After inviting Mike Fritz to apply for membership, UL Standards & Engagement confirmed that the technical committee chair of TC2849 approved Fritz’s membership, followed by confirmation of TC2580, which covers the standards UL2271 and UL2580. 

UL2849 is the voluntary standard for electrical systems for e-bikes, while UL2580 is the standard for batteries for use in electric vehicles, such as e-bikes, including voluntary standards UL2271 and UL2580.

Fritz is chief technology officer for Human Powered Solutions, a consultancy focused on pedal-only, electric-assist, electric component, connectivity and communication product and system design, manufacturing, and management. In addition, it has extensive industry and consumer research experience, and data and insights on retail dealers.

“I’m old school,” Fritz said. “I started my professional career at the Schwinn Bicycle factory in Chicago back in 1973. Over the years, I have worked in product engineering management for several e-bike brands, as well as being CTO for e-bike propulsion system component manufacturers. Importantly, I was employed as the North American technical representative by a leading battery pack supplier to the e-bike industry. 

“This experience enables me to offer our micromobility clients a level of technical insight that they would not have when sub-contacting product development and manufacturing engineering to OEMs and third- party suppliers. This is especially true with respect to lithium-ion batteries and related micromobility propulsion systems. I was trained on technologies, processes, and protocols associated with the design, production, and servicing of high-quality lithium-ion batteries used in the e-bike industry.”

“A key service Human Powered Solutions offers to micromobility clients is the ability to interact with lithium-ion battery pack suppliers to establish complete battery pack specifications and necessary performance attributes to ensure that clients are integrating appropriate battery packs into propulsion systems that are suitable for their application.” 

The global nonprofit UL Standard & Engagement is a safety science organization that develops, publishes, and maintains consensus standards that guide the safety, performance, and sustainability of new products and evolving technologies and services, delivering solutions that range from household appliances to smoke alarms, from batteries and building materials, to cybersecurity and autonomous vehicles. www.ulse.org

Contact Mike Fritz: mike@humanpoweredsolutions.com


July 29 “A Dangerous Combination: Teenagers’ Accidents Expose E-Bike Risks.The New York Times: “The e-bike industry is booming, but many vehicles are not legal for teenagers, and accidents are on the rise. On a Thursday evening in late June, Clarissa Champlain learned that her 15-year-old son Brodee had been in a terrible crash, the latest teen victim of an e-bike accident. He had been riding from home to shot-putting practice. The e-bike, a model made by Rad Power, had a top speed of 20 miles per hour, but his route took him on a busy road with a 55-mile-per-hour limit. While turning left, he was clipped by a Nissan van and thrown violently. Ms. Champlain rushed to the hospital and was taken to Brodee’s room. She could see the marks left by the chin strap of his bike helmet. ‘I went to grab his head and kiss him,’ she recalled. ‘But there was no back of his head. It wasn’t the skull, it was just mush.’ Three days later, another teenage boy was taken to the same hospital after the e-bike he was riding collided with a car, leaving him sprawled beneath a BMW, hurt but alive. In the days following, the town of Encinitas, where both incidents occurred, declared a state of emergency for e-bike safety.” HPS Analysis:There is much more to this New York Times article, and I urge you to read every word. I you cannot find it, let me know and I will email it to you. While there is a good argument to be made for our society ignoring the real problems of our car culture, the very real accidents, injuries and fatalities associated with bicycles and e-bikes are growing, and our industry needs to immediately reevaluate and reconsider everything it knows, and become aggressively proactive about all aspects of safety. There are two federal agencies currently evaluating how to best address the safety of electric bicycles: the Consumer Product Safety Commission (CPSC), and the National Highway Traffic Safety Administration (NHTSA), as well as New York City, the State of New York, and the State of California. In addition, CPSC is also evaluating how to best address the safety of pedal-only bicycles. Last month, HPS recommended PeopleForBikes take immediate action to form a Standards and Safety Committee to focus the resources of the American bicycle industry on all the issues associated with product safety and user safety. We are burning daylight people.

July 30 “The New York Times Attacks E-bikes While Ignoring the Real Dangers All Around Us.elecrtrek: “The New York Times published a pair of articles this weekend highlighting the rising number of deaths of cyclists riding electric bikes. However, in one of the most impressive feats of victim-blaming I’ve seen from the publication in some time, the NYT lays the onus on e-bikes instead of on the things killing their riders: cars. The first article lays out a number of recent tragic deaths of e-bike riders, including that of a 15-year-old boy in Encinitas, California. The article even explicitly lists the biggest danger that played a role in that crash, explaining that the boy’s bike ‘had a top speed of 20 miles per hour, but his route took him on a busy road with a 55-mile-per-hour limit.’Yet the article seems to imply that the e-bike’s presence was the compounding issue, instead of reading into the author’s very own sentence to realize that the true problem was that the road didn’t have anywhere safe for cyclists to ride. There was no protected bike lane.” HPS Analysis: Here again, I urge you to read the whole article in electrek by Micah Toll, and if you cannot find it, please let me know and I will e-mail it to you. The city of Encinitas declared a state of emergency for e-bike safety, but did it really mandate safer roads for all of its citizens including walkers, joggers, bicyclists, and vehicular operators? Or, did it put band-aids on the problem to satisfy the public outcry? And, what role did the American bicycle business play in working with federal, state, and local government, as well as schools, user groups, and NGO’s, to stay engaged for the long term to bring safe streets, education, and protected bike lanes to the community? This is what HPS means by the American bicycle industry becoming aggressively proactive about all aspects of safety.

July 30: “E-bike Battery Fires Prompt Call for Better Regulation.” BBC: “Batteries for e-bikes should be regulated in the same way as fireworks, heavy machinery or medical devices, because of the fires risk they pose, a charity has said. In June a woman and two children died in a fire linked to an e-bike battery. Currently, manufacturers can self-declare that e-bike and e-scooter batteries meet safety standards. But campaigners Electrical Safety First says the batteries should require third-party approval before sale. Cambridgeshire Fire Service said the bike was the ‘most probable cause’ of the fatal blaze in June, and it is investigating the e-bike that was left charging in the flat. Meanwhile, the London Fire Brigade said it has been called to a fire caused by e-bike batteries on average once every two days in 2023.” HPS Analysis: This BBC article is confirmation that the UK, where e-bikes have been popular and sold in greater quantities before, during, and after the pandemic, is now experiencing e-bike-associated lithium-ion battery fires, and is seeking regulatory safety standards and related solutions. This article quotes Electrical Safety First CEO Lesley Rudd as saying: “The UK should adopt regulations similar to rules introduced in New York City in March 2023.” While we do know the primary origin of the hazard present in the UK is different than that in New York City, the net effect is, sadly, the same. This shows the importance of lithium-ion batteries being manufactured, tested and certified to UL 2271, e-bikes manufactured, tested and certified to UL 2849, along with education of retailers, including DTC sellers, and consumers concerning the proper management of lithium-ion batteries supplied with e-bikes and other micromobility devices.

July 30: “Trucking Giant Yellow Shuts Down Operations.” The Wall Street Journal Business: “The 99-year-old company, with 22,000 Teamsters employees, advises customers and workers of shutdown. Yellow, one of the oldest and biggest U.S. trucking businesses, shut down on July 30, wrecked by a string of mergers that left it saddled with debt, and stalled by a standoff with the Teamsters union. The 99-year-old- company is known for its cut-rate prices, and has more than 12,000 trucks moving freight across the country for Walmart, Home Depot and many other smaller businesses. What Yellow couldn’t deliver, despite swallowing rivals, getting union concessions, and securing a government bailout, was consistent service for customers or profits for investors.” “A failure imperils nearly 30,000 jobs, including around 22,000 Teamsters members, and hundreds of its nonunion employees were laid off July 28 after the company stopped taking in new shipments from customers. It would be the biggest collapse in terms of revenue and jobs for the fickle U.S. trucking industry, though customers say disruptions should be limited. Manyu shifted their cargoes to rivals in recent weeks, hastening Yellow’s demise.” HPS Analysis: Two-years ago, the collapse of Yellow would have been a disaster for the U.S. economy and the bicycle business. Even 12-months ago, it would have been a major disruption to American commerce. Today, not so much. The U.S. economy has cooled enough, and consumer demand has ebbed, to the point where rival domestic trucking firms have picked up all the freight Yellow could no longer take. Unemployment spiked the two weeks after Yellow shut down operations, but dropped back to previous levels as the non-union workers and union drivers found work. Domestic freight continued to flow, and there was no discernable disruption to shipments of bicycle business merchandise. While this bankruptcy ended up having no real impact on the U.S. economy, it did leave the American people with about a one-third ownership in Yellow as the result of the terms of the financial bailout negotiated by the previous Administration.   

August 2: “Columbia Has Too Much Footwear While Prana Sales Plunge 32 Percent.Sourcing Journal: “In a Nutshell: Columbia Sportswear chairman and CEO Tim Boyle told investors in a second quarter earnings conference call that “elevated inventory levels, particularly in footwear,” contributed to higher clearance and promotional activity in the quarter. Getting rid of excess stock has been a priority for several months now. Boyle said the Sorel owner is taking a more ‘conservative approach to planning the balance of the year,’ such as managing expenses and looking for growth opportunities.” “U.S. e-commerce net sales were down mid-single-digit percent. The online environment has become more competitive and promotional, as consumers seek out value in the marketplace, Boyle said. Columbia Sportswear got a boost from lower inbound freight costs. However, higher clearance and promotional activity, as well as higher distributorship, which generally carries lower gross margins, didn’t help.” “We continue to anticipate that China will be one of our fastest-growing markets in 2023, Boyle said.” HPS Analysis: Athletic and sports footwear appears to be tracking along the same arch as the bicycle business, and too much inventory and too few sales are the primary issues. Columbia, like the top bicycle brands, reports second-quarter sales declines in Canada and the U.S., and increased sales in China. Columbia also reports e-commerce net sales were down in the second quarter.

