 1.6 from February. Consumer confidence continues to be on the upswing, rising two points in March since January of this year. That’s according to Numerator’s latest Consumer Sentiment Tracker, which surveyed over 6,000 Americans. Consumer confidence was up again in March, driven by increased comfort across the board, including with the job market, with non-essential spending, and with consumers’ ability to make ends meet. Despite higher spending comfort, consumers are increasingly looking for ways to save and are being conscious of their spending.” “The March Financial Outlook Score was 50.9 (-1.0), signaling that consumers feel neutral about their household finances. Looking ahead one year from now, 24 percent of those surveyed think their finances will be better than they are now, 53 percent think they’ll be the same, and 23 percent think they’ll be worse.” HPS Analysis: The March Consumer Confidence Score of 57.3, was the highest monthly figure since October of last year. The American bicycle business, led by the top-tier brands, still will not invest all or a part of $30,000 in conducting quality primary consumer research to determine why consumers backed away from purchasing new bicycles, including e-bikes, and more importantly when and what will bring them back to purchase. The research initiative is led by the National Bicycle Dealers Association (NBDA), and HPS does not understand why the rest of the bicycle business doesn’t want answers in these confusing and turbulent market conditions. Denial is not a plan, and ignorance is not, in this case, bliss.     

4-08-24: “Vosper: From relations to transactions.” Bicycle Retailer and Industry News: “I was talking to one of my longtime cycling industry friends a couple of weeks ago. They’re a 50-year industry veteran who’s still involved with the day-to-day business of their company. As always, we chatted about the state of the industry, and toward the end of the conversation, they said something that brought me to a full stop. ‘Rick,’ they said, ‘the entire cycling industry is evolving from a relational business model to a transactional one. And I don’t think there’s any way back from that.’ In case you’re not familiar with those terms, they’re pretty simple. A relational model is one driven by relationships. A transactional model is driven by, you guessed it, individual transactions. So a transactional approach is all about the immediate sale. If you don’t get the sale, nothing else matters, and what happens to the relationship as a result is a secondary consideration. A relational approach is one where the long-term relationship is the big picture, and whatever sales (transactions) come out of it are the result of the relationship and, more importantly, the quality of the relationship. Mutual interest, where both parties benefit, trumps the immediate self-interest of either party. To put it another way, transactional interactions are about ends — what you get — and relational interactions focus more on means — how you get it.” HPS Analysis: This is an excellent article, and HPS encourages our newsletter recipients to read it, and if they already have, read it again. All the feedback we have collected and received through the end of April, and in the absence of primary consumer research, indicates that bike shops need to pivot near-term to strong relationship-based business plans with suppliers and their customers. The ongoing major advantage bike shops have over all other retailers, including brick-and-mortar and DTC, is personal relationships that can last a lifetime, and can also be multi-generational. This includes the unique omnichannel relationships bike shops can develop with their online customers. There is a new relationship playbook for bike shops that the NBDA is going to begin to roll out at the Summit in Bentonville, Arkansas May 22-23, and if you haven’t sign-up to attend make sure you visit and register for the follow-up webinars.    

4-08-24: “Yellen junks 200 years of economics to block China clean tech.” Bloomberg Opinion: “ ‘Government support is currently leading to production capacity that significantly exceeds China’s domestic demand, as well as what the global market can bear,’ Yellen said in a speech to the American Chamber of Commerce in Guangzhou. That excess is building in ‘solar, EVs, and lithium-ion batteries,’ she said last month at a U.S. solar plant. Step back for a moment, and the suggested policy change is remarkable. One of the most distinguished living economists is rejecting what’s been one of the most fundamental principles of economics for more than 200 years: comparative advantage. If a country can manufacture goods at lower costs than you can, you shouldn’t raise tariff barriers. Instead, you should import the goods, and send back something in return where your industry is more efficient. Yellen herself appears to recognize the disconnect. ‘People like me grew up with the view that if people send you cheap goods, you should send a thank-you note. That’s what standard economics basically says,’ she was quoted as saying in an interview with the Wall Street Journal last week. ‘I would never ever again say, ‘Send a thank-you note.’” HPS Analysis: We are talking about the 78th Secretary of the U.S. Treasury and 15th chairperson of the Federal Reserve, the first woman to hold either position, and one of the most respected living economists, Janet Yellen. HPS wants to clarify that this is an opinion editorial from Bloomberg. With this all said, Yellen is making it clear that she has shifted her thinking on comparative advantage relative to the PRC providing financial support for certain industries that allows their companies to export and practice predatory overcapacity. The EU is alarmed and reacting to the surge of electric vehicles that the PRC is producing and exporting to Europe, but that are being priced under the domestic brand competition to capture more consumer purchases, which is the definition of predatory overcapacity. Of immediate concern to the EV and micromobility sectors in the U.S. is the PRC overcapacity in the manufacture of lithium-ion batteries as shown in the chart that accompanies this article. This is just one example of all those shown that are of concern to the U.S. government and its efforts to put a stop to the PRC practice of predatory overcapacity by shifting its position on the 200-year principle of comparative advantage. Like Secretary Yellen, the bicycle business should no longer send thank-you notes to Chinese sources practicing predatory overcapacity.

4-09-24: “Pon declares ‘robust’ 2023 performance despite bike market correction.” BIKE europe: “Besides strong brands such as Gazelle in the Netherlands performing well, Pon continued to explore new opportunities in 2023, such as the partnership with Volkswagen Financial Services to expand opportunities in the bike leasing segment. Following a historic year in 2022, the bike division of Pon Holdings has reported a 5 percent drop in 2023. Referring to the ‘sharp correction’ in the bicycle market during 2023, turnover in the Pon Bike division decreased by 100 million euros. However despite the pressure on prices and margins, ‘most of our quality brands managed to hold their own thanks to their strong market positions,’ explains Janus Smalbraak, CEO of Pon Holdings. 2022 was a historic year for Pon Holdings with sales exceeding 10 billion euros for the first time in the company’s history. The bicycle cluster, Pon.Bike, contributed significantly to this following the acquisition of Dorel Sports and the increasing demand for e-bikes at that time. However, despite the challenging economic environment during 2023, the company generated turnover of more than 10 billion euros for the second consecutive year. The Pon.Bike cluster, which includes over 20 brands including Cannondale, Cervélo, FOCUS, Gazelle, GT, and Kalkhoff, recorded a slight decline in turnover of almost 2.3 billion euros in 2023, having achieved over 2.4 billion euros in 2022.” HPS Analysis: Pon.Bike purchased Dorel Sports in October 2021 for $810 million cash, and created a global group of 20 brands with revenue projected at $2.9 billion. If everything in this BIKE europe article, which is probably based on a press release, is factual and correct, Pon.Bike is the most successful global company in the bicycle business. As HPS has reported, a 5 percent decline in revenue 2023 over 2022 is significantly better than global players like Shimano and Giant, both of which have reported double-digit percentage drops in profit 2023 over 2022. There is no question Pon.Bike is well-funded and financially sound compared to all its competitors, a point it makes in this article. Based on what HPS has gathered, it is also a well-managed company with a deep interest and understanding of the need for and value of good, accurate data about the market and individual brands. Pon.Bike states that it has opened a Cannondale Sports Group assembly and distribution facility in Savanna, Georgia. HPS will watch the role this facility will play in Pon.Bike operations as the year progresses.

4-09-24: “Why a leading electric bike company just slashed nearly all its prices.” electrek: “Ride1Up, a San Diego-based electric bicycle maker known for an increasingly broad range of affordably-priced electric bikes, is trying to make its e-bikes even more accessible. The company just announced that effective immediately, it is cutting prices on nearly its entire lineup. Massive sales are nothing new in the e-bike industry. Several e-bike companies have been running incredible deals for much of the past six months. Remember those Black Friday deals that turned into holiday sales, only to then morph into Valentine’s Day bundles and Easter discounts? Yeah, the entire e-bike industry has been offering incredible rollercoaster sales as warehouses remain largely packed with overstocked bikes, fueled by pandemic-era buying sprees. But unlike most companies, Ride1Up is taking the major step of making those sale prices permanent. Instead of offering a misleadingly high MSRP and a much more attractive sale price, Ride1Up is moving more of its models towards a simplified, lower-cost model that is more sincere and transparent.” “Ride1Up proudly announces permanent price reductions for many of our highly-rated e-bikes, making them more affordable without sacrificing build quality and components,” the company explained.” HPS Analysis: This electrek article is PR-centric, but does peel back a fundamental difference in the pricing and distribution structure and methodology of the new DTC (direct to consumer) brands and the established mainstream brands in the American bicycle market. What the author describes is the current situation of discounting and reducing prices to flush inventory and stay competitive. Ride1Up is a DTC brand. The DTC e-bike brands are competing primarily with specialty retail that has employed a three-step pricing structure, whereby the brand purchases from an OEM at a FOB price, imports the product, and either sells it or transfers it to a distribution center or wholesale distributor for a price that includes landing costs and a profit. The products are then sold at wholesale to a retailer who marks the product up to a retail price, which may be controlled by an MSRP agreement with the brand. This is three-step distribution and pricing. Recent discounting has lowered retail price points, in some cases dramatically, compared to 2022. Ride1Up is trying to establish DTC pricing where it can still make revenue and profit projections while being competitive at retail with both DTC and specialty retail competition.  

4-12-24: “FDNY makes first-ever criminal arrest of e-bike shop owner for unsafe storage of batteries.” The City: “For the first time in their campaign to stamp out e-bike battery fires, the Fire Department Friday filed criminal charges against an e-bike shop owner who has repeatedly faced civil summons for allegedly selling illegal uncertified batteries, and charging the potentially explosive batteries in an unsafe manner. Just after noon Friday, fire marshals arrived at the Electric Bicycle Shop at 1239 Flatbush Ave. in Flatbush, Brooklyn, arresting and handcuffing the store owner, Tian Liang Liu. The charges, including reckless endangerment, relate to fire code violations due to the unsafe storage and charging of batteries. This is the first time the department has used criminal charges against those violating laws related to e-bike batteries. Until now the FDNY and the Department of Consumer and Worker Protection have strictly relied on hitting store owners with civil penalties. In most cases, those only carry minimal financial penalties. The arrest indicates the FDNY’s increasing frustration in its efforts to end a disturbing trend that has skyrocketed since the number of micromobility devices mushroomed during the pandemic. More than 660 e-bike battery fires have erupted across the city since 2019, killing 28 New Yorkers and injuring 400 more.” HPS Analysis:  One of many things that impressed me when attending a seminar at the New York Fire Department (FDNY) headquarters was the fact that the fire marshalls who made presentations carried side arms, because under New York City laws and regulations they are deputized to make arrests, unlike most fire marshalls in most cities. The New York City Fire commissioner has made it very clear on numerous occasions that FDNY is going to be aggressive in enforce city ordinances, and this is proof positive. As long as there are violations there will be arrests.    

4-13-24: “China woos multinational firms.” The Economist – The World in Brief: “China’s economic planners have high hopes for the China International Consumer Products Expo, which opens in the southern city of Haikou on Saturday. They expect global brands to flock to the event. They would also like to see swarms of local consumers buying up the wares on offer. State media say that more than 3,000 brands from 59 countries will be in attendance to witness the ‘consumption power’ of a country with 1.4 billion people. The Communist Party has dangled the Chinese consumer in front of global retail brands for decades, telling multinationals to set aside their concerns about the country’s governance if they want a cut of China’s market. That proposition has recently become less appealing. China’s consumer confidence index has been depressed since 2022. The support of China for Russia’s war in Ukraine troubles Western firms. As big as it is, China’s market looks less enticing than before.” HPS Analysis: As both the Giant Group and Shimano financial reports indicate, China’s consumer market for bicycles is important to global sales, revenue and profit going forward. The PRC is doing everything it can to attract Western consumer product brands to the Chinese consumer market. The Chinese economy needs the involvement of Western consumer brands right now, but its growing restrictions and unfriendly treatment of foreign companies, plus its support for the opposite sides in the current armed conflicts is making it very difficult, and Western consumer product brands are either staying away or reducing their presence in China. This is a concern HPS has for the global players who have indicated they are looking to China and growth in sales of lightweight performance bicycles for a major portion of profitability in 2024 and 2025.

4-16-24: “Powell dials back expectations on rate cuts.” The Wall Street Journal: “Federal Reserve Chair Jerome Powell signaled that first-quarter inflation data has raised uncertainty over when and if lower interest rates would come later this year. Firm inflation during the first quarter has called into question whether the Federal Reserve will be able to lower interest rates this year without signs of an unexpected economic slowdown, Chair Jerome Powell said Tuesday. His remarks indicated a clear shift in the Fed’s outlook following a third consecutive month of stronger-than-anticipated inflation readings, which derailed hopes that the central bank might be able to deliver pre-emptive rate cuts this summer. Officials had previously said they were looking for greater confidence that inflation was returning to their target, and were optimistic another month or two of data might meet that standard.” HPS Analysis: As I read the daily newsletters over each month, I have become aware of the financial community’s fascination with what the Federal Reserve Chairman is going to say in the monthly announcement of the Fed governor’s decision about the interest rate. Every speech or panel or interview a Federal Reserve governor or the chairman gives or participates in, is examined for clues and sometimes debated at length. The market wants cheap money, which means lower interest rates, and the speculation in early April was all about the outside possibility of the Fed cutting the rate. It didn’t happen and the market quickly swung to a tighter for longer posture, at least until we get further into May. The bottom line for the bicycle business is tighter loan requirements and lower asset value of inventory and receivables. Brands and wholesalers are not going to offer extended or even attractive terms, so they limit the receivables they carry and they are not going to purchase and bring in quantities of inventory because of the increased cost of financing it.

4-16-24: “Cambodia’s bicycle export nosedive not over yet.” BIKE europe: “The plunge in demand for bicycles made in Cambodia which started last year has not yet come to an end. Cambodia’s bicycle export value fell 43 percent year-on-year in the first quarter of 2024, a General Department of Customs and Excise’s report confirms today. The Southeast Asian country exported bicycles worth US$96.9 million (€91.1 million) during the January-March period this year, a decrease of 43 percent from US$170 million (€159.9 million) over the same period in 2023. While the market had anticipated a stabilization of the production decline in the low- to mid-end market, these export figures clearly show the struggle is not over yet. The bicycle industry in Cambodia was hit hard when customers in the U.S. and Europe slowed down orders due to excess inventories last year. In 2023 the total export value decreased by 23 percent from US$ 899.7 million (€827.6 million) in 2022 to US$ 416.7 million (€383.3 million) last year.” “Bicycles are regarded as an important product for Cambodia as they are one of the country’s major manufacturing products for exports after garments, footwear, and travel goods. “The drop in export is the result of the global economic slowdown and market uncertainties that had resulted in a plunge in purchase orders,” said the Ministry of Commerce’s Secretary of State spokesperson in Cambodia.” HPS Analysis: There is a definite and pronounced ripple effect back upstream from the reduction in consumer demand for all things bicycle in the North American and European markets. Cambodia was the number two Asian source country in units for bicycles imported into the U.S. in 2023 and 2022, after China and ahead of Taiwan and Vietnam. When there is a drop of over 40 percent in orders, the bicycle plants in source countries either start manufacturing other products, or pull back completely and shut down. In either case, skilled workers are lost and ramping up becomes difficult in the future. There is also re-shoring and near-shoring whereby imports from Asia are replaced by either domestic production in the case of Europe, or production closer to the consuming country, like Mexico in the case of the U.S. The bottom line is a potential reset of supply lines and sourcing for import-dependent markets like the U.S.

4-16-24: “Dick’s Sporting Goods expands partnership with resale platform.” Chain Store Age CSA: “Dick’s Sporting Goods partners with resale platform SidelineSwap. Dick’s Sporting Goods continues developing its in-store trade-in event offerings. The sporting goods giant is building on its collaboration with SidelineSwap, an online marketplace for new and used sporting goods it initially partnered with in August 2022, and followed up with a strategic investment in November 2022. Other notable SidelineSwap investors include eBay. Throughout 2024, Dick’s customers will be able to drop-off their used sports gear at SidelineSwap trade-in events at select Dick’s store locations throughout the U.S. The used gear will be evaluated by SidelineSwap buying experts, and customers will be paid with Dick’s e-gift cards to use toward their next purchase. Items that do not qualify for trade-in can be donated or recycled. According to Dick’s Sporting Goods, customers who attended its trade-in events in 2023 received an average payout of $120 for their used gear, and nearly all customers surveyed said they would be interested in reselling their used sports gear at least once per year.” HPS Analysis: The used market is growing rapidly in the U.S., and Dick’s Sporting Goods expanding its resale platform is an example of this growth that started and continues in clothing and fashion, and has spread to all segments of consumer goods. The reset and pivot that bike shops are being advised to plan for in the near term includes an aggressive expansion into the used market to bring in and establish relationships with consumers, and support revenue and profit planning for the business. NBDA already has several excellent recordings of helpful webinars available to members and will be producing more used market webinars.

4-18-24: “DHS crackdown on illicit trade includes greater de minimis scrutiny.” Sourcing Journal: “U.S. customs enforcement is kicking up a notch. The Department of Homeland Security announced Friday that it’s rolling out an ‘enhanced strategy’ to counter illegal trade and ‘level the playing field’ for the American textile industry, whose 500,000 jobs it says are critical for our national security. ’We are dedicated to ensuring a fair and level playing field for American businesses,’ said Homeland Security Secretary Alejandro N. Mayorkas. ‘The textile industry, like other industries, suffers when competitors use forced labor, violate customs laws, and engage in other illegal practices to undercut U.S. businesses and drive prices unfairly low. Through strengthened enforcement measures, enhanced inspection and testing, and increased information sharing, this administration is protecting thousands of American workers and the U.S. textile industry.’ Efforts include sharpening the screening of small, sub-$800 package shipments that fall under the hotly contested Section 321 de minimis exception.” HPS Analysis: The loophole that the de minimis exception has created is getting the attention of Congress, and while the emphasis is currently on the textile industry and low-cost fashion, the bicycle industry will benefit from sharpening the screening of small, sub-$800 package shipments, some of which will contain low cost, dangerous lithium-ion batteries intended for e-bikes and other micromobility devices. What has intensified the attention of Congress is fentanyl and the component chemicals to manufacture fentanyl and other illegal and hazardous drugs. This is now a bipartisan issue with growing support in both the House of Representatives and the Senate. The bicycle business has become a small player in this issue, but will benefit from the quicker action that is moving forward toward improving the screening process and reducing the value amount of small shipments. HPS expects positive action this year.

4-18-24: “Trek closes Italian subsidiary and reorganizes Southern European organization.” BIKE Europe: Trek has closed its Italian subsidiary and incorporated this market within the newly formed Trek South Europe. In a short press release, the American company announced the creation of its fifth major European subsidiary, following GAS (Germany, Austria and Switzerland), BLX (the Netherlands, Belgium, Luxemburg), Nordics and UK+. The news of Trek Italia closure caused quite a stir in Italy, also considering that its Bergamo headquarters, located inside a beautiful two-story building, very American in style and space, only opened in 2019. The branch employed 27 people but with its merging into Trek South Europe eight positions were lost.” “The 19 remaining employees have been integrated into the new structure, along with their French, Spanish and Portuguese colleagues.” “The headquarters of Trek’s new Southern European office has been established in Madrid.” “The new subsidiary was created in order to foster synergies and improve the competitiveness of the Wisconsin-based brand in Europe.” “Trek Italy will close definitively in the coming weeks and the five Italian Trek stores which were directly depending on the Italian office, will continue operating and will be supported by the local staff.” HPS Analysis: HPS has emphasized that the top-tier American bicycle brands have become billion-dollar multinationals. This BIKE europe article provides details of a part of the Trek right-sizing reorganization in Europe. Note that the new Southern European Trek subsidiary has, according to the article, “created in order to foster synergies and improve the competitiveness of the Wisconsin-based brand in Europe.”

4-18-24: “Sea Otter Classic back with a bang with best-ever industry day.” Bicycle Retailer and Industry News: “The world of cycling and outdoor sports descended on Monterey, California, for day one of the Life Time Sea Otter Classic presented by Continental. “Taking place from April 18-21, 2024, the first day of the world-renowned event, Industry Day, brought brands and industry leaders together alongside fans and racers of all abilities in a celebration of two-wheeled culture and competition.” “Out of the record 1,100 brands in attendance, more than 50 brands gave cycling fans and the international media the opportunity to see their latest releases on U.S. soil for the first time on day one; including new products from Parlee Cycles, POC, Peaty’s Products, ION, and Abbey Bike Tools.” “We’re expecting to welcome almost 80,000 cycling and outdoors enthusiasts over the four days, and there really is something for everyone.” HPS Analysis: I attended the Sea Otter Classic before the pandemic, and with 80,000 to 100,000 consumers, this is the premier bicycle event in the U.S. The 1,000-plus brands are part of the attractions, and an opportunity to get hands-on consumer feedback about new and existing products. Given the current U.S. market conditions, a successful Sea Otter Classic is welcome news. Bike Fest in Bentonville, Arkansas, May 23-26, is also becoming a major consumer event with bicycle brand participation. Founded in 2020 and supported by the Walton Foundation, this is an example of what the U.S. needs — a dozen such consumer events to reach out and actively promote all aspects of bicycling, from transportation and mobility to exercise and family recreation and competition. There will always be multiple event producers, but bicycle industry and business associations like NBDA, LAB, and, IMBA need to pitch in and co-sponsor and participate in bringing brands to these events. Part of the pivot is bike shops reaching out and sponsoring consumer events in their communities, and getting other retail channels selling bicycles involved to spread the word about the fun, enjoyment and many benefits of bicycling.

4-19-24: “Kent Outdoors looking for buyer for Kona Bikes.” Bicycle Retailer and Industry News: “Kent Outdoors, which acquired Kona Bikes from its founders in 2022, said Friday that after a strategic review it has decided to sell the bike brand. The move comes after Kona became the talk of the industry by setting up an expo tent prior to the Sea Otter Classic, and then breaking it down and leaving the event before it opened. The news also comes as Kent announced a new CFO and a new $100 million credit facility from Eclipse Business Capital, an asset-based lender.” “Kent said the new credit facility follows recent investments from Goldman Sachs and Comvest Partners. ‘These investments are critical to the company’s efforts to implement a strategy for future growth and success as it continues to market innovative new products for outdoor enthusiasts and adventure seekers,’ the company said. A year and a half after announcing the acquisition by Kent, Kona announced a new consumer-direct sales program that many U.S. dealers found objectionable.’ ‘In recent months Kona has advertised deep discounts in its consumer-direct program, including a buy-one-get-one free promotion. Kent Outdoors is no relation to Kent International, the New Jersey-based mass market bike maker. Besides Kona, Kent Outdoors owns outdoor brands including Arbor Snowboards, O’Brien, Freedom Foil, Aqua glide and BOTE.” HPS Analysis: Kent Outdoors is not affiliated with Kent International, bicycle supplier to Walmart and owner of Bicycle Corporation of America, the largest bicycle assembly facility operating in the U.S. With this said, Kent Outdoors acquired Kona during the pandemic and the surge in bicycle demand. Kent Outdoors also took Kona DTC, alienating many of Kona’s long-time dealers in the bike shop community. Kent Outdoors has decided that it wants to stick with its ownership of primarily watersports brands, and does not want to wait for the bicycle market and business to recover. HPS views this as fallout from the shakeout.

4-21-24: “How Chinese firms are using Mexico as a backdoor to the U.S..” BBC: “The reclining armchairs and plush leather sofas coming off the production line at Man Wah Furniture’s factory in Monterrey are 100 percent made in Mexico. They’re destined for large retailers in the U.S., like Costco and Walmart. But the company is from China, its Mexican manufacturing plant built with Chinese capital. The triangular relationship between the U.S., China and Mexico is behind the buzzword in Mexican business: nearshoring. Man Wah is one of scores of Chinese companies to relocate to industrial parks in northern Mexico in recent years, to bring production closer to the U.S. market. As well as saving on shipping, their final product is considered completely Mexican, meaning Chinese firms can avoid the U.S. tariffs and sanctions imposed on Chinese goods amid the continuing trade war between the two countries.” “The Man Wah sofa factory is located inside Hofusan, a Chinese-Mexican industrial park. Demand for its plots is sky high. Every available space has been sold. In fact, the Industrial Parks Association of Mexico says every site due to be built in the country by 2027 has already been bought up. Little wonder many Mexican economists say China’s interest in the country is no passing fad.” HPS Analysis: This article casts light on how Chinese companies are using near-shoring in Mexico as a backdoor into the U.S. market. Consumer products manufactured in Mexico by Chinese-owned companies are “Made in Mexico” and subject to treatment under the new version of the North American Free Trade Agreement. This is also classic near-shoring and will, as the article points out, be employed more aggressively by Chinese companies as trade relations between the PRC and U.S. become more intense and fractious. Whether the bicycle OEMs in the China and Taiwan will actively pursue the nearshoring option remains an open question, since none of the OEMs have, to our knowledge yet moved to take advantage of this option. HPS will keep you advised.  

4-23-24: “Shimano reports weak sales while outlook remains slow.” BIKE europe: “Bicycle component manufacturer Shimano reports that demand for bicycles continued to be weak at the start of the year. In the first quarter of 2024, net sales decreased by double digits compared to last year. Also for the rest of the year, the outlook will remain uncertain for Shimano. Between January and March this year, Shimano’s net sales decreased 22.6 percent from the previous year to JPY 76,090 million (460 million euros). The operating income decreased by 52.7 percent to JPY 10,471 million (63 million euros). The market situation in Shimano’s markets vary a lot, although overall interest in bicycles remained high as a long-term trend. “On the other hand, supply and demand adjustments continued, and market inventories remained high globally,” the component supplier reports. In Europe, the market for bicycles continued to be strong in Germany and the Benelux, while in other European countries, market inventories remained high due to cooling consumer confidence on account of inflation and economic slowdowns. In North America, retail sales of completed bicycles softened, and market inventories remained at a high level. In the Asian, Oceanian and Central and South American markets, retail sales of completed bicycles were weak due to sluggish personal consumption on account of rising inflation and economic uncertainty, and market inventories were at a high level. The Chinese market is a big exception as popularity of road bikes continued, helped by an outdoor recreation boom. As a result, retail sales of completed bicycles were favorable, and market inventories remained at an appropriate level. In the Japanese market, retail sales were sluggish as affected by the soaring price of completed bicycles due to yen depreciation and pullbacks in consumer spending and market inventories remained high.” HPS Analysis: Shimano is, in HPS’s opinion, being candid and forthright about how the first quarter has played out and how the rest of the year is shaping up. Shimano is being realistic about the full extent and scope of the so-called “inventory problem.” This gets passed off as a whole bunch of finished goods in boxes clogging up warehouses until they can be sold. This is only true in part. The rest of the story is work-in-process in the form of frames, forks and processed components like racks, carriers, baskets, etc. backed up at OEMs, along with lots of components, including Shimano components packed for OEM production that have to be repackaged for any hope of aftermarket sales. Added to this are the subcontractors who manufacture the lower quantity finished goods for their bigger OEM customers. An example is a subcontractor that produces the kids bikes under a brand name for an OEM. The brand customer may know about the subcontractor or may not care. When the order delays and cancellations worked their way down the supply chain, some of the large OEMs told their subcontractors to bite the bullet and warehouse the excess inventory, including components, and many OEMs also refused to pay for this excess and stuck the subcontractors with financial burden. Shimano knows it will take time to work this excess through the supply chain, and that it isn’t as simple as when orders start being placed again.  

4-23-24: “Boxes piling into Mexican ports – but then piling up.” The Load Star: “Mexico’s box ports continue to boost throughput, fueled by nearshoring and roaring trade with the U.S.. Manzanillo, the nation’s largest gateway, clocked up 7.3 percent growth for the first three months of the year, with 8,324,581 tons. Imports surged 15.7 percent, while exports advanced at a more stately 6.4 percent. Box traffic at the port’s four container terminals climbed 17.7 percent, driven by a 19.2 percent rise in imports. Manzanillo handles about one-third of Mexico’s exports and 40 percent of containerized imports. Lazaro Cardenas, Mexico’s second-largest cargo port, has not yet released traffic numbers for March, but February saw a 35 percent surge in container volumes, while the port’s auto business rose 5 percent, to 100,843 units. Containerized imports climbed 33 percent, while exports jumped 53 percent. Mexico’s waterborne international trade has been on a tear this year, kicking off with 20 percent growth in box traffic in January. The two largest ports on the Gulf coast, Veracruz and Altamira, registered increases of 13.1 percent and 29.5 percent respectively. On the Pacific coast, which accounted for 73 percent of traffic, Manzanillo and Lazaro Cardenas saw box volumes grow 13.8 percent and 40 percent respectively. Trade with China has been a major driver. According to Xeneta, China’s containerized exports to Mexico soared 60 percent in January. Last year, China-Mexico trade grew 34.8 percent, up from a modest 3.5 percent in 2022. Chinese manufacturers, as well as their counterparts elsewhere, have been rushing into Mexico to retain access to the U.S. market, which helped it regain the crown as the largest trade partner for its northern neighbor last year. That same momentum made Laredo overtake the port of Los Angeles as the largest gateway for U.S. imports.” HPS Analysis: Here is one of the problems with the increase in near-shoring Chinese and U.S. consumer goods manufacturing in Mexico. Mexican ports are being pushed to capacity or overwhelmed with both inbound ocean shipments of raw material and components and outbound ocean shipments of finished consumer goods. Note that Laredo has overtaken the port of Los Angeles as the largest gateway for U.S. imports. This means Mexican ocean ports will have to be monitored for import and export volume and activity going forward.

