IT IS OUR PROBLEM!

54 years ago, the American bicycle industry faced the specter of the federal government regulating bicycles as products sold to consumers. The reaction of the industry, through its trade association the Bicycle Manufacturers Association (BMA), was to resist and fight the government by advancing the manufacturing standard it had developed in the face of growing imports.

Schwinn, the company I worked for, had left the BMA in the late 1960s in a dispute over promoting chain store bikes. Sears was the largest retailer of bicycles at the time, and held sway over Murray-Ohio and Huffy, the domestic sources of its bicycles, making it the largest financial contributor to the industry association.

Our marketing department continued to cooperate with the industry association, and coordinated our full-time bicycling advocate activities and financial support for the League of American Wheelmen and Bicycle Institute of America (BIA), the umbrella bicycle industry association under which the BMA operated.

When it became obvious that Congress was going to pass, and the President was going to sign, the Consumer Product Safety Act creating the Consumer Product Safety Commission (CPSC), and that the CPSC was going to develop a mandatory bicycle safety regulation as its very first standard-setting activity, the BMA collected funding to work in opposition, and to lobby both the Congress and the new federal agency.  

The BMA approached Schwinn for its help. Frank V. Schwinn, the third generation president of the company, discussed the request with his management team. He made the decision that his company was going to cooperate with CPSC and BMA to craft the best possible bicycle safety regulation for the whole of the American industry, including domestic producers and importers, and for the consumers who purchased bicycle products for themselves and their children.

Some of Mr. Schwinn’s management team felt the accident cases documented by CPSC and its predecessor agency, the Bureau of Product Safety, “wasn’t our problem” because Schwinn’s manufacturing and quality standards were far better than those of the rest of the bicycle manufacturers and brands.

Mr. Schwinn responded that it was indeed our problem, because the public judged all of us, all of the bicycle manufactures and brands, as the same when it comes to their safety, and the safety of their children.

I was one of the young managers who had been working with the Bureau of Product Safety, and was engaged on behalf of Schwinn with the newly formed CPSC. I reported to Ray Burch, vice president of marketing. He made sure I understood Mr. Schwinn’s meaning and intent. I acted accordingly, including cooperating with BMA when our aims and objectives were mutually compatible, and to opposing BMA when they were not. When in doubt, Ray advised, “do the right thing, and Mr. Schwinn will understand.”

As representatives of the Schwinn Bicycle Company and the Schwinn family, we didn’t impose or recommend Schwinn standards. We used those standards as examples of what could be done, how to do it, and how to measure it. In some cases, we learned from what CPSC developed, and from what BMA members and importers were doing.

The point is that we worked for at least half a decade on achieving the best possible federal mandatory bicycle safety standard that in turn provided safe bicycles to American consumers.

When the mandatory bicycle safety regulations became effective January 1, 1975, there was a two-year requirement for a label stating: “Meets U.S. Consumer Product Safety Commission Safety Regulations for Bicycles.” In Schwinn’s case, this was a yellow hang-tag that went on the handlebar with the owner’s manual. It served to inform and educate American consumers.

I realize this is history, and that many in today’s bicycle business are not interested in the history of either the business, or what is now an old and tired CPSC bicycle safety standard. I still feel there is a lesson to be learned about not denying responsibility by saying “it’s not our problem,” just as Frank V. Schwinn said 53 years ago.

There are those among the multi-national bicycle brands with headquarters in the U.S. that advocate for making international bicycle safety standards, and specifically ISO4210-10, the U.S. mandatory standard replacing the CPSC standard.

I for one think this is an excellent idea! ISO4210 was developed as the CPSC was developing the first mandatory bicycle safety standard, with the same participation through the American National Standards Institute (ANSI), CPSC, BMA and Schwinn.

Don McKay, an engineer who was with the Bureau of Product Safety and transferred to CPSC, was contacted by the International Organization for Standardization (ISO) and ANSI about the formation of a standards committee under ISO to create an international bicycle safety standard that would be as compatible as possible with the mandatory U.S. standard being developed by CPSC. The purpose was to ensure foreign-manufactured bicycles would be able to enter the U.S. market by meeting the mandatory federal standard.

When Don McKay asked Schwinn to participate, Frank V. Schwinn approved because he saw it as part of “our problem.” His company had been importing components from Europe and Asia since the end of World War II, and became a significant importer of complete bicycles during the 1971-1974 “bicycle boom.”

ISO4210 has its origin in the original CPSC bicycle safety standard. The significant difference now is that the CPSC standard has aged, basically frozen in time, while the ISO4210 international standard has been updated frequently as the products have evolved over the years.

Again, this is history that many in the industry today have no interest in. However, there should be an immediate interest in the public perception of an industry that is concerned about the safety of the consumers that purchase and use their products.

The consumer doesn’t know, or care, if the lithium-ion battery that powers the e-bike they own is from a “member” of a trade association or not. What they care about and expect is that the product they purchased, whether from an online seller or a bike shop, is safe to own and use.

They are also naïve, demanding and wanting both the lowest price and safe products. It is our problem, as an industry, to provide this in the best way possible for them. It is also an opportunity just waiting to be discovered.

As many of you already know, Human Powered Solutions (HPS) supports the National Bicycle Dealers Association (NBDA) in advocating for UL2849, a voluntary third-party testing and certification e-bike electrical power systems standard.

UL 2849 was developed under the auspices of Underwriters Laboratory (UL) pre-COVID, with the active participation of three members of the bicycle industry: Trek, Bosch and SRAM. The committee that developed UL2849 is still active, and has already amended this voluntary standard once since it was promulgated January, 2020. I can let you know who sits on the UL2849 development committee on request.

Brands can have their e-bike electrical propulsion systems third-party tested, certified, and listed with UL, which gives them the right to use the UL sticker on their products.

HPS has reviewed the cost associated with testing, compliance and listing to UL2849, and shared our findings with Bicycle Retailer and Industry News. The costs of compliance and listing, like insurance and shipping, are amortized over the cost of each complete product, or stock-keeping-unit, utilizing that complete electric drive system.

For some brands this will spread the cost over an appreciable quantity of units. Depending on annual unit volume, the compliance cost can have a wide range that with most brands will not have an appreciable effect on retail pricing.

With this said, HPS feels this is the time for an e-bike brand to promote its products’ compliance and listing to UL2849 with retailers and consumers, and is an opportunity to enhance and build brand integrity and share of mind with all.

Contact Jay Townley: jay@humanpoweredsolutions.com

CONFRONTING SHRINKING SALES AFTER A PANDEMIC-DRIVEN BOOM

All the news and factual bits and pieces that float to the surface indicate the American bicycle business is in an uncertain place, as our primary supply chain shuts down from January 20 until about February 6 for Chinese New Year, and we wait to see how many workers are able to come back to factories, desks, CAD stations, trucks, warehouses and ocean ports.