August 3: “Industry Makes its Point, but Can the CPSC Regulate Lithium-ion Batteries?Bicycle Retailer and Industry News: BETHESDA, Maryland: “Mike Fritz left last week’s Consumer Product Safety Commission public hearing on lithium-ion battery safety confident he and other industry representatives convinced the agency that mandatory regulations are needed. ‘Whether they have the resources to take effective action in the short term remains to be seen,’ said Fritz, Human Powered Solutions’ chief technology officer, who has worked with the National Bicycle Dealers Association to educate retailers about safe storage and handling of batteries. Matt Moore, PeopleForBikes’ policy counsel, agreed. ‘That was part of my testimony, that they don’t currently have the resources to effectively enforce regulations for various reasons, one of them being the de minimis exemption, and the difficulty inspecting those shipments,’ Moore said. Whether they have the resources to do the rulemaking, is really dependent on their budget and budget priorities. The current climate in the House is not good for additional appropriations. In fact, they’re looking to cut what has been allocated for agencies across the board.” HPS Analysis: I sat in the audience through all the testimony presented July 27, and participated in the conversations during the breaks, lunch, and over beer after the public meeting. The summary of the day was that the need is urgent because of the fires and deaths in New York City and elsewhere in the country; there is agreement that mandatory federal standards are required; that harmonization and merging with European and UL lithium-ion battery and bicycle/e-bike regulations and standards is eminently possible; and immediate action is required by the Consumer Product Safety Commission. What surprised the Chairman of the CPSC was the general unanimity of all the presentations. He also warned that the CPSC mandatory standards and regulatory process is arduous and difficult, and made more so by the oversight exercised by the House Commerce Committee. The future of standards and regulation of lithium-ion batteries, e-bikes, and bicycles, is going to be up to the fortitude of the American bicycle business and the global industry to rally around and fight for safety.

August 7: “WFSGI Postpones 2023 World Cycling Forum.” Bicycle Retailer and Industry News: “The World Federation of the Sporting Goods Industry has postponed its World Cycling Forum 2023 to a later date. The Forum had been scheduled to take place during the IAA Mobility conference in Munich, Germany, next month. ‘In discussion with senior leaders of the industry, and seeing the ongoing economic challenges within the bicycle industry, we have made the decision to postpone the World Cycling Forum 2023, the WFSGI announced Monday. While we know this is disappointing, our first priority is to listen to the bicycle industry’s current situation. The new date will be communicated in due course,” the group added.” HPS Analysis: Scheduled for September 5-6, this would have been the fourth year for the World Cycling Forum, initiated by the WFSGI in 2020, the first year of what has become known as the Pandemic Bicycle Boom in the U.S. “…Seeing the ongoing economic challenges within the bicycle industry” is cited as a major reason for postponing the event, which we respectfully opine is the wrong reason. If anything, this should be the driving force in going ahead with the scheduled gathering of global leaders in the bicycle/e-bike industry, including PeopleForBikes as the leading U.S. industry association. What is the global bicycle industry so afraid of discussing out in the open?

August 7: “China Property Giant Country Garden Warns of up to $7.6 Billion Loss.” BBC Business: “Country Garden, which is one of China’s biggest property developers, has warned that it could see a loss for the first six months of the year of up to $7.6 billion (€6bn). The announcement is the latest signal of the major issues facing the world’s second-largest economy. This week official figures showed China had slipped into deflation for the first time in more than two years. Exports have also fallen sharply, while youth unemployment is at a record high.” HPS Analysis: China remains the largest source country for bicycles and related finished goods imported into the U.S., and while the problems of the Chinese economy have so far represented manageable issues for importers into the U.S., the looming problem is for multinationals selling bicycles and related products in China. Over the past three decades it has become conventional wisdom in the global bicycle business that Giant taught Trek how to successfully enter the Chinese home market, Merida taught Specialized, and so on. China has proven to be a significant OEM market for international publicly-owned brands like Shimano. For all the multinational bicycle, component, and accessory brands selling in the Chinese market, they are conducting local business in what is a domestic, or home market. With the European and North American bicycle markets declining, the Chinese home market has become very important to some, and perhaps many, of the multinational brands. A decline in Chinese demand for components and finished goods will only add to the sales and profit woes for multinationals.

August 7: “Strong Sales in China Help Keep Giant Group Revenue Decline to 5 Percent.Bicycle Retailer and Industry News: TAIPEI, Taiwan – “Giant Group’s first-half revenue was NT$42.6 billion ($1.34 billion US) in its first fiscal half, down 5.4 percent from the same period last year. But the company said strong sales in the China market helped. The domestic China market’s interest in performance cycling drove a 70 percent sales increase in the half there. However, sales for Giant-branded products in Europe were down 12 percent in the half, and in the U.S., they were down 44 percent, the company reported. First half e-bike sales supplied 35 percent of the Group’s revenues in the half, up 6 percent from the year prior.” “Overall the Group’s gross margin rate decreased to 21.3 percent, and net profit before tax came in at NT$3.35 billion, a decline of 32.9 percent. Net profit after tax came in at NT$2.02 million, a decline of 44.3 percent. First-half earnings per share were NT$5.15. HPS Analysis: Giant Group is a publicly-traded company on the Taipei Stock Exchange, and as such is obligated to publish its quarterly financials, as are Merida and Shimano, which is traded on the Tokyo exchange. Giant Group is only down 5 percent in revenue for the first half of this year because of a 70 percent sales increase in the Chinese domestic bicycle market. While this is a relatively small loss overall, the U.S. was down 44 percent, and Europe was down 12 percent, meaning any significant decline in the Chinese home market during the second half of this year will serve to increase the negative revenue for Giant Group. There is a definite link between Giant Group’s financial results and the Chinese home market, and this link may exist between other multinationals in the global bicycle business and the Chinese consumer goods market.

August 8: “Moody’s Downgraded the Credit of Several Regional Banks, Citing Rising Costs and Troubled Commercial Real Estate Sector.” Marketplace: “It’s been about five months since Silicon Valley Bank and Signature Bank collapsed. Shortly afterward, First Republic folded. But since then, things have been relatively calm in the banking world. That is, until this week. The ratings agency Moody’s announced that it downgraded the credit rating of several regional banks, citing problems related to rising interest rates and troubled loan portfolios. A lot of the problems in the banking sector that emerged earlier this year haven’t gone away.’ ‘Generally speaking, you don’t want to force banks to undergo significant and costly changes during periods of time when credit is less available,’ Kathryn Judge, a law professor at Columbia, is quoted as saying. ‘Judge went on to say: ‘…this week’s downgrades are a sign that that period of time is going to last a while, even though dramatic bank failures, like those earlier this year, are likely behind us. That means regional banks will keep paying more interest to depositors, and lending out less of their deposits.” HPS Analysis: HPS Senior Advisor Steve Bina’s related article covers Moody’s downgrading the credit ratings of several regional banks, and the potential impact on the availability of loans to small businesses, and the cost of that money from lending institutions. This is the issue that has been most important to the bicycle business and the specialty bicycle channel of trade since Silicon Valley Bank and Signature Bank collapsed: the overall availability and tightening of lending on the part of the remaining banks. The inventory that got financed during the pandemic bicycle sales surge that has not been sold is going to have to be turned into cash or refinanced at a higher interest rate, if banks are willing to refinance it.

August 8: “Bike Imports Plummet as Average Value Climbs.” Bicycle Retailer and Industry News: WASHINGTON – “Bike imports were down steeply in the first half of the year compared to the year prior, even as the average import value of bikes increased significantly. The U.S. imported about 1.4 million adult non-electric bikes through June, down 62 percent from the same period in 2022, when the U.S. imported 3.6 million. In dollar value at port, the imports were worth $504 million, down 38 percent from last year’s first-half value. The figures are from Department of Commerce USA Trade data released August 8. E-bikes lack a unique product code at import (they share a code with electric motorcycles and other electric cycles), making it difficult to include them in the totals. All the numbers in this article are for non-electric bikes. The average value of an adult bike at import in the first half this year was $360, up 60 percent from a year prior. HPS Analysis: First, let me say this is a great article. I went back over the tables and charts a dozen times. As many of you know, I am a data junky, and the five detailed tables and pie-charts are well worth examining carefully, and absorbing the story they have to tell. However, as the author Steve Frothingham makes clear: “All the numbers in this article are for non-electric bikes.” Electric bikes are not included because: “E-bikes lack a unique product code at import,” making it impossible to include the hottest category with the greatest growth potential for the industry in the data and the totals. While this is a great report, it highlights what we, as an industry, do not know. And there is agreement that what we do not know is very vitally important to the future of our industry. And yet, we do not seem capable of creating and rallying around a solution that provides the data we need about imports, domestic assembly, and manufacturing of e-bikes, to define and plan our future.

August 9: “Radio Flyer to Open its First-Ever Store at Woodfield Mall.” Chain Store Age: “The maker of the iconic ‘Original Little Red Wagon’ is entering brick-and-mortar. The 106-year-old Radio Flyer will open its first-ever retail store in November, at Woodfield Mall in Schaumburg, Ill. The store will offer the company’s full product lineup, including stroller wagons, scooters, tricycles, go-karts, bikes, and more, along its new line of electric bikes and ‘unique’ gift items for the holiday season. The store is designed to offer customers the ‘ultimate Radio Flyer experience.’ The attractions will include a test track where kids can get in the driver’s seat for rides and hands-on experience in products such as go-karts and scooters. Shoppers will be able to customize wagons and other items. In addition, an in-store bike shop will offer free rides for kids’ bikes and adult electric bikes, along with services that include professional assembly, custom bikes, accessory fittings, and more. HPS Analysis: Heather Mason, president of the NBDA, told us the news about the first Radio Flyer retail store before this CSA article, and before it was published in BRAIN. Heather had interviewed `Robert Pasin, chief “wagon” officer and CEO at Radio Flyer, for a Podcast. Pasin, is the third-generation CEO of this 107-year-old Chicago company. Radio Flyer recently entered the electric bicycle market with its Flyer line, and is expanding its dealer network in the U.S. HPS is looking forward to visiting the new Radio Flyer retail store after it opens in November of this year.  