4-25 24: “U.S. industry discuss challenges at Bicycle Leadership Conference.” BIKE europe: Scott Montgomery attended the PeopleForBikes Bicycle Leadership Conference March 27-29 and wrote an article for BIKE europe. “Approximately 260 industry executives attended the Bicycle Leadership Conference (BLC) this year which given the tough past year demonstrates the vitality and commitment to this annual meeting of the minds of the U.S. cycling industry.” “The annual stats review was very light this year, a disappointment to some as this has been a very popular segment in the past, so very few figures and no charts or comparisons were shared. Most wondered if this was because they did not want to bring down the mood with drops in performance, or used to suggest that more attendees join the market information providers Circana and People for Bikes levels to gain better access to the data. Either way, we all know 2023 was a very down and very challenging year for the U.S. cycling community.” “After a positive but still sober Taipei Cycle Show last March that was mostly optimistic about the market recovery starting around the world, I was struck by the positive feedback that just about every attendee I spoke with shared about the pending results for the first quarter of 2024. I heard of year-on-year results in the range of 12-28 percent improvement over the same period last year. This left me with a positive impression that the worst was behind us and that 2024 would be positive, especially for e-bikes and most other product categories.” HPS Analysis: Scott Montgomery is an excellent writer, but HPS was a little surprised that his article about attending the PeopleForBike Bicycle Leadership event appeared in a European trade publication. There has been little U.S. trade publication coverage, and this article appeared almost a month after the event. The complete article is extensive, and we highly recommend obtaining and reading it in its entirety. While there were presentations and panels from the investment and private equity outside financial experts looking into the U.S. bicycle business, and representatives from the European business, we found the coverage of the annual stats review most interesting. Scott reports the stats review was “very light this year” and “a disappointment to some as this has been a very popular segment in the past, so very few figures and no charts or comparisons were shared. Most wondered if this was because they did not want to bring down the mood with drops in performance, or used to suggest that more attendees join the market information providers Circana and People for Bikes to gain better access to the data.” If true, HPS views this as shortsighted on the part of the organizer and a disservice to the paying attendees. Scott also opined that participants talked: “… of year-on-year results in the range of 12-28 percent improvement over the same period last year. This left me with a positive impression that the worst was behind us and that 2024 would be positive, especially for e-bikes and most other product categories.”  While interesting, HPS thinks that based on the Shimano article, this is aggressively optimistic.

4-29-24: “Over 45K retail stores may close in next five years.” RETAILDIVE: “E-commerce penetration is expected to rise, helped in part by third-party players like Temu and Shein, according to a new report. About 45,000 retail stores may close in the coming years as retail’s physical footprint increasingly shifts to serve as fulfillment and distribution centers, UBS analysts led by Michael Lasser said in an April 22 report. That forecast is based on the premise that online retail penetration rises to 26 percent from 21 percent with retail sales growth of 4 percent by 2028. Banks’ reluctance to lend, higher operational costs, and consumers’ sustained inclination to spend on services instead of goods also drive store closing forecasts.The U.S. still has too much retail square footage, the UBS analysts said, as third-party players like Temu and Shein are positioned to drive further e-commerce penetration without the overhead of managing and maintaining a physical footprint. The analysts said apparel and accessories, consumer electronics and home furnishing retailers need to shrink their footprints the most.” “’However, retail is unlikely to reach a post-store era anytime soon,’ the analysts said in their 100-page report. ‘Our analysis assumes that stores remain an important part of the overall retail ecosystem for retailers and consumers. In the simplest terms, stores serve as hubs of fulfillment and support distribution logistics,’ UBS said. ‘This is increasingly more important as consumers are becoming more demanding for convenience or immediate deliveries. The retailers best positioned to gain are those that are adopting and investing in omnichannel experiences.’” HPS Analysis: The facts seem to indicate that the U.S. is over-stored at retail. and even with the loss of up to 45,000 storefronts over the next five years, the country will still have enough brick-and-mortar stores to service consumers and meet their needs in a digital, connected world where consumers can shop 24-7 and expect access to every retailer’s products and inventory. The big advantage for bike shops is the finding that stores remain an important part of the overall retail ecosystem. Selling services, including pick-up, delivery, assembly, repair, and access to the circular economy of previously-owned bicycles and selected accessories, and extensive expert product and activity knowledge, are huge points of advantage and differentiation in the omnichannel bike shop channel of the future.

4-30-24: “Cannondale reduces workforce as part of reorganization.” Bicycle Retailer and Industry News: “Cannondale has reduced its workforce by less than one percent during a company reorganization from a multi-regional to unified global structure, a company spokesperson told BRAIN. The Pon-owned brand is moving away from regional teams with global design and engineering experts working more closely together, said the spokesperson, who would give no further details. In 2022, Cannondale announced a new global organizational structure that eliminated regional general managers and leveraged Pon.Bike to enhance operations and growth. A year earlier, Pon.Bike announced it purchased Dorel Sports, the parent company of Cannondale and other brands.” HPS Analysis: Cannondale is the lead brand in the specialty channel segment of Pon.Bike’s U.S. portfolio. A less than 1 percent reduction in workforce is in line with the Pon.Bike declaring a “robust” 2023 despite the overall industry downturn. Where this fits in the plans for the distribution and assembly facility in Georgia remains to be determined, but it is entirely possible that the workforce for this facility was hired and in place before this workforce reduction took place. We are getting bits and pieces, and most of the Pon.Bike U.S. activity in both its specialty retailer and mass merchant bicycle businesses is shrouded behind a curtain. We are going to have to wait to see, if we ever do see, what Pon.Bike’s plan for the U.S. market is.

4-30-24: “New Utah bill defining multiple-mode and out-of-class electric bicycles goes into effect May 1.” Bicycle Retailer and Industry News: “Starting May 1, 2024, Utah State Bill HB 85 will go into effect after being signed into law on March 21, making Utah the first state to proactively address issues posed by certain electric vehicles. The bill includes a definition of multiple-mode electric bicycles, and also more clearly defines out-of-class electric vehicles (OCEVs). Multiple-mode electric bicycles are bicycles capable of switching between the three class modes. During PeopleForBikes’ 2024 Bicycle Leadership Conference, Utah Representative Jeff Stenquist, one of the sponsors of the bill, discussed this landmark legislation with PeopleForBikes Policy Counsel Matt Moore. ‘The impact of this bill is positive for both the bicycle industry and consumers. The bill is the first in the nation to define multiple-mode products and their labeling requirements while establishing truthful advertising requirements for OCEVs sold as e-bikes. This clarification will help legitimize actual electric bicycles that fit into the three-class system while clarifying gray areas around some switchable products. The bill breaks new ground by requiring sellers of vehicles that are not electric bicycles to inform consumers of that fact if they promote their products as ‘electric bikes’ or ‘e-bikes.’”  HPS Analysis: While this legislation and the new state law were supported and lobbied for by the American bicycle industry trade association, HPS feels it is unnecessarily confusing and convoluted, and has created a situation that, depending on how events of this year turn out, sets up a legal battle over the Utah and similar state legislation that the industry association is supporting, and the absolute preemption of the mandatory bicycle safety regulation as it will be amended and promulgated over the next two to three years, as well as the safest products for bike shops and American consumers.

Contact Jay Townley:


03-04-24: “U.S. lawmakers are calling for a crackdown on the special trade provisions that e-commerce juggernauts Temu and Shein are using to flood the country with cheap imports.” The Wall Street Journal Logistics Report: “The shipments using the de minimis rule are surging this year, the WSJ’s Richard Vanderford reports, with at least 485 million packages entering the U.S. so far this fiscal year after 685 million packages were counted in the entire previous fiscal year. The customs provision allows packages with contents under $800 in value to enter the country duty-free under a simplified procedure. Critics say that is helping companies sidestep tariffs and defy bans on imported goods made with forced labor. A House panel estimates that Temu and Shein alone account for about a third of all de minimis shipments. Freight industry officials say the trade has turned the two companies into major forces in trans-Pacific air freight markets. HPS Analysis: The bar chart below is from the Wall Street Journal article and it graphically shows the huge increase in de minimis shipments, including cheap, low-quality, untested and uncertified lithium-ion batteries representing an imminent hazard to U.S. consumers. HPS and the NBDA have joined PeopleForBikes in asking that lithium-Ion batteries intended for use with e-bikes and e-scooters be excepted from treatment under the de minimis rule, making shipment into the U.S. subject to import duty and inspection by U.S. Customs.

Chart from Wall Street Journal article March 4, 2024

03-05-24: “Target to open 300 stores over next decade.” Chain Store Age CSA: “Target Corp.’s new 10-year plan includes a big commitment to brick-and-mortar. The discounter said it plans to build more than 300 stores over the next decade as it looks to reach ‘new guests with a shopping experience that’s welcoming, convenient and fun, whether they’re shopping the aisles or using same-day services.’ The news followed the release of the chain’s better-than-expected fourth-quarter results. Target also plans to invest to enhance the vast majority of its nearly 2,000 stores. HPS Analysis: Target is the number two mass merchant retailer of bicycles, behind Walmart, which recently announced it would build 150 new stores over the next decade. 400 to 450 more mass merchant channel competitors selling bicycles, including e-bikes, can be viewed a number of ways that can be good for bicycling, communities, and for bike shops who reach out to make the “circular” previously-owned and after-purchase service business work for the benefit of their businesses. 

03-05-24: “Trek Bicycle plans to ‘right size’ with 10 percent cuts to spending – Company also will reduce SKUs by 40 percent, according to internal document.” Bicycle Retailer and Industry News: “Trek Bicycle president John Burke has told company leaders that he has decided to “right size” the company by 10 percent in response to slow sales and high inventory levels. But he says the company’s overall strategy remains unchanged. In an internal memo Burke sent to executives recently, he said details of the cuts would be announced Friday. He said in addition to a 10 percent cut in spending, Trek would substantially reduce its stock-keeping units (SKUs), saying Trek’s model year 2026 SKUs will be 40 percent lower than the model year 2024. ‘These are turbulent times in our business,’ Burke began in a confidential Company Update document that Burke sent internally, which BRAIN has obtained. He went on to say the global bike market is ‘in chaos,’ with high inventory levels at wholesale and retail levels leading to ‘significant and continued’ discounting. He said retail sales were below Trek forecasts, including in January and February this year. He said the company has not hit its monthly sales goals for the past 15 months. He said the situation left him with three options: simply hope for better days ahead, continue to make cuts around the edges, or ‘right-size our business to the realities of the marketplace.’ He said he decided to take the third route. He said Trek would reduce overall spending by 10 percent with cuts to programs and positions, with decisions made on or before March 8. Trek will also simplify its product lines and reduce inventory levels. He said the model year 2026 inventory will be 20 percent lower, measured in days in stock, than they were before the pandemic bike boom.” HPS Analysis: The post-pandemic economy and bicycle marketplace is impacting everyone in the business, including Trek. Having been through what is now called “right-sizing” more than once back in the day, I can tell you that you better get it right the first time. Making a second round of cuts is more traumatic for a company than the first round, and planning is everything. Plan it deep and broad enough the first time, get it done, and make it work until the core organization comes out the other side whole and is able to resume generating profit, working capital and financial growth.

03-06-24: “Congress, industry leaders launch coalition to close the de minimis loophole,” Sourcing Journal: “The issue of de minimis reform has gained palpable momentum on The Hill in recent weeks, culminating in the launch of an advocacy group pushing for decisive action against the controversial trade provision.” “The daily deluge of de minimis shipments is impossible for CBP to contend with, according to Michael Stumo, CEO of the Coalition for a Prosperous America, which represents U.S. producers across a number of sectors. ‘Customs officials want to – and know how to – protect Americans from unlawful goods imports and illicit drugs,’ but goods entering the country through direct mail can’t be searched effectively, he explained. Congress capitulated to FedEx and UPS to create high-volume lawlessness enabling Shein, Temu, and foreign criminal organizations to ship goods to U.S. customers and drug dealers. Nearly half a billion packages have entered the country under de minimis to date in 2024, with the majority hailing from China. “They are uninspected, they don’t pay any tariffs, we know for a fact that many of these products are made with forced labor and intellectual property theft, and they do not meet our consumer safety standards,” said Representative Earl Blumenaur (D-Ore.), ranking member of the House Ways and Means Trade Subcommittee who is spearheading The Coalition to Close the De Minimis Loophole. HPS Analysis: Under Section 321 of the Trade Facilitation and Trade Enforcement Act, packages valued at under $800 can enter the country duty-free, and they often make their way into the hands of shoppers without being inspected by Customs and Border Protection (CBP). Calling de minimis a “loophole” is an understatement. When a drug dealer can import fentanyl into the U.S. without fear of inspection, the so-called loophole, as members of Congress are saying, has become a dangerous threat to our society. A good friend of mine still believes that you still cannot ship lithium-ion batteries unless they meet international and U.S. Hazmat requirements. That’s only true if you follow the rules and regulations. Delivery via parcel post and parcel delivery services of hazardous lithium-ion batteries is occurring every day in the U.S. when shipped directly to the purchasing consumer under Section 321 at a value of $800 or less. They are not declared as dangerous, are not inspected, are not subject to import duty, and are delivered directly to the purchasing consumer just like fentanyl is. It needs to stop! Please contact your members of Congress and request they immediately sign on to The Coalition to Close the De Minimis Loophole.  

 03-07-24: “DHL is hunkering down for a continued decline in global shipping demand.” The Wall Street Journal Logistics Report: “DHL parent Deutsche Post says a weak market last year is extending into 2024, the WSJ’s Dominic Chopping reports, and it’s now projecting earnings to decline oi the first half before growing in the second half of the year. That suggests a gloomy outlook for global goods trade, from parcels to heavy freight, because of the extensive reach DHL has across cargo transportation markets. The company’s operating earnings tumbled 25 percent last year to about $6.9 billion. It’s projecting little if any earnings growth this year, saying ‘volatility in demand and geopolitical crises will remain with us in 2024.’“ HPS Analysis: DHL, UPS, and FedEx have all announced layoffs and trimming services including reducing air-freight flights from Asia. Small parcel delivery will cost more, and service will be subject to change going forward. Keep in contact with the parcel service you use and compare costs to make sure you receive the best deal available in uncertain times.

03-07-24: “Despite turbulent times, Haro Bikes is expanding and upgrading its model lineup.” Bicycle Retailer and Industry News: “Unlike many in the industry, Haro Bikes has been busy expanding instead of contracting. Unburdened by inventory concerns that have choked much of the industry, the longtime BMX and mountain bike brand is preparing what new Global Chief Commercial Officer Lars Hjort termed a full-line bike offering. ‘It’s a challenging but exciting time for us,’ Hjort said at Taipei Cycle on Thursday. He joined the company at the beginning of the year after stints at Specialized, Felt and Marin. In addition to Hjort, within the past year Haro hired CEO Bjarke Rasmussen, formerly vice president of global operations for Cycling Sports Group, senior engineer Ty Buckenberger, formerly with Specialized, supply chain director Graise Ooi, formerly with Blix Bicycles inc., and chief marketing officer Megan Tompkins, who worked for Crankbrothers, Specialized, Shimano and BRAIN. ‘We did a lot of hires because we are moving the brand from being solely focused on BMX and mountain bikes because we want to play I the big leagues,’ Hjort said.” “What Haro won’t be expanding is its sales channel to direct-to-consumer. Hjort said the approximate 700-retailer network will remain an integral part of the brand’s operation.” HPS Analysis: If I am correct, Haro Bicycle Corporation is currently owned by Jayu Yang, former owner of Kenstone, a Taiwan-based bicycle OEM. Jayu Yang and her cousin, Dr. Shu-Yuan Yang founded GRONBLA (, a company dedicated to developing recycling methodology for plastics. Haro is not only “unburdened by inventory concerns,” it has a vision and plan for the future supported by investment capital. This BRAIN article from March 7 also points out that Haro, in addition to investing in management talent, is “… building a U.S. assembly line in Vista, California, with bikes expected to be rolling off the lines in three to four months.” Onshoring is being considered and Haro is watching what is going to happen with duty rates on bicycles imported from China later this year. As I said, Haro has capital, experience, know-how, and a plan for the future.

03-08-24: “Taipei Cycle Show 2024: 7 takeaways from Asia’s largest bicycle trade show.” Cycling Industry News: “More than 950 exhibitors and 3,500 booths make Taipei Cycle the biggest bicycle exhibition in Asia and a prime business hub for the global bicycle industry and its supply chain. Therefore, the event offers an excellent opportunity to get an early sense of the current mood in the bicycle industry as well as the prevailing trends when it comes to product innovations. During our visits to the exhibition halls at the Nangang Exhibition Center, seven themes particularly stood out.”

  1. “The long wait for the turnaround – The bicycle industry has been struggling with numerous problems for almost two years now, including high inventory levels, a challenging economic climate, and falling export values. This is also clearly noticeable at the Taipei Cycle Show. Taiwan’s e-bike exports fell by a whopping 21.9 percent year-on-year. In the components and accessories segment, the decline was even 41.4 percent. The economic situation is, therefore, one of the most discussed topics at the Taipei Cycle Show. Based on several conversations at the trade fair, it seems that the industry may not turn the corner until the end of 2024 or 2025.

HPS Analysis: We urge you to read this whole article and the other six takeaways, although the first one is the most important. The theme has been repeated for several weeks now, ever since the last day of the Taipei Cycle Show. We will explore more about the details of “the long wait” as you read through this month’s newsletter. The inventory glut also includes work-in-process (i.e. finished frames) stuck in OEMs and sub-contractors, along with all kinds of components stuffed in OEM, subcontractor, and outside warehouses. This current “inventory problem” is far different than any such problem this industry has experienced before, not just because it is global, but because it has its tentacles in every step in the supply chain.

03-08-24: Bike Europe market reports: “European e-bike imports in downward freefall; Bicycle market in the Netherlands slides down by 6 percent, Lean year for e-bike sales and production in Czech Republic, UK losing heavily in catch-up game with European bicycle market, Is Denmark’s dramatic bicycle market situation a forecast for other European countries?” HPS Analysis: Just read the descriptions posted above. There is not a positive or bright spot in the bunch, and that is the point.

03-08-24: “We need to talk about Rad Power Bikes’ new e-bike batteries.” electrek: “Electric bikes just may be the biggest transportation revolution of our generation, helping millions replace car usage with more affordable, more efficient alternatives. But there’s no denying that concerns have been swirling about the safety of e-bike batteries, even if such fire fears have primarily been overblown by much of the media. Leading electric bicycle maker Rad Power Bikes has just unveiled its new “Safe Shield Battery” in an effort to mitigate worries over e-bike battery safety. And it’s something we need to talk about. The whole underlying issue here is based on the fact that e-bike batteries are usually comprised of dozens of smaller, energy-dense lithium-ion battery cells. Those cells are similar – and sometimes identical – to the cells used in everything from electric cars to power tool battery packs. The individual battery cells store lots of energy and are generally quite safe. However, danger can occur when the cells are punctured or short-circuited, with the latter often happening when water makes its way into battery packs over time. Well-made e-bike batteries use several methods to mitigate these risks, and the result is that battery fires are exceedingly rare.” “However rare though, e-bike fires can and do occur in poorly-made batteries or in battery packs that have been abused, damaged, or otherwise misused. And that’s exactly what it looks like Rad Power Bikes set out to solve with its new Safe Shield e-bike batteries. The secret sauce in Rad’s batteries isn’t actually the battery cells themselves. Those are fairly standard cells like you’ll find in many other e-bike batteries. The major difference is how the battery packs are constructed. They use a method known as potting, which basically encapsulates electronics in a waterproof resin barrier. It’s common in electronics that will live much of their lives outdoors, as it seals the sensitive components from moisture.” HPS Analysis: The article talks about “urethane resin” that waterproofs and also acts to “thermally” insulate the cells from each other, preventing a thermal runaway from occurring. Mike Fritz, HPS Chief Technology Officer, had been looking into potting for e-bike batteries when the news about Rad Power Bikes introducing its “Safe Shield Battery” broke, so it didn’t take long for him to get up to speed and start to ask pertinent questions, including the testing that has been done to validate the thermal insulating of individual cells that “cook-off” but are isolated so a thermal runaway event doesn’t occur. Other related questions include the added weight to the battery pack, and the recyclability of the packs with the resin added. However, “potting” e-bike lithium-ion battery packs may represent an added process that will guarantee low risk and maximum safety for good quality lithium-ion battery packs manufactured using LG, Samsung or Panasonic cells by manufacturers that have their battery packs tested and certified to UL 2271 by a NRTL and assembled into systems by e-bike manufacturers, brands and importers that have their complete e-bike systems tested and certified to UL 2849 by a NRTL. HPS also notes that while potentially very good news, it is prospective. It will still require enforcement, and it will not affect the past, present or near-term future that is and will be populated with low-cost hazardous lithium-ion battery packs used and intended for use with e-bikes. The whole of the industry will need to step up and take responsibility for getting the message out and educate and advocate until these dangerous battery packs are purged from the U.S. market.

03-10-24: “Two Sessions: China touts openness while tightening control.” BBC: “The National People’s Congress is usually capped off by the premier’s press conference. But this year, and for the rest of the term, the traditional has been mysteriously nixed. Officials have said there was no need for it given there were other opportunities for journalists to ask questions. But many observers saw it as another sign of consolidation and control, in what became a running theme for the congress, even as top officials preached openness. The cancellation of the press conference also effectively diminishes Premier Li Qiang’s profile. Though the event was scripted, it was a rare chance for foreign journalists to ask questions and give the country’s second-in-command some room to flex his muscles.” “The dimming of the spotlight on the premier, along with a shorter congress this year, are all signs of ongoing structural change within the Chinese Communist Party (CCP) where President Xi Jinping is increasingly accumulating power at the expense of other individuals and institutions, noted Alfred Wu, an associate professor at the National University of Singapore who studies Chinese governance. But to the outside world, the party is keen on projecting a different kind of image as it battles dwindling foreign investor confidence and a general malaise in its economy. Addressing international journalists last week, foreign minister Wang Yi insisted China was still an attractive place to invest in and do business. This year’s economic blueprint, delivered by Mr. Li at the start of the session, laid out plans to open up more areas to foreign investment and reducing market access restrictions in sectors such as manufacturing and services. These moves come after foreign investors were spooked by recent anti-espionage and data protection laws, as well as several sudden high-profile detentions of Chinese and foreign businessmen. Foreign direct investment in China recently fell to a 30-year low. HPS Analysis: My first business trip to the PRC was in May of 1983. I flew to Shanghai for a week-long meeting of the ISO Technical Committee TC 149 and its sub-committees working on the development of what became ISO 4210, the international safety standard for bicycles. Our delegation from the UK, France, Germany, Japan, and the U.S. was one of the first to be invited to come and meet in China, which in turn was just opening up to the West. In the 41 years since, the bicycle business in China has gone from no exports to the largest exporting source country in the world. The governance by the Chinese Communist Party (CCP) has also evolved. This report gives you an idea of the conflict between what is said about wanting Western investment, and the restrictions placed on Western companies doing business in China. Western companies and investments are leaving, but the bicycle business is having great difficulty leaving in whole or part. As we contemplate an uncertain future, there is no global replacement currently capitalized and in operation that can replace the production capacity of the Chinese bicycle and e-bike export infrastructure.

03-11-24: Vosper: E-bikes step up in a down market.” Bicycle Retailer and Industry News: “2023 was the year that everyone is trying to forget. Inventories were way up, sales were way down, and relations between suppliers and retailers were way more strained than anyone can remember. And as I pointed out last month, things aren’t likely to get much better anytime soon.” “Some have speculated that when e-bike imports reach 20 percent of pedal-only, it will mark an inflection point for e-bike sales in the U.S. and that some large increase in market share (the hockey stick curve) will happen as a result. I am skeptical of this projection. Here’s why: a large majority of e-bike sales are at the very bottom of the mass market as low-end bikes are shipped D2C from China and other Asian manufacturers. These units have no direct parallels in the pedal-only market segment, so there’s no basis for an apples-to-apples comparison, which renders that 20 percent number arbitrary. To really see the relationship, we’d have to look at dealer and mass retailer sales and filter the bottom feeders out of the equation somehow. At present I don’t believe the industry has the resources to do this. All the foregoing raises an interesting question: If we cut back our imports so much in 2022 and 2023, why do we still have so much excess inventory in 2024 and even into 2025? The answer, of course, is that we brought in enormously too much inventory during the COVID years, as far back as 2020 and 2021. And we’ve been choking on that inventory ever since. Which is to say our current inventory crisis is a long-term problem, and long-term problems tend not to have short-term solutions, however much we may want them. The only bright spot in this otherwise gloomy picture is that e-bikies, at specialty retail price points anyway, seem to be doing rather better than other product categories. In an informal poll in the Facebook group Cycling Industry Recovery, 56 percent of retailers responding reported that their sales are up relative to their pedal-only models.” HPS Analysis: There is no question that e-bikes are the new growth product category, with more styles and types than any new emerging category this business has seen in years. Not everyone believes that e-bikes will save the industry. Marc Sani writes in Through The Grapevine in the April issue of BRAIN that: “Will e-bikes save the industry? Not anytime soon.” HPS is also working on collecting data for the NBDA Summit in May and publication of the U.S. Bicycle Market Overview Study 2022-2023 Report due to be published by the NBDA the end of May or early June. While the data isn’t complete, we do know that in 2023 e-bikes were 9.5 percent of estimated total bicycle imports into the U.S. and regular bicycles, all wheel sizes, were 90.5 percent. When we look at the FOB value (cost at the factory shipping dock) of 2023, bicycle imports of e-bikes were 50.2 percent of the estimated total FOB value of total bicycle imports, and regular bicycles, of all wheel sizes, were 49.8 percent. From an FOB cost standpoint, just under 10 percent of last year’s bicycle unit imports represented half of the total FOB cost value. This brings focus to why the industry is fixated on e-bikes – the dollars. This is as it should be, but we caution that placing too much emphasis on dollars, starting with retail selling price and working down to FOB value, has to be done rationally, and logically, keeping unit market penetration and incident-rate or per-thousand population in focus. Meanwhile, relative to 2023, we agree that e-bikes stepped up in a down market! 

03-12-24: “NRF: E-commerce spurs sales growth in February.” Chain Store Age CSA: “So far, 2024 is off to a good start for retailers. Retail sales built off “solid gains from January” in February 2024, aided by exceptionally strong e-commerce performance, according to the CNBC/NRF Retail Monitor, powered by Affinity Solutions, released Tuesday by the National Retail Federation. Roughly 18 percent year-over-year growth in online and non-store sales, according to the Retail Monitor. That compared with a decrease of 0.16 percent month-over-month and an increase of 2.34 percent year-over-year in January 2024.” “February sales were up in all but one of nine retail categories on a yearly basis, led by online sales, sporting goods stores and health and personal care stores, and up across the board on a monthly basis.” HPS Analysis: E-commerce is growing, and bike shops need to continue to expand their omni-channel sales by improving and growing their website content and product sales, including service and rental bookings and appointments. Major bike brands are actively competing for online business, and bike shops have the advantage of offering mobile delivery, pick-up and service, and for those shops that do not compete with any of their bike brands, they can sell bicycles and e-bikes online.

03-12-24: “Financial and organisational problems piling up at Accell Group.” Bike europe: “The financial situation for KKR owned Accell Group is becoming increasingly challenging. A group of lenders decided to select advisers to assess options for the bicycle manufacturer amid struggles spurred by waning demand and operational hurdles. Accell is also facing an expensive recall of the Babboe cargo bike and at the same time, the union might shut down one of the Heerenveen factories later today. The group lenders who do not trust the financial position of Accell Group have asked Houlihan Lokey (HLI) and Milbank as advisers, while KKR is collaborating with Kirkland & Ellis to weigh their options, reports Bloomberg. According to the Dutch media outlet FD, Accell Group itself asked the British investment bank Rothschild and law firm Stibbe for advice. ‘That is a bad sign,’ says a restructuring expert in the FD. ‘It means that the company is assisted independently of its shareholder. When things go bad financially, the interests of the shareholder and the company run parallel.’ None of the financial institutions involved want to comment on the current situation. HPS Analysis: This article points out that last summer Fitch Ratings downgraded Accell Group and questioned the ability of the Group to meet its financial commitments. “We believe the current capital structure is unsustainable due to a material drop in profit with only a gradual recovery assumed from 2025,” said Fitch.   

03-12-24: “Shipping’s new port labor battle.” The Wall Street Journal Logistics Report: “U.S. importers are bracing for a new season of uncertainty as threats of a walkout at East Coast and Gulf Coast ports flare even before contract talks with dockworkers formally begin. The International Longshoremen’s Association is seeking to build on the strong wage gains other transportation unions have won, including the deal for a 32 percent increase at West Coast ports that was struck last year. The WSJ Logistics Report’s Paul Berger writes the union directed local chapters to resolve their work issues by May 17, and negotiations for a new coast-wide deal would get underway after that. ILA chief Harold Daggett has said that dockworkers will strike if a new agreement can’t be reached before the current contract expires on Sept. 30. Ocean carriers expect retailers to start bringing goods in early or ship more volumes out of Asia to the West Coast to avoid potential disruption.” HPS Analysis: In these uncertain times we will not enjoy a stable ocean freight shipping season for some time to come, if ever again. The reason bike shops need to watch what is happening with shipping container rates is being hit with an increase for freight or a surcharge, and the brand not reducing or eliminating the increase when rates go down. Ask your suppliers for periodic updates and make sure any surcharges or freight-related increases are justified and explained and removed when no longer applicable.