So much of the global and U.S. bicycle business is privately-held, or in the hands of private equity and venture capital, that very little public information is available about layoffs, order cancellations, inventory, and the financial condition of the supply chain.

With that said, here are a baker’s dozen headlines from U.S. and European news sources, bicycle trade and consumer publications that shed some light on the currents and winds of the bicycle business during the month of January 2023.

1. Peloton agrees to pay a $19 million fine for delay in disclosing treadmill defects. This story is taken from National Public Radio and, goes on to report:

“Peloton had received more than 150 reports of incidents involving people, pets or objects being pulled under and entrapped at the rear of the treadmill, by the time the company informed regulators, the CPSC said.

“Those reported incidents included the death of a child and 13 injuries, including broken bones, lacerations, abrasions and friction burns, the agency said.

“After initial resistance from the fitness company, Peloton and the CPSC jointly announced the recall of the Tread+ treadmill in May 2021.”

HPS thinks this is significant because it shows that the greatly-weakened CPSC, often portrayed as “toothless” by the bicycle industry, does indeed have fangs that bite, and when it gets the support of Congress, can and will enforce section 15(b) of the Consumer Product Safety Act.  

The bicycle industry association, in HPS’s opinion, should pay careful attention to CPSC going forward.

2. Both Merida and Ideal Bike announce top management changes. The story appeared in Bike Europe, and reports:

“Merida CEO Michael Tseng will step down as president of Merida. His son, Vansen Tseng, will assume this position following an approval by Merida’s board of directors effective 1 February.

“Ideal Bike general manager Tim Lin already stepped down on 31 December 2022, but will remain with the company as special assistant to the chairman. At the turn of the year the vice president of Ideal China, Frank Chen, was appointed as Lin’s successor at Ideal Bike.”

Merida is the number two bicycle and e-bike Original Equipment Manufacturer (OEM) in Taiwan, with manufacturing facilities in mainland China and Europe. The U.S. brand most associated with Merida is Specialized. Merida also owns a percentage of Specialized.

Ideal is the number three bicycle and e-bike OEM in Taiwan, with manufacturing facilities in mainland China, and is the source for a variety of U.S. and European brands.

Merida is a public company traded on the Taipei stock exchange, and we believe Ideal is as well. HPS finds the timing a bit odd given the uncertainty of 2023 and what we believe is the mounting financial pressure on all the top-tier Taiwanese bicycle industry OEMs that also own and control manufacturing facilities in China.

3. The US bike manufacturer Specialized announced last week that it was laying off 8% of its employees, or some 125 people. This headline comes from the January 17 issue of The Outer Line, a cycling enthusiast newsletter. It goes on to report: “This comes just a few weeks after discontinuation of its ambassador program. While severe economic challenges have impacted companies both across the bike industry (Outside, Zwift, Wahoo, Strava, Pearl Izumi, The Pro’s Closet, etc.), and the wider economy in recent months, Specialized’s pullback signals a significant retrenchment from their early COVID-era aggressive expansion plans, which included purchasing and opening their own retail network and even starting a consumer-direct sales pipeline.

“Outside of the simple fact that the era of cheap capital is over, this retreat confirms that the COVID bike boom was an aberration that pulled future years of consumption forward. The initial misread of the trend by the industry’s major brands, and ensuing production bottlenecks and product shortages, triggered a whiplash effect where there are now too few customers and too little money chasing too much product. Ironically, the industry has come full cycle: the next few years will likely look a lot like the landscape before COVID hit in early 2020.”

This enthusiast cyclist newsletter offers the opinion to affluent consumers that: “…the COVID bike boom was an aberration that pulled future years of consumption forward.” HPS finds this a plausible theory as relates to the market for high-end acoustic bicycles, and worth considering from a consumer research standpoint.

4. Specialized re-organization also impacts European operations. This headline is taken from a January 19 Bike Europe article that reports: “Citing a changing global economy and faster than anticipated changes within cycling, Specialized announced the job losses on January 11. The press release stated that an organisational adjustment will allow the brand to be adaptive and continue to invest in innovation. Giant is another manufacturer taking extreme measures to future-proof itself. In December the company wrote to its suppliers asking for payment postponement.

The article shows a picture of the new Specialized European headquarters located in Arnhem, the Netherlands, and also says: “A representative of the European operations, confirmed to Bike Europe that employees in Europe are also affected by the layoffs, but no further details were given than what was in the press release coming out of Morgan Hill. It leaves the question, who will be the next big brand to announce strategic repositioning this winter? Watch this space.”

HPS agrees with Bike Europe, and is also watching for who will be the next big brand to announce strategic repositioning this winter.

5. 2023 may be a rollercoaster for e-bike prices. For those of you who follow electrek, you know Micah Toll writes an article almost every day. This one ran in the January online consumer newsletter, and offered the opinion that:

“Prices in the electric bike industry spent years with relative stability until the pandemic’s many ripple effects wreaked havoc on the industry. Over the last few years we’ve watched prices rocket up and then plunge back down again in a matter of months, only to repeat. Many riders had hoped to see 2023 bring with it a return to normalcy in the industry. Based on the several recent price changes across many companies, that doesn’t appear to be the case.”

The article ends: “With only a week into 2023 and no stability in sight, don’t expect to count on this being the year that prices drop back to normal for good.”

From what HPS has seen since this article posted, 2023 will be a rollercoaster for e-bike prices, primarily DTC, but spilling over into specialty retail.

6. “Global e-bike brands gather in Las Vegas for back to normal CES.” This is taken from a January 17 Bike Europe article. HPS attended the Consumer Electronics Show in Las Vegas, but came away thinking this headline is slightly overstated.

The stringer who wrote the Bike Europe article states: “Held from 5-8 January, the event attracted more than 115,000 visitors and 3,000 exhibitors. For the 2023 edition, organiser Consumer Technology Association still focused on electric mobility with a growing number of car manufacturers, but also a multitude of e-bikes brands. A hot topic this year was vehicle-to-everything (V2X) technology, which continues to catch the attention of more companies.”

HPS agrees that V2X technology will be a hot topic in the bicycle market going forward, as was shown and demonstrated at the PeopleForBikes SHIFT-22 Conference. However, a “multitude of e-bikes brands” is an overstatement. The brands identified in the rest of the article are Komda, Invanti, LUL, Vinfast, Cake, and RCA.

HPS’s Mike Fritz advises anyone wishing to attend CES in the future to study the hall layouts and attendees and make a plan for efficiently navigating and visiting exhibiters. Otherwise, the size of the show is overwhelming.

7. VanMoof asks investors for additional funding to continue operations. A January 24 Bike Europe article announced: “The trendy Amsterdam-based brand VanMoof has seen its turn-over hike since 2017. A strong global branding made it an attractive investment for private equity. But VanMoof has also experienced the back side of the current supply chain problems, just like many others in the industry.