August 10: “China’s Economic Shocks Have Thrown the World Off Balance.” Bloomberg Opinion: “Trade is plunging and prices are sliding. How much disappointment can the global economy bear? In the later year of the epic U.S. growth stretch that ended with COVID-19, a phrase began to catch on to describe the buoyant conditions spreading across the globe. The world was said to be on the cusp of an unusually synchronized expansion. Few people still spoke of a jobless recovery in America, and China, after some rare stumbles, appeared to be returning to its old robust self. Inflation was off the floor, seen as a good thing. HPS Analysis: The question at the beginning of this article is factious, but nonetheless has deep meaning for those of us who have been practitioners importing bicycle products into the U.S. from Japan, Taiwan, and China over the last five decades. From 1973 to 2019, the business of efficiently manufacturing and shipping bicycles to the U.S. evolved into Standard Operating Procedure, cost-efficient, predictable, and reliably repeatable month in and month out.  During the disruptions of the pandemic, a protectionist attitude rose up about Chinese high-tech products like computer chips during a time of shortages and surging consumer demand. This, coupled with the false premise that punitive import tariffs of up to 25 percent on top of regular tariffs would force China to the bargaining table to import more American goods like corn and pork, has evolved over the past five years to the point where a recent survey shows that 66 percent of Americans would support a pro-tariff presidential candidate, despite the fact that it is the American importer of record, and eventually the consumer, that pays the total cost of tariffs. Decoupling is very hard, in large measure because the Chinese have become vertically integrated and very good at what they do. Despite the bicycle business moving production to Cambodia and Vietnam, China remains the largest source of units, supplying 83 percent of all sizes and types of non-electric bicycles imported into the U.S. six-months year-to-date 2023. Politicians and governments want one thing, while consumers want another, and on the supply side buyers and sellers are doing their best to deal with the reality of market demand. If that isn’t “Off Balance” I don’t know what is.

August 10: “Shifting Trade Winds.” The Wall Street Journal Logistics Report: “A persistent downturn in world trade raises questions about whether deeper changes are underway that will alter long-term patterns of good flows. Weak global economic growth, high interest rates, and geopolitical tensions are weighing on goods trade, the WSJ’s Marcus Walker and Yuks Hayashi write, even as trade in services gets a boost from rebounding Chinese exports, suggesting decades of global integration may be unwinding. Instead, shifting supply chains suggest trade is entering a new era in which the West and China do more business with their political friends and less with each other. The change toward more fragmented trade patterns would have significant implications for a shipping sector that has supported far-flung supply chains. For now, forecasters are projecting only meager global trade growth this year, and a recovery next year well short of average yearly growth.” HPS Analysis: Yes, there is a definite and pronounced downturn in the flow of goods from China and other Asian source countries, as evidenced by regular bicycle imports into the U.S. being down 62 percent in units and 38 percent in value six months year-to-date. Consumer demand in Europe and North America has been declining steadily since the last half of 2022, and now consumer demand in China is starting to decline. Computer chips and other high-tech products like cell phones are shifting their sourcing, as the article indicates, but decoupling and resourcing for the relatively low-tech bicycle business, including e-bikes, is proving much more difficult, and will be years behind the high-tech sector. What this means from a geo-political standpoint relative to manufacturing, and from a logistics standpoint as pieces of the longstanding global integration unwinds and shifts, represents a series of near-term issues the bicycle business is going to have to face and manage to craft modified patterns for the flow of goods to the markets outside of China and Asia.

August 11: “Cycle Industry’s Collapse After Bike Boom Ends This Year, Say Analysts.” Forbes: “Bicycles may be greener than cars and globally outsell them, but the $61 billion bike biz isn’t as healthy as many might assume. Periodic surges, such as the emergence of mountain biking in the 1980s or the stellar demand driven by COVID lockdowns, hide the industry’s low margins. According to an analysis by Yahoo in Taiwan, the bicycle industry is facing a ‘super cold winter’ of falling demand. Asian suppliers of cycles and cycle components have yet to recover from the inevitable market crash that followed the COVID bike boom, and still carry high inventory levels … Industry analysts believe 2023 will be a trough year, with sales recovering through 2024 and beyond, and at a more sustainable level than the heights of the COVID bike boom.” HPS Analysis: This article is by Carlton Reid, a long-time bicycle advocate and writer, and senior contributor to Forbes. The HPS Analysis is that he is generally correct concerning the “super cold winter.”  We agree with the pre-pandemic industry generated universally low margins. However, we are of the opinion that overall prices increased during the pandemic, which also increased gross margins. These increases are baked into costs in the tiers of distribution, and have not yet all stripped out by discounting and price reductions. 2023 is definitely a “trough year,” but we are not as confident in the prediction for 2024 because of the new bicycle riding and purchaser demographics.  

August 13: “Multinationals turn to generative AI to manage supply chains.Financial Times: “Some of the world’s biggest companies are turning to artificial intelligence to navigate increasingly complex supply chains as they face the impact of geopolitical tensions and pressure to eliminate links to environmental and human rights abuses. Unilever, Siemens, and Maersk are among those using AI to negotiate contracts, find new suppliers, or help identify those connected to issues including the alleged repression of Uyghur Muslims and China’s Xinjiang region. Although AI support in supply chain management has been used for years, and the development of so-called chain management has been used for years, the development of so-called generative AI technology has been offering more opportunities to further automate the process … Up to 96 percent of supply chain professionals are planning to use AI technology, according to a survey this month of 55 executives by logistics group Freightos, although only 14 percent were already using it.” HPS Analysis: All of the major bicycle brands selling in the bike shop and specialty retail channels are multinational at $1 billion or more in sales revenue. The top-tier OEMs and component brands are also multinational, with sales revenue of $1 billion or more. HPS believes the top-tier multinationals in the bicycle industry, including the large mass merchants in North America and Europe, are turning to generative Artificial Intelligence (AI) to manage their supply chains. Generative AI means the process of analysis, tracking, mapping, generating contracts, letters of credit, purchase orders, tracking shipments, and more, are either totally automated or partially so. As the survey indicates, almost all plan to employ generative AI systems to manage their supply chains, but only a minority are currently doing so. Big changes are coming in supply chain management, and the bicycle industry needs to both adopt the new methodologies, and openly share the data and information generated with every touch point in the supply chains.

August 14: Vosper: Midsummer Blues for the Specialty Retail Channel.” Bicycle Retailer and Industry News: “It’s been a long, tough spring, and now it’s shaping up to be an even longer, tougher summer. Not only has the weather across most of the United States been terrible for business – unprecedented heatwaves plus massive rains, and even tornadoes and flooding, depending on what part of the country you’re in – but consumer demand continues to be weak in many product categories, not just bicycles. As a result, bike industry sales are way down, and the massive inventories we carried into 2023 are still with us. If anything, the product oversupply has increased each spring. Although there are still shortages at some high-end price points, many of the bread-and-butter bikes we took on in Q4 of 2022, and the beginning of 2023, are still with us. HPS Analysis: Rick Vosper does his usual thorough job of logically presenting the details, and in this case the grim facts, of where the American specialty retail channel is, and where it is probably headed. This article is a must-read, and Rick is quite right in that the specialty bicycle channel is really good at shooting itself in the foot,  in this case by unnecessarily introducing 2024 models when 2023 merchandise is still available, and heavily discounting direct to consumers, and devaluing the finished goods inventory still in retail inventory. This is not all, but covers the highlights. One point that I believe needs to be made relates to climate change and “… the weather across most of the United States” being terrible for business. While absolutely true, the bad weather that will be terrible for our business and all outdoor-related businesses has become the new normal, and our industry needs to plan climate and weather-related disruptions into our annual planning and forecasting going forward, including communicating with customers.

August 14: “China’s Worsening Economy Is Hurting Corporate America.” The Wall Street Journal Business: HONG KONG – “China’s deepening economic slump is damaging the fortunes of big American companies deeply rooted there, with some growing increasingly pessimistic that the country’s long-awaited post-pandemic boom will materialize. Companies embedded in China’s ailing manufacturing, construction, and export industries are reporting weaker sales. In some cases, they are warning of further trouble to come as growth grinds to a near halt, and economic readings are dour.” HPS Analysis: We have subscribed to the conventional wisdom that the top-tier bike shop brands established distribution and retail stores in China starting in the 1980s. We do know that the top-tier OEMs like Giant, Merida, and Ideal have large manufacturing footprints in China, as do most of the component manufacturers. While none of them are of the size in terms of revenue as the American companies named in this article, we believe they all have distribution established inside China, and they will be adversely impacted by a worsening Chinese economy. The ripple effect will be felt during the last half of 2023 and into 2024.

August 14: “Is the Bike Industry in Trouble – Or Is It Making Another Comeback?Bicycling: “Between the COVID-19 bike boom, and the slump in sales that followed, the cycling industry has been on a wild ride for the last four years. But industry experts say that by 2024, the business of bikes may finally stabilize. Admittedly, it’s hard to see an end in sight now, with brands like Van Moof declaring bankruptcy, All City Cycles announcing their closure, Bell announcing layoffs, and bike behemoths like SRAM and Shimano still taking hits to profits quarter after quarter. According to a recent Forbes article, major players in the cycling space in Taiwan are going so far as to call this moment in time a ‘super cold winter’ due to falling demand but huge overstock. HPS Analysis: This is the bicycling consumer press covering what the bicycle industry trade press seems reluctant to come to terms with, i.e. the bike industry is in trouble. The editors at Bicycling see the sales and discounts, and also the shifting ad revenue, and as the article acknowledges, read the international press coverage. It is interesting that the Forbes article is an authoritative source, and neither the bicycle industry association nor the industry trade publication.    

August 14: “NBDA to Host Special Industry Supplier Update with Guest Expert Bob Margevicius.” Bicycle Retailer and Industry News: “The National Bicycle Dealers Association (NBDA) is excited to announce an upcoming informative webinar titled: ‘NBDA Special Industry Supply Update’ featuring guest expert Bob Margevicius, executive vice president of Specialized Bicycle Components.” HPS Analysis: Over 300 folks from the bicycle business signed in, and stayed for this amazing webinar that logically explained the current status of the bicycle supply chain using Bob Margevicius’ insightful analysis of the most current data available. Here is the link to the recording of the webinar, and HPS urges everyone who receives this newsletter to watch and listen carefully, even if you have already seen it.

August 15: “Pacific Northwest Heat Wave Could Break Temperature Records through Thursday.” National Public Radio Weather: “Numerous heat-related warnings and advisories are being issued for a dangerous heat wave blanketing the Pacific Northwest to the northern Rocky Mountains this week. High and low temperatures could tie or break records. The National Weather Service (NWS) urged people in parts of Washington, Idaho, Oregon, Montana, and Northern California to prepare for dangerous triple-digit temperatures this week, with little reprieve due to record-warming overnight temperatures until Thursday.” HPS Analysis: We are going to keep hammering on this – bad weather that will affect the ability to get outside to ride a bicycle is a here-and-now, recurring issue in all regions of the country. The bicycle business needs to get ahead of managing this issue, and invest in and develop a “bicycling weather channel” that retailers and consumers can access 24-7 in-store and online, to help bicyclists plan when and where they can get outdoors. Developing and stocking bad-weather riding gear and emergency kits opens new opportunities. 