03-12-24: “Taipei Cycle 2024 confirms tough year ahead for supply chain.” Bike europe: “The 2024 Taipei International Cycle Show will go in the history books as the edition of high hopes, but low expectations. The Taiwanese component manufacturers are eagerly waiting for more order volume while the bicycle brands are confronted with a huge financial burden due to the inventory issue. As expected, the 2024 Taipei Cycle Show did not bring any relief to these challenges. The buzz on the show floor on the first day of Taipei Cycle could not conceal the issues faced by the industry. Compared to the 2019 edition, the Taipei Cycle Show which took place from March 6-9 saw a lower attendance of International buyers this year, although the number of visitors was remarkably up from last year. Bicycle sales are back to a regular pre-pandemic level, but the supply chain is so full that some component manufacturers are currently opening their production for only one or two days a week. I order to not lose out on future market positions, companies are doing their utmost to keep their R&D up and running.” “In various markets both retailers and suppliers are faced with credit rating decline by their banks. This only results in even higher inventory levels upstream in the supply as companies have to reduce their stock because of a limitation of their working capital. According to market insiders, the industry is afraid that the imbalance will not be over once companies manage to clear their warehouses. At what moment in the year will bicycle brands be convinced to increase their component order levels again? This increase needs to be taken stepwise to give the component manufacturers sufficient time to restart production. Still, it is expected that this restart of the market will bring extensive increases in lead times again.” HPS Analysis: It is no longer as simple as clearing finished goods inventory and placing orders for the supply to make bicycles so OEMs order components. As referenced in an earlier article, the inventory problem has become much more complex, involving OEMs, subcontractors, component manufacturers, and their subcontractors. The tentacles of the inventory problem are wrapped around every aspect of the multifaceted bicycle supply chain, and it will not get back to some form of normalization until the excess is flushed. Remember, the industry supply chain had run on the JIT system for decades. During the pandemic, as the Bullwhip effect forced a switch to the JIC system, JIT was tossed out. Now the brands want to go back to a JIT system to stabilize their finances, with no regard for the role they played in the cause and effect.

03-13-24: “Giant Group annual sales down 16 percent; company looks to e-bikes and performance bikes for growth.” Bicycle Retailer and Industry News: “On Wednesday, Giant Group’s board approved its full 2023 financial report, which shows consolidated sales of NT$76.95 billion ($2.44), an annual decline of 16.4 percent. The company said weak demand for entry-level and mid-level products in North America and Europe contributed to the decline, as did high inventory in the channel. On the other hand, the company said it had seen “huge” bicycle sales growth in China. Giant’s net profit before tax declined by 45.1 percent to NT$4.8 billion, net profit after tax came at NT$3.4 billion, a decrease of 41.8 percent, and earnings per share were NT$8.68. The board approved a cash dividend of NT$5. Since the start of 2024, Giant’s revenues have not improved. January revenues were down 18 percent from the year prior and February was down 27 percent. Giant said e-bikes, sold under its own brand and made for other brands, provided 30 percent of its revenue last year.” “The company said that in 2024 industry will continue to deal with the excess inventory challenge, as well as uncertainties in the economy. However, it said Europe and North America show strong demand for performance-level products while sales in China will continue to grow.” HPS Analysis: This is a relatively complete year-end financial report, although it still has a good helping of verbiage for the stock market, investors and stockholders, which we have done our best to skip. The headline is what the industry focuses on and “…annual sales down 16 percent” is probably as good a statistic as the managers and owners could make out of the financials. An after-tax profit drop of 41.8 percent is a tough nut to reduce and turn positive, and this is surely what the Giant management is setting out to do.

03-14-24: “Dick’s Sporting Goods reports record Q4 sales.” Bicycle Retailer and Industry New: “Dick’s Sporting Goods’ fourth-quarter sales were the largest in its history while its full-year net sales increased over 2022. Net sales for the fourth quarter ending Feb. 3 were $3.87 billion, compared with $3.59 billion year-over-year. For 2023, net sales were $12.98 billion, compared with $2.36 billion at the same time last year. Dick’s had comparable store sales growth of 2.4 percent that was driven by a 1.6% percent transaction increase.” “Giant Group confirmed on Feb. 12 that it will sell bikes through about 25 specialty stores owned by Dick’s, including House of Sports, Public Lands, and Moosejaw locations. Fourth-quarter net income increased 26 percent, from $236 million to $296 million year-over-year, with earnings per share rising from $2.60 to $3.57. Full-year net income was steady at $1.047 billion compared with $1.043 billion in 2022. Full-year earnings per share rose 13 percent, from $10.78 to $12.18.” HPS Analysis: This is the largest of the full-line sporting goods channel retailers and Dick’s is clearly having a good year. It is probably a decent assumption that this includes their bicycle and e-bike sales. As HPS has noted, the Giant brand will be sold by 12 of the specialty retailers owned by Dick’s, but not the Dick’s Sporting Goods stores. Dick’s plans for more stores to be added in the U.S. resulting in more mass merchant and full-line sporting goods competition for specialty bicycle retailers in the U.S. over the next decade.

03-14-24: “Giant benefits in Europe with integrated e-bike solutions and service.” Bike europe: “When e-bikes began to make a market entrance, global brand Giant determined that innovation in integrated in-house technologies would be the key to success. Since 2023 all R&D is carried out at the European headquarters in Lelystad, the Netherlands, where a new development centre has been opened. Now, in-house service is an additional benefit to boost sales in saturated and fragmented European e-bike markets. ‘Many dealers in the early days of e-bikes came to me and said why are you thinking so complicatedly, just go to Bosch and then we can sell your e-bikes easily,’ Oliver Hensche, managing director of Giant Deutschland GmbH explained at a recent media gathering. ‘This is true for the first year and the second, but in the long run, you will have no benefit. Because we understood the bicycle as an integrated product and from the business point of view we knew it made sense to develop our own system.’ Giant is aiming to strengthen its position on the European market with its own technology. The in-house motor SyncDrive was developed together with Yamaha and the brand has a long-standing relationship with Panasonic for battery development. For shifting technology, Giant has partnered with enviolo. Referred to as ‘SyncDrive powered by Yamaha,’ the technology is specified on all Giant e-bikes. Developing it’s own system technologies has allowed Giant to continue to innovate through investment in Europe-based R&D teams with the support of Taiwanese counterparts. This own system has also allowed Giant to open up new business opportunities when it comes to servicing.” HPS Analysis: HPS found this story very interesting. Giant has fully developed a proprietary electric propulsion system for its e-bikes worldwide, which means North America as well as Europe and Asia. This system, as described, seems well thought out and configured. The German electric training and service system is also well thought out and configured. SyncDrive is probably not only well know to North American Giant dealers, but has already been integrated into shop service systems and mechanics training. It seems logical that when North American e-bike sales have grown sufficiently, the Europe-integrated e-bike solutions and service concept will migrate across the Atlantic.

03-15-24: “We no longer forecast a recession in 2024.” The Conference Board Economic Forecast for the US Economy: “The U.S. economy entered 2024 on a strong footing. Various indications of business activity, labor markets, sentiment, and inflation have generally been moving in a favorable direction. However, headwinds including rising consumer debt and elevated interest rates will weigh on economic growth. While we no longer forecast a recession in 2024, we do expect consumer spending growth to cool and for overall GDP growth to slow to under 1 percent over Q2 and Q3 2024. Thereafter, inflation and interest rates should normalize and quarterly annualized GDP growth should converge toward its potential of near two percent in 2025. U.S. consumer spending held up remarkably well in 2023 despite elevated inflation and higher interest rates. However, this trend is already beginning to soften in early 2024. For instance, retail sales growth over the first two months of the year were weak. Gains in real disposable personal income growth are softening, pandemic savings are dwindling, and household debt is increasing. Consumers are spending more of their income on service debt, and delinquencies are rising. Additionally, the growth in ‘buy now, pay later’ plans may also weigh on future spending as bills come due. Thus we forecast that overall consumer spending growth will gradually slow to a standstill in Q3 2024 as households struggle to find a new equilibrium between income, debt, savings, and spending. While we anticipate labor market conditions to soften over this period, we do not expect them to deteriorate. As inflation and interest rates abate, consumption should expand once again in late 2024.” HPS Analysis: The Conference Board no longer forecasting a recession is good news. The fact that this forecast includes: “… overall consumer spending growth will gradually slow to a standstill in Q3 2024 as households struggle to find a new equilibrium between income, debt, savings, and spending” is not bad news for bike shops.

03-18-24: “Ballooning credit card balances already loom over 2024’s retail sales.” RETAIL Dive: “The level of debt may surpass the all-time record this year, even when adjusted for inflation, some analysts say. Retail sales in January and February indicate a possible pull-back in consumer spending, which some analysts warn is due at least in part to burgeoning credit card debt that could continue throughout the year. Retail sales in November and December, with some holiday sales pulled into October, beat many expectations this past season. Half of consumers planned to fund their purchases with debt. Indeed, in the fourth quarter credit card debt and delinquency rates surged, with card balances up by $50 billion over the period to reach $1.13 trillion, according to the Federal Reserve Bank of New York’s Center for Microeconomic Data. ‘Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels,’ Wilbert van der Klaauw, economic research advisor at the New York Fed, said in a statement. ‘This signals increased financial stress, especially among younger and lower-income households.’“ HPS Analysis: Consumers that are buying bicycles at discounted prices have used credit cards and buy-now-pay-later credit cards more frequently. The growing problem going forward is credit card balances and credit card defaults. The increase in interest rates doesn’t help. While some economists have noted these increases, they feel other economic factors, like high wages and low unemployment are moderating the growing credit card debt. HPS is concerned about how these problems will impact consumer purchases and how defaults may impact bike shops.

03-19-24: “Recent news of brand ‘right-sizing’ from Trek – one of the industry’s biggest bicycle and accessory multi-line product companies – confirmed that the bike market faces more upheaval before it can truly rebound from its inventory glut woes.” THE OUTER LINE: “Our friends at Wieierflits provided a broader global perspective on this crisis last week as part of its Taipei Cycle Show business news analysis and wrap-up. In assessing the situation, they cited how historically poor industry-wide forecasting techniques created a perfect storm coming out of the COVID-19 pandemic. ‘A gigantic deficit has led to a gigantic surplus. Production (capacity) has increased, but demand has decreased,’ and as a result, Wieierflits discovered that several of the most important brands have millions of mid-to-to-high-end frames ‘gathering dust’ with no buyers lined up, potentially suppressing several billion dollars of sales worldwide. And the situation unfortunately might not be resolved this year or in 2025, as export figures from the Taiwan Bicycle Association and the Bureau of Foreign Trade indicated that Taiwan’s bicycle industry fell by as much as 21.29 percent from January to August in the last year alone.” HPS Analysis: The Outer Line is a competitive racing newsletter and blog, written for enthusiasts who follow international bicycle racing. They, like other bicycling consumer publications, are very interested in the current inventory problem working it way through the global bicycle industry. The Outer Line contacted a European online bicyclist publication, Wieierflits, and mined their report from the Taiwan Cycle Show for detailed intel. The report that “several of the most important brands have millions of mid-to-to-high-end frames ‘gathering dust’ with no buyers lined up” is an important piece of the puzzle.

03-19-24: “Giant Group revenue pushed up by Chinese market.” Bike europe: “A huge increase in bicycle sales in China could not compensate for the weak demand of entry to mid-level products from both North America and Europe, reports Giant Group in its 2023 financial report. In this overview, the company reported a 16.4 percent decline in consolidated sales to TWD 76.95 billion (€ 2,23 billion). ‘We even ship bicycles that cannot be sold in Europe and North America to China. This market will maintain steady and show double-digit growth this year,’ said Giant Group CEO Young Liu at a press conference during Taipei Cycle Show. According to Giant, the start of 2023 was still relatively good, but later in the year, export to Europe and North America continued to decline. The challenging market situation resulted in a decline of its net profit before tax by 45.1 percent to TWD 4.8 billion (€ 139 million). Giant reports a decline in the e-bike sales volume, although this category still makes up 30 percent of the company’s total revenue, both on the OEM and ODM market. Still Giant expects that e-bikes will remain the main growth driver.” HPS Analysis: HPS has mentioned this before, and our concern is the importance of the Chinese bicycle market to Giant and the other Taiwanese and American bicycle brands that sell to Chinese consumers. The Chinese economy continues to be challenged, and there does not appear to be any real stimulus to consumer spending in the works. This article makes it clear that Giant Group is relying on Chinese consumer sales in 2024 and we will keep watching.

03-20-24: “Peak population: A growing challenge for the U.S. economy.” The New York Times: “Since its inception, the U.S. has relied on population growth to keep its economy pumping. New generations of native-born Americans and immigrants enter the workforce, they produce goods and services, and then spend their income in a cycle that drives supply, demand and growth. They also pay taxes that fund programs like Social Security and Medicare. Over every 50-year period in U.S. history, the population has grown at least 50 percent, sometimes by far more. But that’s about to change. Americans now have fewer children than past generations did. And depending on levels of immigration, the country’s population may plateau in the coming decades. HPS Analysis: Demographics are most often overlooked in discussing the bicycle market. Demographics is the study of the U.S. population and it really has everything to do with population and peak population. The number of American bicyclists per thousand of U.S. population is incident rate, or what percentage of Americans ride a bicycle. If we record the data and study it over time, we can see if more people per thousand or fewer people per thousand are riding bicycles. If the U.S. population continues to grow, the incident rate, as a percentage will ideally go up, but any case is a percentage of a growing population. Peak population is when the U.S. total population no longer grows and is about to decline. HPS will present U.S. bicycle riding participation 2000 to 2023 at the NBDA Summit in Bentonville, Arkansas in May.

03-20-24: “Federal Reserve holds interest rates steady, projects three rate cuts later this year.” National Public Radio npr: “The Federal Reserve held interest rates steady on Wednesday, but policymakers signaled they still expect to start cutting rates later this year. Updated forecasts from members of the Fed’s rate-setting committee show an average of three quarter-point rate cuts in 2024, similar to what policymakers were projecting in December. Investors welcomed that news. All of the major stock indexes climbed to record highs, with the Dow Jones Industrial Average jumping 401 points or 1 percent. Fed policymakers said their basic outlook hasn’t changed, even though inflation was slightly hotter than expected in January and February. ‘I don’t think we really know if this is a bump on the road or something more,’ Fed chairman Jerome Powell told reporters. ‘We’ll have to find out. In the meantime, the economy is strong. The labor market is strong. Inflation has come way down. And that gives us the ability to approach this question carefully.’ Markets see slim chance of a rate cut at the next Fed meeting in May, with a higher probability in June. Since last summer, the Fed has kept interest rates at their highest level in more than two decades, in an effort to tamp down demand and bring prices under control.” HPS Analysis: Most business owners, large and small, are aware the Federal Reserve held interest rates steady earlier last month. The only change has been in the employment figures which came out in early April and further dampened the possibility of cuts in the rate this year. This could all change again of course as each month unfolds. HPS thinks it is good to read what the Fed says as it moves along in its fight against inflation, including higher interest rates on money. Higher interest rates are showing more often as a problem for the bicycle business as pertains to getting loans and the cost of loans to finance inventory.

03-21-24: “Lululemon CEO warns of slow start to 2024.” Sourcing Journal: “Lululemon Athletica Inc. finished strong for 2023 with a fourth-quarter earnings beat, but chief executive officer Calvin McDonald warned ‘there has been a shift in the U.S. consumer behavior of late, and we’re navigating what has been a slower start to the year.’ For a perennial outperformer which continues to track ahead of its strategic goal to double sales over five years, hitting $12.5 billion by 2026, it was an unusual splash of cold water. Shares of the Vancouver-based company fell 10.6 percent to $428 in after-hours trading on Wall Street. But McDonald told analysts on a conference call that Lululemon remains both strong and flexible. ‘Consistent with what we’ve seen from others in the market, the consumer environment in the United States has been somewhat challenging,’ he said. ‘However, despite the market dynamics, we remain optimistic about our opportunities to grow our business in the U.S. in 2024 and to continue to gain market share.’“ HPS Analysis: The CEO of a well-established, $12.5 billion athletic clothing brand warns that: ‘there has been a shift in the U.S. consumer behavior of late.” The American bicycle business is well aware of a change in consumer behavior of late, but hasn’t been able to put its finger on exactly what or why. Despite being cautious and concerned, Lululemon is moving forward cautiously because they don’t know what the “shift” exactly is! HPS will keep asking questions to see if we can find out.  

03-21-24: “Package deliveries are clogging city streets.” Marketplace: “Online shopping surged in the pandemic, and retailers could be shipping out 32 billion packages in the U.S. alone by 2028, that makes the ‘last mile’ of delivery tricky to solve. It’s a rainy evening in New York City, a flash-flood-warning kind of rain. But it’s nothing Michael Singh hasn’t seen. ‘Yes, rain, snow, high winds, all of it,’ said Singh, who’s been a bike messenger for seven years and started with Amazon a few months ago. He begins his shift in a warehouse where he loads boxes onto an e-bike trailer the size of a bathtub. ‘This is a little light today. I’m guessing because of the rain.’ This cargo bike delivery program is a pilot with the city of New York. In a place as dense as Manhattan, trucks aren’t efficient. ‘You know, going stop to stop, double parking, congesting the streets,’ said Jessica Schumer, who leads New York City public policy for Amazon. It’s a problem that’s gotten worse in the last few years. Between 2019 and 2020, U.S. parcel volume grew almost 40 percent to 20 billion packages. By 2028, as many as 32 billion packages are projected to be shipped in the U.S. ‘This isn’t just an issue in New York City. Miami, Boston, Portland and other cities are running cargo bike programs to try to make more efficient the most expensive and emissions-heavy piece of the logistics chain, the last-mile delivery … It takes an ecosystem to be successful from a business perspective … In other words, companies are probably not going to come up with a whole new way of delivering packages unless it helps their bottom lines. Parcel delivery on foot or bikes can reduce costs, but the infrastructure has to be just right, with, say new bike lanes or warehouse-friendly zoning. Cities also need to take both a carrot and a stick approach.’ ‘We identified some incentives that can sweeten the pot,’ said Diniece Mendes, director of freight mobility at New York City’s Department of Transportation. Carrots include special loading zones and sticks include congestion pricing.” HPS Analysis: Delivery cycles and cargo bikes have been a slowly growing specialty segment since Arnold, Schwinn & Company sold the U.S. Post Office cycle trucks after World War II. There has been an active cargo bike business in New York City for at least a decade and Worksman Cycles has been a specialty supplier of food, delivery and industrial tri-wheelers for three generations of ownership. Other brands have moved in just prior to and during the pandemic, and this article sheds light on the latest developments, including the adaptation of electric propulsion systems.

03-22-24: “Frasers Group to relaunch Wiggle and Chain Reaction Cycles websites.” Cycling Industry News: “It had been rumored for a number of months, but it’s now confirmed: Frasers Group has announced the relaunch of Wiggle and Chain Reaction’s e-commerce sites, marking a significant step following the acquisition of the brands and intellectual property. Frasers Group, which already has a strong position in the UK cycling market through Evans Cycles, secured the rights to Wiggle and Chain Reaction in March 2024, alongside the brand rights for their in-house ranges which include Nukeproof, Vitus Bikes, and DhB. Alongside the e-commerce relaunch, which is due to take place next week, Frasers Group is looking to create commercial partnerships to enhance and expand these own-brand lines through development, sales, licensing, and international distribution opportunities.” HPS Analysis: This is worth bringing to the attention of HPS newsletter readers because it illustrates that bankrupt brands don’t necessarily go away. Wiggle and Chain Reaction have been really irritating online competition in the U.S. for about a decade. Online sellers who thought they had seen or heard the last of them need to look over their shoulders. 

03-22-24: “KKR’s $1.7 billion bike crash is a cautionary tale.” Bloomberg Opinion: “When KKR & Co. acquired Dutch manufacturer Accell Group NV in 2022, the private equity firm must have hoped to cash in on health-conscious consumers parking their cars and hopping on high-priced e-bikes. Instead, the owner of bike brands such as Lapierre, Haibike and Raleigh is burning cash and drowning in inventory, providing a lesson in understanding headwinds and overpaying in red-hot markets. While the bike industry should have a bright future once the current storm abates, KKR faces an uphill slog to earn a return on its €1.6 billion ($1.7 billion) purchase, which came at a 21 percent premium to the group’s all-time-high stock price. As with other consumer appliances and equipment, demand for bikes rocketed early in the pandemic, but this growth wasn’t sustainable: Having at first struggled to obtain enough merchandise, retailers ordered too much, leaving corporate cash tied up in inventory. Interest-rate hikes have compounded these problems by making customers think twice about bike purchases (which nowadays can easily cost four figures), and shops have been forced to offer big discounts to offload excess stock. The reverberations are still being felt. Japanese bike component giant Shimano Inc.’s bike-related sales plunged almost 30 percent last year, while UK retailer Halfords Group Plc last month warned on profits, blaming a ‘challenging and competitive’ cycling market. Several manufacturers, distributors and retailers have gone bust, including Dutch e-bike maker VanMoof BV and Signa Sports United NV, which owned various e-commerce sites (Signa Sports was part of Austrian tycoon Rene Benko’s ailing retail and property empire, and went public via a SPAC in 2021 at a more than $3 billion valuation.) The lights remain on at Accell, but the cycling group has become quite the headache for KKR: It’s one of three private investments that have seen the biggest decreases in value, according to the PE firm’s annual report, which didn’t quantify the paper loss. There are few comparable publicly traded bike manufacturers, but shares of Taiwan firms Giant Manufacturing Co. and Merida Industry Co. have each declined more than 25 percent since the Accell takeover was announced.” HPS Analysis: This Bloomberg article is the most comprehensive we have seen. It touches on issues that even Bike europe hasn’t gotten into. Despite this being a European public company and Group it is instructive for U.S. managers and analysts.

03-25-24: “Raised stakes in a firearms bidding war.” The New York Times DealBook: “A battle over Vista Outdoor, the company behind top ammunition brands like Remington and Camelbak water bottles, is escalating, and national security is becoming a bigger factor in the fight. The investment firm MNC Capital today raised its bid for the company to $3 billion, DealBook is first to report, hoping that a more generous offer, and further uncertainty that a rival bidder, the Czechoslovak Group, can pass a U.S. national security review, will win over Vista’s shareholders. MNC is offering $37.50 a share for all of Vista, up from a bid of $35 last month and 16 percent higher than where Vista’s stock closed on Friday. In a letter to Vista’s board reviewed by DealBook, the investment firm reiterated that it had lined up financing for its offer, despite questions by Vista about how solid those commitments were. Vista rejected MNC’s previous offer, saying a planned breakup of itself would be more valuable for shareholders. (Vista has agreed to sell its ammunition business to CSG for $1.9 billion, leaving its non-firearm division, Revelyst, as a stand-alone public company.) MNC argued that its new offer assigns Revelyst $1.1 billion in enterprise value, nearly double the $570 million implied by the CSG deal.” HPS Analysis: The bike business brands owned by Vista that it plans to move to Revelyst are Bell, Blackburn, CamelBak, Fox, and Giro. This gives some idea of how huge the conglomerates that are gobbling up brands have become.

03-28-24: “Dalio Says China Must Fix Debt Problems or Face ‘Lost Decade.’ “Bloomberg: “Ray Dalio warned that China should cut its debt and ease monetary policy or face ‘a lost decade.’ The billionaire founder of Bridgewater Associates said in a nearly 5,000-word post on LinkedIn that he agrees with Chinese President Xi Jinping’s warning of a 100-year period of unprecedented change and recommends the country take steps to manage its debt problem. The hedge fund titan was referring to the Chinese Communist Party’s political slogan of ‘great changes unseen in a century,’ used to describe the future trajectory of international order. While the phrase was first used by Chinese academics following the 2008 recession, it was adopted by the party in 2017 and since used in diplomatic contexts. ‘When there is a lot of debt and big wealth gaps at the same time as there are great domestic and international power conflicts, and/or great disruptive changes in nature, and great changes in technology, there is an increased likelihood of a ‘100-year big storm,’ he wrote.” HPS Analysis: HPS had not heard of Ray Dalio before reading this article. After we read his resume and learned why Bloomberg paid attention to him we decided to run this article. This is a long-time insider and business advisor to the CCP and Presidents of the PRC. He is trying his best to get an urgent message to President Xi. He will probably be heard. Whether he will be listened to, we can only hope, wait and watch.

Contact Jay Townley:


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. 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 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 or email 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:


01-02-24: “2024 will mark the end of the post-pandemic economy.” Bloomberg Opinion: “Economists did not believe it was possible, but they’ve been wrong a lot lately, and in their defense, it has only ever happened once (or maybe twice) before: We may be witnessing that rare achievement known as a soft landing. The U.S. Federal Reserve’s latest forecast expects the inflation rate to slide back down to 2 percent without much job loss or economic slowdown. But before we celebrate this bravura monetary performance, or decide unemployment and growth aren’t sensitive to inflation or interest rates after all, allow me to offer two observations, one looking backward and one forward. First, the last few years have been highly unusual. Second, this year will mark the end of the free-lunch economy. The post-pandemic economy was marked by several unlikely factors. Shortages coming out of the pandemic sparked inflation, which was then exacerbated by unnecessarily expansionary monetary and fiscal policy. Just as the economy was poised to recover, in other words, policymakers gave it rocket fuel. All that stimulus money increased household savings. Savings-rich households kept spending, and firms desperate for workers faced an exceptionally tight labor market. Meanwhile the Fed not only pursued nominal zero rates, it tried to bring down longer-term rates and mortgages, and did so well after the pandemic had ended. The result was that even as rates increased, the economy stayed somewhat resilient. During the long period of low interest rates that preceded the post-pandemic, many firms, investors, and households locked in low rates. Thus they were relatively unaffected by rising rates. Now, as we head into 2024, it’s increasingly clear that America has spent its post-pandemic dividend. Households in the bottom half of the income distribution don’t have so much extra savings, and some are even going into debt. Debt-dependent firms and investors are approaching their maturity wall and have to refinance at a higher rate soon. HPS Analysis: What will follow the end of the post-pandemic economy? We have speculated about this for several years now, and in part the era we are entering will be defined by the maturity wall debt-dependent businesses face, and will either have to refinance at higher rates, become zombies, file for Chapter 11 protection while restructuring, or liquidate. Businesses that are not now debt-dependent will look to a future where making a net pre-tax profit will be dependent on managing their cost of doing business and not selling anything below their cost of doing business, including service labor. This is eminently doable but does mean some in the bicycle business will have to rethink their business models, including embracing the fact that their business is the brand. This is particularly important for bike shops to think through.

01-02-24: “China’s Xi Jinping warns of economic ‘winds and rains’ as recovery disappoints.” The Wall Street Journal: “Chinese leader Xi Jinping urged his countrymen to brace for more economic challenges in the year ahead, sounding a cautious note as a string of weak readings highlights the many headwinds facing the world’s second-largest economy. ‘On the path ahead, winds and rains are the norm,’ Xi said in a New Year’s Eve speech to the nation on Sunday, promising more efforts to shore up growth and address concerns over jobs and the cost of living. ‘Some companies are facing business pressures and some people are running into difficulties finding jobs and in their daily living.’ Xi’s remarks came hours after Beijing published data that offered fresh signs of weakness in the Chinese economy, piling pressure on the government to take bold new steps to fire up growth in the coming year. Official surveys released on Sunday suggest factory activity slid deeper into contraction in December, owing to thin order books at home and abroad, while the services sector struggled as consumers kept a tight leash on spending.” HPS Analysis: We have tried to inform our readers about the importance of the Chinese bicycle consumer market to the multinational bicycle brands and the global market. The quarterly financial reports of the public bicycle companies have reinforced our assumption, and while we still don’t know the exact amount of business being done in China, we do know it is substantial. Since China is the second-largest global economy, we think it is logical that it is the second-largest market for many of the multinational bicycle brands. A warning from the Chinese leader about ‘winds and rains’ in the Chinese economy in 2024 does not bode well for the financial reports from the multinational bicycle brands.” Note: HPS uses the U.S. CPSC definition of a “bicycle” as found in 16 CFR 1512.

01-03-24: “These are the five potential trouble spots that could knock the global economy off course.” Bloomberg: “The global economy was tested in 2023 as it rarely has been before: inflation and the most aggressive monetary tightening campaign in decades, wars in Europe and the Middle East, a festering real estate crisis in China, and the deepening rivalry between Washington and Beijing, which is forcing companies to rethink supply chains and security.” “The International Monetary Fund forecasts global growth of 2.9 percent in 2024, a whisker below last year. With two wars raging and some 40 national elections on the calendar, political developments will shape the year, especially as Donald Trump makes a go at winning back the presidency. But crucial economic stress points could upend the benign outlook.

  1. Will the American consumer capitulate?
  2. Can Beijing keep a lid on the housing crisis?
  3. European laggard
  4. Japan’s risky exit from negative rates
  5. Can India live up to its promise?”

HPS Analysis: We don’t often stray into the weeds of politics, wars, and international economic pain points, but the five trouble spots that Bloomberg has identified as having the potential to knock the global economy off course got our attention. We think the top three are of most interest to the global bicycle business. Number 1. “Will the American consumer capitulate?” The whole point of the Fed’s efforts to cool down Inflation impacts American consumers, and the difference between a recession and a soft landing will depend in great measure on how the job market holds up. The Fed’s latest projections see the jobless rate climbing to 4.1 percent by the end of the year. Unemployment claims, published weekly, are a leading indicator of labor market softness and should be watched closely. Number 2, “Can Beijing keep a lid on the housing crisis?” The world’s second-biggest economy is in the midst of a multiyear slowdown. Nomura Securities Co. estimates that 20 million apartment units were presold for which construction has been delayed or hasn’t started. Top officials have pledged to prevent a cascade of debt defaults by developers that will engulf the banking sector, and this may be the year of a full-blown government bailout. Number 3. “European laggard” refers to Germany being the worst performer among major economies in 2023. Higher energy prices and tight monetary policy, coupled with weaker global demand for its exports, caused a slight contraction in gross domestic product for the year. Germany is the largest bicycle market in the EU. China is an important market to the global bicycle business as is the U.S., meaning that the first three of the potential trouble spots are very important to the bicycle industry.