“Without a capital injection, the company warned its future was in danger within two months,” reported the Dutch financial newspaper FD yesterday. The preliminary annual report for 2021, which was filed just after the turn of the year, stated that the e-bike manufacturer was discussing with investors and suppliers to pay between €10 and €40 million. It now appears that only existing investors participated in the latest capital injection. These include London-based investment firms Balderton and China’s Hillhouse.”

HPS notes that this situation may be attributable to the company’s original business plan, and not reaching the revenue required to cover expenses in the face of declining sales.

8. Amprio confirms take-over by SRAM. On January 5 Bike Europe reported: “This week Amprio confirmed the take-over of the e-bike components business of Rheinmetall by SRAM. Bike Europe learned from industry insiders that SRAM is now taking serious action to join the e-bike boom.

“SRAM is late coming to the e-bike electric propulsion system party, and any acquisition in Europe now has a higher risk attached to it because of the economic conditions brought on by the Ukrainian war. With this said, SRAM has a good solid reputation as a drive train and system source, and a European supply base will be beneficial against established competitors in the EU.”

9. McKinsey-WFSGI study reports industry braces for headwinds. On January 26 Bike Europe announced the WFSGI and McKinsey annual report “Sporting Goods 2023 – The need for resilience in a world in disarray.”

“ZURICH, Switzerland – Rising costs, the looming threat of larger recession, low consumer confidence and continuing operational challenges are set to create headwinds, according to sports and bicycle the industry executives. This is one of the key findings from the WFSGI (World Federation of the Sporting Goods Industry) and McKinsey latest annual report.

“In 2022 consumer sentiment was improving month-on-month, reflecting looser COVID-19 restrictions in most markets, companies were placing large orders, both in anticipation of demand and to avoid the supply chain challenges of 2021, and performance in the first half of the year was widely positive. However, inflation was picking up due to the impacts of the war in Ukraine, with higher raw material and energy costs prompting some companies to raise prices. In the meantime, consumer sentiment showed signs of deterioration with -40% consumer’s net intent to purchase sporting goods items, and discretionary spending declined. Supply chains gradually became more reliable, but the sudden increase in available product in destination countries paired with declines in spending led to widespread overstocking.

“According to the WFSGI and McKinsey, 2023 is expected to be a challenging economic environment with continuing subdued consumer sentiment. This will require a holistic approach from sporting goods companies to focus both on preserving demand and building resilience. WFSGI and McKinsey write that in 2023, four key themes will shape the industry:

“Brand relevance: Sporting goods companies are among the most effective brand builders in the world. As consumer expectations rise and brand relevance deepens, brand building is expected to become more important.

“Sustainability: Accelerating decarbonization and scaling circular business models will be key for sporting goods companies to meet their aspirational sustainability targets.

“Nearshoring: In an era of supply chain disruption, more companies are likely to turn to nearshoring as an element of de-risking and speeding up their supply chain strategies.

“Industry is profitable growth for private investments: The success of sporting goods brands has attracted a wave of private investment. This is especially true for complementary brands, brands with an elevated digital interaction with consumers, and analytics at scale.

HPS will study and analyze this report in detail, and advise clients of its findings. Clients and interested companies and individuals should obtain the report and conduct their own review, keeping in mind that the U.S. bicycle business stands apart from the European bicycle business, and both are subsets of the sporting goods markets in Europe and the U.S.

10. Council member’s bill would ban e-bikes, e-scooters in NYC. This is from a January 26 Bicycle Retailer and Industry News (BRAIN) online article that reports: “A New York City council member introduced legislation a week ago to ban e-bikes and e-scooters until they can be made safer and called for them to be treated like motor vehicles.

“The bill, put forth by Robert Holden on Jan. 19, would repeal the 2020 law that made e-bikes and e-scooters legal in the city and calls for a $500 fine. It would not include electric wheelchairs or other mobility devices designed for those with disabilities.”

This is serious and immediate. The Micromobility Reporter (TMR) lead story this month, “It Is Our Problem!” focuses on the importance of the American bicycle industry trade association recognizing that all e-bikes sold in the U.S., and all lithium-ion batteries used to power e-bike propulsion systems, are within their purview and responsibility.

The National Bicycle Dealers Association (NBDA) has actively engaged with the New York City Council and the Fire Department of New York City, along with UL and CPSC, to find solutions to the New York City e-bike lithium-ion battery fire problem, and do so in a manner that will not result in the banning of e-bikes.

11. Rad Power CEO: “We recognize that we have made mistakes.” Several trade publications, consumer publications, and new media reported this, and the latest is a January 27 article published online in BRAIN.

“Rad Power Bikes CEO Phil Molyneux said in an e-mail to customers this week that the company has made mistakes and will learn from them. In the past year, the direct-to-consumer brand had three lawsuits filed against it, including one for a wrongful death of a girl riding as a passenger on one of its bikes.

“As a young company, we recognize that we have made mistakes. Now we are dedicated to learning from them,” said Molyneux, who succeeded founder Mike Radenbaugh in November. “The culmination of these efforts represents the ‘New Rad,’ one that combines the forward-thinking innovation of our early years with the knowledge and resources to make us more customer-focused than ever before.

“In October 2021, Rad Power announced that its latest $154 million financing round brought in a total of $329 million in investments since its inception in 2006. The company claimed then it was the world’s best-funded e-bike brand, at least in the direct-to-consumer market.”

Micah Toll of electrek is fond of referring to Rad Power Bikes as the largest e-bike brand in North America, and he bases this in large measure on the $329 million in investment since 2006. True, the Rad DTC sales figures are impressive, but as the title of this article states: Confronting Shrinking Sales After a Pandemic Driven Boom.

HPS would not have advised the president of Rad Power Bikes to make the statement about a “New Rad,” but we were not asked either. Watch Rad carefully from this point forward as the market and financial pressure rises.

12. Giant Group buys minority share in Stages Cycling in $20 million deal. This article was also in several trade publications, and this is from a BRAIN January 27 online article:

”Giant Group has made a $20 million investment in Stages Cycling, acquiring 32.5% of the company’s common stock according to a filing with the Taiwan stock exchange.

“Stages, based in Portland, Oregon, makes stationary smart bikes for the commercial gym and home markets, crankarm-based power meters, and GPS bike computers. Giant has manufactured some of Stages smart and commercial indoor bikes for several years, and Giant also distributes some Giant-branded Stages GPS computers to its dealers globally.

“According to the announcement in Taiwan, on Jan. 20 Giant’s board approved the purchase of 32.5% of Stages Cycling Inc. common stock for $6.5 million and Stages Cycling’s convertible corporate bonds for $13.5 million. Giant made the investment through its subsidiary Gaiwin US I Investment Inc. 

“Giant said its strategy is to expand Giant Group’s presence within the indoor cycling market and to build Giant’s ‘cycling ecosystem.’”

Even in good times, this would have been an unusual acquisition. Giant just bought about one-third interest in a large customer for not a lot of money, depending on what the financials of Stages Cycling Inc. look like.