August 15: “The 10 Brands with the Most ‘Influential’ Branding Are…” Chain Store Age: “The controversial OnlyFans platform topped the list, with an average of 147,736 combined monthly searches, according to Web design company Digital Silk, which analyzed search data for more than 200 of the world’s largest brands by combining each name with the terms ‘logo,’ ‘brand,’ and ‘branding,’ to see which brands people are searching for the most in America.” Here are the Top 10 most influential brands, as ranked by Digital Silk: OnlyFans, Instagram, YouTube, Starbucks, TikTok, Facebook, Nike, Amazon, Apple, and Jordan. HPS Analysis: Influential branding is the key takeaway here. What influences average age 65 is far different than what influences average age 25, and when it comes to the bicycle market, the pandemic profoundly changed the “most influential branding,” So has the Internet, and who the influencers are, that sway the brand thinking and preferences. If you want more proof, visit electrek.co and electricbikereport.com, and take a look at the brands they have tested and are recommending, compared to bicycling.com.

August 16: “Heybike Receives UL2849 Safety Certification.” Bicycle Retailer and Industry News: SAN FRANCISCO – “Heybike, a leading e-bike brand, is proud to announce that it has received the UL 2849 battery safety certification. Receiving this certification validates Heybike’s constant pursuit of quality and safety assurances underlined in its design and manufacturing process. Strict quality controls are integrated into every stage of Heybike’s production process, from design conception, down to the finished products that reach consumers.” HPS Analysis: Heybike is a brand of e-bike that you find frequently on Amazon and Walmart.com. However, this DTC second or third-tier e-bike brand has launched UL2849 Safety Certification as a marketing tactic, joining a small but growing number of e-bike brands that are promoting and marketing UL2849 Safety Certification as an important difference between their brands and all the other brands of e-bikes in the American market, including, at least for now, all the top-tier brands. The top-tier complain that testing and compliance with UL2849 is costly, and will take a long time to implement. Heybike and other brands are doing what HPS believes will become a rapidly growing trend of using UL2849 Safety Certification as a marketing tool to differentiate and capture market share in a turbulent consumer marketplace.   

August 16: “Target Slashes Full-year Earnings Forecast as Retailer Struggles to Win Over Thrifty Shoppers.” CNBC: “Target on Wednesday missed quarterly sales expectations, and slashed its full-year forecast, as it again had trouble convincing shoppers to buy more than necessities. The big-box retailer cut both its full-year sales and profit expectations. Target offered a gloomier outlook, even as some top economists have scrapped calls for a recession, and government data show signs that inflation is cooling. The company said it now expects comparable sales to decline by about mid-single digits for the full fiscal year, and earnings per share to range from $7 to $8. It previously anticipated comparable sales would range from a low single-digit decline, to a low single-digit increase, and earnings per share would come in between $7.75 and $8.75. HPS Analysis: The second largest U.S. mass merchant retailer of bicycles is having a difficult time as the consumer market continues its shift to lower-priced value. What isn’t included in this article is an additional problem Target is having with theft and shrink. As far as HPS knows, Target has not pursued an aggressive private-label bicycle program. Accordingly, the decline as it impacts the bicycle business falls on suppliers like Pacific Cycles, now owned by PON.

August 17: “Walmart Lifts Profit Outlook Again on Boost From Bargain Seekers.” Bloomberg: “Walmart Inc. raised its annual profit forecast again, but struck a cautious tone on consumers and the U.S. economy. Rising borrowing costs, and the resumption of student loan repayments, will add to the strain on U.S. household budgets in the coming months. After a strong first half of the year, the midpoint of the retailer’s profit forecast for the current quarter slightly trailed analyst estimates. ‘Jobs, wages and pockets of disinflation are helping our customers,’ Chief Executive Officer Doug McMillion said on a conference call with investors and analysts. ‘But rising energy prices, resuming student loan payments, higher borrowing costs, tightening lending standards, and a drawdown in excess savings, mean that household budgets are still under pressure.” HPS Analysis: The largest retailer of bicycles in the mass merchant channel, and in the U.S., is doing well, and better than its leading competitors. As far as HPS knows, Walmart is pursuing an aggressive private-label bicycle program which is resulting in even more reduction in orders to suppliers like Huffy, Pacific Cycle, and Kent. Walmart, through the Walton Foundation and the companies owned by the Walton family, has become heavily involved in bicycling, and is actively funding bicycling infrastructure expansion throughout Northwestern Arkansas. The bicycle industry is gravitating to Bentonville, AK, the epicenter of bicycling activity and global headquarters for Walmart. The Cycle of Influence will be held there in September, followed by the PeopleForBikes SHIFT23 in October.

August 19: “Road Safety Emergency Declaration Yields Promising Results in Carlsbad, California.” SMARTCITIESDIVE: “Injury-causing accidents dropped 19 percent year over year, turning around a trend of growing accidents involving bikes. But ongoing efforts will require a lot more money. HPS Analysis: This is a promising series of events that provides a case study for advocates to take to cities. The declaration of a road safety emergency released funding that allowed education and enforcement that dropped injury-causing bicycle/e-bike accidents by 19 percent year over year. That is the good news. The bad news is that more funding will be required to maintain the program in Carlsbad, and expand it to other municipalities in California, and around the country.

August 18: “The Panama Canal Has Become a Traffic Jam of the Seas.” The Wall Street Journal: “More than 200 vessels are stuck on either side of the waterway as a serious drought cuts crossings. A flotilla of ships is stuck on both sides of the Panama Canal, waiting for weeks to cross after the waterway’s authorities cut transits to conserve water amid a serious drought. Vessel-tracking data shows more than 200 ships currently waiting to transit, a figure that has been climbing since the canal capped daily transits to 32 last month from an average of 36 under normal conditions. The waterway’s entrances on the Pacific and Atlantic oceans are dotted with ships that are backed up for more than 20 days.” HPS Analysis: The steam-ship lines are rerouting ships around South America or North Atlantic routes. This is not the result of too much shipping volume. It is the result of serious drought conditions lowering the water levels. Container ships are being partially unloaded to reduce draft and allow them passage. This is climate change’s impact on global shipping. For the bicycle business there has not been any large amount of shipping dependent on the Panama Canal, and it is common practice to offload container ships at West Coast ports, and put East-bound containers on stack trains to the Midwest and East Coast.  

August 18: “Survey: 66% Percent of Americans Would Back Pro-Tariff Presidential Candidate.” Sourcing Journal: “Brands and retailers calling for an end to the Trump-era Section 301 tariffs may be out of step with the views of the typical consumer. New data shows that two-thirds of Americans believe the U.S. government should slap more tariffs on China-made goods.” HPS Analysis: Let’s be clear – the 25 percent punitive Section 301 tariffs, which are in addition to existing tariffs, are paid by the importer of record, not the Chinese manufacturer or shipper. All tariffs are paid by the bicycle brands, and are passed along to retailers who pass them along to consumers. The anti-China sentiment has simply gotten out of hand and been taken too far. HPS believes PeopleForBikes understands this, and is part of the American business community lobbying against the Section 301 punitive tariffs that should be struck down, leaving the regular tariffs on imports from all source countries, including China, that have been in place for almost 50 years. 

August 22: “Nike Suffers Record Rout on China Concern, Inventory Woes.” Bloomberg: “Nike Inc. posted a record streak of losses as concern over China’s sluggish consumer recovery builds, and elevated merchandise stockpiles continue to weigh on profitability, according to the activewear industry. The stock slid 1.4 percent to $101.46 on Tuesday, falling for a ninth straight session in its longest losing streak since the company’s initial public offering in December 1980. The latest drop came after retailer and Nike customer Dick’s Sporting Goods Inc. reported disappointing fiscal second-quarter results, and cut its profit outlook for the year, due in part to more theft at its stores. Nike’s weakness coincides with increasing signs of a soft consumer rebound in China, which is a key growth market for the sports gear giant. China’s retail sales growth decelerated to 2.5 percent in July, worse than the median forecast of 4 percent … The rout has wiped out nearly $13 billion of Nike’s market value, which currently stands at $155 billion.” HPS Analysis: We have said before that we think the athletic shoe industry is a close parallel to the bicycle industry as it related to the Bullwhip effect, and the inventory overhang that it created in supply chains, and a slowing of consumer demand beyond the overall slowing in retail sales. Nike is a specific example, although the bicycle business doesn’t have a single brand valued over $150 billion. Of note is Nike’s counting on China as a key growth market, which is also similar to bicycle brands like Giant, and we think others of the multinationals.   

August 22: “Ace Hardware Aims for a Total of 170 New Stores in 2023.” Chain Store Age: “Ace Hardware has already cut the ribbons on 100 new stores in the United States in 2023, and the Oak Brook, Illinois-based company promises that 70 more will be in operation by New Year’s Day 2024 … Ace continues to prove that local, service-based hardware stores remain relevant in a segment dominated by Home Depot and Lowe’s. It has opened more than 1,100 locations in the past five years, and last year delivered shareholders a 39 percent return of $345 million. Many of those shareholders are the independent operators of its stores, which now number more than 5,800 in 60 countries and all 50 states. Ace’s sales last year topped $22 billion.” HPS Analysis: Ace Hardware is the largest dealer-owned retail hardware business in, we think, the world, but certainly in the U.S. The point is, as the article notes, Ace “… continues to prove that local, service-based hardware stores remain relevant” with competitors like Home Depot and Lowe’s. For the 15th time in 16 years, Ace was ranked highest for customer satisfaction among home improvement retailers by J.D. Power in 2022, with a score of 869 out of a possible 1000. Lowe’s and Menards tied for second place with scores of 849. At one time in its history, Ace Hardware was a cooperative, which is a business model that has been tried with limited success in the U.S. The supply side has not supported dealer cooperatives in the past, but the times, the channels of trade, and the consumer market demographics all changed during the pandemic. Perhaps it is time for bike shops to revisit the cooperative business model.

August 24: “Merida Reports First Half Year Sales and Profit Decrease.” BIKE europe: CHANGHUA, Taiwan – “The sparse numbers reported by Merida Industry Co. clearly indicate that its 2023 export position is in decline compared to 2022. The bicycle manufacturer posted a single-digit sales decrease, and a double-digit drop in profit, for the first half of 2023 … Merida’s 2023 half-year sales were 6.6 percent down.” The half-year profit was also down 38.8 percent. HPS Analysis: While we will never see the private multinational companies’ financials, at least if they stay out of Chapter 11 or 7, the public multinational companies have to disclose quarterly, as Shimano and Giant have. Merida has now disclosed its Q2 and first-half financials, although as sparsely as it can. It comes as no surprise that Merida’s first-half sales were down 6.6 percent, or that profit was down 38.8 percent. Although it was not mentioned, our concern is the amount of business Merida is doing in China, and the impact a downturn in the Chinese business will have on Q3, and the second half of 2023.