01-04-24: “Wall Street’s ambitions in China run into a rising firewall.” Bloomberg: “One of Wall Street’s biggest banks stopped briefing the head of its subsidiary in mainland China on sensitive company strategy, so the government can’t easily eavesdrop or demand details later. At nearby outposts for other U.S. and European banks, executives are spending tens of millions of dollars to locally house financial data and set up on-site internal controls. Some units are even looking at reshaping balance sheets to stand separate from parent companies. Those are just some of the many behind-the-scenes machinations taking place inside the Chinese arms of global financial firms as they try to navigate heightened tensions between the world’s two largest economies, as well as new rules in the name of national security. JPMorgan Chase & Co., Morgan Stanley, and HSBC Holdings Plc are among a long list of banking behemoths that have deep ties and long histories in China.” HPS Analysis: This is very disruptive to the Wall Street powerhouses who back in 2020 benefited greatly from China ending an era of frustration for global investment banks by loosening rules to let them take full control of the joint ventures they had set up with local partners in China. Western bank leaders had hoped to integrate their joint ventures into their mainstream businesses to compete harder for deals and trading in China’s growing economy. Four years later, their big banks’ local outposts are being left as underdogs against China’s domestic giants.

01-05-24: “U.S. unemployment has been under 4 percent for the longest streak since the Vietnam War.” National Public Radio: “The U.S. job market held up well in 2023 despite rising interest rates. Employers added 2.7 million jobs last year and unemployment remained under four percent throughout the year. The U.S. job market capped off a strong year in December, as employers continued hiring at a solid pace. Employers added 216,000 jobs last month, according to the Labor Department. The unemployment rate held steady at 3.7 percent. Unemployment has now been under four percent for almost two years, the longest streak of rock-bottom jobless rates since the Vietnam War.” “December’s job gains were concentrated in government and health care. Retailers added 17,000 jobs, suggesting a solid finish to the holiday shopping season.” HPS Analysis: As HPS understands the economic dynamics at play. U.S. unemployment being “under 4 percent for the longest streak since the Vietnam War” is the primary reason many economists are predicting a soft landing, as inflation edges toward two percent and the country avoids a recession. It is also an important factor in the probability that the bicycle business could see a modest increase in unit volume in 2024 over 2023. There is still a great deal of uncertainty, with the biggest unknown being consumer demand for sporting goods and specifically bicycles in Q2 and Q3 of the 2024 season.

01-05-24: “A major Chinese shadow bank has filed for bankruptcy on the grounds it was unable to pay its debts.” BBC: “On Friday, a Beijing court accepted the application from Zhongzhi Enterprise Group (ZEG), which has lent billions to real estate firms. Chinese officials launched an investigation into ‘suspected illegal crimes’ against the firm in November. It followed reports that ZEG had declared it was insolvent. The struggling group reportedly told investors in a letter in November that its liabilities – up to $64bn (£50.6bn) – had outstripped its assets, now estimated at about $38bn.” “ZEG is a major player in China’s shadow banking industry, a term for a system of lenders, brokers, and other credit intermediaries who fall outside the realm of traditional regulated banking.” HPS Analysis: First, please do not confuse Zhongzhi Enterprise Group (ZEG) with ZEG, the large European bicycle dealer cooperative, ZEG. Second, the shadow banking industry is also well-established in Europe and North America. It is unregulated, as it is in China, and is much more willing to take financial risks in return for much higher interest rates on loans compared to the regulated banking sector. This may not be quite the white-collar version of a loan shark, but it does show the desperation of some of the Chinese real estate firms.

01-05-24: “Yellen declares U.S. economy has achieved soft landing.” Bloomberg: “Treasury Secretary Janet Yellen declared Friday that the U.S. economy had achieved a long-sought soft landing, a historically unusual event in which high inflation is tamed without significantly damaging the labor market.” “Government figures out earlier Friday showed job gains and wage increases in December both exceeded expectations. The report, which suggested continued upside for inflation, prompted investors to trim bets that the Federal Reserve would begin cutting rates in March.” “Yellen zeroed in on the latest wage data, which showed average hourly earnings rose 4.1 percent in the year through December. Given consumer inflation for the year is projected by economists to come in at 3.2 percent, that would mean wages exceeded price growth in 2023.” HPS Analysis: Treasury Secretary Janet Yellen is a respected economist. Two years ago she consistently rejected the gloomiest predictions for the U.S. economy, even as the central bank pursued an aggressive rate-hiking campaign through 2022 and 2023. While never ruling out a recession, Secretary Yellen said she saw a so-called soft landing for the U.S. economy. HPS appreciates her optimism. She has been mostly alone in declaring a soft landing, although several well-respected economists have also opined that the U.S. economy is on the cusp of a soft landing, which will be generally good news, bringing one certainty to an uncertain 2024.

01-08-24: “Vosper: compared to last year, 2024 doesn’t look so bad after all.” Bicycle Retailer and Industry News: “It’s been a tough year for a lot of people, both suppliers and retailers. If you’re one of the businesses that did well in 2023, congratulations, and more power to you. As for the rest of us (you know who you are), there’s some relief to be found in knowing 2023 is finally behind us. To get a sense of what happened on a nationwide basis, I reached out to Patrick Hogan, senior research manager for the PeopleForBikes Coalition. ‘2023 (consumer bike) sales have been at an all-time low for 20 of the last 24 months,’ as measured through Circana (formerly NPD), Hogan told me. ‘We’ve seen a steady decline in unit sales for adult non-electric bikes. Units have historically ticked down, while dollars tick up as the price tags get higher every year. This is especially true as more and more e-bikes enter the product mix.’” “The year is projected to come in at 12.8 million units, he says, for specialty and mass channels combined, a number that does not include the growing category of consumer-direct sales, which leaves out a huge piece of the e-bike market. In fact, it’s the weakest year for bike sales since PFB began keeping track of that data in 2015. Combine all-time low sales with all-time high product inventories, and it’s made for a 12-month series of body blows to many in the industry.” HPS Analysis: Rick Vosper has done his usual excellent job with this article. Patrick Hogan and PeopleForBikes (PFB) have provided all the data that is required to get a really good picture of the past year, and the decade from 2015 through 2024 based on the Global Risk and Opportunity Forecast as produced by S&P Global for PFB. But therein lies the rub. The first thing that jumped out at me was “… the weakest year for bike sales since PFB began keeping track of that data in 2015.” 2023 was most certainly a weak year for bike sales, but there are good, accurate bike sales figures readily available going back to the 1950s. The second thing that jumped out to the point that I stared at off and on for about a week, is the bar chart in the article (see below). I talked to a friend who works on bike industry data in Europe, and he mentioned the same thing I did. Both of us stared at and studied this bar chart and then did a rough trend analysis. In my uneducated but experience-based opinion, this would have been a better and perhaps a tad more credible forecast if it had been based on 20 or 30 years of sales history, which is still available.

01-15-24: “No, e-bike fires are not a ‘leading cause of death’ in NYC.” electrek: “It’s a new year and yet we’re facing the same old problem as last year: electric bike fear-mongering from irresponsible journalists painting an overblown risk of e-bike fires. This time we’ve got a doozie of a headline from Men’s Journal: ‘E-bike batteries a leading Cause Of Death in NYC.’ “The only problem is it’s wrong. As in, completely wrong. The premise is not even close to aligning with reality. This isn’t to say that fires from improperly constructed or tampered with electric bike lithium-ion batteries are a non-issue. It is an important matter requiring increased regulation, something NYC has already begun. The issue is a fatal one, even. New York City saw at least 17 deaths last year from fires started by faulty lithium-ion batteries. It’s worth noting that many, if not most, of these fires aren’t actually caused by e-bike batteries but rather electric scooters and e-motorbikes that firefighters don’t understand and thus lump into the e-bike category. But that’s a nuance lost on most people so we’ll ignore it for now and include all micromobility-related fires. Every one of those 17 deaths last year is a tragedy. And increased regulation to weed out the ultra-cheap, poorly made e-bikes can help. But to call it a “leading cause” of death in NYC is journalistic malpractice. In fact, in all of my extensive research, I can’t even tell you what rank it is because it is so far down the list of leading causes of death in NYC that the statistics don’t even go that low.” HPS Analysis:  Micah Toll, author of this electrek article is right on. The media is guilty of “journalistic malpractice” and “fear-mongering” if it over-hypes the actual risk, and ignores the legitimate New York City education campaign about the risks and dangers of non-complying lithium-ion batteries for micromobility devices, like e-bikes and e-scooters. What the Fire Department of New York has been saying is that lithium-ion battery fires are tragically causing fire deaths, but that the fatalities attributable to these fires can be reduced with community education and understanding of both the dangers and best practices for managing the hazardous, noncomplying lithium-ion batteries now in the hands of consumers, including recycling and getting them out of the public domain. (For reference, there were reported 386 deaths by homicide in New York in 2023).

01-16-24: “Scott Sports next to get multi-million loan from owner.” Bike europe, SEOUL, South Korea by Jo Beckendorff: “Scott Sports owner Youngone Corporation has granted its subsidiary a temporary financial injection of SFR 150 million (€160.6 million). The high inventory level throughout the bicycle sector is tying up so much capital that even profitable companies like Scott Sports are in urgent need of capital to continue their daily operations.” “According to the official Youngone statement, the loan will be used to support the company’s working capital, including the payment of the salaries of Scott Sport employees. Youngone has also appointed a dedicated controller to manage and supervise the process.” “Scott Sports, known for their bicycle and outdoor bands like Avanti, Bach, Bergamont, Bold Cycles, Dolomite, Lizard, Malvern Star, Powderhorn, Scott and Syncros, intends to use the capital injection ‘to support its business operations.’’’ HPS Analysis: The key issue pointed out by Jo Beckendorff is, “The high inventory level throughout the bicycle sector is tying up so much capital that even profitable companies like Scott Sports are in urgent need of capital to continue their daily operations.” It is true that Scott Sports is primarily a European brand, but there is distribution in North America, and the point that HPS is concerned about is that there is simply not enough capital in the whole of the global bicycle business for many companies to continue daily operations without either a loan from a parent company or a financial institution. Additionally, debt-dependent firms and investors in the global bicycle business are approaching their maturity wall and will have to refinance at a higher rate this year.

01-16-24: “Chinese Premier makes surprise economic growth disclosure.” The Wall Street Journal: “Chinese Premier Li Qiang gave global business elites a big hint on highly anticipated growth figures, as he sought to reassure them that investing in China is an opportunity, not a risk. Li delivered the message in an address at the World Economic Forum in Davos, Switzerland, as Chinese leaders seek to stem an exodus of foreign investment with growth slowing and relations deteriorating with the U.S.-led West. In doing so, he made an unusual early disclosure, saying that China’s growth last year is expected to be about 5.2 percent. The country is set to release the official gross domestic product figure for 2023 on Wednesday.” “The question is whether global firms are buying it. Foreign businesses and investors have been souring on China’s huge economy, data show, with billions of dollars fleeing Chinese stocks and bonds through most of last year. Foreign direct investment in China was negative in the third quarter, with outflows of capital exceeding inflows by $11.8 billion, implying that companies were yanking profits or disinvesting from China altogether. That marked the first negative quarterly outflow of direct investment recorded in balance-of-payment data that stretch back to 1998.” HPS Analysis: U.S. and European businesses are attempting a de-risking strategy that doesn’t require extensive decoupling from Chinese sourcing which has been deemed to be neither reasonable nor feasible. What this boils down to is shifting some production to Vietnam, Cambodia, Thailand, and Taiwan, without totally withdrawing and relying on China for component parts and subassemblies. Meanwhile, Taiwanese and U.S. companies are pulling capital and profits out of China. 

01-16-24: “Pandemic darling.” Bloomberg The Brink: “E-scooters and e-bikes are emerging as the latest pandemic darlings to tumble into a wave of distress as cutthroat competition weakens providers and rising costs damp consumer demand. Bird Global, which filed for bankruptcy last month, is the latest victim. The U.S. operator struggled to turn a profit, losing market share amid rising prices and waning demand after workers returned to the office, according to the filing. But the list of struggling providers is much longer. In Germany, where many of these startups emerged, e-scooter manufacturer UNU is undergoing an insolvency process, while executives at Tier Mobility spent months hunting for emergency funding before merging with peer Dott last week. ‘Some companies might have overspent in technology, expansion, and hiring when funding was cheap,’ said Kersten Heineke, a Frankfurt-based partner in McKinsey. ‘What is key is how quickly companies were able to switch gears from being growth-focused to achieve profitability as soon as possible.’’’ “Stricter safety regulation is also impacting e-scooter firms. In September, Paris became the first European capital to outlaw the devices following a referendum.” “It’s not going much better for e-bikes. KKR’s Accell Group, which defines itself as ‘the European market leader’ is grappling with cash burn, while its debt is failing to attract demand in the secondary market. In the Netherlands, manufacturer VanMoof went bankrupt in July. While many in the U.K. took to cycling during the pandemic lockdowns, the demand for e-bikes stalled in 2023, according to a survey by researcher Mintel.” HPS Analysis: It is instructive to get Bloomberg and McKinsey’s reading of the micromobility market. HPS agrees with Heineke that, “The next 18 months are going to be a defining period when most of the consolidation will happen.” Heineke goes on to opine, “You are starting to see some winners, including those who have achieved profitability, those who have already announced mergers, companies which have different lines of business aside from e-scooters and e-bikes, or those focused on niche geographies.”

01-17-24: “How will store of the future look?” Sourcing Journal: “Physical retail is here to stay, but the shops of the future are upgrading the in-store experience. At the National Retail Federation’s Big Show in New York City this week, industry experts and executives outlined what they see as a new model for the store of the future, one that emphasizes experiential elements and a focus on community.” “In general, shoe brands appear to be opting for newer, smaller concept stores that aim to blend a showcase of top-tier products with unique experiences catered to specific regions. They’re interesting because they’re smaller square footage, so they’re much more productive, and they are hyperactive in that you can use those stores to ship to the consumer locally. Other retail leaders emphasized the need for stores to build connections with their local communities. HPS Analysis: Brand was also mentioned in the article, and the fact that consumers know your brand goes right to the point that local bike shops ARE the brand in the minds of their local communities, and are the brand the local consumer knows. The fact that the National Retail Federation (NRF) is making the statement that “physical retail is here to stay” is significant, coupled with declaring that “… the shops of the future are upgrading the in-store experience.” Omni-channel has fallen out of popularity as a descriptor, but it tells the story of the retail methodology that the vast majority of bike shops need to migrate to, along with a major change in dropping the attitude and adopting an inclusive, welcoming smile for everyone that walks through the door.

01-17-24: “Retailers are stuck in a cycle of constant sales.” Marketplace: “Retail sales numbers were up 0.6 percent in December, the month that closed out the 2023 holiday season. Last year, holiday promotions started as early as the day after Halloween. Meanwhile, we just came off Martin Luther King weekend that also came with deals. Next up, there will be sales for Valentine’s Day, President’s Day, and every ‘Day’ after that. We’ve even gotten to the point where sales inspire sales. When Amazon has Prime Day, Target has Target Circle Week and Walmart has Walmart Plus Week. So the question is: if everything’s always on sale, is it actually ever on sale? And how did we get to this 24/7 sales environment?” HPS Analysis: While the rest of the retail world got to the 24/7 sales environment before the pandemic, and the whole of the bicycle industry joined the constant sales and discounting retail environment at the end of 2022 as the direct result of rising retail prices during the pandemic and an extraordinary glut of inventory, we are now stuck in a cycle (no pun intended) of constant sales. Consumers enjoy getting something they want on sale. MSRP (Manufacturers Suggested Retail Price) was what the mainstream brands used to control the American market, and what kept retail pricing in check for the better part of several decades. They may try to bring MSRP back. It will be a question of whether consumers will let them. Marketplace tells the story of Ron Johnson. In the early 2010s JCPenney hired a new CEO, Ron Johnson, a former VP at Target and Apple. Under Johnson, JCPenney made a bunch of changes, the biggest one being doing away with sales. Johnson figured consumers would rather pay a consistent, low price instead of having to deal with coupons, markdowns, and sales. He was wrong. Shoppers were confused about the brand, so they stopped shopping. Sales plummeted, Johnson was fired, and JCPenney went back to markdowns and sale prices. During the pandemic the bicycle brands were able to double MSRP, followed by roughly eight months of drastic discounting and sale pricing. When inventory ratios stabilize, will brands be able to get away from the 24/7 sales environment?

01-17-24: “Holiday sales hit new record – so do full-year sales.” Chain Store Age CSA: “Despite inflation and high interest rates, consumers ramped up their spending in December, helping to end the holiday season and full year on an upbeat note. Core retail sales during the 2023 holiday season grew 3.8 percent over 2022 to a record $964.4 billion, according to U.S. Census Bureau data. The results easily met the National Retail Federation’s forecast that holiday sales would increase between three percent and four percent over 2022 to between $957.3 billion and $966.6 billion. Sales for the full year grew 3.6 percent over 2022 to a record $5.13 trillion.” “The holiday total, which is not adjusted for inflation, includes online and other non-store sales, which were up 8.2 percent at $276.8 billion.” HPS Analysis: American consumers kept spending in 2023, just not on bicycles. According to this report’s data from key sectors for the two months combined on an unadjusted year-over-year basis, electronics and appliance stores were up 9.3 percent, the highest of the seven categories. Sporting goods stores were up 0.3 percent, the lowest of the seven categories.

01-18-24: “Macy’s to cut more than 2,300 jobs, about 3.5 percent of its workforce, and close five stores.” CNBC Retail: “Macy’s on Thursday said it will cut about 3.5 percent of its workforce and close five of its namesake mall locations as the legacy department store moves to trim costs and turn around slowing sales. The move will affect approximately 2,350 positions across its corporate office and stores, company spokesman Chris Grams said.” “The company notified employees about the layoffs on Thursday and the last stores that will be shuttered are located in Arlington, Virginia, San Leandro, California; Lihue, Hawaii; Simi Valley, California and Tallahassee, Florida. The stores will close in early 2024.” “Macy’s is in the middle of an effort to turn the roughly 166-year old department store into a brand that resonates with consumers who are shopping online, looking for value, and turning to competitors including e-commerce retailers such as Amazon and Shein, big-box players such as Target and off-price names such as TJX-owned T.J. Maxx, instead of its stores.” “Macy’s has 723 locations across the country as of Oct. 28, the end of the most recently reported quarter. The majority of those, roughly 500, are its namesake stores, followed by 158 Bluemercury stores and 56 Bloomingdale’s stores.” HPS Analysis: Macy’s is a legacy department store retailer with a 166-year history. It is taking on every retail format that has chipped away at its legacy over the last 30 years and become an online player in the bargain. Macy’s was in the business news at the end of January for turning down a multimillion-dollar buyout offer that analysts concluded was all about the land and buildings Macy owns, and not the retail business. This alone was a huge clue to the challenge Macy’s has in pulling off its multi-channel retail strategy.

01-18-24: “Shipping costs to increase more than 5.9 percent in 2024.” Logistics Management: “To no one’s surprise, the big two carriers raised rates for 2024, announcing an identical 5.9 percent general rate increase (GRI). It was smaller than recent increases but make no mistake, it will drive up the cost of doing business for millions that rely on shipping. Hidden fees, changing requirements and added surcharges drive actual increases well beyond the reported rate. Reveel’s analysis finds the average customer will pay 7.72 percent more with UPS and 8.17 percent more with FedEx. HPS Analysis: Ocean freight rates dropped like a rock at the end of 2023. The big carriers raising rates in 2024 is no surprise as they attempt to gain some degree of profitability after, in HPS’ opinion, gouging the market during the pandemic. HPS will watch this situation carefully, and we urge ocean shippers to talk to their carriers and brokers and work at locking in the most favorable rates and routes possible for 2024. Fortunately, the Suez Cannel isn’t an important route for North America, but the Panama Canal is, and there is an East Coast longshoremen’s strike almost certain in Q2. West Coast ports will be loaded as will intermodal routes to the Midwest and East Coast.

1-19-24: “Davos sees nothing normal about the global economy for 2024.” Bloomberg Economics: “The world is finding an uneasy equilibrium with a more benign economic backdrop overshadowed by a panoply of geopolitical risks, according to the final Davos panel of 2024. The prospects of subsiding inflation and a pickup in global trade offer some encouragement for investors despite the backdrop of war and populism, European Central Bank chief Christine Lagarde and peers agreed, as the World Economic Forum drew to a close. ‘Normalization – that’s what we have begun to see,’ she told the audience in the Swiss resort town, before adding an important qualifier. ‘It is not normality that we’re heading to,’ she added. The six-member panel was charged with summarizing the mood in Davos after a week where participants tended to put a brave face on the global outlook, accentuating the likelihood that a deep recession will probably be avoided despite unprecedented monetary tightening to bring inflation under control. HPS Analysis: The overriding theme at Davos was uncertainty. Several members of the final panel agree that the world economy is seeing more normalization, but it is clearly not normality that the world is headed toward in 2024. The global economy was challenged during the pandemic when global trade was disrupted and the J.I.T. (Just In Time) systems were totally blown up and replaced with J.I.C. systems (Just In Case) that led to over-capacity, excess W.I.P. (Work In Process), and finished goods inventories that are still disrupting supply chains and markets. The U.S. economy beat down inflation and just might make a soft landing, but recession still looms as uncertainty grips the world’s economies.

01-19-24: “Sports Illustrated announces major layoffs, putting the brand’s future in jeopardy.” The Wall Street Journal: “Sport Illustrated announced major layoffs on Friday, according to the publication’s union, throwing the future of the legacy sports magazine into question. The union said it was notified by the magazine’s publisher, the Arena Group, that it intended to ‘lay off a significant number, possibly all’ of Sports Illustrated’s unionized staffers because Arena had lost its license to publish the magazine.” “Arena said in a regulatory filing that it lost the license to publish Sports Illustrated after it missed a $3.8 million quarterly payment to its licenser, Authentic Brands Group.” “Arena said it was in discussions with Authentic Brands and would continue to publish Sports Illustrated until the matter was resolved.” HPS Analysis: The union reports more than 80 unionized employees at Sports Illustrated. This situation shows again the extreme difficulty publishing has in keeping pace with the transition to digital media and the changes in advertising. I thought Sports Illustrated had figured it out when they chose Martha Stewart as their swimsuit model last year.

01-22-24: “The one thing all great bike shops know.” Bicycling: “Local Bike Shops are a cycling institution. They’re up there with the cycling club or the group ride as one of the handful of concepts that are core to riders of all kinds. But while other things in cycling have moved forward, many shops seem to be stuck in the past. The basic tenets of bike shops haven’t changed much since I first worked in one in the early 2000s. The business model is the same — one part as a dealer of bikes, gear, and apparel, and the other as a service department that fixes almost anything with two wheels. What changed is how riders buy their bicycles and cycling gear. Even though I believe buying a bike in person is a good idea, especially if you’re unsure of sizing or simply want to throw a leg over it before laying down the money, I acknowledge that many of us buy bikes from direct-to-consumer brands. While this buying model has pricing advantages, it also has drawbacks, the obvious being not knowing if you’re buying the right size and difficulty in finding spare parts, especially proprietary ones. But a big disadvantage of purchasing a consumer-direct bike is one that shouldn’t exist and that I’ve experienced often: the resentment you feel when you walk into a shop with a bike you bought online.” “It’s off-putting to get a lecture or a snide remark from mechanics or the shop’s owner simply because the bike wasn’t bought from them. It’s bewildering as a consumer and it’s self-defeating for the shop itself.” “The death of the local bike shop has been foretold over and over. But the good ones are still here. And they keep thriving. They do so, in large part, because they respect that there’s still one thing that can’t be ordered online, great service.” HPS Analysis: We recommend this article to you. We encourage bike shop owners, managers, and employees to get past their prejudices, drop the attitude, and replace it with an open mind, welcoming smile and attitude for everyone who walks into the shop. Great service goes beyond the service shop and the service department staff. Great service is all about attitude and truly wanting to help customers and serve their needs no matter where they may have purchased the bicycle they own. They are coming to you for something they need, and that’s the magic that can create a connection that can last a lifetime.

01-22-24: “Investment bankers are starting to see Mexico as a money spinner.” Bloomberg Markets: “For years, Mexico was an afterthought among investment bankers, a perennial underperformer overshadowed by Brazil. Not anymore. Suddenly there’s growing conviction on Wall Street that the country is on the cusp of a breakout if it can avoid squandering the opportunity. Bank of America Corp., Morgan Stanely, and Goldman Sachs Group Inc. all predict investment banking revenue from Mexico will jump this year. Banco Santander SA, the top local bond underwriter last year, will invest $1.5 billion to beef up technology for retail clients. JPMorgan Chase & Co. CEO Jamie Dimon said his bank has ‘doubled or tripled’ capital in the country over the past six years and sees a ‘great’ outlook for growth.” HPS Analysis: This is most welcome news. Finally the “real” money in the U.S. is taking capital investment for manufacturing and distribution in Mexico seriously. This is the BIG piece that has been missing up to now. The Chinese have already established manufacturing beachheads, but this is an opportunity for European and Taiwanese entities with the know-how in bicycle manufacturing to find financial partners and establish manufacturing inside North America.

01-24-24: “Just-in-time makes a comeback.” The Wall Street Journal Logistics Report: “Retailers are reviving an old playbook for managing inventories. Companies have largely brought inventories back in line with sales after struggling the past four years to find a sweet spot between holding enough merchandise and not too much. The WSJ Logistics Report writes that retailers now say they are replenishing items rather than building stockpiles. The shift marks a return to the ‘just-in-time’ inventory management strategy many companies had employed before pandemic-driven product shortages and volatile shifts in consumer demand prompted a switch to a ‘just-in-case’ approach. Executives at apparel seller Tailored Brands, furniture maker IKEA, and big-box retailer Walmart, say their supply chains are running smoothly, allowing them to better predict lead times and forecast customer demand. But logistics experts caution retailers could change back if supply-chain turmoil gets worse amid disruptions at the Suez and Panama canals.” HPS Analysis: It is about time! Purchasing and manufacturing best practices are finally getting re-established after the J.I.C. (Just In Case) system was made necessary by the disruptions of the pandemic years. There may be better forecasting methods coming online, but they are all improved front-ends for J.I.T. supply chain systems.

01-25-24: “U.S. economy grew at 3.3 percent rate in latest quarter.” The New York Times: “The U.S. economy continued to grow at a healthy pace at the end of 2023, capping a year in which unemployment remained low, inflation cooled and a widely predicted recession never materialized. Gross domestic product, adjusted for inflation, grew at a 3.3 percent annual rate in the fourth quarter, the Commerce Department said on Thursday. That was down from the 4.9 percent rate in the third quarter but easily topped forecasters’ expectations and showed the resilience of the recovery from the pandemic’s economic upheaval. The latest reading is preliminary and may be revised in the months ahead.” HPS Analysis: While the sporting goods sector and the bicycle business haven’t benefited from the strength in 2023, and will by all accounts continue to struggle in 2024, it is a strong U.S. economy that holds the promise for a slow and steady recovery for the bicycle business going forward.

01-25-24: “Pacific Cycle recalls e-bike models because of fire hazard.” Bicycle Retailer and Industry News – WASHINGTON D.C.: “Pacific Cycle is recalling two e-bike models because the wiring harness that manages the lithium-ion battery charging was improperly assembled and can overheat and catch fire. There have been three reports of the battery catching on fire, resulting in one injury of second-degree burns. About 1,700 Ascend Cabrillo and Minaret e-bikes are affected by the recall and consumers should stop using and keep them unplugged before receiving a refund.” “The e-bikes were sold at Bass Pro Shops and Cabela’s stores nationwide and online from January 2023 through November 2023 for between $1,400 and $1,500.” HPS Analysis: Product safety recalls are always troubling. In this case there are no reported fatalities, although there are injuries. This product recall case stands out to HPS because it is proof of the position the NBDA has taken based on the advice from HPS to advocate for testing, certification and listing for UL 2849 and UL 2271 by a N.R.T.L. (Nationally Recognized Testing Laboratory). A N.R.T.L. is required to perform four unannounced inspections of the component manufacturers that make up the electrical systems tested for compliance to UL 2849 throughout the year after the testing of the system is successfully completed and the e-bike electrical propulsion system is certified. Some in the industry have argued that only the battery should be tested, and others that the testing and certification should be done by an authorized testing lab that has no requirement for unannounced inspections after the initial testing. HPS has advocated for testing of the whole system under UL 2849 by a N.R.T.L. to make sure the components, like the wiring harness, are tested and the manufacturer is visited and inspected after the initial testing to make sure they are producing the same level of quality that was tested as part of the complete system. This recall of a population of 1,700 e-bike systems has resulted in three fires and one injury. You do the math.