The convertible corporate bonds will convert to stock, in which the value of the 32.5% common stock convert to over another 64%. We may be wrong, but HPS analysis is that Giant just pulled a relatively large OEM customer of its fitness plant out of a financial crisis for now.

13. What tracking one Walmart store’s prices for years taught us about the economy. This last article is from a January 26 NPR article that shops a Walmart store in Georgia, in Liberty County, just south of Savannah that was shopped in 2019, before the pandemic and inflation. This normally wouldn’t make our newsletter, but out of the hundreds of items NPR put in its shopping cart for comparison, one was a bicycle!

Note that the last item above is a “Girls bicycle with training wheels.” The brand is Kent, and the Package Price in August, 2019, was $68.00. The Package Price December 2022 is $98.00, an increase of 44%.

We don’t know any more about the bicycle itself, or whether it was imported or assembled at the Kent-owned Bicycle Corporation of America plant in South Carolina. What we do know is the retail price leader, Walmart, had an inflationary price increase of 44% from the summer of 2019 to the winter of 2022 in the retail price.

While HPS is not aware of any similar retail price tracking in the industry, this one example may explain, at least in part, why the American bicycle business is confronting shrinking sales after a pandemic driven “boom.”

Contact Jay Townley: jay@humanpoweredsolutions.com.

TURMOIL AND DOWNSIZING SEEN IN CYCLING AND OTHER SPORTS MEDIA PLATFORMS

The following is taken from The Outer Line, December 14, 2022. While the audience is primarily adult enthusiast cyclists, HPS found the author’s observations compelling as related to the overall American bicycle and e-bike business. We edited the original article for easier reading.

A few weeks ago, we commented on the turmoil and downsizing occurring in the cycling and other niche sports media platforms. As economic headwinds and uncertainties continue, this trend continues to intensify – in both the overall media business as well as the broader bicycle industry. With declining ad revenue and more hesitant subscribers, media platforms across the board are tightening their belts.

Substantial cuts have more recently been made at mainstream media firms like CNN, the Washington Post and USA Today. As former CNN host Brian Stelter put it in an essay for The Atlantic, “Media Winter is here once more, and it is getting ugly.” 

It seems that a “prerequisite for working in media in the 21st century is a tolerance for turmoil and constant change, continuing consolidation and ownership change; politicians and CEOs like Elon Musk fighting about coverage, AI threatening to replace writers, and not to mention that the pay is often terrible.” And it may be tougher in smaller niche media markets like individual sports verticals.

Another observer summarized it more concisely, saying, “Media is one of the worst businesses known to man.”  And it’s not just in the media. Layoffs have spread far beyond the editorial side in the cycling world, just two years after the historic “COVID boom.”

This retrenchment was best illustrated by COVID-darling Wahoo reportedly laying off at least 15 percent of its staff – likely largely due to over-extending itself after incorrectly assuming pandemic consumer habits would remain even after things returned to normal.

In addition, its partner turned competitor, Zwift, released a smart trainer significantly undercutting Wahoo’s indoor riding products. Strava has also reportedly laid off about 15 percent of its staff, as did The Pro’s Closet. And Specialized just discontinued its special ambassador program.

Beyond being a reflection of the current economic and financial headwinds, all of these recent developments also suggest that rather than COVID causing a boom in consumer spending, it may have just brought forward several years of spending. Hence, because of this over-optimistic forecasting, we will likely see the industry enter a prolonged lean time.

If you find this as interesting as we did, let me know: jay@humanpoweredsolutions.com

CHRONOLOGY OF EVENTS: E-BIKES, BATTERIES AND UL2849

On January 4, 2023 Human Powered Solutions will attend a virtual public meeting between the United States Consumer Product Safety Commission (CPSC) and PeopleForBikes (PFB) that Erika Jones, PFB counsel, requested.

This virtual meeting will last 60 minutes. It will be devoted to questions that PFB will ask CPSC about the December 19, 2022, memorandum from Robert S. Kaye, Director CPSC Office of Compliance and Field Operations, to 2000 manufacturers, importers, distributors, and retailers of micromobility devices, including e-bikes, for consumer use.

Below we have provided a chronology of events from December 8, 2022 through December 31, 2022 covering some of the most important communications we are aware of relative to the January 4 public meeting.

HPS will continue to keep our clients and TMR readers informed and up to date on events involving and affecting e-bikes, lithium-ion batteries, voluntary standards, testing and certification.

Please contact me you have any questions or require copies of any of the communications, articles or documents listed below at jay@humapoweredsolutions.com

————–

Chronology of events: e-bikes, lithium-ion batteries and UL2849

December 8, 2022: Consumer Reports investigative article by Stephanie Clifford: “Fire! Fire! Fire!” The Perplexing, Deadly Electric Bike Problem.

December 8, 2022: PeopleForBikes Zoom meeting of electric bicycle sub-committee.

December 9, 2022: Press release: commissioner Mary T. Boyle statement on lithium-ion battery fires and e-bikes

December 18, 2022: Letter from Heather Mason, president of the National Bicycle Dealers Association (NBDA), to chair Alexander Hoehn-Saric, U.S. Consumer Product Safety Commission re: electric bicycle (e-bike) certification to UL 2849.

December 19, 2022: Memorandum from Robert S. Kaye, director CPSC Office of Compliance and Field Operations to manufacturers, importers, distributors, and retailers of micromobility devices for consumer use.

December 20, 2022: Statement from chair Alexander Hoehn-Saric on CPSC letters regarding micromobility battery safety.

December 20, 2022: Letter from Heather Mason, president of the National Bicycle Dealers Association (NBDA) to NBDA members to share an update regarding e-bicycles, certification, and safety.

December 20, 2022: Bicycle Retailer and Industry News online article titled: Dealer association asked CPSC to make statement on e-bike standards.

December 21, 2022: E-mail from PeopleForBikes to members: Update: CPSC letter on micromobility devices. This e-mail announced “…an upcoming meeting to discuss” the implications of the CPSC memorandum of December 19 scheduled to take place January 4.

December 23, 2022: Public notice that Joel Recht and other CPSC staff will meet with Erika Jones, counsel, and representatives from PeopleforBikes to discuss lithium battery safety on micromobility products January 4, 2023.

December 23, 2022: Jay Townley received a return phone call in the afternoon from Joel Recht, CPSC deputy director for Hazard Identification and Reduction, requesting an e-mail address and stating that he would e-mail instructions January 3, 2023, for linking via Webex to observe the scheduled January 4, 2023 public meeting with PeopleForBikes. Recht stated this will be a virtual meeting.

December 29, 2022: Why Taking Leadership In E-Bike Safety Is Essential by Claudia Wasko, VP at Bosch E-bike Systems Americas, Forbes Business Development Council Post.

December 31, 2022: E-bike batteries raise safety concerns amid rise in fires: “Very hard to examine” article by Peter Charalambous, ABC News.