August 25: “Dick’s Sporting Goods, Macy’s Flash Warning Signs on U.S. Consumer Spending.” The Wall Street Journal: “Rising levels of theft, student-loan repayments, and credit-card delinquencies, cloud earnings picture for retailers … The readouts from Dick’s and Macy’s illustrate the economic challenges that persist among sellers of consumer goods. Spending on items such as apparel, electronics, and sporting goods, surged early in the pandemic, but slowed significantly starting last year, causing whiplash among retailers that bet on buying patterns continuing at higher levels.” HPS Analysis: Dick’s Sporting Goods is the largest of the Full Line Sporting Goods Channel bicycle retailers. Slowing sales of sporting goods and theft are dragging down gross sales and profitability.   

August 29: “Raimondo Says Business With China Is Key But Increasingly Risky.” Bloomberg: “U.S, Commerce Secretary Gina Raimondo argued that China is driving away American companies by making investments in the world’s second-biggest economy increasingly hazardous.” HPS Analysis: We will have to wait and see if Commerce Secretary Raimondo was able to get this message across to the members of the Chinese government that she met with on her late August trip to the PRC. HPS doesn’t want to belabor this, but Secretary Raimondo has made it very apparent to the PRC leadership that old behavior and new regulations are driving American companies away. The real question is the impact on the established PRC supply chain to the U.S., which is primarily Taiwanese owned.

August 29: Study: “Secondhand Market Will Reach $276 Billion in Five Years.” Chain Store Age: “According to the 2023 Recommerce Report from mobile secondhand marketplace OfferUp, 85 percent of three percent from 2022. In addition, 27 percent of respondents ventured into the secondhand market for the first time within the last year in 2023, there was a 27 percent increase in secondhand sellers compared to the previous year. As a result, the secondhand market is projected to reach $188.5 billion by the end of 2023, and $276 billion by the end of 2028, representing a 58 percent growth rate, outpacing the overall retail market by 4.4 percent.” HPS Analysis: The NBDA conducted a fantastic webinar featuring James Moore, who went through all the detail for a bike shop developing a very profitable previously-owned bicycle and e-bike department of their retail business. The webinar was recorded and is available by contacting the NBDA at www.nbda.com. This article confirms the other articles we have been reporting on, indicating the growth in the circular economy. The NBDA Cost of Doing Business shows that the highest gross margin product segment is used bicycles and e-bikes at 50 percent.  

August 30: “Shipping’s Peak Starts Petering Out.” The Wall Street Journal: “Operators brace for a second straight fall with only tepid gains during the typically busy time of the year. Industry experts point to ongoing concerns over consumer demand as a crucial damper on shipping volumes.” HPS Analysis: This is confirming the continued slowing of exports of consumer goods from Asia and China for import into the U.S. Pre-pandemic, there was a late summer/early fall surge of imports to the U.S. of consumer goods for holiday sales. What this article indicates is that whatever shipping peak there was going to be has come, and appears to be petering out.”

August 31: “Ideal Bike Sees Double-digit Revenue Downshift in Q2.” Bike europe: TAICHUNG, Taiwan – “As the third in line after Giant and Merida, Ideal has also reported red figures for this year. While the bicycle manufacturer was still able to keep up its Q1 revenue at a comparable good level with a slight 1.8 percent decrease, Q2 2023 saw a double-digit downshift.” HPS Analysis: All three of the largest Taiwanese bicycle/e-bike OEMs with significant manufacturing footprints in China have now reported Q2 and first half 2023 results. Ideal initially reported downturns that were followed by a report that VanMoof went into Chapter 11 protection, owing Ideal over a million dollars. Ideal’s European manufacturing facility had been previously informed in April of the insolvency of its major German customer Advanced Sports GmbH.  

Contact Jay Townley: jay@humapoweredsolutions.com


July 6 “Porsche Sets Future Strategy for E-bikes.Bike Europe: FRANKFURT, Germany – “Porsche AG bundled its e-bike drivetrain activities under the umbrella of Porsche eBike Performance GmbH, which it founded in 2022. This includes the recently acquired brands Greyp and Fazua. The latter is celebrating its tenth anniversary this year, and a Eurobike presentation in Frankfurt was all about the lightweight e-MTB pioneer. However, the e-bike ambitions of the German company go beyond this. What can we expect from Porsche in the coming years?” HPS Analysis: This article by our old friend Jo Beckendorff is well worth reading in its entirety because it answers the question it asks. The article is based on an interview during Eurobike with Dr. Jan Becker, CEO of Porsche eBike Performance GmbH, who is responsible for “outlining the future strategy of all” combined Porsche bicycle business activities. What this article clarifies is the relationship between the two joint ventures Porsche eBike Performance GmbH and P2 eBike GmbH and Ponooc Investment, which is part of Pon Holdings, the same company that founded Pon Bike Group. HPS has been watching the automotive interest and investments in the e-bike sector since before the pandemic, and Bosch represents an automotive cross-over that has made substantial investments in the e-bike drive train business over the past two decades.

July 6 “As Downtowns Struggle, Businesses Learn to Love Bike Lanes.” Bloomberg CityLab: “From Manhattan to San Francisco, the need to rethink the urban core is encouraging business improvement districts to change their tune on prioritizing cars. In early March, New York City Mayor Eric Adams stood on a stretch of Broadway just above West 25th Street to present Broadway Vision, his administration’s plan to transform the famous corridor with bike lanes, low-traffic shared streets and plazas closed to cars.The mayor brushed off concerns that the changes would snarl traffic. ‘There’s a culture shift that must take place in this city,’ Adams said. ‘The number of pedestrians that walk clearly outnumber the number of drivers.’ Looking on next to Adams was James Mettham, president of the Flatiron NoMad Partnership. That’s the business improvement district (BID) that represents some of the largest developers and property holders on Broadway, including countless eateries and bars. HPS Analysis: We found this article surprising and exciting. While automotive traffic increased after the pandemic, and large cities removed micromobility lanes and reopened pedestrian and micromobility-only roadways to cars, trucks and busses, the fact that New York City continued with its plan for business improvement districts to work with and encourage neighborhood businesses to embrace and install bike lanes, low traffic shared streets and plazas closed to cars is hopeful! The success of these BID’s is economic proof of changing thinking about prioritizing cars.

July 7 “Taiwan June Exports Slump the Most in 14 Years on Weak China, U.S. Demand.” Reuters: TAIPEI, Taiwan – “Taiwan’s exports fell more than expected in June, slumping the most in almost 14 years, as the island struggled with persistent weakness in demand from the U.S. and China for its hi-tech products. As Taiwan is often considered a bellwether of global electronics demand, the sharp slump adds worries about a much weaker half of the year. June exports plunged 23.4 percent in value from a year earlier to $32.32 billion, the finance ministry said on Friday (July 7), the 10th consecutive month of decline. That was worse than a fall of 14.1 percent in May, and missed a Reuters poll forecast for a 13.35 percent contraction. HPS Analysis: Taiwan is also considered to be a bellwether of global high-end bicycle and e-bike exports to North America and Europe. This export slump is an indicator of the overall bicycle business in the American market, although what is selling are the new 2023 models introduced by the high-end brands. Exports typically slow during the third quarter but start to pick-up toward the end of Q3 and into Q4, as importing brands stock up to fill dealer orders for the new year, and DTC brands fulfill consumer orders. HPS doesn’t project this happening during the last half of 2023 as the imbalance between supply and demand continues in the face of low demand to clear inventory, and declining consumer demand at the high end as the result of continued increases in interest rates. Upper-income cyclists still have the economic wherewithal, but typically pull back on purchases in times of economic stress.   

July 10 “Rad Power Bikes Gives up on European E-bike Market, Focuses on U.S. Instead.” electrek: “After half a decade of operations in Europe, Seattle-based Rad Power Bikes is closing down its E.U. operations this year. The company cited its intention to refocus on the North American market. The company has been selling its models in Europe since 2018 when its E.U. launch marked the entry of widely-affordable electric bikes into the market. At the time, the RadWagon’s European entry was described as the ‘first high-powered longtail cargo e-bike to be available in the European market.’ The RadRover, which was launched as the RadRhino in Europe, also helped boost the popularity of fat tire adventure-style e-bikes in the market, similarly to the American model’s effect in the U.S. market several years earlier. HPS Analysis: Rad Power Bikes was valued at $1.65 billion in October 2021, according to PitchBook, making it not only one of a handful of “unicorn” startups in the Seattle region, but one of a handful of “unicorns” in the global bicycle business, although I do not believe it was given this specific recognition. Rad launched in 2007, and began selling e-bikes directly to consumers through online sales in 2015. It grew into the leading e-bike seller in North America, and raised $304 million in 2021. According to GeekWire news, a local Seattle-based newsletter, the company plans to lay off fewer than 40 employees in Europe by the end of 2023, making this the fifth round of job cuts since April 2021. Mike Radenbaugh, who helped start the company in 2015, stepped down as CEO in November 2022, and is now board chairman. He was replaced by Phil Molyneux as president and chief operations officer. Molyneux was previously president at Sony Electronics and Dyson America. The company has faced multiple challenges recently, including a wrongful death lawsuit related to property damage, and the recall of around 30,000 units because of a safety issue. Under Molyneux, the withdrawal from Europe is reported as part of a broader effort to reign in spending and focus on safety. Rad Power Bikes will be watched carefully as relates to the current bicycle business shakeout.