01-26-24: “REI lays off more than 300 employees as it warns about rocky 2024.” Sourcing Journal: “CEO Eric Artz notified employees in a Jan. 25 letter that the outdoor retailer would lay off 357 people across its organization, including 200 corporate employees at its headquarters, and 121 in its distribution centers. The news follows Nike’s December announcement to ‘streamline’ its organization and cut costs, partly via layoffs. Google and Amazon have also announced fresh job cuts for 2024 .In announcing the layoffs, Artz described an ‘increasingly challenging’ state of REI’s business and the outdoor industry at large, and said he expects these challenges to persist this year. He projects 2024 revenues to be down compared to 2023. ‘As you know the state of the business – and our industry – has become increasingly challenging and highly promotional,’ Artz wrote, adding that the outdoor specialty retail channel has been in decline for four quarters. ‘While we were able to outperform this trend for much of the last year, it caught up to us in Q4 and we now expect conditions to remain very challenging throughout 2024.’“ HPS Analysis: My compliments to Eric Artz for his honesty about the situation. I have had to lay off employees and terminate employees in my past experience as a company executive, and I didn’t like it. The layoffs are just a symptom of a financial problem that goes to the capital strain on REI that is probably attributable to excess inventory in the face of reduced and declining revenue. I am troubled by his prediction that: “we can expect conditions to remain very challenging throughout 2024.”

01-30-24: “8 logistics trends to watch in 2024.” Supply Chain Dive: “Risk is sparing no mode of transportation in 2024, as geopolitics, labor talks, freight demand and capacity fluctuations will continue to alter supply chain strategies.” “While conversing with several experts on the risks ahead for the year, Supply Chain Dive rounded up eight logistics trends to watch in 2024:

  1. Red Sea crisis threatens rates.
  2. Panama Canal restrictions add complexity.
  3. East Coast port labor talks loom large.
  4. West Coast ports may experience heightened traffic.
  5. Overcapacity remains a problem for trucking companies.
  6. Labor clashes a risk for parcel delivery networks.
  7. Air forwarders eye growing e-commerce activity.
  8. Forwarders wary of geopolitical risk.”

HPS Analysis: So much for “normalization” in the face of uncertainty. Freight volume of all types is down, but freight rates are increasing again, primarily because of the eight disruptions listed above. The Red Sea crisis affects primarily European ocean routes. However, the Panama Canal restriction, because of a drought and low water levels, effects ocean shipment to the Eastern ports of the United States. East Coast port labor slowdowns and a possible strike make the East Coast port problem worse. More ocean freight can be routed to the West Coast ports and more containers can be routed to stack trains to the Midwest and East, but the railroads are reducing service and laying off train crews. Shipping by truck is still viable. Parcel delivery services have increased rates as they are laying off people and there are more labor problems coming up this season that might interfere with shipping service. Air forwarders are increasing rates and reducing service, and forwarders are dealing with a great deal of uncertainty and avoiding as much “risk” as they can, which will affect both shippers’ cost and service.

Contact Jay Townley:


11-30-23: “Investors descend on Dubai,” Bloomberg Green Daily: “The larger-than-usual group of investors and bankers in attendance at COP28 in Dubai are not there primarily (if at all) for altruistic reasons. They’ve traveled to the United Arab Emirates for the same reason they’d go to an airshow or a heavy industry convention: the possibility of making a lot of money. For Nikita Singhal, co-head of sustainable investment & ESG at Lazard Asset Management, the climate crisis is too often portrayed as a risk in investors’ portfolios, while the opportunities to profit handsomely from the economic changes required to slow global warming are regularly overlooked. Climate change is ‘one of the largest economic disruptions of our lifetime,’ [emphasis added] Singhal said at the Bloomberg Business Forum at COP28. The other side of that coin, she says, might be a chance for ‘the greatest alpha-generation or investment-return’ in a long time.” HPS Analysis: COP28 did not, to the knowledge of HPS, receive any trade press coverage by the bicycle industry and there was no attempt on the part of the American micromobility sector to reach out and connect with “one of the largest economic disruptions of our lifetime.” Climate change has been, and will be, one of the leading disruptors, impacting strategic thinking and planning relative to the bicycle industry as it merges into the micromobility sector going forward. The significance of COP28 is the attention now being paid by the world’s financial community to all of the aspects of climate change, including the investments in fossil fuels, alternate forms of energy and power and mobility and micromobility.

12-5-23: “Companies are going broke gradually, not suddenly,” Bloomberg Opinion: “Lots of things were supposed to happen this year, but didn’t. With only weeks to go, neither the recession in the U.S. nor the dramatic post-Covid rebound in China have come to pass. But perhaps the strangest non-event has been the widely anticipated wave of corporate defaults. That doesn’t mean that problems aren’t coming. Oleg Melentyev of Bank of America points out that the bankruptcy of WeWork happened ‘relatively quietly,’ even though it was the largest U.S. company to go bust since the global financial crisis, while the Austrian property group Signa, whose assets included a share in New York’s Chrysler Building, last week became Europe’s biggest post-GFC insolvency. A major repricing of the credit markets to account for those awaited defaults has also failed to happen. But if widespread corporate failures did arrive, they might provide just the catalyst to bring along the much-delayed recession.” HPS Analysis: There is, in HPS’s opinion, a definite difference between the European trade press coverage of the financial events of the past year compared to U.S. coverage that, again in our opinion, tended to focus more on specialty retailers and less on companies, suppliers and brands. With this said, HPS has come to the realization that companies in the bicycle and micromobility space are: “…Going Broke Gradually. Not Suddenly.” It’s like slow motion and it is also because debt-dependent firms and investors in and around all aspects of micromobility are approaching their maturity wall and will have to refinance soon, and at higher interest rates, if they can actually get access to higher interest financing. Stay tuned.

12-5-23: “China’s debt outlook downgraded as economy slows,” BBC News: “China’s debt outlook downgraded as economy slows. Moody’s issued a warning as it cut its outlook on the government’s debt to negative, from stable. The firm is the latest to raise concern about problems facing the world’s second-largest economy. China said it was disappointed by the move, calling the economy resilient. The country has signalled plans to ramp up stimulus spending, as it battles soaring youth unemployment, weaker global demand hitting its manufacturing industry and deepening woes in the property sector.” HPS Analysis: Keeping in mind that the U.S. credit rating was downgraded in the third quarter of last year, this action by Moody’s to downgrade China from stable to negative adds another uncertainty to an already increased risk to North American, European and Asian companies to doing business with and in China. Keeping in mind that China represents both the primary manufacturing source and a key growth consumer market for the multinational bicycle business brands, this additional uncertainty serves to add to the risk going into 2024.

12-5-23: “Canyon sales up 23 percent in first three quarters, but profitability declines.” Bicycle Retailer and Industry News: “Privately-held Canyon Bicycles announced December 4 that its year-on-year sales increased 23 percent in the first nine months of 2023. According to a statement from Groupe Bruxelles Lambert, which acquired Canyon in 2020, the bike brand’s sales in the first nine months of 2023 were 621 million euros ($670.5 million at today’s exchange rate), up from 506 million euros in the same period of 2022. Despite higher sales volume, Canyon’s EBITDA growth declined 6 percent in the period. GBL said the EBITDA performance was due to ‘higher discounts on certain bike categories and a supply shortage of high-demand bikes due to issues at on of its suppliers.’ The supplier issues affected the availability of Canyon’s road and gravel bikes in the third quarter and have since been resolved, according to GBL.” HPS Analysis: An increase in sales and a decrease in profitability is not a sustainable financial strategy over the long term and is unfortunately indicative of what brands are facing through the last quarter of 2023 and going into 2024. Canyon’s Direct-To-Consumer (D2C) business model is built on the premise that it can provide top of the line quality at bargain pricing and generate the same profitability as traditional distribution.

12-7-23: “Ride1Up Portola review: Is this the new go-to low-cost electric bike?” electrek: “When Ride1Up unveiled the Portola folding electric bike, it was obviously a major play to snatch the title for the leading low-cost electric bike. Now that we’ve had sufficient time in the saddle, it’s high time to see how this budget electric bike stacks up. When it comes to low-cost e-bikes, there are essentially two groups. Sure, that’s oversimplifying it, but stick with me here. There are ultra-budget mega-retailer bikes, like those found on Amazon, Walmart, etc. You can often find those e-bikes in the $500-$800 range. Then there are the actual e-bike companies that sell really low-cost e-bikes, such as those from Lectric Ebikes, Rad-Power Bikes, Aventon and today’s review, Ride1Up. These budget e-bikes are usually a bit more expensive, often starting at between $800-$1,200 (and increasing from there), but they have more reliable service and support because they come directly from an electric bicycle maker that deals only in e-bikes. not also in toasters and air mattresses. So that’s the lens through which we have to look at the Ride1Up Portola. At $995, it’s not going to compete well against the super cheap price of a Walmart e-bike, but it still undercuts most of the main e-bike players in the market, and comes from an e-bike brand that stands behind its products. Plus, it’s got way more features and nicer build quality than you’d ever find on a typical Walmart or Amazon special.” HPS Analysis: You have probably noticed that American bicycle market consumer pricing has been pummeled by discounting and sale pricing with the end result that the race to the bottom has resulted in e-bike pricing steadily dropping over the last four quarters. Micah Toll, writing for electrek, is providing an explanation for the bifurcation of the D2C portion of the e-bike segment of the American market. Walmart and Amazon, or what Micha Toll calls the “ultra-budget mega-retailer bikes” in the $500 to $800 retail range, and “budget e-bikes” sold by “actual e-bike companies that sell really low-cost e-bikes” in the $800 and $1,200 retail range. Ride1Up is what Micha Toll calls an “actual e-bike” company and the focus is on the introduction of the Ride1Up Portola 20-inch fat tire folding e-bike sold D2C for $995. HPS’s concern is not the retail price but testing and certification by a NRTL (nationally recognized testing lab) to UL2849 (which is inclusive of UL2271). HPS called Ride1Up and talked to a customer service representative, and found out that all Ride1Up lithium-ion batteries are tested to the UL2271 lithium-ion battery standard, but complete electrical propulsion systems are not tested to UL2849 because of the cost of testing. HPS maintains that this is no longer acceptable as an excuse nor as a standard for customer and consumer safety. Walmart and Amazon both have programs for testing and certification of e-bike electric propulsion systems to UL2849, which includes testing to UL2271 and for aftermarket and replacement lithium-ion batteries to UL221. NBDA has already posted and distributed eBike Lithium-Ion Battery Pack Storage, Use and Care Protocols (Updated December 26, 2023), and it is now time for all industry trade associations to adopt and similar protocols and guidance to members. In addition, online and print publications like electric need to include “Tested and Certified by a NRTL to UL 2849” as a standard line item, indicating “yes” or “no” for each e-bike they test and evaluate so consumers know what e-bikes are certified and which are not yet certified.

12-7-23: “Shimano investigating report of ‘modern slavery’ at one of its Malaysian suppliers.” Bicycle Retailer and Industry News: “Shimano says it is investigating after a news report that a supplier to its factory in Malaysia has operated under conditions that are ‘akin to modern slavery.’ The U.K.’s The Telegraph reported December 7 that the factory, Kwang Li Industry, has deducted fees from foreign worker paychecks that reduce pay by as much as a third, putting the pay below Malaysia’s minimum wage. Additionally, the article said workers from Nepal and Bangladesh have to take out high-interest loans to pay recruitment fees to a third-party agency the factory uses. According to The Telegraph, the recruitment payments by workers are in breach of a 2018 memorandum between Malaysia and Nepal that requires employers to pay recruitment fees. The Telegraph also cited reports of worker abuse in the Kwang Li factory. Andy Hall, a British labor rights specialist, told The Telegraph that conditions at the factory were ‘akin to modern slavery.” HPS Analysis: Does anyone else see the irony in The Telegraph publishing this story on December 7? This is the date, December 7, 1941, that Japan attacked at Pearl Harbor, Hawaii and brought the U.S. into World War II. Beside what HPS thinks is an obvious attempt by The Telegraph to add prejudice to its allegations, what is described is totally unacceptable, and cannot be tolerated, but is also all too common throughout the world. The poor and incarcerated of every nation are taken advantage of and so called “modern slavery” is sadly found in the U.S. as well as throughout Asia. The global and U.S. bicycle industry associations need to work with Shimano and every multinational company and brand in the bicycle industry to establish manufacturing and sourcing codes of conduct that include standards for employment and work

12-8-23: “RIP to fast and free shipping.” Bloomberg Opinion: “This year might go down in history as the end of free and fast shipping. The good old days were sweet. Nearly any online goods, big or small, could arrive at your door within a couple of days for free and often could be sent back at no cost. It was exhilarating. For a time, businesses were willing to eat the cost of shipping, which can take as much as 10 percent to 15 percent of a company’s profits, because they were in a fierce fight for e-commerce dollars. But over the last year, retailers have been quietly rolling back options that would get orders to your door within days as their operating margins suffered. To cut down on costs, retailers, including Inc., Walmart Inc., Chewy Inc. and Wayfair Inc. have closed or canceled the opening of distribution centers this year. At the same time, retailers have followed the lead of companies such as L.L. Bean Inc. by adding new minimum order values for free shipping after years of requiring no minimum. HPS Analysis: What is happening here is rising costs of handling and shipping eating into profitability, as the article states. “Fast and Free Shipping” has been one of the advantages that D2C retailers have had over brick-n-mortar retailers, and this will serve to level the playing field somewhat. In addition to cost, the demise of free shipping takes away one of the marketing points made about the advantage of buying online.

12-10-23: “Don’t burn your house down. Here’s how to buy safer electronics.” The Wall Street Journal: “Faulty electronics are causing more fires in homes lately. This holiday season I don’t want to give my neighbors the wrong kind of light show, so I sought advice on how to avoid buying potentially dangerous devices. E-bike and e-scooter battery fires are soaring, particularly in New York, where 17 people have died and dozens have been injured this year.” “Chances are, your electronics won’t become incendiary devices the moment you plug them in. But safety officials and product testers say that if you buy cheap, low-quality or fake products, you increase your risk of a fire and face other hazards. Online shopping, while convenient and cost-effective, exacerbates the problem. In marketplaces hosted by Amazon and other major retailers, items sold by third-party sellers aren’t vetted with the same rigor as merchandise sold directly by the stores. As a result, you have to be extra diligent.” “Look for a certification label from a nationally recognized testing laboratory, markings such as UL, ETL, CSA, or SGS, said Patty Davis, a spokeswoman for the U.S. Consumer Product Safety Commission. These typically appear on packaging or the product itself, which is why it is sometimes easier to assess product quality in-person.” “When it comes to e-scooters and other mobility devices, the UL label is particularly important, says the CPSC. A 2022 letter from the agency highlighted a ‘rise in fires and other thermal events’ and urged manufacturers and retailers to adopt UL certification to ‘significantly reduce the risk of injuries and deaths.’ “ HPS Analysis: This was a very good and well-researched article that the American bicycle market can use more of. Electric bicycles, while not the only “electronics” covered, are prominent and there certainly is enough good information that can educate consumers, not the least of which is the advice to: “Look for a certification label from a nationally recognized testing laboratory, markings such as UL, ETL, CSA, or SGS.” The U.S. bicycle trade association representing e-bike and lithium-ion battery brands and distributers has an opportunity to send out press releases and provide articles by and interviews with “experts” providing useful educational information about e-bikes and the care and maintenance of lithium-ion batteries.

12-12-23: “LEVA and NBDA bring E-Bike training to CABDA 2024.” Bicycle Retailer and Industry News: “The Light Electric Vehicle Association (LEVA), in partnership with the National Bicycle Dealers Association (NBDA) and the Chicago Area Bicycle Dealers Association, is proud to bring fresh e-bike training content to CABDA Midwest 2024 from February 6-8. Together, they are adding three education opportunities to visiting retailers, including a half-day hands-on technician training workshop on the day before CABDA officially opens, a battery safety and handling certification on both show days, and a presentation on the state of the U.S. e-bike market in 2024, including forecast on how the market will develop in the coming years.” HPS Analysis: While several brands now conduct proprietary technical training exclusively for their dealers, this is the first step in the bicycle industry providing hands-on e-bike and lithium-ion battery technician training for all independent specialty bicycle retailers. The half-day training is for a modest fee February 6 at the Schaumberg Convention Center and is co-sponsored by CABDA and the NBDA, and conducted by LEVA. In addition, LEVA will conduct seminars and an e-bike market presentation during the CABDA Midwest Expo and HPS’s chief technology officer, Mike Fritz will present two technology and lithium-ion battery seminars per day, February 7 and 8. Please refer to the CABDA Midwest Expo Schedule for details.   

12-13-23: “Fed begins pivot toward lowering rates as inflation declines.” The Wall Street Journal: “Slowing inflation prompted Federal Reserve Chair Jerome Powell to pivot away from raising interest rates and toward considering when to cut them, igniting a rally on Wall Street. The Fed held its benchmark federal-funds rate steady at a 22-year high on December 13, and offered every reason to think that its most recent increase this past July probably marked the end of the most aggressive cycle of hikes in four decades.” HPS Analysis: While Treasury Secretary Yellen may have been premature in declaring a soft landing for the U.S. economy, the Fed chair made it clear that raising interest rates may be over, and that the central bank’s attention is now focused on when it will begin cutting rates. Meanwhile, HPS is advising clients not to expect reductions during the first quarter of 2024, and that resulting reductions in the cost of loans will probably mot be a reality until the second quarter at the earliest.

12-13-23: “2024 retail predictions: five trends to watch.” Chain Store Age CSA: “The rise of the physical store. Research shows that improving customer experience remains the number one priority for businesses. The rise of the ‘phygital” store is the result of a fusion of physical and digital retail strategies to create a cohesive customer journey. The physical approach recognizes that customers move seamlessly between physical and digital touch points when shopping. While customers know how to use retailers’ online stores to make their purchases, when they go into physical stores they are not just looking for a specific product, but also the purchasing experience.” HPS Analysis: The other four retail predictions are important, but we feel the number one prediction: “The rise of the physical store” is not only significant, but lands right in the middle of the specialty bicycle retail strategy going forward. Physical stores are growing in importance, even among those retailers that have been strictly D2C up to 2024.

12-15-23: “It’s a bad time in the cycling industry and a great time to buy a new bike.” Bicycling: “The Tarmac SL7 Expert is one of the nearly 200 Specialized bikes on sale. I take no joy in saying this: The bicycle industry seems kinda effed right now. While I am decidedly not a business expert, headlines and conditions seem grim, and many people and brands are feeling the pain. However, it’s also an extremely good time to shop for a new bicycle.” HPS Analysis: Specialized isn’t alone. This article also mentions Kona’s Process bike two-for-one deal, with a link, Cannondale with 100 models on sale, Trek with over 50 models on sale and Giant with 100 bikes on sale (and of course links), 40 Canyon models on sale with a link, Santa Cruz, Pivot, Cervelo, Yeti, Ibis, Norco, with a link to Competitive Cyclist, Allied, Alchemy and SCOR with links, and e-bike brands Rad Power, Aventon and REI’s Co-op house brand with, of course, links. The secondary market is also covered with references to Facebook’s used bike group and Pinkbike’s BuySell postings and The Pro’s Closet with a link to an “extensive list of products on sale.” The author, Matt Phillips, senior test editor for Bicycling, has an extensive interview with Rick Vosper. Phillips opines, “Although things are grim right now, the bike industry expects the overstock problem to (eventually) correct itself. I’ve seen statements from brand representatives and experts expressing confidence that the inventory situation will normalize… in 2025 or 2026.”

12-16-23: “‘Underwater’ car loans signal U.S. consumers slammed by high rates.” Bloomberg Wealth: “Negative equity on automobiles is at the highest level in more than three years, with higher prices and borrowing costs hitting owners. It’s a tough time to be a car owner in the US. Prices for new vehicles are high and interest rate hikes have made loans more expensive. And many car owners now owe more on their loans than their vehicle is worth. This situation, commonly called being ‘underwater’ or having ‘negative equity,’ occurs when the price of a car falls faster than the owner can pay down the loan for it. In November, people with negative equity were underwater by an average of $6,054, the most since April 2020 and well above pre-pandemic averages, according to automotive information firm Inc. It’s a precarious spot for many Americans, coming after a twin surge in car buying and interest rates has strained finances and fueled an uptick in automobile repossessions.” HPS Analysis: This is bad news because it means many consumers will have less expendable money to spend on things like new bicycles, but good news because it makes an investment in a regular bike or e-bike as a low cost, environmentally friendly, clean means of transport a good investment. Rebates and subsidies for e-bikes are added incentives.

12-17-23: “Buy now, pay later keeps people spending – without credit agencies knowing.” The Wall Street Journal: “Consumers are shifting more of their spending to so-called buy now, pay later lenders, a trend that is only accelerating as high interest rates dent budgets and pandemic savings dry up. That is sounding alarms at consumer-advocacy groups that say companies like Afterpay and Klarna provide fewer protections than credit cards and encourage shoppers to take on more debt than they can afford. A quarter of all American adult consumers have used buy now, pay later loans, according to LexisNexis Risk Solutions. Over Black Friday and Cyber Week, such payment plans accounted for 7.2 percent of all online sales, a 25 percent jump from last year, Adobe found. (They were also a big factor in the declining use of store credit cards.) Buy now, pay-later firms can extend loans as large as $25,000, offering annual interest rates ranging from 0 percent to 36 percent. The rates offered are dynamic and depend on the borrower’s standing, payment timeline and the item being purchased. Retailers can also pay fees to offer better terms, such as 0 percent interest, at checkouts. In comparison, the average annual interest rate on credit cards is 21.19 percent, according to the Federal Reserve.” HPS Analysis:  There is no question that bicycle retailers and D2C brands have employed Buy Now Pay Later tactics to close sales during the last quarter of 2023 and continue to use this tool going into 2024. 7.2 percent of all online sales may not sound like much, but this amounts to a little over $16 billion that may not have been spent in whole or part if this means of getting a loan to make a retail purchase wasn’t available. That’s the upside. Read on to learn about the downside.

12-17-23: “Electric Bike Report best electric bikes of 2023, December 17, 2023.” Electric Bike Report: “Our picks for the Best Electric Bikes of 2023:

  • Best Fat Tire Electric Bike: Aventon Aventure 2
  • Best Folding Electric Bike: Lectric XP 3.0
  • Best Electric Bike for Women: Electric Bike Co. Model S
  • Best Budget Class 3 Commuter: Ride1Up 700 Series
  • Best Electric Bike for Seniors: Aventon Pace 500 3 ST
  • Best Commuter Electric Bike: Aventon Level 2
  • Best Utility Electric Bike: Rad Power Bikes RadRunner Plus
  • Best Budget Fat Tire Electric Bike: Lectric XPeak
  • Best Step-Thru Commuter Electric Bike: Rad Power Bikes RadCity 5 Plus

HPA Analysis: There is also a “best price” category, to which you can add Mokwheel Basalt, and the Blix Sol Eclipse to the five e-bike brands and models listed above by Electric Bike Report. Lastly, a “best high-end” category lists seven models between five brands, including Specialized with three models, Evelo, QuietKat, GoCycle and Trek with one model each. This dovetails into my earlier “rant” and preliminary list of pandemic induced disruptive changes they were instrumental in creating. If you do not already read electrek, Electric Bike Report and Bicycling every day, I recommend you do so. Why Bicycling? Because it not only is an indicator of what is trending in the gearhead and enthusiast segment, this consumer publication, in the opinion of HPS, does an objective job of covering the e-bike market and both traditional and new brands. There are other trade and consumer publications and please let me know of any that you recommend.

12-17-23: “1903-The First Flight.” National Park Service: “December17, 1903 The 27-m.p.h. wind was harder than they would have liked, since their predicted cruising speed was only 30-35 m.p.h. The headwind would slow their groundspeed to a crawl, but they proceeded anyway. With a sheet, they signaled the volunteers from the nearby lifesaving station that they were about to try again. Now it was Orville’s turn. Remembering Wilbur’s experience, he positioned himself and tested the controls. The stick that moved the horizontal elevator-controlled climb and descent. The cradle that he swung with his hips warped the wings and swung the vertical tails, which in combination turned the machine. A lever controlled the gas flow and airspeed recorder. The controls were simple and few, but Orville knew it would take all his finesse to handle the new and heavier aircraft. At 10:35 he released the restraining wire. The flyer moved down the rail as Wilbur steadied the wings. Just as Orville left the ground, John Daniels from the lifesaving station snapped the shutter on a preset camera, capturing the historic image of the airborne aircraft with Wilbur running alongside. Again, the flyer was unruly, pitching up and down as Orville overcompensated with the controls. But he kept it aloft until it hit the sand about 120 feet from the rail.” HPS Analysis: The brothers, who were from Dayton, Ohio, flew four more times that day, taking turns. Wilbur’s second flight and the fourth and last on December 17, 1903, was an impressive 852 feet in 59 seconds. But it was Orville’ first 120-foot flight of the day that would go into the history books as man’s first powered flight. What I personally marvel at is the total disregard that the American bicycle industry has for, in my opinion, the single most significant historical event in our industry and business. Orville and Wilbur Wright not only owned and operated the Wright Cycle Company, they designed front hubs and a coaster brake, as well as assembling and eventually manufacturing their own line of bicycles. Orville and Wilbur were top-tier bicycle mechanics, and perhaps not up to the level of today’s Cat 1 UCI Certified team mechanics, they designed and built the first wind tunnel, light-weight aircraft engine, the first functional propeller and the first airplane, all in their bike shop in Dayton, Ohio, and the bicycle industry totally ignores these wonderful historical facts. This didn’t happen anywhere else in the world. It happened right here in the good old U.S.A., and everyone in the bicycle business and particularly those of us that worked in a bike shop should not only be proud, we should celebrate every year on December 17.  My question to the powers that be in the American bicycle business is why don’t we?

12-18-23: “eBliss Global partners with automotive products manufacturer.” Bicycle Retailer and Industry News: “E-mobility company eBliss Global will collaborate with Petra Automotive Products to utilize its dealership partners for delivery, setup, and support in North America for its ALWAYS e-bikes. The ALWAYS line of e-bikes are designed exclusively for auto dealerships, including folding, e-cargo, and fat tire models. Entry-level models start at $3,495. ‘We want to meet customers who may have never considered an e-bike before where they already buy vehicles,’ said Dave Boyle, head of automotive at eBliss Global. ‘We are ecstatic to be partnering with Petra Automotive Products, a company these dealers know and trust, to help facilitate future relationships with auto dealerships.’ Petra Automotive Products is located in Houston and founded in 2010. It manufactures more than 360 maintenance products and services for automotive dealers, chains, and independent vehicle repair facilities.” HPS Analysis: If you have heard the monthly NBDA podcast, you have heard HPS talk about the automotive industry and our conviction that the future of the American bicycle industry and business is going to be driven (no pun intended) by the automobile industry and its vision for the future of micromobility, which includes the bicycle business. This may be an example, although we haven’t done enough homework to be sure yet. Note that this is not an automotive business that wants to attract and sell bike shop customers. This an automotive business that wants to attract and sell e-bikes to automotive customers.

12-20-23: “E-scooter company Bird files for bankruptcy.” electrek: “Global e-scooter company Bird, an early pioneer of shared micromobility, has seen better days. It has confirmed that is filing for bankruptcy for its service in the U.S., while keeping its Canadian and European operations intact for the time being. Bird released a press release this morning announcing it has entered ‘into a financial restructuring process aimed at strengthening its balance sheet and better positioning the company for long-term, sustainable growth.’ The company said it will continue to ‘operate as usual’ during the process by maintaining service and commitments to its partner cities, fleet managers, and employees. Bird runs its operations in some 350 cities around the world, with the bulk of those being in the U.S.. The company was founded in 2017 by Travis VanderZanden, a former Lyft and Uber executive, as one of the key dockless micromobility players on the scene. In 2021, Bird went public via a SPAC merger, but the stock plummeted from more than $2 billion at its New York Stock Exchange debut to $70 million a year later, which earned it a stern warning that its stock had dipped too low. In September, its stock became delisted from the NYSE because of its inability to lift its market cap to $15 million. Bird recently acquired its rival company Spin from Berlin-based Tier Mobility, and then announced a round of layoffs. According to Bloomberg, the Miami-based company listed assets and liabilities of between $100 million and $500 million in a court filing. The Chapter 11 bankruptcy will give Bird a chance to restructure its finances without the disruption of its day-to-day operations, with the ultimate goal of selling its assets within the next 90 to 120 days, according to the press release.” HPS Analysis: There are some in the specialty bicycle retail channel of trade that will be happy that Bird and other ride share companies are in financial trouble and are in danger of leaving the market. All in all, Bird going into Chapter 11 is not a good thing for the bicycle market or business, although it might be a good thing for Bird as a company to stabilize and develop a plan to become profitable across the board. The available data from the North American Bicycle Rideshare and Scooter Rideshare Association (NABSA) shows that ride share leads to consumer purchases of their own micromobility transport, and that the loss of bicycle and scooter rideshare results in more consumers utilizing mass transit. It would benefit the bicycle industry to work with bicycle rideshare companies like Bird to help them become more financially stable going forward.

12-20-23: “U.S. consumer confidence surges most since 2021 in broad upturn.” Bloomberg Economics: “U.S. consumer confidence rose in December by the most since early 2021 as Americans grew more upbeat about the labor market and the inflation outlook. The conference board’s index increased to 110.7 in December from a revised 101 reading in November, data published Wednesday showed. The median estimate in a Bloomberg survey of forecasters called for a 104.5 reading. A measure of expectations, which captures the outlook for about six months out, advanced as consumers saw better business conditions, incomes and labor market prospects. Expected inflation a year ahead fell to the lowest level since late 2020. Meanwhile a gauge of current conditions rebounded from the lowest reading in more than two years. The report showed optimism across the board, from job prospects and inflation to future incomes and business conditions. More Americans said they are planning to go on vacation, buy a car or purchase big appliances. The results point to an economy holding up well going into 2024.” HPS Analysis: This is welcome news after several months of low consumer confidence. While good news for the overall American economy, it may still not translate to an increase in consumer traffic in bike shops or shopping and buying online or in-store. The American bicycle industry can be its own worst enemy, and after months of slow business, sale pricing and discounting the brands and suppliers are telling the NBDA that they can not afford to step up and sponsor the consumer research that will provide guidance as to why consumer demand has ebbed, and when it will pick back up going forward.