COVID-19 IS TEARING THROUGH CHINA

There are several things going on relative to this headline, including the fact that COVID-19 and its variants are still with us after almost three years. For the American bicycle business, COVID-19 has been turned loose in epidemic proportions on our largest supply source of bicycles and e-bikes.

A December 28, 2022 article in the Economist Weekly edition states, “After nearly three years of self-imposed isolation, China is opening up again. The domestic travel restrictions, mass-testing requirements and draconian lockdowns of the ‘zero-COVID’ policy were scrapped in early December. On January 8 China will reopen its borders too. People arriving from abroad will no longer have to quarantine. More flights into China will be allowed. Visas will be granted to business travelers and students (though not yet to tourists). And Chinese nationals will be allowed to travel abroad without needing to provide the authorities with a reason.”

There are no accurate figures on how many Chinese people have been and will be infected, but it is clear the government will not report the real numbers. It is now estimated by sources outside of China that as many as 250 million Chinese have come down with COVID-19, and that 1.5 million will die as the urban wave peaks in January, just as the Lunar New Year begins.

On January 20 factories shut down and workers in the urban areas of China leave for their home villages in the rural provinces, some taking COVID-19 with them.

The human suffering and loss of life is tragic. It also means the disruptions to bicycle and e-bike manufacturing will continue after the Lunar New Year into February and March as COVID-19 closes manufacturing facilities and workers become ill and are delayed returning to work.

We have not seen the final import data for 2022 yet, but based on 2021 import data China was the source country for 86.8 percent of all the bicycles and e-bikes imported into the U.S. (See the NBDA U.S. Bicycle Market Overview 2021 Report, Table 22, page 45: www.nbda.com)  

This also means the brands will have difficulty balancing their inventory of finished goods because of the Q-1 2023 disruptions to their Chinese-based supply chains.

The only good news is the disruptions to the Chinese supply chain will mean a Q-1 slowing of imports of low-cost e-bikes under the de minimis rule.

If you have questions, contact me at: jay@humanpoweredsolutions.com

THE BIG IF

I am writing this on the last day of 2022, a year that literally went from a supply chain nightmare of scarcity to the discomfort of surplus.  

From what I have been reading in the trade press in Europe and the U.S., there has been a tendency in the bicycle business to not acknowledge this excess inventory. When its existence does slip out, as it did recently with Giant, there is an uneasiness about the financial implications of the surplus.

In general, the sentiment seems to be that good sales this coming spring will ease the situation and bring inventory levels back to what is referred to as “normal circumstances.”

This to me is the big if: IF consumer demand results in good sales this coming spring. This also smacks of management by hope.

I realize the bicycle business in the U.S. is trying to be as proactive as it can relative to attracting consumers to bicycles and bicycling, including e-bikes. However, I fear the mainstream bicycle business doesn’t have all the customers and potential customers in focus, and as the result isn’t able to connect with and sway enough of them.

My premise is based on the excellent consumer research done by Sports Marketing Surveys, now known as Sporting Insights, for the NBDA in Q-4 2021 and published Q-1 2022 by the NBDA: www.nbda.com/store

This consumer research uncovered the fact that approximately 30 percent of adult cyclists were new to cycling, depending on the category, and a higher percentage were female compared to historic demographics. In the case of e-bikes, many wanted throttles and “BMX” styles.

You can dig deeper into this detailed consumer research study, but one of my take-aways was the bicycle business had attracted new and different adult purchasers during the pandemic in 2020 and 2021, but before we could study them, many quit walking into and purchasing from bike shops.

Consumer demand drives everything in our world, sales, forecasts, production, shipping, and inventory of components and finished goods. Everything! When consumer demand drops off so does everything else. When too much inventory is in the bicycle supply chain when consumer demand slows, an overhang of surplus inventory results, like a blockage in a pipeline.

In the case of the bicycle business in the U.S., we don’t really know why consumer demand slowed during Q-3 of 2022, or why it continued to drop below pre-pandemic levels of sales during Q-4.

Some additional consumer research focused on the e-bike segment has been done recently, but I believe the panel size was too small. Although I am not privy to the methodology or results, I don’t believe it captured consumer purchase information or future intent from a group that may represent both the problem and the solution.

What I am speaking about are the American consumers who have purchased directly from e-bike sources in China under the so called de minimis rule.

While this is direct-to-consumer (DTC), it is a piece of the American bicycle business that is mostly not being tracked, although DTC purchasers and riders were included in the NBDA consumer research I have referenced.

The fact that they are not tracked is because de minimis import transactions are not recorded by U.S. Customs, and do not show up in the statistics followed by everyone in the business, including the trade associations, Ed Benjamin at LEVA, and Human Powered Solutions.

American consumers purchasing an e-bike or regular bicycle valued at $800 FOB or less can have it shipped directly to their home addresses with no duty, tax or inspection, and no record of the transaction.

If you are wondering if there are a lot of these transactions, the U.S. Congress reports there are 2 million of them in the U.S. every day. We have provided detail about why America has de minimis transactions and the attempts to stop them in previous articles. Contact me if you would like to know more.

From the buzz we have been picking up from advocates and bicycle riders, the number of adults and teenagers passing them on unrecognizable no-name e-bikes has increased in recent months. Bike shops are also reporting more of this type of e-bike being brought in for service.

Bottom line: we will not know until the NBDA conducts the same type of consumer research as it did during Q-4 of 2021 with the same robust panel of 2,500 adults, using the same methodology as the previous study, which included DTC purchasers like those buying under the de minimis rule.

Meanwhile U.S. inflation hit a 40-year high at 9.1 percent at the end of 2022, and the economic picture does not present a high probability of consumers coming back to bike shops to make purchases this spring, although the unemployment rate is at 3.5 percent, tied for the lowest since 1969.

So combined with other economic factors, we will have to wait to see IF consumer demand and sales this spring will reduce the current excess inventory to “normal circumstances.”

HPS will continue to report on this situation, and I welcome your comments. You can contact me at: jay@jayhumanpoweredsolutions.com

CHANGING THE GAME

Half of adult e-bike riders (50.7 percent) started (39 percent) or returned (17.1 percent) to riding a bicycle during the pandemic, from 2020 to 2021. This data is from NBDA consumer research published in late 2021 and available at www.nbda.com.

This is reminiscent of the home-grown beginnings of BMX on the American West Coast in the late 1970’s. BMX emulated motorcycle motocross racing, employing modified 20-inch bicycles.

The research also says that most adult cyclists who plan to buy an e-bike will purchase a BMX bike!

Before you toss this response away, stop and consider that the majority of consumers aren’t really that accurate about bicycle styles and types. When adult cyclists say they plan to buy a BMX type e-bike, we suggest many are thinking of the fat-tire 20-inch or 24-inch e-bike they have seen on the Internet, like this one:

American e-bike brands like Rad Power Bikes (founded in 2015), Juiced (founded in 2010) and Super 73 (founded in 2016) were direct to consumer (DTC), and are now including bike shops in their distribution and marketing.