July 11 “Retail Defaults Set to Jump This Year, Moody’s Says.Retail Dive: “Strong balance sheets have become even more crucial for retailers, according to a report from Moody’s Investors Service released July 10. Over the next 12 months, Moody’s expects defaults among retail and apparel to jump from 6 percent to 8.6 percent. Elevated product, labor, and freight costs, higher markdowns, and weakening consumer spending have driven profits down, per the report. Home goods, apparel retailers, and smaller companies are especially at risk. With interest rates up, credit is more expensive. Therefore, because of their higher debt levels, private equity-owned retailers, including department store Belk, are particularly vulnerable, Moody’s found.” HPS Analysis: While the National Retail Federation sees “positive momentum” for retail sales the second half of this year, Moody’s Investors Service is forecasting weak U.S. growth this year and next. “Weaker, highly leveraged companies continue to have a tough time accessing capital in a market where investors remain risk averse,” Moody’s analysts opined in their July 10 report. HPS agrees, and retailers with little financial cushion could buckle under the pressures of the current economic environment, with excess inventory acquired at high landed costs and sales and discounts undercutting inventory value in the marketplace. There are approximately a baker’s dozen multi-location specialty bicycle retail chains that exceed $10 million in annual gross revenue, including those owned by multi-national brands like Trek, Specialized, and Cannondale (Pon.Bike), and they all are experiencing sales declines as consumers spend more cautiously on goods and prioritize services. During the past 12 months, deteriorating liquidity and profitability have already claimed underperforming retailers. Some costs and overall inflation are easing, but high labor rates, availability of trained service technicians, and weak consumer demand for discretionary goods, are continuing to hurt profits.

July 12 “Inflation Eases to its Lowest in Over Two Years, but it’s Still Running a Bit High.” NPR Business: “Annual inflation hit 3 percent in June, the lowest since March 2021, a sign that the Federal Reserve’s aggressive rate hikes are having an impact, though it will likely have to take even more action. Measured from May to June, consumer prices rose just 0.2 percent, according to the Labor Department’s report on July 12. Rising rent and clothing prices last month were partially offset by falling prices for airfare, used cars, and furniture. Gasoline prices rose 1 percent last month, but are down more than 26 percent from a year ago when pump prices hit an all-time high of more than $5 a gallon.” HPS Analysis: Though this report shows that inflation continues to ease, it is still running higher than the 2 percent target that the Federal Reserve has set. As this analysis is being written, we know that the Fed raised the prime rate by a quarter percentage point in late July, with the intention of further cooling the American economy and easing inflation even further, until it reaches the 2 percent target. More economists are signing on to the “soft-landing” way of thinking, as the American economy continues to show slowing, but with sufficient employment to keep the economic engine running. The American bicycle business has not yet recovered from the rapid ebbing of consumer demand at the end of 2022, just before the pandemic subsided. As consumer demand continues to contract, as the Fed intends, the bicycle business continues to struggle with slow sales that have made it impossible to sell down and reduce the unprecedented finished-goods inventory that amassed in the supply chain during the pandemic-induced demand surge. HPS opined that the American bicycle business entered a classic shakeout in the last quarter of 2022, and we hold to this declaration. Shakeout is a term used in business and economics to describe the consolidation of an industry or sector, in which businesses are eliminated or acquired through competition. It may also refer to a situation in which many investors exit their positions, often at a loss, due to uncertainty or recent bad news.

July 13 “VanMoof Enters Chapter 11 Status After Months of Rumors.” Bike Europe: Amsterdam, the Netherlands – “The district court of Amsterdam has granted VanMoof Holding B.V. preliminary suspension of payment (chapter 11 status). It marks the end of many rumors about the financial stability of VanMoof.” HPS Analysis: VanMoof was founded in 2016, and successfully raised a total of €200 million from venture capitalists over the next seven years based on its DTC business model, which included innovative and unique designs, high-tech functionality, and extraordinary customer service. Once referred to as the “Tesla of micromobility,” reports indicate that the brand was thwarted by servicing issues, and the additional costs that came with repair and warranty. Over the last three weeks, a variety of opinions have risen about the problems encountered, and the attempts by management to get back on financial track, but it appears this specific business model has not gained sound business traction sufficient to maintain it during a market shakeout.

July 13 “China’s Drop in Exports Signals Deepening Slowdown in Global Trade.Wall Street Journal Global Trade: Singapore – “Exports are crumbling in China and across Asia, showing the deepening toll that rising interest rates are taking on global trade and economic growth. Trade has been slowing for months, but the pullback has further to run, economists say, as central banks keep up their campaigns to beat back inflation, and the U.S. and Europe slide toward recession. Chinese exports fell at their steepest annual pace in June since the early days of the pandemic in February 2020. China isn’t the only Asian export powerhouse reporting sinking overseas sales. Exports from Taiwan fell 23 percent in June compared with a year earlier, while Vietnamese exports were down 11 percent. Exports from South Korea were down 6 percent, according to official figures compiled by data provider CEIC.” HPS Analysis: As we reported last month, American consumers have shifted their buying again this summer. During the pandemic, consumer demand shifted more to online and from services like eating out, going to movies, ordering take-out for home delivery, binge-watching streaming TV shows and movies, and splurging on goods online. After the pandemic, consumers shifted to visiting physical retail stores, and shifted the services they spent money on. During the summer consumers shifted again, this time to doing more shopping online before going to a down-market physical store to buy, and again changing some of their selection of services. In general, consumers reacted to the Federal Reserve increasing prime rates to slow the economy, and not only shifted from high-end and middle-market retailers to lower-end retailers, but also quit spending as much on electronics, home improvements, and other consumer goods. Asia and primarily China are still America’s factories, and when Americans cut back on demand for goods, those factories have fewer orders, and manufacturers lower quantities of goods. It is still all about consumer demand.

July 13 “QBP and TPC Make Staff Reductions.” Bicycle Retailer and Industry News: Bloomington, Minn (BRAIN) – “Distributor Quality Bicycle Products and retailer The Pro’s Closet each announced workforce reductions this week. Each cited the industry’s inventory challenges as cause. QBP said it reduced its workforce by 5 percent on July 12. The distributor said the layoffs affected multiple departments at the company’s U.S. facilities, and its U.S. and Canadian distribution centers remain open and fully operational.” QBP is the largest, and one of the few certified B Corporations in the American bicycle business. “On July 13 The Pro’s Closet, a Colorado-based retailer of used and new bikes, confirmed that it made workforce reductions. The company declined to say how many employees or what percentage of staff was affected.” HPS Analysis: Since this article appeared on the BRAIN website, we have been asked several times by industry insiders “… what’s up with Quality Bicycle Products?” Our response: “…QBP is being honest!” There are very few public companies in the bicycle industry, and the majority are privately-held brands, and companies that have no legal obligation to make public reports about revenue, profits, or staffing issues. QBP, to the credit of both proprietorship and management, made the decision to become a certified B Corporation, and in the process pledged to be more transparent to their customers. Pro’s Closet is a DTC retailer owned by a VC firm, and while not a certified B Corporation, is being transparent with the trade. Both are to be complimented for doing what the rest of the bicycle industry has been hesitant to do, and that is being transparent and honest about the current situation, and the near-term challenges and long-term future.

July 14 “Is Mexico the New China? Nearshoring and Reshoring Experts Weigh In.Sourcing Journal: “Three years ago, the way supply chains operated around the globe changed dramatically as the COVID-19 pandemic shut down factories, halted production, and created shipping and logistical logjams that would persist for nearly two years. In the time since, many of those pandemic-related issues have been resolved, but geopolitical events such as the Russian invasion of Ukraine, and the growing tensions between China and Taiwan, have created new problems for those sourcing abroad. These events, coupled with other factors, have led many companies to explore reshoring their product to the United States, or nearshoring to neighboring areas such as Mexico and Latin America. Deloitte estimated in November that American companies were expected to reshore 350,000 jobs in 2022.” HPS Analysis: There are a growing number of articles about this and similar subjects. Mexico does have the potential to become the “new China” or the “new factory” for the U.S. with many advantages, including cutting finished goods lead times by at least 1/3, but for the bicycle business, like many other industries, nearshoring and reshoring remain extremely complicated and very difficult to achieve, starting with the fact that there is no common agreement among the members of the so-called American bicycle industry. I say “so-called” because there is no U.S. domestic bicycle manufacturing currently being done in the U.S. (by the CPSC definition of bicycle). There is bicycle and e-bike assembly, but there is no manufacturing defined as fabricating frames and forks, as well as assembling the final end item. This is because the U.S. is a bicycle import-dependent country, and has been for over 30 years, that the execution of a reshoring or nearshoring business plan is so complex and difficult. This, in HPS’s opinion, doesn’t mean it cannot be done successfully, but it demands knowledgeable and careful planning.

July 15 “Weeks of Extreme Heat Strain Small Businesses and Economy.” Wall Street Journal: “Heat waves stretching across large parts of the globe are straining power grids and shutting businesses that can’t keep their workers cool. Some of the hardest-hit areas will face hotter temperatures in the coming days, forecasters say, adding to the risk’s that infrastructure will fail. More than 100 million Americans are being affected by the heat barrage, according to the National Weather Service. A streak of 110-degree days is frying Phoenix, and an unrelenting heat wave is punishing Texas and other parts of the South.” “Researchers studying the impact of recent heat waves found that they can cut economic growth. There are ‘pretty clear signals that the warmer years are associated with lower output,’ commented an economist at the University of Arizona who studies the economic consequences of climate change. Excess heat hurts labor productivity, and can harm learning capabilities in school since people aren’t using their brains as well in the heat. HPS Analysis: Weather, including heat waves, are now in the top three influences on American bike shops, according to the 2023 edition of the NBDA Specialty Bicycle Retail Study. Bike shops large and small need to monitor and adjust business plans and daily merchandising to the weather. Make sure that store policies and procedures create the safest and most productive working environment for workers, and a good shopping environment for shoppers and customers. Track weather and weather events daily, and provide shoppers and customers access to weather forecasting in-store and online. Provide tips on what bicycle riders need to carry with them to be prepared for weather events, and stock and sell the items you recommend. Conduct classes on how to be prepared for weather events. Investigate indoor exercise products and trainers, and consider providing indoor training and riding space that customers can engage by the hour, day, month, or year.

July 15 “Multinationals in China Accelerate Push to Decouple Data.Financial Times: “Beijing’s move to expand anti-espionage rules and data regulation has companies racing to hive off systems. Global companies are accelerating their push to decouple China data in response to the country’s increasingly stringent data and anti-espionage laws, as relations between Washington and Beijing deteriorate. The drive for full localization of data in China, and separation of information technology systems from the rest of the world, has accelerated over recent months as Beijing strengthens its control and regulation of data. U.S. consulting firms including McKinsey, Boston Consulting Group, and Oliver Wyman are splitting their IT systems, according to a half-dozen staff at the companies.” HPS Analysis: What this means is global companies are creating completely separate and autonomous IT and computer systems for China only, or exclusively. This way all data specific to China stays inside China, and is not sent across the PRC border. It still isn’t clear how much of this is actually going to be necessary, but the global players with offices and staff inside the PRC do not want to take a chance that their offices may get shut down by the government, and/or staff incarcerated. Worse yet would be American, Canadian, European, or Asian nationals being arrested, detained, or denied access to the PRC. While the likes of McKinsey, Boston Consulting, et al deal with this at a higher level, smaller multinationals in the bicycle industry like Giant, Merida and Ideal are caught like deer in the headlights of the new Chinese laws that they need to comply with while getting supply chains back in reliable operation, and keeping customers in North America, Europe and elsewhere in Asia informed and serviced. Data has become the lynch-pin of reviving Just-In-Time manufacturing and inventory management, along with figuring out how to provide it without being accused of spying and getting taken off to jail, or barred from entering the PRC.