12-20-23: “Americans may be taking on too much pay-later ‘phantom debt.’“ The New York Times: “Buy now, pay later loans are helping to fuel a record-setting holiday shopping season. Economists worry they could also be masking and exacerbating cracks in Americans’ financial well-being. The loans, which allow consumers to pay for purchases in installments, often interest free, have soared in popularity because of high prices and interest rates. Retailers have used them to attract customers and to get people to spend more. But such loans may be encouraging younger and lower-income Americans to take on too much debt, according to consumer groups and some lawmakers. And because such loans aren’t routinely reported to credit bureaus or captured in public data, they could also represent a hidden source of risk to the financial system. ‘The more I dig into it, the more concerned I am,’ said Tim Quinlan, a Wells Fargo economist who recently published a report that described pay-later loans as ‘phantom debt.’ Traditional measures of consumer credit indicate that U.S. household finances overall are relatively healthy. But, Quinlan said, ‘If those are missing the fastest-growing piece of the market, then those reassurances aren’t worth a darn.’” HPS Analysis: The 25 percent increase in Buy Now, Pay Later (BNPL) loans to pay for online purchases during the holiday season helped record retail sales for the holiday selling season, but it may have been part-and-parcel of consumers taking on too much “phantom debt.” Whether BNPL are going to hurt or help remains to be seen, but it does appear these loans have helped sell more bicycles and e-bikes during the last quarter of 2023.

12-21-23: “Is there light at the end of 2023?” Bike europe: “In contrast to recent years when the ‘best read’ items in Bike Europe were related to high-level investments and buoyant market developments, 2023 marked a vivid turning point. This year was notable for bankruptcies, closures and concerns over financial positioning. HPS Analysis: The whole Bike Europe article provides a chronological walk through insolvency, bankruptcy and the financial troubles of the bicycle industry across the pond. Bike Europe has, in the opinion of HPS, been candid and timely in reporting the problems and issue as they arose. The question is rhetorical and there unfortunately there is no light penetrating the fog of uncertainty – yet.

12-21-23: “Fitch Ratings warns Accell Group finances are ‘unsustainable.’” Bike europe: “The reorganizations announced at three of its subsidiaries was already a clear indication of a new policy at Accell Group BV. Now the reason why has become clear. Fitch Ratings has downgraded Accell Group and questions the company’s possibility of meeting its financial commitment. According to Accell Group, ‘the Fitch report reflects the difficult market circumstances.’ “According to Accell Group, ‘KKR has continuously supported the liquidity needs of the business in this challenging environment with a long-term conviction on the industry and business outlook. Most recently, they have provided incremental funding of €150 million in addition to the €100 million made available in mid-2023. The commitment of €250 million in this year is a clear signal of the confidence they have in the business, and this provides Accell Group with sufficient liquidity to weather these short-term challenges. Other stakeholders have also been highly supportive including by providing a €75 million ABL facility (Asset Based Lending) and up to €100 million receivables securitization.” HPS Analysis: This would be a whole lot more scary if it were not for Accell Group being able to publicly disclose the financial support it has received from KKR and its other investors. However, with this said, the total financial support of €425 million so far discloses the magnitude of the financial problem, and the Fitch rating will not make the road back to financial health any easier.

12-25-23: “E-bike maker SONDORS up for sale as company enters receivership.” electrek: “After a series of financial setbacks, followed by an Electrek expose revealing the failed Metacycle electric motorcycle project, e-bike maker SONDORS has appeared to enter receivership. The search is now on for a buyer who can scoop up the company and its assets. Electrek has reviewed documents sent out by Rock Creek Financial Advisor (RCFA) indicating that an RFCA representative has been appointed as receiver of SONDORS, Inc. and that the company is being offered for sale along with its assets.” HPS Analysis: As an earlier article points out: “Companies are going broke gradually, not suddenly.” SONDORS financial troubles appeared to start when it got into the electric motorcycle business mid-pandemic, and it never was able to recover. In the first half of 2023 electrek reported that SONDORS had walked away from its motorcycle manufacturer in China without paying what was owed for finished goods sitting on the factory floor.

12-26-23: “USTR extends exclusions from China Section 301 tariffs to allow for comments on sunsetting of the exclusions and alignment with four-year review.” USTR Press Release December 26, 2023: “The Office of the United States Trade Representative today announced the further extension through May 31, 2024, of the reinstated and COVID-related exclusions in the China Section 301 investigation. The exclusions were previously scheduled to expire on December 31, 2023. USTR announced the opening of a docket for public comments on existing exclusions on January 22, 2024. The extension will enable the orderly sunsetting of the exclusions, except in cases where current information suggests that, consistent with statutory factors and objectives, additional time would enable shifts in sourcing to the United States or third countries. The extension will also facilitate the alignment of further decisions on these exclusions with the ongoing four-year review.” HPS Analysis: Good news for the financially-challenged American bicycle industry, at least for the next five months until May 31, 2024. The Section 301 tariffs are an additional 25 percent which is added to the already existing import tariffs on bicycles, most bicycle parts and accessories and e-bikes originating in China. HPS refers to Section 301 as punitive tariffs, because they are paid within two weeks of the goods entering the customs territory of the U.S., by the importer of record. However, the Section 301 punitive tariffs have been suspended for over a year and the regular tariffs on complete bicycles of 5.5 percent and 11 percent have been collected and included in the landed cost of goods. The percentage collected is of the FOB, or factory cost of the goods. The price-cutting and discounting has, so far, been off of the landed cost of goods that, generally speaking, has not included the Section 301 punitive, or additional tariff of 25 percent. What has happened is the United States Special Trade Representative, or USTR, has kicked the can down the road and both allowed for more comments, and delayed a decision, about doing away with, or sunsetting, the suspension, or exceptions. That’s good, right? Not exactly. What it means is the additional 25 percent punitive tariff would go into effect at 1:01 a.m. June 1, 2024, unless the suspension or exceptions are continued, or the Section 301 punitive tariffs are done away with altogether, which at this point seems unlikely. If this is a major planning concern HPS suggests you consider submitting comments to the USTR following the guidelines provided and reach out to the trade associations already engaged in lobbying this issue.

12-27-23: “Big Four bike brands can be crucial for retailer success.” Bicycle Retailer and Industry News by David DeKeyser: “When I read Rick Vosper’s October opinion/analysis piece, headlined “Nearly half of U.S. bike shops don’t carry any Big Four brands,’ my obvious reaction was; ‘but more than half do.’ And it must be pointed out that the stores that carry a Big Four brand sell far more than half the products being sold in the dealer channel. I believe that a counterpoint to Rick’s column is necessary for bicycle retailers who are looking to bring on a brand from the Quadumvirate (Rick’s term), or perhaps those who are considering opening or purchasing a store. They should consider both the positive and negative implications of working with a Big Four brand.” HPS Analysis: David DeKeyser called and talked to me before he penned his rebuttal to Rick Vosper’s article, and I told him basically what I have detailed in my rant above. I think both Rick and David are making the same error I did in assuming the pre-pandemic bicycle market and business is the same, or relatively the same, as the post-pandemic bicycle market and business. The simple fact is that it is not, and it is dramatically different enough that the premise that one or more of the Big Four bike brands are crucial for retailer success is not longer valid.

12-27-23: “Banking crisis plays out at America’s smallest lenders.” The Wall Street Journal: “The failure to anticipate how quickly the Fed would raise interest rates has upended banks big and small this year. Three bigger ones collapsed this spring, but it is community banks that have been in a full-blown crisis. The losses on long-term bonds have unnerved depositors, investors and regulators who have questioned how bankers failed to properly protect themselves from interest-rate risks. Community banks typically focus on plain vanilla lending, making a lot of small-dollar loans to businesses and households that fuel local economies. They also usually stay close home, serving deeply loyal depositors but limiting their diversity and reach. In the wake of the pandemic, that business model has proven problematic. The banks were flooded with deposits. But loan growth had been slow, so banks turned to parking deposits in Treasuries, mortgage-backed securities and municipal bonds. While normally considered safe, the market value of those securities fell when interest rates climbed. That left many banks sitting on billions in paper losses, raising regulatory and investor concerns.” HPS Analysis: For many small to mid-sized businesses, including bike shops, the health and financial position of their local bank is crucial to their business viability, and particularly if they have a loan renewal or new loan request to finance their business going forward. HPS advises that if you have a maturity wall or other financial obligation coming due this year, talk to your loan officer as soon as possible and find out if (1) your business is eligible for a loan extension or (2) if your business is eligible for a loan, and (3) what terms are now being offered. Do this as early as possible so there is still time to explore options and/or alternatives.

12-28-23: “Why corporate bankruptcies were up in 2023 despite the improving economy.” National Public Radio: “Imagine taking a Bird scooter to Rite Aid before heading to a WeWork, where you read a news article on Vice and then buying a gift on Bed Bath & Beyond’s website. What is this, 2018? No, this is 2023 and you’ve just interacted with five of the hundreds of companies that filed for bankruptcy this year. Most of these companies have not completely collapsed, but they are limping along. While most major indicators like inflation finally cooling off and consumer confidence improving, show the economy turning the corner, corporate bankruptcies this year have moved in the opposite direction.” “According to S&P Global Intelligence, there were 591 corporate bankruptcies in 2023, one of the highest bankruptcy totals since 2011. Only 2020, with 639 corporate bankruptcies, witnessed more. ‘This is the market swing we’ve been expecting for some time,’ said Brook Gotberg, a professor at Brigham Young University who specializes in bankruptcy law. ‘Bankruptcies are cyclical,’ Gotberg said. ‘There are periods of prosperity. Companies borrow. Then a spike in interest rates, and companies can’t refinance, and bankruptcies suddenly surge,’ she said. Chapter 11 gives a little bit of time for a company to get their act together and fix their problems,’ said Edward Altman, a bankruptcy expert at New York University. Altman also studies what are known as ‘zombie companies,’ which are firms that do not make enough money to pay the interest on their debt. They are called zombies because despite not doing the very minimum on their debt obligations, they still exist, even if their fundamentals are essentially dead.” “The number of zombie companies, Altman’s research has shown, has grown from 1.5 percent in the 1990’s to nearly 10 percent today among publicly traded companies in the world’s 20 largest economies. ‘Corporate zombies are on the rise, and I predict it is going to get worse in 2024, when an enormous amount of corporate debt is coming due and companies are facing difficulties trying to refinance or pay off that debt,’ Altman said, pointing out that for many of the companies, insolvency will be their likely fate.” HPS Analysis:  We may be fixating on the whole Chapter 11 thing, but 591 corporate bankruptcies in 2023, and 639 in 2020, with 2011 being the next largest year, reinforces our concern for what may be coming. The zombie company thing is also a concern and their growth to approximately 10 percent of the publicly traded companies in the world’s 20 largest economies, and more specifically China. We will now have to wait and watch as Edward Altman predicts: “Corporate zombies are on the rise, and I predict it is going to get worse in 2024, when an enormous amount of corporate debt is coming due and companies are facing difficulties trying to refinance or pay off that debt.”

12-28-23: “Surveyed retailers say this past year was one of the worst ever when corrected for inflation.” Bicycle Retailer and Industry News: “Our industry is awash in bad news. As we publish this in December, and Christmas layaways already a distant memory, it’s certain that 2023 will turn out to be the worst sales year this century when corrected for inflation.” HPS Analysis: There are a whole bunch of statistics from the survey questions and quotes from bike shop owners that complete the bulk of this article by Ray Keener, but the headline and 3.5 lines above tell the tale. The industry association won’t have 12-month year-to-date 2023 data for a month or so, but it is readily apparent that there was no up-tick in the bike business during the last quarter of 2023 and isn’t likely to be an increase during the first quarter of 2024. Meanwhile the industry trade association, to our knowledge, continues to claim it doesn’t have the funds to help sponsor the consumer research NBDA has proposed to get answers, or at least guidance, from consumers as to why they stopped purchasing bicycles and related products and services and just as importantly, when and what they will start purchasing in the future. Maybe the specialty bicycle retail channels were the only retailers that report “… this past year was one of the worst ever when corrected for inflation” but we doubt it. The mass merchant, full-line sporting goods and D2C channels have had their problems with demand and sales, with the end result that it was not a good year for the total U.S. bicycle business. HPS has already gone on a rant about the 2024 American bicycle market being totally changed from the pre-pandemic market and as Pete Drucker warned, “The greatest danger in time of turbulence is not the turbulence – it is to act with yesterday’s logic.”

12-30-23: “As 2023’s abysmal bicycle and accessory sales year wraps up, hand-wringing and debate over the drivers behind the downturn, and the timing for a potential rebound are ricocheting around the cycling media.” THE OUTER LINE AIRmail Weekly Newsletter: “Everyone – from YouTube content creators to established bike industry analysts – seems to have an opinion about supply chain prioritization changes, demand forecasting mistakes, and the collapse of traditional product distribution channels like Wiggle. However, most agree that the market has been flooded by the late arrival of 2023 products (and even some from 2022) just as 2024 products are being delivered. Fire sales to dump dead stock, highlighted by online retailers purges of Wiggle’s Nukeproof and Vitus brands, historic discounts on major manufacturer brands, heartburn suffered by local bike shops, and even a 2-for-1 Kona deal (!?), seem likely to continue to suppress sales into 2024 as well.” HPS Analysis: THE OUTER LINE provides a hard-hitting and candid narrative that HPS feels is an accurate picture of 2023 from the enthusiast portion of the market. We recommend you add the AIRmail Weekly Newsletter to your reading list.

12-31-23: “The rules of the road are changing, but not fast enough for everyone” National Public Radio: “Traffic fatalities in the U.S. are up sharply since the beginning of the pandemic, especially for pedestrians and cyclists. That’s bringing attention to a previously obscure federal manual that’s sometimes called the Bible of road design. Since 1935, the Manual on Uniform Traffic Control Devices has set national standards for street signs and road design, with major revisions every decade or so. The latest version runs to more than 1,000 pages. And while the MUTCD doesn’t get much attention outside of transportation circles, it has a major impact.” “Safety advocates have been urging federal officials to make the manual friendlier to pedestrians and cyclists in the first major revisions to the document since 2009.” In the latest version, the bicycle section is twice as large as it was in the previous edition. HPS Analysis: We think this is a fitting close to this month’s The Micromobility Reporter because it is all about the all-capital letter SAFETY that the American bicycle industry and business is going to have to address, and soon, if it hopes to gain back and grow the number of butts that get on bicycles, including e-bikes. The League of American Bicyclists (LAB) is very aware of the Manual on Uniform Traffic Control Devices, o“r MUTCD, and why the latest version doesn’t go far enough in addressing motor vehicle speed to make a significant reduction in pedestrian and bicyclist motor vehicle accidents, injuries and fatalities. Make plans to attend the LAB National 2024 Bike Summit, March 19-21 at the Martin Luther King Jr. Memorial Library. Washington, D.C, to support and advance pedestrian and bicyclist SAFETY.

Contact Jay Townley:


You may have noticed that a lot of things that were supposed to happen this year didn’t! Looking at the big picture, we are weeks away from the end of the year, and neither the recession in the U.S., nor the post-pandemic rebound in the Chinese economy, have come to pass. Perhaps the strangest non-event, from the standpoint of the big picture, has been the widely anticipated wave of corporate defaults.

This doesn’t mean that a wave of corporate defaults isn’t coming in the new year. It only means they haven’t happened yet. Bank of America points out that the bankruptcy of WeWork happened “relatively quietly,” even though it was the largest U.S, company to go belly-up since the global financial crisis (GFC) of 2007-2008, while last week the Austrian property group Signa became Europe’s biggest post-GFC insolvency.

The slow-motion crumbling of Signa has taken its U.S. business units with it, including those in the bicycle business, and the D2C channel is now without Wiggle as one of multiple negative results. Some of you in the bike shop channel of trade may applaud the demise of Wiggle, but be careful what you wish for.

What troubles me is the data showing that the financial strength of multinational and domestic companies has been declining for a while, a trend that was only briefly interrupted by the attempted restructuring and stress-testing during the wake of the GFC in 2008.

The economists HPS has looked at have employed U.S. companies’ Altman Z-scores, a measure developed by New York University professor Edward Altman, to estimate how close to bankruptcy a public company is.

In the last century, more than 50 percent of all public companies looked strong and healthy using Altman’s metric. That number has now dropped below 10 percent for the first time.

Many companies in the bicycle industry, both multinationals and U.S. domestic, are privately owned, so the Altman measurement of their financial health cannot be measured. However, it is logical that private companies will generally follow public companies relative to financial health.

HPS readily concedes that the Altman system may be outdated in the new era where intangible assets make up a far greater share of company balance sheets and do have value, but the point is that U.S. company financial strength and credit quality have degraded since the GFC.

We also recognize that the very biggest multinational U.S. companies, often referred to as the “Magnificent Seven” big-tech stocks, don’t need to worry about default, and it’s the large number of smaller companies, including many in the bicycle industry, that worries us.

The single biggest factor helping to push off bankruptcies to date has been the success of company CFOs and financial managers in negotiating long-term debt when they had the chance during the protracted low-interest rates that followed the pandemic.

But even a generous low-interest rate is going to expire, and the debt is going to have to be renegotiated. Companies are balking at renewing debt at much higher rates, but if they have not reached a place of relative financial stability or outright strength based on cost-efficient, JIT inventory that customers want, delivered at disinflationary prices that allow a positive net profit at competitive consumer prices, they have no leverage.

The end result is that they will have to assume debt at higher rates that will force internal changes to generate even modest net profits by reducing expenses and forgoing growth.

Too gloomy for the holiday season? Could be. However, we would rather err on the side of caution and have our clients and the bicycle industry develop business plans that create an attitude of optimism about profitably surviving to be a part of the future of the new, emerging micromobility industry and market.

Happy Holidays to You and Yours!



11-3-23: “Maersk Cuts 3,500 Jobs, Reports Net Income Down 94.5%.Sourcing Journal: “Global container shipping titan A.P. Moller-Maersk is cutting its workforce by another 3,500 employees, with up to 2,500 of those in the coming months and the remaining 1,000 cuts extending into 2024. The cuts are part of a 10,000-employee layoff that started earlier this year to get headcount down to 100,000.” “The cuts at Maersk come as the shipping line announced third-quarter earnings. Sales in the period plummeted 46.9 percent to $12.1 billion from $22.8 billion a year ago. However, net income fell 94.5 percent to $489 million, down from the $8.8 billion generated in the year-ago period when ocean carriers were making record profits amid tight capacity and astronomical freight rates.” HPS Analysis: Ocean carriers have gone from feasting to famine in one year. Rates per 40-foot container peaked in early 2022, as did landed costs and pricing downstream to the consumer. In the 4th quarter of 2023, the question is whether the much lower ocean and domestic freight costs have been passed along in the reduced price of goods to retailers and consumers?

11-3-23: “Fox Factory to Buy Baseball-Softball Brand Marucci for $572 Million.” Bicycle Retailer and Industry News:  “Fox Factory is striking out in a new direction with the acquisition of Marucci Sports, a baseball and softball equipment brand. Marucci also owns Lizard Skins, which started as a bar tape company in Utah 30 years ago and has found new growth selling grip tape for bats and racquets.” “Fox also announced a sharp decline in sales in its bicycle-related businesses in the most recent quarter, which it blames on high inventory in the channel. Sales in the division were forecast to hit a ‘low water mark’ in the third quarter, but the results were $25 million lower than the company expected.” HPS Analysis: You have to read between the lines and also understand that there are two different “Fox” businesses. In this case, Fox Factory has experienced a decline in its bicycle-related businesses, and it is taking its cash to make an acquisition in the baseball and softball equipment business. What will happen to the financially challenged bicycle-related businesses remains to be seen.

11-3-23: “HLC Experiences Layoffs, Will Close Texas, Pennsylvania DC’s.” Bicycle Retailer and Industry News: “HLC had a round of layoffs that included some of its e-commerce business solutions team, while sources told BRAIN the South Carolina-based distributor will close its Texas and Pennsylvania distribution centers.” In September 2022, private equity firm MiddleGround Capital acquired HLC. HPS Analysis:  HPS ranks HLC as the number two independent bicycle business wholesaler to the IBD channel in North America. Number one, QBP, had previously announced layoffs. Now HLC, which was acquired by a venture capital firm in 2022 at the cresting of the pandemic-driven bicycle business surge, has announced layoffs and contraction in the face of unfavorable market conditions.   

11-4-23: “Honda Shows Off Its First Electric Bicycle.” electrek: “Honda is taking a page out of just about every other major automotive manufacturer’s playbook by debuting its first electric bicycle, the Honda e-MTB Concept. The bike was just shown off at the Japan Mobility Show in Tokyo, where it joined several other futuristic and/or brand-widening debuts from other leading Japanese motorcycle companies and automakers.” HPS Analysis: There is nothing unusual about a major automobile brand like Honda showing a “concept” e-bike at the fall mobility and automotive shows, never to be heard or seen again because they were just for show. What is unusual about the Honda e-MTB Concept is that the brand may actually be serious about going into production and entering the market. Rather than a design concept that can’t actually be produced, the e-MTB Concept is well-specified with name-brand, mainstream components, and could be produced by any number of quality OEMs for delivery into the 2024 marketplace. Distribution and marketing are just two of the remaining big issues, but Honda is well positioned if it decides to take the next steps.

11-6-23: “WeWork Files for Bankruptcy Amid Glut of Empty Offices.” The New York Times: “WeWork, the real estate company that offered start-ups and individuals sleek quarters to pursue their entrepreneurial dreams, filed for bankruptcy in the United States on November 6 after years of struggling to find its footing.” “WeWork listed 660 locations in 37 countries. Monday’s actions will not affect WeWork franchises outside the United States and Canada.” HPS Analysis: The bankruptcy of WeWork happened relatively quietly, even though it was the largest U.S. company to go bust since the global financial crisis. There was no major reaction by financial institutions or the government. Business and commerce just jogged along as if nothing much had gone down. To quote John Authers, a senior editor for markets and Bloomberg Opinion columnist, “Companies are going broke gradually, not suddenly. Like a U.S. recession or China’s post-Covid rebound, a wave of corporate defaults was anticipated this year but didn’t happen. That doesn’t mean it won’t.

11-6-23: “Analog Vs. Electric – Is This a Real Fight or a Discussion?” BikeMag: “Although we are on the same side of the fence regarding transportation, this discussion can still ruffle a lot of feathers. Can’t we all just get along? A fascinating debate has been growing over the last several years: the rhythmic hum of the analog bike chain versus the electrifying buzz of the e-bike revolution. As a member of the electric commuter squad who has spent his whole life as an analog rider, let’s pedal this discussion and dissect the merits of sticking to the classic pedal power or embracing the new wave of electrified cycling.” HPS Analysis: Bruno Long, the author, is pointing out an internal conflict that the bicycle industry in America doesn’t want to acknowledge:  the conflict between the hard-core analog bicycle aficionados, new e-bike riders, and the analog converts to e-bikes like the author. This most often manifests itself in communities where the hard-core analog bikers fight against allowing young e-bikers to ride on community bikeways and bike paths. The bicycling movement, with the goal of getting more butts on bikes, will be much better off if we can all just get along.

11-8-23: “Why Shein Isn’t Sweating De Minimis Reform.” Sourcing Journal: “Peter Pernot-Day is Head of Strategic Communication at Shein, and he was interviewed by Sourcing Journal. Shein has recently made significant investments in its U.S. supply chain despite the “…increasing weight of congressional scrutiny over Shein’s potential ties to forced labor in China’s Xinjiang Uyghur Autonomous Region, as well as its use of the de minimis provision in customs law to purportedly skirt duties, taxes or fees to the U.S. government, as well as any additional oversight.” “Our competitiveness comes from the fact that we have extremely low inventory waste, in many cases below one percent, and this almost sell-through-like nature of our business, Pernot-Day said. It’s technology enablement, it’s the use of machine learning, and very efficient production capabilities. If de minimis was to one day go away, Shein will still be able to compete on price, he said.” HPS Analysis: While Shein has been singled out as the single largest abuser of the de minimis exception, and its largest beneficiary, this article makes it clear that Shein has used its wealth and its ability to change its operations over time to arrive at a point where it is no longer dependent on the de minimis rule to underpin its U.S. business. While HPS agrees with the vast majority of what has been said about how bad de minimis is, and the very real safety hazard it has facilitated relative to lithium-ion batteries, it may be time to move the argument away from Shein and focus on other abusers, and excluding e-bikes and lithium-ion batteries from inclusion in treatment under the de minimis exception.

11-9-23: “Human Powered Solutions Chief Technology Officer Mike Fritz Has Been Accepted As A Member of UL Technical Committee 1487 on Battery Storage and Containment Standards.” Human Powered Solutions Press Release: “UL Standards & Engagement confirmed that the chair of the newly formed TC1487 approved Fritz’s membership application to the technical committee that will be developing and writing a test standard for lithium-ion battery storage and containment. HPS Analysis: Lithium-ion battery storage and containment has quickly grown as a vitally important subject for bike shops, wholesalers, and multiple occupancy buildings. New York City has recently promulgated a city ordinance that has established the laws and regulations that bike shops must now follow to store and charge e-bikes and lithium-ion batteries. The city of San Francisco is now considering a similar ordinance. Both and probably all future municipal ordinances provide cabinets to store and charge lithium-ion batteries for e-bikes and other micromobility devices. However, there are currently no safety standards that such cabinets must be tested and certified to a standard. That is what TC1487 has been convened to develop and publish. Mike Fritz, as a member, will represent the perspective of bike shops and the American bicycle industry.

11-9-23: “Rad Power Bikes Is Shutting Down Its New York Store In Latest Belt-tightening.” electrek: “Rad Power Bikes, a leading U.S.-based electric bicycle retailer, has just announced that it is closing its New York City retail store. The company didn’t give an exact date for the closure, but confirmed yesterday that the Brooklyn-based Rad store would be sunsetting. The retail location has operated for over a year and was part of Rad’s expansion into brick-and-mortar stores. That strategy sought to expand Rad’s U.S. retail presence to provide prospective customers with local shopping, servicing, and test ride opportunities. It was seen as a power move that smaller brands wouldn’t be able to match, helping Rad maintain an edge over the wave of low-cost yet lower-quality brands entering the U.S. market. Other Rad Power retail locations have opened in Seattle, Denver, Salt Lake City, St. Petersburg, Berkeley, Santa Barbara, Huntington Beach, and San Diego, according to GeekWire.” HPS Analysis: Rad Power Bikes is rated by electrek as the largest D2C e-bike retailer, with over 600,000 owner-riders since the pandemic started in March 2020. Rad has become a member of PeopleForBikes (PFB), and its founder and CEO served on the PFB board of directors. Over the last three years, Rad Power Bikes has been the subject of a wrongful death lawsuit and several other product liability-related litigations. The company, which at one time had a valuation over $1 billion, has recently announced layoffs and the shutting down of its European operations effective the end of this year. Belt tightening continues as the largest of the new wave of D2C e-bike retailers struggles, with the rest of the American bicycle business, with a slowing in consumer demand.

11-10-23: “Ringing in the Holiday Season with Consumer Sentiment At A 6-Month Low.” Marketplace: “Americans are still feeling pretty grumpy about the economy, according to the latest consumer survey from the University of Michigan. Sentiment dropped for the fourth straight month in November to a new six-month low, which could spell trouble for the all-important holiday shopping season. But as we’ve talked about before, consumers’ feelings and how they spend haven’t always lined up in this weird post-lockdown economy.” HPS Analysis: This is one of the great conundrums of both the economy and the bicycle market in the U.S.. The American consumer has continued to spend in the face of inflation, but not on bicycles. This is the subject of a number of articles and analyses this month, and hopefully will be the subject of a much-needed consumer research study that the NBDA has been soliciting brands and suppliers for sponsorship. So far HPS understands that the supply side has informed the NBDA that it cannot afford the sponsorship cost. Go figure. The NBDA is offering an answer to one of the most important questions the supply side needs to get to the future. Now the same companies that made a pile of cash during the great pandemic demand surge say they cannot afford it?

11-10-23: “Bike Shop Brands Are Finally Giving E-bike Riders What They Want: Throttles.” electrek: “To grossly oversimplify the e-bike market in the U.S., there are two types of electric bikes: those with hand throttles and those without. Traditionally higher-end bike shop brands have long eschewed throttle-enabled electric bikes, opting instead for pedal assist designs that only provide helping motor power when the rider also pedals. On the other hand, direct-to-consumer (D2C) e-bike companies have long embraced throttle e-bikes. As D2C brands scoop up more of the growing market, traditional bicycle brands are starting to take note.” HPS Analysis: This is one of the most interesting facts to come out of the NBDA 2021-2022 consumer research. A large percentage of e-bike riders, mostly women, said they wanted a throttle on their next e-bike. At least three of the Big Four have figured this out, but instead of adding throttles to their top-tier brands, they have added them to their secondary offerings. Trek now has a moped-style model with a throttle in its Electra line. Specialized has a moped-style model with a throttle in its Globe line. Giant has a moped-style model with a throttle in its Momentum line. HPS has also noted that the secondary brand offerings also are more affordably priced at around $2,000 MSRP, and are available either D2C or direct with store pick-up or delivery. This is also a very clear sign that the American bicycle market has shifted appreciably from the beginning of the pandemic to the end of 2023. It is no longer your father’s bike business.