These brands, and others like them, are based on motorcycle, moped and scooter design. They have in many cases excited consumers who have never ridden a bicycle before about riding an e-bike, or “bicycle” as defined.

Our analysis indicates that the sales surge during the pandemic changed the bicycle market and business. The NBDA consumer research found the traditional mainstream bicycle business views e-bikes as primarily an electric assist feature add-on to regular bicycles, and appeals to older bicycle riders. New e-bike brands that are primarily DTC are designed and marketed to new and younger consumers who are interested in environmentally-friendly recreation and transportation.

The traditional bicycle business and customers are more interested in values like component groups and proper fit. The new brands, and their younger, more female customers, are more interested in eco-friendly outdoor recreation and transportation. They are also interested in what a brand’s values are, as well as what they support and believe in.

Reaching out to and effectively communicating with both the traditional and new customer is the challenge for the future of the American bicycle business in uncertain times for consumer engagement and participation.

Understanding the traditional and new consumer demographics, along with changing buying and use habits, will require a change in thinking, marketing tactics and strategies going forward. It is no longer just about banning “them” from local trails and bike paths, or restricting “out-of-category” products. It is about understanding differences of perception, and finding common ground to actually be inclusive, to grow the American bicycle business and market.

Contact Jay Townley: jay@humanpoweredsolutions.com

LETTING GO OF CHINA

A November 24 article from The Economist reported that “Multinational firms are finding it hard to let go of China.” The subhead asked “Should companies divest, decouple – or double-down?”

It is no surprise that companies and brands that have sourced their global supply chains in China for decades, and more recently selling their products to the emerging Chinese consumers, are having difficulty moving away from China as the geopolitical situation makes it harder to continue to stay there. But what does this have to do with the American bicycle supply chain?

Forty-years ago Sears was the largest retailer of bicycles in the U.S. I ran into their bicycle buyer at a restaurant in Shanghai in 1984. Over the next 10 years every retailer and brand associated with the American bicycle supply chain established sourcing in China.

Giant manufactured for Trek. Giant established bike shops in China. Giant, we understand, helped Trek establish bike shops in China as well. Merida manufactured for Specialized and, we understand, also helped Specialized establish bike shops in China.

Over the next the next three decades all three, Giant, Trek and Specialized, became billion-dollar companies with world-wide distribution including China. This also means all three are multinational.

We can only speculate about the dollar volume of the business the two American brand companies are doing annually in China. Assuming it is appreciable, we are also assuming they, along with publicly-traded Giant, find themselves in the same situation as The Economist describes, finding it hard to let go of China for several reasons, including sourcing from a well-established supply chain, in addition to the revenue from doing business with Chinese consumers.

The bicycle business isn’t high-tech, but from the U.S. bicycle business standpoint, it has been dependent on the combination of Taiwanese and Chinese manufacturing, engineering and supply chain expertise for three decades. American bicycle and e-bike brands can design and engineer products, but they rely on Original Equipment Manufacturers (OEMs) for manufacturing, engineering and expertise. Leaving China means figuring out how to maintain the level of quality manufacturing that is available from Chinese OEM sourcing.

Part of the equation is that the majority of Chinese exporters to the U.S. market, including Giant and Merida, are owned or controlled by Taiwanese companies.

The American bicycle business, including the supply chain, grew-up with this conundrum and learned to live with it pre-Covid and pre-pandemic, and before the geopolitical situation grew into the current situation where multinationals, including the leading brands in the American bicycle business, have to decide to “divest, decouple – or double-down” relative to business in and with China.

Contact Jay Townley: jay@jayhumanpoweredsolutions.com

THE BRUTAL TRUTH ABOUT RESHORING

There has been a lot of chatter in the bicycle business of late about reshoring bicycle and e-bike manufacturing to the U.S. Anyone who follows my articles and op-eds knows I am a long-time proponent of reshoring (bringing bicycle and e-bike manufacturing back to America), or nearshoring (bringing manufacturing inside North America to Mexico, Canada or both).

To be clear, manufacturing is not assembly. The two terms of art have different meanings when applied to the bicycle business. They also require different levels of capital investment. However both require the same level of component support.

Manufacturing means rolling the tubing, or processing tubing, that is formed, welded, or otherwise joined into a frame, front fork or other frame configuration. This makes up the primary sub-assembly of a bicycle that may be coated in some form, and joined with other sub-assemblies like wheels, or electric propulsion systems, and then assembled and packaged with the required components to create a complete bicycle or e-bike for use by consumers.

In short, a bicycle manufacturer fabricates the frame and front fork, and combines them with all the required sub-assemblies and components into a packaged product for final assembly by a consumer or commercial assembler.

Assembly means purchasing the frame, front fork or other frame configuration pre-built. This becomes the bicycle’s primary sub-assembly that may be coated in some form, and joined with other sub-assemblies like wheels, or electric propulsion systems, and then assembled and packaged with the required components to create a complete bicycle or e-bike for use by consumers.

The short version is a bicycle assembler buys everything, and then assembles and packages the various pieces into a complete bicycle or e-bike for use by consumers.

Detroit Bicycle Company, owned by Cardinal Cycling Group, is currently the largest bicycle manufacturing plant in the U.S. with annual production estimated at 10,000 to 15,000 complete bicycles per year.

Bicycle Corporation of America (BCA), owned by Kent International, is the largest bicycle assembly plant in the U.S. with annual production estimated at 300,000 complete bicycles per year.

BCA has the capacity to assemble far more complete bicycles and e-bikes, and will eventually add all the machinery and other equipment required to become a manufacturer. The primary limitation to growth to a realistic annual production of around 1 million complete units per year, is the availability of component parts in-country that do not have to be imported from off-shore.

All the business entities currently involved in bicycle and e-bike manufacturing and assembly in the U.S. know and understand the nature and meaning of this limitation. It is significant.

Let us start by following the money from retailers in the U.S. up-stream, and following the revenue to the original equipment manufacturers (OEMs) and their sub-contractors and component suppliers.

When consumer demand was high, as it was from the second quarter 2020 to about the third quarter 2022, everybody paid full price and more. The discounting and price cutting that plagued the bicycle business and drove down gross margins for decades disappeared. It was replaced with fluid cash flow and high gross margins of profit for retailers, bicycle and e-bike brands, OEMs and component brands and manufacturers.

For the first time in decades, suppliers had the upper hand. Retailers, including Walmart, had to pay the price to get relatively hard-to-get finished bicycles and e-bikes, including ocean, air and trucking costs.

Giant and Shimano both made it clear that they were not going to expand production capacity by building new manufacturing facilities. They were looking at the probability that the so-called “boom” wasn’t going to last long enough for them to finish plant expansion before the added capacity would no longer be needed because consumer demand would recede. They did add shifts and worked what weekend and holidays they could, but all within existing manufacturing facilities.