July 17 “Bikeshare Is Still Growing in Popularity After Pandemic Cycling Boom.” Bloomberg: “The pandemic-era spike in biking has translated to continued growth for the largest U.S. bike-share systems. Annual ridership of bike-sharing programs in six U.S. cities jumped 27 percent in 2022 compared with pre-pandemic levels to almost 45 million trips, with 2023 on pace for another record jump, according to data from the US Bureau of Transportation Statistics. New York City’s system makes up most of the gains, with other major programs in Boston and Chicago also having more participation in 2022 than prior to the pandemic. While San Francisco and Washington, D.C., had lower ridership in 2022, this, too, may already be shifting. More recent government data shows that ridership in Washington, D.C., has far surpassed pre-pandemic levels in the first five months of 2023. ‘The pandemic resulted in a lot of people buying bikes or getting on bikes that they had not used in a good amount of time. So there were new people exposed to biking,’ said Ken McLeod, policy director for the League of American Bicyclists.” National expenditures on bicycles and accessories hit a nearly $9 billion peak in March 2021, per government data according to Alex Engel, a spokesperson for the National Association of City Transportation Officials. HPS Analysis: We have maintained for almost a decade that bike-share is, as the League of American Bicyclists points out, a way to expose new people to biking, including e-bikes. We encourage bike shops to support their municipal bike-share programs, and look into the profit potential of offering bicycle rental programs and rent or lease-to-buy options for consumers. The U.S. Bureau of Transportation Statistics numbers are also of interest, in that they paint the picture of a bicycle business that increased prices in the face of demand in 2020 that generated an increase in national expenditures on bicycles and accessories from $6 billion pre-pandemic, to a peak of $9 billion during the pandemic to just below $8 billion in 2023. This leads to the question: Where’s the beef?

July 21 “FDNY Commissioner Laura Kavanagh will testify about dangers of lithium-ion batteries” CBS New York: New York – “FDNY Commissioner Laura Kavanagh will testify before the Consumer Product Safety Commission about the dangers of lithium-ion batteries. Kavenagh is heading to Washington, D.C., next week to express concerns about the fire risks. She says lithium-ion batteries have caused 131 fires in New York City so far this year, resulting in dozens of injuries and 13 deaths. According to Kavanagh, batteries are now the second-leading cause of fire deaths in New York City.”

July 21 “Deadly Battery Fires from E-bikes, Scooters Prompt Action in NYC.Smartcitiesdive: “The city launched an education campaign, as legislators push for new policies, and community groups strive to reach micromobility-reliant delivery workers. In New York City’s Chinatown in June, four people died in a fire caused by lithium-ion batteries in micromobility vehicles, bringing the city’s 2023 death toll related to such fires to 13. Since 2020, there have been nearly 500 of these fires in the city. Mobilized by the growing risk, the city has launched an education campaign, as local leaders push for new policies to prevent future micromobility battery fires. Community groups have joined in the effort as well, with many focusing on reaching the tens of thousands of delivery workers whose livelihoods depend on e-bikes and scooters.” “Local leaders are also pushing policies to prevent micromobility battery fires. In March, New York City Mayor Eric Adams signed into law new requirements that by September will ban the sale, lease, or rental of electric micromobility devices that are not certified by safety accreditation company Underwriters Laboratories.” HPS Analysis: FDNY Commissioner Kavenagh went on to make a detailed presentation to the four sitting Consumer Product Safety Commissioners on July 27 at the CPSC headquarters in Bethesda, Maryland. She ended her testimony by stating that the FDNY had declared an emergency relative to the storage and charging of lithium-ion batteries for micromobility devices, and was actively inspecting bike shops and other charging locations, and issuing tickets for non-compliance with applicable New York City (NYC) fire codes. HPS is researching the applicable NYC fire codes for the NBDA, and will be issuing a report and guidelines for NBDA bike shop members in NYC. HPS will also be actively researching additional assistance for NYC delivery workers to purchase micromobility devices, including e-bikes, chargers and replacement batteries that are certified by UL.

July 22 “California Wants to Create a Driver’s License for Electric Bikes.” electrek: “A driver’s license for an electric bike? It could be coming soon in California. Believe it or not. That’s if some state lawmakers who drafted Assembly Bill 530 get their way. A new bill has been proposed to create such a driver’s license in California. The move is in response to many young electric bike riders who often take to the streets without having tested for or received a typical driver’s license for a standard car. That means they are often ignorant of many traffic laws and safety information.” “Assembly Bill 530, which will soon enter committee, would require both an online written test and a state-issued identification for riders who do not have a driver’s license. The bill would also ban riders under 12 years old from riding e-bikes.” HPS Analysis: This legislative proposal has already sparked a lively debate between The New York Times reporter Matt Richtel, who lives in Irvine, California, and electrek’s Micah Toll, who lives in Israel, with a variety of “experts” and wannabe’s tossing their comments in for good measure. The bicycle industry trade association is going to have to eventually take a policy position on this and similar legislation that is going to be introduced, because California is a bellwether state, as is New York, and will be followed by other state legislatures. The NBDA will also have to take a position, as will the League of American Bicyclists. The American bicycle industry is not prepared for the storm of federal and local ordinances, mandatory regulations, and state laws, that is fast approaching, and the NBDA is the only bicycle industry association that has formed and scheduled a Quarterly Forum to discuss being proactive and taking constructive action going forward.

July 23 “World’s biggest recreational bike ride begins anew for golden anniversary trek across Iowa.” Associated Press: Sioux City, Iowa (AP) – What bills itself as ‘the world’s longest, largest and oldest recreational bicycle touring event’ was more like the world’s biggest traffic jam Sunday as riders, packed together in a sinewy stream of brightly colored jerseys and shorts, churned across the Loess Hills on the western edge of Iowa. It’s called RAGBRAI – the Register’s Annual Great Bicycle Ride Across Iowa – and it promised to be bigger than ever this year, as the brainchild of two writers from The Des Moines Register celebrated its golden anniversary with a route similar to its first. That meant a start in Sioux City, where ambitious riders ceremonially dipped their rear tires in the Missouri River, and a finish for those with legs and the temerity to last that long seven days later in Davenport, on the Mississippi River.” HPS Analysis: I remember RAGBRAI when I was VP of marketing for Schwinn Bicycle Company, back in the day. We were a sponsor, and our cycling activities manager rode the event, and our advertising manager arranged for the delivery of a truckload of water melons to the official encampment for each night for the seven nights. Calling this the biggest recreational bike ride in the U.S. is no exaggeration. There were 20,000 official weeklong registrations and another 9,000 that secured day passes, but they were joined by thousands more who simply crashed the ride, which means there could have been more than 50,000 bike riders on the road to Davenport any day of the RAGBRAI. No matter what the number, I am dumbfounded that the world’s biggest recreational bike ride didn’t get any mention or coverage in the American bicycle industry consumer or trade press. If it did, I will be happy to be proven wrong.

July 24 “As Another Boom Wraps, CPSC Proposes Rules Update: Deadline is today to submit public comments online.” Bicycle Retailer and Industry News; Washington – “The last time the Consumer Product Safety Commission took an in-depth look at its bicycle safety regulations, it was the mid-1970s, and the industry was just emerging from that decade’s bike boom. The agency had only been launched in 1972.” “The CPSC’s 16 CFR Section 1512 came into effect on May 11, 1975, to address braking performance, structural integrity, frame and fork energy absorption characteristics, and seatpost and handlebar retention. Interestingly, bicycles were the first product the CPSC regulated after it became an actively funded federal agency. ISO 4210 – a standard created by the International Organization for Standardization – was created after the CPSC rules.” HPS Analysis: My business partner Mike Fritz and I were both quoted in this article that did not cover exactly what comments the CPSC wanted to receive from the public on or before July 24. The main subject was a petition from an individual on behalf of Woom, a DTC juvenile brand headquartered in Europe, that requested that the footbrake requirements in 16 CFR Section 1512 specifically for smaller sidewalk bicycles be revoked. In addition the CPSC asked for comments on the adequacy of requirements for bicycles in the commission’s rules, including electric bicycles. There were almost 300 written responses received by the commission from individuals, bicycle brands, component companies, PeopleForBikes (PFB), and the NBDA. There is no question that 16 CFR Section 1512 is old and outdated, and needs to be updated to cover the bicycle products of today, including electric bicycles. HPS agrees with the NBDA and PFB written submissions calling for CPSC to engage in rulemaking to adopt the latest edition of ISO 4210 including 4210-10 covering electric bicycles, and all or that portion required of UL 2849 to cover electric propulsion systems for electric bicycles including chargers and battery packs. And HPS also agrees with the NBDA and PFB in asking that the footbrake requirement be retained along with a new requirement that properly tested hand brakes also be allowed. This is the beginning of a very big and important undertaking for the American bicycle industry and business, and the United States Consumer Product Safety Commission. Buckle-up.

July 24 “Lyft CEO David Risher’s Efforts to Turn the Company Around: Cheaper Rides, Fewer Distractions.” Wall Street Journal: “New boss considers options for bike fleet, including a sale of the division or a partnership with an investor. Lyft is exploring strategic alternatives for its bike division, the latest in a series of moves by its new chief executive to turn around the struggling company. The company is looking to sell its fleet or forge a partnership with an investor that infuses cash into the division, according to people familiar with the matter. It wants the prospective buyer or investor to continue to list the two-wheelers on its app so riders don’t experience significant changes. The company bought a bike-rental operation in 2018, and the vehicles have been popular in several cities. New Yorkers took more than 114,000 rides a day in June through Lyft-owned Citi Bikes. But maintaining the fleet is an expensive logistical undertaking, and a distraction from the company’s core business, the people said. Lyft doesn’t own the cars used by the drivers.” “Since taking the reins as Lyft’s CEO three months ago, David Risher has cut hundreds of jobs, introduced new features for riders and drivers, and maintained that employees return to the office. Risher inherited Lyft at the same time the ride-sharing company was struggling with eroding market share, a sliding stock price, and low employee morale. HPS Analysis: As previously reported, bikeshare has been resurging in many large American cities since the end of the pandemic, but as this article reports, has run into financial problems that center on the cost to providers like Lyft maintaining a fleet of pedal and electric bicycles, docking stations. and the back-room systems required to run bikeshare systems for municipalities. The fault is with the business model not bikeshare as a service to the public, so it is up to the providers like Lyft (who happens to be the nation’s largest with 80 percent share), and the cities served, to get the economics of the business model worked out.