11-10-23: “Round of Applause for Amazon, Who Is No Longer Selling Illegal E-Bike Batteries to New Yorkers. Finally.” Bicycling Magazine: “In a significant step forward for fire safety in New York City, Amazon is now at least partially in compliance with new city laws banning the sale of uncertified e-bike batteries. E-bike safety continues to be a serious issue in New York City, where thousands of delivery workers rely on the vehicles each day for work. Earlier this year, New York City passed Local Law 39, which makes it illegal for anyone to sell batteries to New Yorkers that don’t meet certain safety standards.” HPS Analysis: HPS agrees that this is a big step in the right direction. With this said, Amazon, Walmart, and all of the D2C retailers reaching into New York City and beyond need to more aggressively require their e-bike and lithium-ion products and their third-party sellers to test, certify and list to UL 2849 and UL 2271 ASAP.

11-13-23: “Vosper: Top-ten Bike Brands Have Shifted Significantly Since 2010.” Bicycle Retailer and Industry News: “Make no mistake: when it comes to bikes, we are still very much a dealer-driven industry. Absent pure D2C labels like Canyon, the enormous majority of both brand prestige and sales dollars for most bike companies comes down to the strength of their dealer networks.” “Gain more dealers over time, your brand strengthens. Lose them, and you weaken. All of which makes the size of a brand’s dealer network one good indicator of its overall health.” “Christopher Georger’s company, Georger Data Services, keeps track of those indicators.” HPS Analysis: Rick Vosper has done his usual great job of researching and explaining the status of the bike shop market segment in the U.S. Rick reached out to Georger Data Services. Between them they have discovered and disclosed that the “Top-ten bike brands have shifted significantly since 2010.” HPS agrees! However, we have real concern that the U.S. bicycle industry is no longer “dealer-driven.” There is no question that bike shops and specialty bicycle retailers are an important segment, but the rise of D2C and the e-bike product segment have created profound changes in the U.S. bicycle industry and market construct that defuse and remix market segments. While still very much a work in process, HPS hopes to bring more clarity to its findings in the coming months. Meanwhile – good job Rick.

11-13-23: “Bad Consumer Sentiment Is Not Surprising.” Financial Times Unhedged: “And sentiment is not getting any better even as the inflation rate grinds down and markets stage a recovery. The preliminary November reading for the University of Michigan consumer sentiment survey was 60.4, the lowest since May and consistent with the miserable sideways trend that extends back almost two years. At Unhedged we don’t find this surprising at all. Prices are up almost 20 percent since the pandemic began. The price of food is up 24 percent, energy 37 percent. That this should make the world feel malign and unpredictable is only natural. It doesn’t matter that wages have, on average, kept pace. If I get a raise, I earned it; it is not a mere symptom of a strong national output. If the price of food is spiraling upwards, that’s a bad economy, or the government’s fault. Nor does it matter that the rate of inflation has fallen. People don’t see the rate of change on the side of a gallon of milk. They see a price that is vastly different from what it once was. Even so, one might ask why sentiment has not improved even as arguably the most important price of all – petrol – has come down in the past six weeks. That can be explained by the fact that while consumer sentiment can fall quickly, it is slow to recover. It is like a personal reputation: built slowly, gone in an instant.” HPS Analysis: Sentiment and spending do not have to travel together. We will visit this inconsistency several times through this month’s articles because the fact that consumer sentiment about the economy is inconsistent with consumer spending is an important factor going forward.

11-13-23: New Partnership Aims to Encourage U.S. E-bike Manufacturing.” Bicycle Retailer and Industry News: “The co-founders of Propel Bikes and Vela Bikes announced November 13 the creation of Bloom, a vertical integration partner for light electric vehicles, with its first manufacturing location in the Motor City. Leading Bloom will be Propel’s Chris Nolte and Vela’s Justin Kosmides, who will collaborate with micromobility strategic partners to provide domestic contract manufacturing, assembly, delivery and servicing. Propel operates three e-bike retail stores, located in New York, Delaware and California. Vela is an e-bike brand that began in Brazil and relocated to Brooklyn, New York.” HPS Analysis: Bloom’s partnership with Newlab in Detroit’s Michigan Central innovation district will offer “flexible, specialized manufacturing capabilities and world-class prototyping equipment.” This is according to the founders. However, we caution that efficient and profitable domestic U.S. bicycle/e-bike manufacturing is not easy to scale up to consistently deliver quality products. All Bloom has to do is go down the block and visit Detroit Bicycle, or maybe they already have.

11-13-23: “Anger Is What’s Driving the U.S. Economy.” Bloomberg Opinion: “A deep-seated resentment about a ‘rigged’ system has been simmering since long before the pandemic and continues to affect consumer attitudes. As it turns out, the big economic story of 2023 is not a recession, as many had predicted. It’s the disconnect between consumer sentiment and behavior. Higher than normal inflation over the past two years is an obvious reason that people would be down about the economy. The puzzle is why people are still behaving as if their economic situation is good. Inflation-adjusted consumer spending is way up, not only above 2019 levels, but above the pre-pandemic trend. In fact, it’s largely the reason that U.S. economic growth is above expectations. And yet consumer sentiment is at levels typically seen only in a recession. All of which raises the question: What’s going on? HPS Analysis: Part of the question is why is the gap between consumer attitudes and action in spending so large. Betsey Stevenson, Ph.D., the author of this Bloomberg Opinion piece, is a professor of public policy and economics at the University of Michigan. She opines that “Much of the economic anger expressed in the polls may be less about current economic conditions and more about the economy the U.S. has built over the past 40 years: one of high and rising inequality, with greater economic fragility due to higher income volatility and a reduced safety net. A deep-seated anger about how the economy is ‘rigged’ has been simmering since long before the pandemic. This anger, mixed with the real pain of inflation and the frustrations borne out of cognitive bias and partisan politics, has created a toxic stew. The result is that, at a moment when America should be celebrating an economy that has outperformed both expectations and its international competition, people are gloomy and anxious. Like a dysfunctional family, we are heading into a holiday season overflowing not with joy but with resentment.”

11-13-23: “Three Economic Risks Facing America in 2024.” The Economist: “America’s economy in 2023 provided a lesson in humility for forecasters. Before the year began almost all predicted that it was for sluggish growth at best, and a recession at worst. The logic was simple: beating inflation was bound to be painful. Instead, America powered ahead at an annualized pace of roughly 2 percent growth, even as inflation receded. This has persuaded many analysts to ditch their gloom. Their median forecast heading into 2024 is that America will avert a recession and get price pressures under control. This would qualify as a ‘soft landing’ after the inflationary scare of recent years. But, given how wrong many were in 2023, it is worth asking if the same is possible in 2024. Three dangers stand out. First, there is always a delay between when central banks raise interest rates and when the economy feels the effects. In 2023 consumers and companies had savings that limited their need for financing. In 2024 they will have thinner buffers, thus increasing their exposure to higher rates. Second, even though the Federal Reserve may have finished raising interest rates, real rates will become progressively more restrictive as inflation falls. Finally, cracks are showing. Unemployment, though still low, is ticking up. Once an economic slowdown gets under way, it risks feeding off itself.” HPS Analysis: There are always risks. Lots of things were supposed to happen this year but didn’t. The strangest non-event from the HPS perspective has been the anticipated wave of company and corporate defaults that were anticipated during the last quarter of this year. That doesn’t mean they aren’t coming. The three dangers referenced above support our concern that companies and corporations, large and small in the global bicycle industry, are for the most part going broke gradually and will take their time, either solving their financial problems through downsizing, mergers, acquisition, refinancing, or not.

11-14-23: “Why Businesses Are Pulling Billions in Profits from China.” BBC News Business: “Foreign businesses have been pulling money out of China at a faster rate than they have been putting it in, official data shows. The country’s slowing economy, low interest rates, and a geopolitical tussle with the U.S., have sparked doubt about its economic potential. All eyes will be on a crucial meeting between Chinese leader Xi Jinping and U.S. President Joe Biden this week. But businesses appear to be already erring on the side of caution. HPS Analysis: Taiwanese business interests own or control over 70 percent of the Chinese export business to Western countries and markets. Given the geopolitical tensions between Taiwan and the PRC, Taiwanese companies started taking their profits and some of their investments out of China starting, HPS understands, in 2022. Obviously, much bigger global businesses are now engaged in “pulling billions in profits from China.” This is part of the reason President Xi Jinping agreed to meet with President Biden in San Francisco in November. However, there is no indication that making multinational businesses confident and comfortable investing and keeping profits in China didn’t come up, and has not yet been addressed despite the best efforts of the U.S. secretaries of Commerce and Treasury. As far as HPS knows, Taiwanese profits from the Chinese export bicycle business remain out of the PRC.

11-14-23: “Taller Cars and Trucks Are More Dangerous for Pedestrians, According to Crash Data.” National Public Radio News: “American cars and trucks keep getting bigger, and new research suggests that additional height comes at a steep cost to safety. Vehicles with higher front ends and blunt profiles are 45 percent more likely to cause fatalities in crashes with pedestrians than smaller cars and trucks, according to new research published November 14 by the Insurance Institute for Highway Safety.” HPS Analysis: While American cars, vans and pick-up trucks have become safer for drivers and passengers, they have become much more dangerous to pedestrians and bicycle riders. The League of American Bicyclists (LAB) has launched a campaign to put pressure on the National Highway Safety Administration (NHTSA) to write rules and regulations to protect and make it safer for pedestrians and bicyclists on American roads. The rest of the bicycle business and community needs to get on board with this LAB initiative as soon as possible, because HPS believes this is one of the issues that has contributed to the recent decline in consumer demand for bicycles.

11-14-23: “U.S. Inflation Eases as Lower Gas Prices Offset Rent Rise.” BBC News Business: “A drop in petrol prices last month helped to drive U.S. inflation to the lowest rate since July. Prices increased at a rate of 3.2 percent over the 12 months to October, the Labor Department said. That was down from 3.7 percent a month earlier. Housing costs continued to climb, but overall price pressures were milder than analysts had expected, suggesting the country’s fight against inflation may nearly be over. From September to October, the price index, which measures prices of a basket of items, was unchanged. Stripping out food and energy prices, which tend to fluctuate and mask wider trends, prices rose by 0.2 percent, easing from a month earlier.” HPS Analysis: Conventional wisdom says that gas prices at the pump are a good indicator of when consumers will buy bicycles. However, post-pandemic there has been a definite disconnect between the retail price of a gallon of gas and both the purchase of bicycles and consumer sentiment. Overall, the drop in gas prices has been highly noticeable across the country during the last quarter of the year, and it has fallen in line with the time-worn conventional wisdom that holds that consumers don’t rush to buy bicycles when gas prices go down.  

11-15-23: “U.K. Bike Industry Bodies Issue E-bike Battery Guidance as New Safety Bill is Proposed.” Bike Europe: “An increase in e-bike battery fires in the U.K. has prompted a call for new legislation to mandate the safety of e-bike batteries including third-party approval. In response, two cycling industry trade bodies in the U.K. have joined forces to issue guidance sheets for the industry and called for stricter enforcement of product safety for products supplied to the U.K.” HPS Analysis: The Bicycle Association (BAGB) and the Association of Cycle Traders (ACT), have issued a joint response to the legislation proposed by Electrical Safety First (ESF) on e-bike fire safety. The new legislative proposal would require immediate mandatory third-party approval of e-bikes and battery packs, among other aspects. The NBDA has brought this initiative in the U.K. to the attention of PeopleForBikes (PFB), and offered to cooperate in a joint industry campaign to issue e-bike battery guidance to the American public.

11-15-23: “Target Earnings Smash Expectations but Sales Fall as Consumers Delay Spending.” Chain Store Age CSA: “Target Corp. reported third-quarter earnings and sales that easily topped Street estimates as strength in beauty and other ‘frequency’ categories helped offset ongoing weakness in discretionary spending. On the company earnings call, chairman and CEO Brian Cornell said that while consumers are still spending, pressures like higher interest rates, the resumption of student loan repayments, increased credit card debt and reduced savings have left them with less discretionary income, forcing them to make trade-offs in their family budgets.” HPS Analysis:  Target is the second largest mass merchant retailer of bicycles in the U.S. Target’s net income “surged” 36 percent while sales decreased 4.3 percent and same-store sales fell 4.9 percent. Digital sales declined by 6 percent. The number of transactions was down 4.1 percent and the average transaction amount was down 0.8 percent. For the fourth quarter, Target expects same-store sales to decline to the mid-single-digit percentage range.

11-16-23: “Walmart Sinks on Cautious Consumer Outlook, Late-October Dip.” Bloomberg Markets: “Walmart Inc’s stock fell the most in more than a year as the retailer struck a concerned tone on the outlook for U.S. shoppers after signs of weakness in the second half of October. There was a ‘sharper falloff’ in sales during the last two weeks of the fiscal third quarter, which ended Oct. 31, said Chief Financial Officer John David Rainey. While the exact cause is hard to identify, higher interest rates, dwindling savings and student loan repayments are weighing on demand, he said. November is off to a good start so far, thanks in part to promotions and holiday shopping. We are more cautious on the consumer than we were 90 days ago at this time, Rainey said.” HPS Analysis: Walmart is the largest retailer of bicycles in the U.S.  While its stock fell in late October, Walmart’s U.S. sales rose 4.9 percent during the three months ending in late October, while Target and Home Depot reported sales declines.

11-16-23: “Five Things We Learned from the Biden-Xi Meeting.” BBC News: “While officials tried to keep expectations low before the meeting between Joe Biden and Xi Jinping on Wednesday, the encounter resulted in agreements on several key issues.” “Here are five things we learned from their California talks:”

  1. There was common ground on climate.
  2. They agreed to tackle fentanyl trafficking.
  3. After a tense period, military communication will resume.
  4. Talks will continue.
  5. Pandas as “envoys of friendship.”

HPS Analysis: The fact that there were five things from the Biden-Xi meeting that the BBC learned is significant in and of itself. However, easing restrictions on foreign investments and businesses in China was not discussed and was left unaddressed. We will have to wait and see if there is any progress in business relationships going forward. But for now, no change.

11-16-23: “National Bicycle Dealers Association Retailer Summit to be Held in Bentonville, Arkansas.” NBDA Press Release – Irvine, CA: “The National Bicycle Dealers Association (NBDA) is pleased to announce the second annual Retailer Summit, to be held in Bentonville, Arkansas on May 22 and 23, 2024. The event will take place at the 21C Museum Hotel Bentonville and is expected to attract retailers from across the country. The Summit ties in with the Bentonville Bike Fest, a three-day festival featuring over 120 brands in expo, races, and consumer events for a dynamic, multi-day industry gathering in the mountain biking capital of the world.” HPS Analysis: This is excellent news from the NBDA. The second annual Retailer Summit at the beginning of the 2024 high-selling season will bring together some of the best minds in the bicycle business to discuss the future and what it holds for the evolving American market and business. HPS is a sponsor and is looking forward to attending and actively participating in this landmark event.

11-16-23: “Walmart CEO Says Shoppers Could See Falling Prices in Coming Months.” Bloomberg: “The head of the world’s largest retailer just used the D word on an earnings call: deflation. ‘In the US, we may be managing through a period of deflation in the months to come,’ Walmart Inc. Chief Executive Officer Doug McMillon told analysts on an earnings call November 16. Granted, prices of Walmart’s U.S. groceries and general merchandise are higher than a year ago, and sharply up on a two-year basis. But McMillon said the increases are slowing and could even begin to reverse. “If that happens, Walmart shoppers could start to see deflation – or a decrease in prices – in dry groceries and consumables in the coming months,” he said. Dry groceries are items such as canned goods and pasta, while consumables refers to day-to-day products such as toothpaste. General merchandise prices “came down a little more aggressively in the last few weeks or months, he added.” HPS Analysis: This may be the most significant pronouncement this year. The CEO of the largest retailer in the U.S. has cautioned that the country is headed into deflation and a decrease in retail prices. Retail prices for bicycles have roughly doubled since the pandemic started, and over the four quarters of 2023, have been pounded down by discounts and price reductions to move a glut of excess inventory. Deflation doesn’t mean retail prices for bicycles and related products will not go back up as the market begins to stabilize, but it does mean that retail prices will be affected by declining costs in the supply chain, and retail prices will settle into new, lower MSRPs.

11-16-23: “Walking has Plummeted Across America.” AXIOS: “There’s been a staggering decline in the number of trips Americans take by putting one foot in front of the other, per a new report. Why it matters: Walking is good for us. That’s true both on an individual level (thanks to the many health benefits it confers) and in the big-picture climate change sense (given that it’s the OG form of zero-emissions travel). In every metro and state that StreetLight analyzed, walking trips declined over the three-year period by at least 20 percent per the report. The rate of decline slowed from -16 percent between 2019 and 2020 and -19 percent between 2020 and 2021, to -6 percent between 2021 and 2022. But that’s still a significant overall drop, from about 120 million trips in 2019 to fewer than 80 million in 2022. HPS Analysis: According to StreetLight, who conducted the study, “It’s clear that the pandemic had an “obvious impact” but beyond that, the group isn’t sure what’s keeping Americans off their feet. Active transportation – that is, walking and biking – accounted for just 10 percent of overall trips in 2022, down from 14 percent in 2019. Driving, however, is only four percent below 2019 levels, yet another sign that America is a country of car lovers. Walking is so fundamental. How can Americans not walk? But the data reveal that over the three years from 2020, 2021 and 2022, walking declined by at least 20 percent. Bicycle riding participation didn’t decline, but it was only up a couple of percentage points, and consumer purchases of new bicycles declined from 2021 to the present. This is yet another inconsistency in post-pandemic consumer behavior.

11-17-23: “Retailer Supply Chain Costs Receding.” The Wall Street Journal Logistics Report: “Lower supply chain costs for retailers may be reaching store shelves. Some merchants say inflation has cooled in many categories, and the WSJ’s Sarah Nassauer and Suzanne Kapner report that retail giant Walmart has seen prices for nonfood items come down more aggressively in recent weeks. Higher prices have helped prop up sales revenue for many retailers as consumers have pared some of their discretionary spending. Walmart saw its U.S. comparable-store sales rise 4.9 percent in the three months ended Oct. 27. Now, Walmart CEO Doug McMillion says the company would need to further reduce expenses as prices fall further. Cost savings are already coursing through shipping operations. Diesel prices are down nearly 34 cents a gallon in the past two months. The Cass Freight Index measure for freight rates in the U.S. domestic markets is down 15.2 percent since January and the Drewry World Container Index is off 39 percent since last December.” HPS Analysis: If higher prices have been propping up sales revenue at America’s bike shops, that is about to end. Lower supply chain costs are flowing through the channels of trade to product prices, reducing gross sales and net revenue as unit volume declines.

11-20-23: “National Bicycle Dealers Association Establishes Bicycle Industry Retailer & Supplier Best Practices Panel.” Bicycle Retailer and Industry News: “The National Bicycle Dealers Association (NBDA) is proud to announce the formation of the Bicycle Industry Retailer & Supplier Best Practices Panel, a collaborative effort bringing together top retailers and suppliers in the bicycle industry. This initiative aims to formulate best practices that contribute to the positive financial health of both suppliers and retailers on a global scale. Scheduled to convene for its inaugural meeting on January 16, 2024, the panel will address a wide array of critical topics integral to the success of the bicycle industry. Key areas of focus include supplier health, retailer health, D2C & e-commerce, human resources, ridership numbers, marketing cycling in general, and the impact of the change in consumer spending habits.” HPS Analysis: A forum to objectively discuss bicycle industry retailer and supplier business practices is long overdue and congratulations to the National Bicycle Dealers Association (NBDA) for launching the Bicycle Industry Retailer & Supplier Best Practices Panel. HPS is looking forward to participating in the inaugural virtual meeting of the Panel on January 16, 2024.

11-20-23: “Taiwan’s Top 3 Face Further Sales and Profit Slumps in Q3 Results.” Bike europe/Jo Beckindorff: “Taiwan’s top three bicycle and e-bike producers, Giant Manufacturing Company Limited (Giant Group), Merida Industry Co., Ltd. and Ideal Bike Corporation, have presented their Q3 financial results. All three are mainly affected by the sales and profit slumps oF the valuable western market. In the long term, and due to the rising awareness of bicycles and e-bikes as an urban mobility solution, the trio forecasts a bright future. However, at the present time there are some hurdles to face, primarily the continued high inventory level within all local sales networks.” HPS Analysis: All of Taiwan’s “top 3” are public corporations traded on the Taipei stock exchange. Giant Group net profit 3-months year to date was 44.6 percent lower than the same period a year ago, Merida’s pre-tax profit was 25.5 percent lower, and Ideal posted a net loss for the period of €4.25 million. All three pointed to continued high inventory levels within all local sales networks, along with reduced demand, for-profit slumps. Without having higher retail prices to prop up sales and facing higher interest rates on borrowings, the Taiwanese “Top 3” faces a challenging 2024.

11-21-23: “The Two Biggest Problems With Electric Bikes Aren’t Even About E-bikes.” electrek: “The rise of electric bicycles is leading to a critical shift in urban transportation, bringing with it the potential for cleaner cities, reduced traffic congestion, and a boost to riders’ physical and mental health. However, there are still two significant barriers preventing many from adopting this green mode of transportation. The strange thing though is that neither of the two biggest problems with e-bikes are even about e-bikes themselves.” The two biggest problems are identified as:

  • The deadly risk of cycling on roads
  • The lurking threat of bike theft

HPS Analysis: HPS has referenced the increasing road accident, injury and fatality data as one of the reasons we believe demand for new bicycles has declined during 2023 and will continue into 2024. Last month we mentioned safety as a key issue that the American bicycle industry must address across the board and as quickly as possible in order to win back consumer confidence in bicycling as a solution.

11-22-23: “Harley-Davidson’s E-bike Company Sold Off in Surprise Deal, Planning U.S. Production.” electrek: “Serial 1, the premium electric bicycle brand originally started by Harley-Davidson, announced today that it has been acquired by a Florida-based manufacturer of light electric vehicles. The shake-up lays the groundwork for Serial 1 e-bikes to be produced in the US, according to a joint statement. HPS Analysis: Reshoring Serial 1 e-bike production in the U.S. is a good thing if it can be accomplished in a consistent and profitable way. The bigger surprise is Harley-Davidson divesting of its e-bike business now, at the end of 2023. We don’t know the details of the purchase price or the terms of the deal, or what has been committed to related to manufacturing, distribution or marketing, in a less-than-robust market.

11-27-23: “Retailers Lean on Tight Inventories.” The Wall Street Journal Logistics Report: “Retailers believe they’ve finally got inventories in the right place after several years of pandemic-driven volatility sent stockpiles and profit margins on a roller-coaster. Merchants this year are heading into their crucial holiday sales period with warehouses no longer overstuffed with mismatched merchandise, and store shelves lined up for steady seasonal demand. The WSJ Logistics Report’s Liz Young writes retailers ranging from Walmart and Target to more specialized sellers like Best Buy and Dick’s Sporting Goods, have pared back their inventories while trying to focus their supply chains more tightly on products that shoppers want. Forecasting fast-changing consumer demand was a major challenge for retailers during the pandemic. This year’s fourth quarter marks a test of new forecasting efforts, and of a disciplined focus on profit margins rather than top-line revenue. Supply-chain flexibility is a major focus this year, including an effort to keep inventory “fresh and clean.”HPS Analysis: We have reported the recent Q3 revenue and earnings from America’s top retailers and most have acknowledged their getting inventories under control and streamlined to better meet consumer demand during the critical year-end shopping season. New-found profitability is based in large part on new forecasting systems that rely more on AI than previous systems. HPS is concerned that little or nothing has been heard about new forecasting, ordering or inventory management systems within the American bicycle business, and we are concerned that the required investments are not being made, or will be made too late to help make necessary corrections.

12-3-23: “The Impact of Healing Supply Chains Is Reaching Deeper Into Consumer Markets.” The Wall Street Journal Logistics Report: “After a historic run-up in inflation, Americans are now starting to see deflation in some goods categories, and economists say goods prices likely have further to fall. The WSJ’s David Harrison reports that prices for durable goods have fallen on an annual basis for five straight months, and were down 2.6 percent in October from their peak in September 2022. That’s a sharp reversal from last year, when product shortages, snarled supply chains and surging consumer demand sent prices soaring. Durable goods inflation peaked at a 47-year high of 10.7 percent in February 2022. One report shows that supply disruptions such as shipping backups accounted for roughly half of the run-up in inflation in 2021 and 2022. The White House estimates that better-functioning supply chains accentuated by weaker demand account for roughly 80 percent of the fall in inflation since 2022.” HPS Analysis: There is the D word again, deflation, and it’s happening in some durable goods and in a growing number of supply chains. The chart below tracks the durable goods pricing against services and the personal expenditures price index from 2016 to the present. Bicycle retail prices, like Icarus, may have flown too close to the sun, and now they have fallen back to earth.


“We Are in the Eye of a Hurricane!” HPS Comment: The conflicts and loss of life reported in October 2023 have pushed geopolitical and economic news and reports of consumer behavior to the corners of the news cycle and for good reason. HPS Analysis: The industry trade press has, from our perspective, been split, with the European trade publications doing more hard-edged and in-depth reporting about the press releases announcing third-quarter revenue and earnings, financial difficulties, including excess inventory and bankruptcies, compared to the U.S. trade press. This includes the recent SHIFT23 event held in Bentonville, Arkansas, that didn’t spend any time, with the possible exception of the insightful presentation by Raymond Gense, Pon Holdings director of future technology, discussing the very real business and financial challenges the American bicycle business is facing today or, more importantly, what the industry can do collectively to improve the future. October was like being in the eye of a hurricane. After being buffeted by high winds and rain there is this worrisome calm that will be followed by another wave of high winds and a winter storm.

October 1: “E-bike Popularity is Surging, Creating Regulatory Challenges on U.S. Roads.” PBS NEWS: “The popularity of bikes with electric motors has soared recently, with U.S. sales topping $1.3 billion in 2022. But while e-bikes are being hailed as a more accessible mode of transportation, their introduction hasn’t been the smoothest ride. Ali Rogin speaks with Molly Hurford, who writes about e-bikes for Bicycling magazine and co-hosts the Consummate Athlete podcast.” HPS Analysis: We urge you to access and read this complete interview with Molly Hurford. What you will find is a still-developing e-bike safety and regulatory landscape that is multifaceted and growing more complex by the day. In addition to the New York City lithium-ion battery fire issue, the city mandate of UL 2849/2271 voluntary third-party standards, and U.S. CPSC development of mandatory federal product safety standards, there is a League of American Bicyclists (LAB)-led safety initiative aimed at the National Highway Traffic Administration (NHTSA), along with a new Coalition For Cyclist Safety (C4CS) advocating for V2X technology in North America, and demands for user requirements and enforcement to address e-bikes on both public roads and off-road facilities and trails. If you are keeping score, that’s a total of five major e-bike safety issues and initiatives that require urgent and immediate response.

October 5: “America Has a Bankruptcy Problem.” Bloomberg: “Rapid rate hikes have helped fuel an increase in company failures this year, and there’s probably more pain to come.” “The surge in U.S. interest rates over the past year has come at a historic pace, and some industries are having a hard time keeping up. Bankruptcies are rising at the fastest rate since the pandemic, but companies are still taking on more debt, possibly a sign the Fed’s work may not be done.” HPS Analysis:  All the signs over the last month indicate more bankruptcy filings over the coming months. Keep in mind that there is actually a growing and financially rewarding business being done in buying brand name companies and individual brands out of bankruptcy protection, pumping capital into them, and taking them back to the market. During the pandemic, big money in the form of venture capital and private equity bought into the bicycle business, and their financial requirements and pressure from their stakeholders will be a factor in what companies and brands are taken into Chapter 11 and 7 over the next two quarters.

October 6: “China Is Becoming a No-Go Zone for Executives.” Wall Street Journal: “Foreigners are thinking twice about business trips to the country after Beijing has barred some executives from leaving.” “Foreign executives are scared to go to China. Their main concern: they might not be allowed to leave. Beijing’s tough treatment of foreign companies this year, and its use of exit bans targeting bankers and executives, has intensified concerns about business travel to mainland China. Some companies are canceling or postponing trips. Others are maintaining travel plans but adding new safeguards, including telling staff they can enter the country in groups but not alone.” HPS Analysis: Within the supply chain there is no doubt that China remains the largest single source of complete bicycles, including e-bikes, and for the majority of components and raw materials required for fabrication and manufacturing, and will be for some time to come. Frequent round-trip travel to China from North America, Europe, and Taiwan is very important to the current supply chain process, as was evident during both the pandemic and post-pandemic. Until the bicycle business substantially changes the supply chain process, managers and executives are going to have to continue to travel to China, even as the difficulties and risks increase. The early adopters who innovate effective changes in the supply chain process will mitigate this risk and also gain an advantage over the competition.

October 8: Big-Company Bankruptcies Hang Over Economy.” Wall Street Journal: “Businesses that loaded up on debt when interest rates were lower now face a growing risk of failure. Business bankruptcies are rising briskly. What’s even more worrisome: many of the troubled companies are large. Corporate behemoths including SVB Financial, Bed Bath & Beyond, and Yellow sought Chapter 11 bankruptcy protection this year. The filers blamed elevated inflation, higher interest rates, waning government aid, and lingering supply-chain disruptions. More corporate filings are likely on the way as high interest rates push big companies over the edge.” HPS Analysis: Pre-pandemic the bicycle business was not populated by many big companies. As the pandemic created the surge in demand for all things bicycle between 2020 and 2022, venture capital and private equity stretched out and rolled up or consolidated brands into big companies like Vista Outdoor and Signa Sports United, whose current financial problems will definitely have an impact on the bicycle business going forward. 