During the pandemic a lot of money was wasted, but a lot of money was also made up and down the U.S. bicycle supply chain that begins in Asia.

Consumer demand has indeed receded, and the U.S. bicycle business is headed for an inventory-induced shakeout that will probably last from three to five years. Price cutting and discounting have already returned, along with the brands trying their best to manipulate retail pricing.

Pricing power has shifted back from suppliers to retailers, although mostly in the mass, full-line sporting goods and specialty outdoor channels. Bike shops are currently in a battle with brands over retail price control.

With all of this said, why would publicly-traded component brands want to invest in U.S. manufacturing, and explain the investment to shareholders, when they can continue to bank profits earned during the pandemic and pay dividends to investors?

Keep in mind some of the OEMs are publicly-traded companies, and they are in much the same situation relative to the U.S. market. The same question can be asked about privately-owned component companies and OEMs as well.

There is also the possibility of the component companies and OEMs, the majority of whom have invested in and built manufacturing facilities in Europe, shifting a portion of the U.S. supply chain to their European production facilities, particularly if the U.S. re-imposes the 301 tariffs on Chinese imports that are currently suspended, and if the war in the Ukraine further suppresses the European market.  

While I am an advocate for reshoring and nearshoring, I am also a realist who worked in a large U.S. bicycle manufacturing company for 14 years before it had to take advantage of globalization and shut down domestic operations and become a large importer.

I spent the next 10 years supervising the company’s purchasing and logistics operations that involved buying complete bicycles, fitness equipment and accessories primarily in Taiwan, China, Singapore and Japan.

What I have observed since 1990 is bicycle manufacturing and assembly, as well as component manufacturing, leaving the U.S. and North America, relocating in Asia to be closer to manufacturing OEMs primarily in China (with the high end in Taiwan). The American bicycle business and market has become import dependent, and this takes us full circle, back to why reshoring is difficult and still a long way off.

There is a limit to the level of reshoring that can be realized because there is a limit to the revenue and profit that can be made as long as components have to be imported from outside North America.

This becomes a double-edged sword in that tariffs on imported componentry have to be kept within a reasonable range. If too high, as with the 25 percent punitive Section 301 tariffs on imports from China, this will discourage domestic assembly and manufacturing. If too low, this will discourage component manufacturers from investing in U.S. production because the domestic industry isn’t protected.

Since bicycles and e-bikes are not high tech, they are not going to attract much if any support from the government or private investors. The financial support is going to have to come, or at least start, from within the bicycle and e-bike business.

The support of state and local government in providing tax incentives and relief, as well as employment incentives, will be important. However, the most important incentives will have to be structured to make it attractive for component manufactures to build plants in the U.S. and/or North America if there is going to be any appreciable reshoring of bicycle and e-bike manufacturing.

Despite the geopolitical tensions between America and China, and Taiwan and China, the U.S. bicycle business is finding it difficult to extract itself from China. Even moving to Vietnam or Cambodia is difficult because of the dependency on raw materials and components from sources in China.

There is no easy answer, and the U.S. bicycle business is going to have to do careful planning and line up local and state political and financial support well in advance of turning the first shovel of dirt.

Perhaps even more important is going to be the effort that local and state governments are going to have to make to attract and convince a sufficient number of component manufacturers to commit to the U.S. to support domestic assemblers and manufacturers who can than grow their business with brands and retailers.

Crafting a plan, and then being patient and flexible, is going to be required if reshoring is going to actually happen at any scale in the U.S.

Questions or comments? Contact me at: jay@humanpoweredsolutions.com.

THE SIGNIFICANCE OF BENTONVILLE

Last month I wrote about my planned trip to Bentonville, Arkansas, for the SHIFT’22 Conference October 18-20. The original plan was for me to attend with one of my Human Powered Solutions partners, Mike Fritz. However, Mike e-mailed the weekend before our departure that he, and his whole immediate family, had come down with COVID. So, I would be traveling on my own, but would be meeting up with Heather Mason, president of the National Bicycle Dealers Association (NBDA), and several of her board members after arrival.

I was impressed with the Northwest Arkansas regional airport, and utilized Uber for the first time to meet up with the NBDA tour of bike shops at the scheduled last stop, Mojo Cycling, owned by David Neal, and located on North Walton Blvd.

My Uber driver was born and raised in Bentonville, and he was knowledgeable about the history of the area and the Walton family. What I observed, and what I heard from my driver, filled in some of the gaps that were missing from my preliminary research.

By way of background, my family purchased a commercial campground in the Wisconsin Dells market area in 1980, and owned and operated it until about 2005. The Wisconsin Dells Visitors & Convention Bureau is an economic and political force in the region. As members we got to know and understand how Wisconsin Dells has four sequential exits off the Interstate, and pre-pandemic, hosted 2.5 million visitors annually.

My point is that I have some appreciation for economic and political clout, the infrastructure it attracts, and what it looks like. What I saw, and what was described to me, was certainly on a par with what I see every day.

According to my local Uber driver, Bentonville is an economic island in Northwestern Arkansas. He confirmed the driving force is Walmart and the Walton family.

I mentally filed this away as we arrived at Mojo Cycling and I joined the NBDA dealer tour of this wonderful full-service bike shop and rental business. Mojo is in the final stages of opening a second rental-only location. After touring it, the NBDA served refreshments and conducted a round-table discussion that afforded the local bike shop owners the opportunity to ask the NBDA president and board members questions about the association, Profitability Project (P2) groups, and the current state of the bicycle business.

From this discussion I gathered more insights into the local market, specifically the influence of the Walton family on bicycling in the region, and the economic impact of both the Walton family and the Walmart business.

The SHIFT’22 Conference opened on Tuesday. Registration was at the Momentary Contemporary Art Museum and 21C Museum Hotel. During the afternoon several of the PeopleForBikes (PFB) subcommittees met at the 21C Museum Hotel, including the electric bicycle subcommittee that I attended, along with Heather Mason. I will cover the topic of electric bicycles and lithium-ion battery safety in detail in another article, but will share that I remain disappointed at the American bicycle business attitude of treating the safety of consumers as someone else’s problem.

Wednesday got underway at the Record Event Space. The overall theme of the Conference was “creating the bike industry we want to see.” The focus was on three core topics and presentation tracks.

  • Diversity, equity and inclusion, building a “welcoming culture within the bike industry and community,” and having the “tough conversations that get us there.”
  • The post-pandemic reimagining of “manufacturing and assembly based in the U.S.” including fostering breakthrough innovation.
  • Sustainable cycling and sustainable climate initiatives with a circular ecosystem, and what they really mean to the American bicycle business, including “what it takes to create a greener and healthier future.”

As I have noted, the second and, third-day presentations were about five blocks from the 21C Museum Hotel, at the renovated Record Event Space with two halls, both capable of seating the SHIFT’22 approximately 250 attendees.

AV, staging, and lighting were all first-class, as was the program. Speakers and panelists were also first-class. Walmart managers and executives, and the Walton family, were well represented throughout.

At this point I think it appropriate to mention the “aspirational” nature of this conference, and what it represented relative to a potential change in direction for the bicycle business.

One of our clients attended the conference, and about half-way through we talked. He said the topics and presentations were very “aspirational,” but not grounded in the reality of the current situation the American bicycle business faced. We met again toward the end of the conference. He said he had asked a member of the PFB staff about this and, was told it was on purpose.

The plan going forward is for the SHIFT Conference to be held in Bentonville in the Fall, focusing on the “aspirational” issues of creating the bike industry we want to see, with the Dana Point conference in the Spring focusing on the current issues facing the bicycle business.

This tied into another observation we discussed related to the change in leadership. No senior PFB board members or top-tier company CEOs were present in Bentonville. Again, when asked the PFB staff said this was by design.

My thought process went along these same lines, as we are witnessing a change in leadership in this country and the world, but wonder if we are also witnessing the emergence of the Walton family as growing influencers and perhaps leaders in the American bicycle business.

As a long-time advocate for the bike shop channel of trade, I do not necessarily see this as all bad for American bike shops going forward, but I do think the bike shop channel of trade will need to stand up for why it is an essential part of the bicycle business, and define what role it will play in the economics of profitability going forward.

We have heard of the investments made by brothers Thomas and Steuart Walton, two grandsons of Walmart founder Sam Walton, in the bicycle business and the bicycling infrastructure in Northwest Arkansas.

Steuart Walton was a speaker on the second day of the conference, and sat for a Q&A session. His brother Thomas was also present in the audience. Together they operate RZC Investments, with 90% ownership of Rapha and ownership of Allied Cycle Works.

Although not discussed at the conference, I think it appropriate to mention Walmart started Viathon Cycles, a DTC carbon fiber brand founded in April 2019, that imports its range of bicycles and does not source from Allied.

Steuart is, in my opinion, a very good public speaker. He made a compelling case for the importance of bicycling to the environment, the future culture of Walmart, and the community of Northwest Arkansas. His presentation included the Ledger, the world’s first cyclable building that is a Walton investment, and will be completed in about a month.

The Ledger will house a Specialized Experience Center and the PeopleForBikes office that is moving from another location in Bentonville, along with other business entities that we are assuming will be tied to Walmart, the Walton foundation and Bentonville.

This leads to Bentonville itself. Here is what the PFB SHIFT’22 agenda said about the host town:

“Towns are the heart of America, and there’s a new American town on the map. It’s a town with a big heart and even bigger ambition. A town where modern progress meets rich history, where the arts meet innovation, and where companies meet communities. A town to visit, to see, to breathe and to discover. Visit Bentonville – a new American town.”

Bentonville is the posterchild for the Walton Foundation’s vision for Northwest Arkansas, and it is the focal point of a regional community from Fayetteville to Bentonville connected by an Interstate, embracing 15,000 Walmart headquarters employees and the world through the regional airport.

All of the Walmart executives and members of the Walton family that spoke at the conference referenced the new Walmart headquarters campus that is under construction on the edge of Bentonville. The goal is a completely sustainable office campus that is open and accessible to the public, who can walk and bike on bike trails that run through the campus.

Part of the objective is for 10% of all Walmart employees to commute to work by bicycle every day. The Walmart campus, like a collage campus, is designed to blend with the community so you will not be able to tell where one stops and the other begins.

Walmart is the largest retailer, employer, and seller of bicycles in the United States. The Walton Family Foundation has been a financial supporter of PFB and bicycling’s role in economic development for well over a decade, but until the SHIFT’22 Conference has been in the background.

COVID-19 accelerated changing the world and the bicycle business. One of those changes is in leadership, another is in supply chains, and still another is in retailing. All are trying to keep up with the changing wants, needs, habits and demographics of consumers.

I do believe that PFB and the American bicycle business will migrate from Boulder to Bentonville over the coming decade because of the combination of support for bicycling, equity, inclusiveness, sustainability, innovation and reshoring.  None of this will be easy, but the third generation of the Walton family has expressed the desire to invest in what must be done to grow the bicycle business in America.

Early in the conference I took exception to the way PFB framed In America, and the post-pandemic reimagining of “manufacturing and assembly based in the U.S.” including fostering breakthrough innovation. Post-conference, I still do.

The session featuring “Innovators Driving Change Through Manufacturing” included Drew Medlock, CEO of Allied Cycle Works, Josh Richards, COO of Game Composites, and Arnold Kamler, Chairman & CEO of Kent International.

I know Arnold Kamler, and have the greatest respect for him and his company, which includes Bicycle Corporation of America (BCA), the largest American bicycle assembly plant located in Manning, SC. Walmart is BCA’s largest customer.

Allied Cycle Works is a DTC, high-end carbon fiber brand that has an excellent reputation and product that is in demand because it is hand-built in Bentonville Arkansas. Allied is owned by RZC Investments, a Walton company.

Game Composites manufactures carbon fiber sport airplanes located at the Northwest Arkansas regional airport. These are top-of-the-line, and expensive even by the standards of the stunt flying aficionados who line up to purchase them. Game Composites is owned in whole or part by the Walton family.

I first want to wish Arnold Kamler congratulations on his 50th year in the bicycle business!

Next I will point out the obvious: BCA is assembling 250,000 to 300,000 bicycles for Walmart annually in a modern facility that is capable of complete manufacturing, which means fabricating frames and forks, in addition to wheels and finishing, as well as assembling and packaging them in multiple shifts with capacity that could total 1 million units per year.

There are multiple reasons for not ramping up production, including frame and fork fabrication. While each can be overcome, particularly with the help of a retailer of Walmart’s size, Arnold will be the first to tell you that none of the solutions are easy, none were discussed at the conference, and all are years away.

The gap between the portion of the American bicycle market that Allied Cycles serves, and the portion that BCA serves, is where the business lives. It is also where it will have to adapt to change if it is going to survive.

The total lack of discussion of the innovations and creative thinking (the “aspirations”) that will be needed to actually achieve a combination of decoupling from Asian sourcing, near-shoring and reshoring, sums up why I still take exception to the way PFB framed In America and the post-pandemic reimagining of “manufacturing and assembly based in the U.S.”

As to my prediction that PFB will migrate from Boulder to Bentonville, I think it is inevitable given the financial momentum. The bike shop channel of trade needs to rethink its relationship with all the other channels of trade for bicycles, and change with consumer wants and needs to adapt to Walton Foundation and Walmart leadership.

This includes the bike shop channel of trade standing up for why it is an essential part of the bicycle business, and what role it will play in the economics of profitability going forward.

Contact Jay Townley, jay@humanpoweredsolutions.com.