October 9: “Retail Needs Promotions to Survive ‘Picky’ Consumers and Weak Sales.” Sourcing Journal: “Growth in the global retail and apparel sectors stalled, but the industry should see modest growth in 2024, according to credit analysts at ratings firm Moody’s Investors Service. They also expect that U.S. retailers will continue to face margin pressures as weak sales outpace inventory cutbacks.” “The analysts expect U.S. retailers to experience continued margin pressure over the next six to nine months as they readjust inventory levels to reflect weakening retail sales. Most retailers in the discretionary space, apparel and footwear retailers in particular, overestimated demand and were caught off guard by how picky consumers have become in their spending as they grappled with a higher cost of living. As consumers dial back on spending, retailers will need to ramp up promotions to clear out inventory. That’s because even though inventories are lower than their peak in August 2022, they are still higher than May 2022. Credit analysts believe retail inventory levels will need to fall further to align with weaker sales. They expect promotions to increase over the next six to nine months as retail sales falter.” HPS Analysis: Bike shops are for the most part truly small retailers, and need to be very aware of their financial situation to understand and gauge if their sales are truly weak, moderate, or good before developing and fielding a merchandising and sales plan. Yes – a plan. Carefully consider your expenses, cash on-hand and realistic sales projections. What is your current inventory and what is on order and due to be received? What is your turnover rate and is there inventory that you need to place on sale and turn into cash, and at what price and margin? What can you do as a retailer to make the inventory you have to sell appealing to “picky” consumers, and can you afford the promotion to make it happen? Make a plan, write it down, revisit your plan with financial information and results weekly if necessary, and don’t hesitate to cut costs, including staff, if that’s what it is going to take for your business to survive.

October 9: “Owning a Car Has Never Been This Expensive.” The New York Times: “Pandemic disruptions drove the expenses associated with owning a car through the roof, creating a financial burden that many drivers didn’t bargain for. For millions of Americans, cars are a necessity to get to work, to carry children around, and to buy food. In recent memory, they’ve also never been as expensive to own. According to AAA, the average annual cost in the first five years of new-car ownership rose to $12,182 this year, from $10,728 last year, reflecting increased purchase prices, maintenance costs, and finance charges. That’s 16 percent of the median household income, before taxes. (The figure includes depreciation.)” HPS Analysis: This is very good news if you can use it effectively. Do some research and find out if your municipality or state have some form of rebate program for micromobility purchases, and promote this financial assistance for the purchase of a bicycle or e-bike to replace an automobile. Find out what kind of financing you can offer to your customers and promote on your website and in your store newsletter, and make sure you and your sales staff have all the details to present with every presentation you give along with hand-outs and takeaway materials. Schedule webinars and in-store education sessions for individuals and families about the household economics of owning and operating a bicycle or e-bike compared to a car.

 October 9: “Shipping Rates Sinking.” The Wall Street Journal Logistics Report: “Ocean freight carriers have little to show from an anemic peak season that has seen container shipping rates plunge from pandemic highs. Daily market prices to move cargo from Asia to the U.S. and Europe in September were down as much as 90 percent from early 2022, extending a downturn that began in the second half of last year. The WSJ’s Costas Paris reports the steep decline is leading carriers to cancel sailings in bigger numbers during a period when operators and their customers are usually rushing to push goods through supply chains. Capacity cuts helped pump up rates a bit in August, but prices have faded more recently and more cancellations are planned this month following China’s Golden Week holiday. There is little relief on the horizon. Wholesale inventories have been ticking down in recent months but are well above pre-pandemic levels, a sign that goods orders may remain depressed for some time.” HPS Analysis: The chart below is from The Wall Street Journal Logistics Report, November 6, 2023. It shows the detail from January 2022 through YTD November 2023:

HPS estimates, depending on how they are packed, that 300 standard bikes and 200 e-bikes are loaded in a standard 40-foot ocean freight shipping container. The container price to the importer has dropped from approximately $53 each to $6 each for a standard bike and $80 each to $10 each for e-bikes. That is an 87 percent decline in ocean freight shipping costs to the importer of record from January 2022 to November 2023.

October 16: “Vosper: Nearly Half of U.S. Bike Shops Don’t Carry Any of the Big Four Brands.” Bicycle Retailer and Industry News: “According to September data from Georger Data Service, some 45 percent of the approximately 7,000 U.S. bike shops do not carry any of the industry’s four biggest brands, Trek, Specialized, Giant or the Pon Group (Cannondale, Santa Cruz, Cervelo, et al). It’s an interesting fact, and one that calls into question the supposed hegemony of the group I like to call the Quadrumvirate. After all, if they’re so dominant why don’t they have greater market penetration, which is to say why aren’t those four brands in a higher percentage of dealers, a combined 70-80 percent, as is typical in other mature industries?” HPS Analysis: Rick Vosper has done his usual excellent job of researching and explaining the current state of the bike shop channel of trade as specifically relates to what percentage of bike shops have signed Authorized Dealer Agreements with the Big Four brands, and what percentage have not. Rick asks a great question, and HPS opines that the American bicycle business has entered a new era of competition that spreads the channels of distribution out to include a viable and expanding D2C channel, as well as a rapidly growing e-bike segment that has multiple sub-segments that are new to the overall market. E-bike specialty retailers like Pedego are not remotely interested in the products provided by the Quadrumvirate. While the American bicycle business is still in a state of perfect competition, HPS doesn’t think it will be in quite the same place after the current shakeout ends. What do our readers think?

October 17: “E-Scooter and E-Bike Injuries Soar: 2022 Injuries Increased Nearly 21 Percent.” United States Consumer Product Safety Commission: “As e-scooters, hoverboards, and e-bikes become more popular for personal transportation and leisure activities, emergency departments are treating an increase in injuries nationwide. A new report, Micromobility Products – Related Deaths, Injuries, and Hazard Patterns, released October 17 by the U.S. Consumer Product Safety Commission (CPSC), shows that injuries associated with all micromobility devices increased nearly 21 percent in 2022 from 2021. Micromobility-related injuries have trended upward since 2017, increasing an estimated average 23 percent annually.” “CPSC is also aware of 233 deaths associated with micromobility devices from 2017 through 2022, although reporting is ongoing and incomplete.” HPS Analysis: This is the CPSC press release that Commissioner Mary Boyle referenced during her Q&A session at the SHIFT23 event October 17. HPS agrees with the other analysts who see this as further cause for the U.S. Consumer Product Safety Commission moving ahead with an adjunct mandatory regulation of e-bikes and lithium-ion batteries, as well as a rewrite of the current 16 CRF 1512. However, Commissioner Boyle made it clear that at best the regulatory process with take a minimum of two years before there will be new and additional mandatory federal standards for bicycles. Given the multiple safety initiatives surrounding e-bike and lithium-ion batteries, HPS supports the NBDA in crafting model voluntary regulations for publication by its Safety & Standards Industry Panel to coalesce support for the combination of UL 2849 / UL 2271, and harmonization with the European standards, including ISO 4210.

October 19: “A Financial Crisis in China Is No Longer Unthinkable.” Wall Street Journal: “Extensive fiscal and financial imbalances have taken China, its leadership, and the world into uncharted territory. The world’s second-largest economy has a deflating property bubble, local governments struggling to pay their debts, and a banking system heavily exposed to both. Anywhere else these factors would be seen as precursors of a financial crisis. But not in China, the conventional wisdom goes, because its debts are owed to domestic rather than foreign investors, the government already stands behind much of the financial system, and capable technocrats are on top of things. Conventional wisdom might be dangerously out of date.” HPS Analysis: Bicycle industry multinationals are financially dependent on sales in North America, Europe, and China. Giant Group, as an example, in its Q3 shareholder report called out strong sales in the Chinese market as the reason its gross sales were just down a single digit. The Chinese economy and expanding consumer market have been attractive to multinationals like Apple, Giant, Trek, Shimano, and Specialized because it has been considered “safe” because it is managed and controlled by the state. As the article warns: “Conventional wisdom might be dangerously out of date.”

October 19: “The Price of Money Is Going Up, and It’s Not Because of the Fed.” Bloomberg: “What’s the most important price in the global economy? The price of a barrel of crude? A microchip? Or maybe a Big Mac? More important than any of these is the price of money. For more than three decades, it was falling. Now it’s going up. Take the yield on 10-year U.S. Treasury notes, which has surged toward 5 percent in recent weeks, pulling up the cost of mortgages and corporate loans in its wake. At first, it seemed as if the market was reacting to another blistering jobs report. But when what looked like a blip turned into a bond market rout, an alternative explanation emerged: investors are finally coming to grips with the realization that something fundamental has changed. Money is going to stay expensive for a good long while, and not just because it’s taking longer than expected for the Federal Reserve to wrestle down inflation.” HPS Analysis: We urge our readers to access and read this article. The time of cheap money is gone, and we have entered what HPS believes is an extended period of high interest rates, meaning the cost of money, in particular business loans, will be correspondingly high. Lean and just-in-time inventory management, as well as the productivity of employees and revenue per square foot of retail space, will become essential key performance indicators (KPI’s). Importers and domestic manufacturers will also be challenged to become more efficient and manage supply chains for reliability and maximum, profitable, turnover.

October 20: “Signa Closes North American Offices as it Prepares for Insolvency Filings.” Bicycle Retailer and Industry News: “Signa Sports United has closed its U.S. offices, which included operation for the Vitus and Nukeproof bike brands and the Hotlines wholesale distribution business, all based in Park City. Signa, headquartered in Berlin, announced earlier this week that it had lost access to a 150 million euro ($159 million) equity commitment from its parent company. The company has reported serious liquidity challenges and had begun the process of delisting from the New York Stock Exchange. It announced Friday that it is preparing to make insolvency filings for its various subsidiaries in the coming days.” HPS Analysis: We still don’t know all the details, so have limited knowledge to evaluate what happened here, and why this big company has imploded and is in the process of crumbling. We do know that “inventory” is mentioned frequently as is the decline in consumer demand. This article points out that the American management was taken by surprise, given they had achieved the sales and revenue objectives given to them. HPS is concerned that this is not an isolated case and that more financial failures are going to emerge as the winter begins.

October 20: “Survey: “Brand Loyalty Decreases as Consumers Look for Ways to Save.” Chain Store Age CSA: “With prices remaining high, brand loyalty is continuing to decrease among American consumers. The U.S. experienced a 14 percent decline in customer loyalty, or those who are loyal to one brand or more, as it dropped from 79 percent in 2022 to 68 percent in 2023, according to the 2023 Customer Loyalty Index from Emarsys among the five loyalty types defined by index. For the third year in a row, nearly half (49 percent) of consumers fall under incentivized loyalty. However, incentivized loyalty has plummeted by 36 percent from 76 percent to 49 percent. Emarsys says that incentivized loyalty depends on the suspension of normal prices. While nearly half (49 percent) of Americans expected regular discounts, loyalty points, and incentives, nearly six-in-10 (59 percent) consumers would also typically switch products if a cheaper option were available, making cost the top reason a shopper would leave a brand.” HPS Analysis: Conventional wisdom holds that regular bicyclists have been “loyal” through thick and thin. However, the current cohorts of American bicyclists have never experienced anything like the pandemic or the post-pandemic economies, and attendant changes in the channels of trade and the ecosystem. Yes, there was D2C pre-pandemic, but nothing like what developed and grew during the pandemic and emerged as what HPS is calling a “new bicycle-business” post-pandemic, where brand loyalty has not only decreased, but is a totally foreign concept to a new wave of younger bicyclists.

October 22: “Welcome to the Age of the Hermit Consumer.The Economist: “In some ways COVID-19 was a blip. After soaring in 2020, unemployment across the rich world quickly dropped to pre-pandemic lows. Countries re-attained their pre-COVID GDP in short order. And yet, more than two years after lockdowns were lifted, at least one change is enduring: consumer habits across the rich world have shifted decisively, and perhaps permanently. Welcome to the age of the hermit. Before COVID, the share of consumer spending devoted to services was rising steadily. As societies became richer, they sought more luxury experiences, health care and financial planning. Then in 2020, spending on services, from hotel stays to haircuts, collapsed. With people spending more time at home, demand for goods jumped, with a rush for computer equipment and exercise bikes. Three years on, the share of spending devoted to services remains below its pre-COVID level. Relative to its pre-COVID trend, the decline is sharper still. Rich-world consumers are spending around $600 a year less on services than you might have expected in 2019. In particular, people are less interested in leisure activities that take place outside the home, including hospitality and recreation. Money is being redirected to goods, ranging from durables like chairs and fridges, to such as clothes, food and wind.” “In countries that spent less time in lockdowns, hermit habits have not become ingrained. Elsewhere, though, the behavior looks pathological.” HPS Analysis: The Economist may have gotten this right. This article points the way to one of the reasons bike shop consumer foot traffic fell off post-COVID. Keep in mind this is not the only reason, but it does peel back the change in behavior to hunker down and cocoon to stay safe and isolated during the pandemic, and one of the permanent to semi-permanent after affects. HPS will work with the NBDA and Sports Insights to validate the “hermit consumer” and try to craft proactive merchandising to make the outdoor activity of bicycling more appealing. Your thoughts are most welcome.

October 23: “Treasury 10-Year Yield Breaches 5 Percent for First Time Since 2007.” Bloomberg: “The 10-year Treasury yield crossed 5 percent for the first time in 16 years, propelled by expectations the Federal Reserve will maintain elevated interest rates and that the government will further boost bond sales to cover widening deficits. The yield rose as much as 11 basis points to 5.02 percent, the highest since 2007. Fed Chair Jerome Powell suggested last week that central bankers are inclined to hold rates steady at their November meeting, but remain open to hiking again if a resilient economy fans inflation risks.” HPS Analysis: This may be old news to some of you. If you are holding 10-year yield treasury bonds in your investment portfolio this is good news. If you are shopping for a loan from a bank or savings and loan, it means interest rates are going up, as previous articles have explained. Note that the Chinese government is currently selling off some of the U.S. treasury bonds it has purchased to “cash-in” so to speak and take advantage of this windfall.

October 24: “Xi Makes Unprecedented Central Bank Visit in Sign of Focus on Economy.” Bloomberg: “Xi Jinping made his first known visit to China’s central bank since he became president a decade ago, according to people familiar with the matter, underscoring the government’s increased focus on shoring up the economy and financial markets. Xi, along with Vice Premier He Lifeng and other government officials, visited the People’s Bank of China and the State Administration of Foreign Exchange in Beijing on October 24, said the people, asking not to be identified discussing private information.” HPS Analysis: Not sure when was the last time a U.S. president visited the Federal Reserve, but for China watchers this visit by the president of China to the central bank was a big deal, and a sign that Xi is paying personal attention to the financial condition of the domestic economy. What impact, if any, this visit will have on consumer and domestic business confidence remains to be seen.

October 24: “Shimano Bike-Related Sales Down 25 Percent in First Three Quarters.” Bicycle Retailer and Industry News: “Shimano is reporting that sales in bike-related products were down 24.8 percent in the first three quarters of its fiscal year, compared to the same period last year. The company’s operating income in its bike business was down 48.8 percent over the same period. The company reported that a ‘free inspection program,’ an apparent reference to the global inspection and replacement program involving millions of Hollowtech cranksets, had already cost it 17 billion yen ($114 million) in the third quarter, which Shimano categorized as an extraordinary loss. It also included a 144 million yen ($961,000) non-operating expense for a voluntary recall.” HPS Analysis: It is a little difficult to sort out the dense Shimano quarterly financial statements, but what is clear is a decline in sales revenue and profitability year-to-date Q3 2023, some of which is attributed to the costs of an extensive recall. Given the rather limited number of public companies in the global bicycle business, HPS thinks it is fair to generalize that what’s happening with Shimano is probably happening to the rest of the global bicycle business. 

October 25: “Navigating the Blaze: The Imperative of UL-Certified Batteries in the World of Micromobility.” BIKE MAG: “In the bustling streets of New York City, a silent menace looms within the sleek frames of electric bikes. The quest for affordable alternatives has inadvertently given rise to a perilous trend, cheap, uncertified electric bike batteries that pose a significant threat, leading to fires that endanger lives and property. In response, New York City has taken a bold step by banning electric batteries that lack UL certification, aiming to curb the rising tide of unsafe micromobility incidents. The term ‘UL-certified’ stands as a beacon of safety in the electric battery realm. UL, or Underwriters Laboratories, is a global safety certification company that rigorously tests products to ensure they meet stringent safety standards.” HPS Analysis: This is one of the best articles about the e-bike-related lithium-ion battery fires reported in New York City written and published by the American cycling consumer press. Although much maligned without either justification or true cause, UL is, as this article states: “… a global safety certification company that rigorously tests products to ensure they meet stringent safety standards.” The City of New York and the U.S. Consumer Product Safety Commission both accept and advocate for testing and compliance to UL 2849 and UL 2271, and HPS urges the whole of the American bicycle business to give its complete support as well.

October 25: “NYC Council focusing on Having Delivery Apps Provide Workers Certified E-bikes, Batteries.” Bicycle Retailer and Industry News: “The City Council met with the city’s Committee on Consumer Worker Protection on Monday to discuss a bill that would require third-party delivery app companies like DoorDash to provide workers access to certified e-bikes and batteries, and another that would require workers taking an e-bike safety course developed by the Department of Transportation. A new bill also was introduced Monday aimed at curbing the rising lithium-ion fires, requiring e-bike or e-scooter businesses to obtain a license to operate in the city.” HPS Analysis: While New York City requires e-bike certification to UL 2849 and lithium-ion battery certification to UL 2271, there is still an unknown but substantial number of low-quality, non-complying e-bikes, and an even larger number of potentially hazardous lithium-ion batteries in use in the city. Fires are continuing to damage property, injure people of all ages, and take lives. It is this safety problem the NY City Council is doing its best to address with its latest round of legislative proposals. The NBDA and HPS are actively engaged in trying to assist in advancing the best legislative requirements possible, while still allowing retailers to stock, sell, and service e-bikes and lithium-ion batteries.

October 26: “Retailers Face Unhappy Returns.” The Wall Street Journal Logistics Report: “Those new fees charging consumers for returning online purchases might be too effective. Logistics company Happy Returns found that about half of the companies that it surveyed say the tactic has worked as intended by slowing the flow of goods coming back into their warehouses. The WSJ Logistics Report’s Liz Young writes that a third of the companies also say they have lost customers since they began charging consumers fees to return items that they purchased online. That suggests merchants are seeing a backlash, as their cut reverse logistics expenses also hit them with a cost in the checkout line. The question surrounding returns is crucial for retailers heading into Christmas since the seasonal surge in sales usually leads to a burst in returns, effectively extending the peak parcel shipping period into January. Retailers last year expected nearly 18 percent of merchandise sold during the holidays to be returned.” HPS Analysis: This is an opportunity. The Big D2C retailers like Amazon have told consumers that they will be charging for returns that until most recently have been free. Returns are a growing problem that the Big D2C retailers are finding both difficult and growingly expensive to deal with. Their answer is to charge the consumer for returns. Consumers do pay attention, and they are pushing back by not purchasing and looking elsewhere. Bike shops don’t have to change their return policies. All they have to do is let consumers know what their return policies are, keeping in mind it is an opportunity to get them back in your store and sell them something else.

October 29: “The U.S. Economy Posted Stunning Growth in the Third Quarter – but it May Not Last.” National Public Radio NPR: “The economy roared over the late summer and early fall as Americans went on a strong spending binge. Data on Thursday showed gross domestic product (GDP) grew at an annual pace of 4.9 percent in July, August and September. That’s more than twice as fast as the previous quarter.” “Forecasters warn the economy is unlikely to sustain this blistering pace in the final months of the year. Growth is expected to moderate as the impact of higher interest rates continues to be felt.” HPS Analysis: Most bike shops already know this. While the economy grew during the third quarter of this year, consumer foot traffic and purchases didn’t increase as the major trade association predicted. We posted this article because it is a caution for the retail channels that did enjoy an uptick in Q3 business that there is a growing probability that it will not last going into the last quarter of this year.

October 26: “U.S. Trade Loophole Fuels Rise of China’s New E-Commerce Firms.” The Wall Street Journal: “A law that allows low-price packages to enter the U.S. duty-free and with little customs scrutiny has enabled the breakneck growth of two e-commerce companies with roots in China: Shein and Temu. Packages valued under $800 can enter the U.S. under simplified procedures known as the de minimis exception. Lawmakers and some U.S. businesses say it is a loophole that the Chinese companies are using at a huge scale, allowing shipments of products that are unsafe or made with forced labor, while avoiding taxes.” HPS Analysis: A billion packages entered the U.S. under the de minimis exception over the 12 months from September 2022 to September 2023, and Shein is reportedly spending over $600 million per month to keep the de minimis exception on the books and in place. The oversized lobbying machine of K Street is gearing up for a fight with the members of Congress that want to eliminate or substantially change the de minimis exception. HPS agrees with the NBDA and PeopleForBikes that the best solution for the American bicycle business is to advocate for eliminating bicycles, e-bikes and lithium-ion batteries for micromobility devices from eligibility under the de minimis exception.

October 26; “GenZ is Not Interested in Driving. Cities are Happy to Accommodate.” Via: “Gen Zers are turning their backs on cars, due to various concerns: financial, environmental, safety, and more. The trend provides a unique chance for city planners to rethink transit design and take steps to steer American society away from the high reliance on cars.” HPS Analysis: Here is good news wrapped up in another piece of the puzzle about the new, post-COVID bicycling consumer. The percentages in this article make it clear that younger Americans are not interested in owning or driving a car. I have experienced this up front and personally with my family. While I live in a rural setting, the impact of GenZ and its interest in owning and driving micromobility vehicles will have an immediate effect on cities of all sizes. City planners are also in the process of evolving, and a whole new generation of under-30-year-old civil engineers and city planners are taking charge and changing conventional wisdom relative to traffic speeds, bike lanes, bike paths, and traffic calming. I am not making this stuff up, and the NBDA just hosted a Monday Mingle that featured a young traffic planner from a community in South Carolina that is making some of these changes.

October 27: “Bosche E-Bike Systems CEO Explains Coalition for Cyclist Safety.” Bike Europe: “19 leading innovators in the automotive, cycling, and technology industries have founded the ‘Coalition for Cyclist Safety [C4CS]. The aim of the alliance is to pursue the goal of advancing the development and expansion of a comprehensive vehicle-to-everything (V2X) communication ecosystem to improve cyclist safety. Claus Fleischer, CEO of Bosch eBike Systems, explains why they were one of the initiators together with Audi of America and Spoke Safety.” HPS Analysis: It took us a while, but in reading this rather lengthy news piece in Bike Europe we found that this is a North American initiative. The CEO of Bosch eBike Systems is explaining why 19 leading innovators in the automotive, cycling and technology industries have founded an alliance to pursue the goal of advancing the development and expansion of a comprehensive communication ecosystem to improve cyclist safety in North America. The why of it has to do with a recent announcement made by the U.S. Department of Transportation, and HPS believes the recent initiative of the League of American Bicyclists to get the attention of the National Highway Traffic Administration (NHTSA) about side-guards on semi-trailers and delivery trucks. As noted earlier, safety has fast become a multi-faceted topic demanding immediate attention. HPS further believes that Bosch and the other 18 leading innovators founded the new Coalition for Cyclist Safety because the North American bicycle business was making it clear that it didn’t have a clue.

October 27: “Islabikes: Cycle Firm Ceases Production Amid ‘Difficult and Turbulent Time’.” BBC News: “A cycle manufacturer which made its name improving children’s bike design is to end production. Islabikes was founded in 2005 by triple British cyclo-cross champion Isla Rowntree. The Shropshire firm said Ms. Rowntree and managing director Tim Goodall had decided to shut after a ‘difficult and turbulent time for the cycle industry.’ It has confirmed it will continue to sell existing stock for the time being, and also make spare parts available.” “The firm confirmed it remained solvent and had no outstanding creditors. Its last company accounts show that in December 2022 it had net assets of over £4m and employed 21 people.” HPS Analysis: This is a European and UK story, but HPS finds it frightening. Here is a small UK manufacturer of juvenile bicycles that has chosen to close its doors after 18 years of relatively successful operation and let go 21 workers because of a “difficult and turbulent time for the cycle industry” with over $3 million in the bank and owing no one. HPS will do more research, but we would like to know what is wrong with this picture.

October 27: “Unlocking the Future of Retail: The Power of 2D Barcodes.” Chain Store Age CSA: “For almost half a century, one-dimensional (1D) barcodes have served as the backbone of retail, facilitating inventory tracking and point-of-sale transactions. The classic barcode, scanned an estimated 10 billion times a day, allows retailers to streamline operations, enhance pricing accuracy, and track product movements with ease, but industry needs are evolving. In an era of growing demand for greater product information transparency, traceability, and authentication, it’s clear that innovation is not just an option, it’s a necessity for brands and retailers to remain competitive. Within the next decade, industry will transition from 1D barcodes as brands replace it with the next generation of barcodes, two dimensional (2D) barcodes, or more familiarly QR codes, a newer innovative tech solution aimed at enhancing consumer shopping experiences and organizational operations.” HPS Analysis: I worked in retail at a bike shop from 1957 until December 1960 and had no experience with computers or barcodes. It wasn’t until I became president of Giant Bicycle Company in North America in the mid-1990s that I was introduced to computerized cash registers, scanning, and barcodes. From that point forward I was both very aware and a strong advocate for barcodes in the whole supply chain, from receiving raw material and components at a manufacturing facility to scanning barcodes for every step of the retail process. This technological advancement to 2D barcodes or QR codes is the beginning of what the Europeans are calling Digital Product Passports that facilitate the compiled history and tracking of a product, like a lithium-ion battery or e-bike, from its raw material, component, sub-assembly, assembly, packaging, transport, customs clearance, warehousing, retail receiving, assembly and delivery to a consumer, service history, entry into the circular economy and final end-of-life recycling. There are many sustainability and product lifecycle reasons for the advancement of this technology and HPS is of the opinion that it is here, and it will spread like wildfire from Europe to North America.

October 31: “U.S. Tax Credits and Subsidies for Electric Bikes are Growing Bigger.” electrek: “Not only are more cities and states promoting financial incentives to help residents buy electric bicycles, but the incentives are often growing in value too. Electric bicycles have proven to be a popular alternative form of transportation for many former car drivers. As prices have dropped and the number of models available has skyrocketed, more families have switched from two-car households to one-car and one- e-bike households. Many young adults are foregoing car ownership altogether, opting instead for more affordable and more fun e-bikes to accomplish their urban commuting, and using car-sharing services for occasional trips that require a larger vehicle.” HPS Analysis: There is a growing optimism about micromobility and U.S. tax credits, and subsidies for electric vehicles and electric bicycles are a sign of confidence that the micromobility business, brands, and retailers can pass on to employees and consumers. HPS will support any municipal, state, or federal proposal for tax credits and subsidies for electric bicycles that have the support of the bicycle and micromobility businesses.

Contact Jay Townley:


As reported in Bicycle Retailer and Industry News (BRAIN) September 7, the U.S. Trade Representative has extended its tariff exclusions for some China-made bicycle products until December 31. The products affected include children’s bikes and some electric bikes, BRAIN reported.

PeopleForBikes has estimated that the extension will apply to products with an import value of more than $100 million, meaning the exclusion from the 25 percent tariff will save the industry more than $25 millionThe Section 301 tariffs were to be applied in addition to pre-existing tariffs on China-made bikes. The exclusions began in March 2022, and have been extended previously. The current extension was due to expire September 30.

The saga of Section 301 punitive tariffs adding 25 percent of the FOB value (or cost of goods loaded into a shipping container in China), to the regular import tariffs of 11 percent, 5.5 percent or “0” (for e-bikes), on Chinese-sourced bicycles and e-bikes, goes back to List 2 effective August 23, 2018.

List 3 followed on July 17, 2018, and was applied to imports that arrived after June 1, 2019, after which importers of record paid a total tariff of 25 percent of the FOB value on e-bikes originating in China, and 30.5 percent or 36 percent of the FOB value on regular bicycles originating in China. Since the total tariff was paid by the importer, it was passed along through cost of goods and product retail pricing to retailers and American consumers.

List 4, effective June 24, 2019, covered all the bike products imported from China that had not been previously covered by Lists 2 and 3.

So, the higher and punitive tariffs were in effect, and included in pricing from the last half of 2019 through the end of the first quarter of 2022. At that time, the Section 301 punitive tariff of an additional 25 percent was suspended, and bicycles and e-bikes imported into the U.S. from China, were charged a reduced import duty of 11 percent or 5.5 percent for pedal-only bicycles, and “0” for e-bikes.

The suspension of the additional 25 percent tariff substantially reduced the landed cost of bicycles and e-bikes, but because of the feeding frenzy of consumer demand, we have no way of knowing if it resulted in any wholesale or retail price reductions.

It is this suspension of the 25 percent additional punitive tariff that is now in effect on imports from China until December 31, 2023. At that time, USTR will decide if this punitive tariff is to be either (1) continued into 2024, or (2) continued to be suspended, or (3) eliminated permanently.

This has created uncertainty about pricing, forecasting, purchasing, manufacturing schedules and financial planning going into 2024.

Contact Jay Townley:


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 (, 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 ( 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 ( 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 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.

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