July 25 “U.S. Consumer Confidence Hits Two-Year High; Recession Fears Linger.” Reuters: Washington – “U.S. consumer confidence increased to a two-year high in July amid a persistently tight labor market and receding inflation, bolstering the economy’s prospects in the near term. But the economy is not out of the woods, with the survey from the Conference Board on July 25 offering mixed signals. Consumers remain fearful of a recession over the next year following hefty interest rate hikes from the Federal Reserve. While more consumers planned to buy a motor vehicle or house in the next six months, fewer anticipated purchasing major household appliances like refrigerators and washing machines. Consumers also continued to report that they intended to spend less on discretionary services, including travel, recreation, and gambling. They, however, expected to increase spending on healthcare, as well as streaming services from home.” HPS Analysis: The demand side remains confusing, with relatively high consumer confidence, a persistently tight labor market and receding inflation. The American bicycle business continues to experience receding demand that has not been strong enough, despite price reductions and discounts, to reduce the Bullwhip Effect inventory glut, including bicycles, e-bikes and accessories that is clogging up the supply side. Unfortunately, there is no longer an exclusive U.S. supply-side trade organization, as exists in other industries, that can meet, discuss, and act on supply-side solutions under the watchful eye of retained council.

July 29 “Fed Raises Rates Again.” The New York Times: “Federal Reserve officials raised interest rates to their highest level in 22 years, continuing their 16-month campaign to wrestle inflation lower by cooling the American economy. Officials pushed rates to a range of 5.25 to 5.5 percent, their highest level since 2001, while leaving the door open to further rate increases in the statement announcing their unanimous decision. Jerome H. Powell, the Fed chair, explained the move in a news conference, but offered few hints about how the central bank was thinking about its next steps. HPS Analysis: The American economy is amazingly resilient, defying conventional wisdom as consumer demand continues to drive it forward. You can almost see the image of the collective business community cringing and closing its eyes when the Federal Reserve raises rates like it did on July 29 to the highest level in 22 years. And yet within a week employment rates and new job creation are reported at either acceptable or better-than-expected levels, and consumers continue to buy both goods and services, although shifting what and how to suit their wants and needs. More economists are signing on to the notion of a soft landing for the overall economy, avoiding a recession. There are some, including HPS, who opine that the economy is on a razor’s edge, and the next three to four months will tell the tale as to whether the country slips into a recession or not. Stay tuned.

July 27 “Shimano Sees Big Opportunities to Enhance Market Potential.” Bike europe: Osaka, Japan – “Shimano regards 2023 as an ‘in-between year’ as Marc van Rooij, president Shimano Europe Group, explained at Eurobike. This is reflected in the financial results for the first half of 2023. The Japanese manufacturer reports a net sales decrease in bicycle components of 17.7 to percent JPY 204,986 million (€1.3 billion) year-on-year, and operating income decreased 39.5 percent to 42,093 million yen (€270 million). Shimano mainly attributes the slowdown in sales to the prolonged turmoil in Ukraine, interest rate hikes by the central banks of various countries to tame inflation, financial uncertainty in the U.S., and other factors exerting downward pressure on the global economy. In Europe, consumer confidence has started to pick up at a low level only, reports Shimano.” “For the short-term Shimano is less positive. ‘While market inventories remain at a high level, retail sales got off to a slow start due to unfavorable weather conditions in the European market in early spring. This is expected to cause a delay in the recovery of demand for our products in the second half of the year. Moreover, production cutbacks at factories are making it difficult for us to absorb the rise in the manufacturing cost ratio. Also for the North American market, Shimano reports weak retail sales of completed bicycles, and market inventories remain at a consistently high level. Meanwhile, Shimano is also facing the depreciation of Asian currencies caused by the ongoing U.S. dollar’s appreciation.” HPS Analysis: I am not sure what leadership role Shimano takes in Europe, but the fact that the company has a president of its Europe Group makes it clear how the North American market and the U.S. are thought of. I mean no disrespect to the good people running Shimano U.S.A., but the world’s largest bicycle component manufacturer and brand seems to leave the U.S. market to the tender mercy of the multinational bicycle brands and our inclusive trade association. Shimano is a great company with a strong cultural and family tie to the global bicycle industry and business, and I am proud to have been a friend to the second generation of Shimano brothers. With that said, I am looking forward to Shimano taking a more active leadership role in the American market, including being more transparent about lead times and product availability, both past and present.

July 27 “Industry asks CPSC for mandatory battery regulations.” Bicycle Retailer and Industry News: Bethesda, Md. – Mandatory federal regulations will be necessary to curb the growing fire danger from lithium-ion batteries, industry representatives said at a Consumer Product Safety Commission public hearing July 27. The nearly four-hour hearing consisted of three panels of industry, independent standards groups, and consumer safety advocates. ‘It’s not lost on me that this broad group of experts, including industry, and voluntary standards bodies, are all calling on us to implement a mandatory standard,’ said Commissioner Richard L. Trumka Jr.’ “In closing remarks, chairman Hoehn-Saric said the hearing convinced him that current voluntary standards are inadequate. He said the CPSC is working to strengthen those standards. He also said he was impressed by testimony asking for mandatory regulations. ‘Almost everybody who has come to testify before us has expressed support for mandatory standards for batteries and electrical systems for mobility devices. And such a standard would definitely make things easier for CPSC to engage in enforcement and provide a baseline safety for consumers out there.’” HPS Analysis: Chairman Hoehn-Saric went on to say that unfortunately the process for CPSC developing mandatory regulations can be “burdensome and slow,” and that the first line of defense needs to be the micromobility device manufactures and importers, as well as the retailers and online marketplaces that are selling these products to consumers. The CPSC chairman is correct in pointing out that it is the responsibility of the manufacturers and importers to test and certify their bicycle and e-bike products as meeting applicable standards and regulations. For bicycle products sold to U.S. consumers, HPS recommends certifying compliance with the mandatory 16 CFR 1512, and voluntarily to ISO 4210. For e-bike products sold to U.S. consumers, HPS further recommends certifying compliance with ISO 4210 through 4210-10 and UL 2849. We also recommend the American bicycle industry association initiate a safety & standards subcommittee to develop policies and compliance protocols for members.

July 31 “Walmart Expands Refurbished Goods Program with ‘Like New’ Items.” Chain Store Age: “Walmart is taking its used goods offerings up a notch to offer items ‘like newbut without new prices.’ The retail giant is expanding its Walmart Restored program which features refurbished tech items and appliances, with a new ‘Premium’ tier. Items that fall under the Restored Premium category are like new, showing no signs of cosmetic damage, and come with a one-year warranty and 30-day (or more) free returns, according to Walmart.” “The refurbished goods are featured in a dedicated ‘Walmart Restored’ section on the chain’s website, and carry the same designation. The items, from brands such as Apple, HP, Samsung, and KitchenAid, also pop up in search and will be available in select Walmart stores starting in the fall.” HPS Analysis: It appears that Walmart, the largest U.S. retailer and seller of bicycles, has fully embraced the Circular Economy with the expanded Restored program to now include premium products. HPS will watch closely for e-bikes to be included in the Restored program, including how lithium-ion batteries and chargers are presented and explained to consumers. Overall, bike shops should have a definite edge when it comes to previously-owned bicycles and e-bikes, and at 50 percent or higher gross margins, we encourage bike shops to embrace their own local version of a Previously Owned or Restored merchandise program.

August 1 “Americans for Free Trade: Clock is Ticking on China Tariff Exclusions Renewal.” Sourcing Journal: “The U.S. Trade Representative (USTR) is running down the clock on a decision regarding the continuation of China tariff exclusions, and a coalition comprised of dozens of trade groups is urging Ambassador Katherine Tai to address the issue promptly. Formed in 2018, Americans for Free Trade includes about 170 associations that represent brands, retailers, manufacturers, farmers, technology firms, energy companies, and other supply chain stakeholders. The collective on July 27 released an open letter to Ambassador Tai asking that she address the forthcoming expiration of tariff exclusions, along with subsequent COVID exclusions on Sept. 30, preferably by opting for their continuation. “In the last five years, American importers, including members of our coalition, have paid more than $183 billion in Section 301 tariffs on products imported from China.” “The product exclusions granted to date have provided limited relief for some companies over this time.” HPS Analysis: The American bicycle business has almost forgotten the Section 301 punitive tariffs in the amount of 25 percent that was added on top of the regular tariffs on all bicycle-related products imported from China, including e-bikes that had previously been subject to zero tariff. The Section 301 punitive tariff on Chinese imports has been suspended (as in not collected), but has not been eliminated and therefore hangs over the heads of virtually all importers of goods from China. The original Section 301 punitive tariff was imposed by the Trump administration, which issued the original exclusions, or suspension of collection. The Biden administration continued the exclusions and has not suspended the additional 25 percent duty, but also has not eliminated the Section 301 punitive tariffs because the have said they want to keep them as a bargaining chip with the Chinese trade negotiators. Given the current relations between the U.S. and PRC, further trade negotiations are a very remote possibility, and eliminating the Section 301 punitive tariffs would allow supply chain planning without the threat of importers having to pay an additional 25 percent to U.S. Customs, which would be added to product costs and inflation and eventually be paid by American consumers.

Contact Jay Townley: jay@humanpoweredsolutions.com.



June 5: “Retailers are starting to shed warehouse space as they pare back their logistics networks and reset their inventory strategies.” The Wall Street Journal Logistics Report: “Discount merchant Big Lots recently closed four of its smaller distribution centers, and hiring in the warehousing sector is in retreat.” The WSJ Logistics Report’s Liz Young writes, “The latest moves follow efforts by market leaders Amazon.com and Walmart to scale back logistics operations, part of a broad realignment underway now that pandemic-driven supply-chain disruptions have largely receded, and consumer spending patterns are shifting toward services. The impact is rolling across an industrial real-estate market that had been booming in recent years. Vacancy rates are ticking up from historic lows, and payrolls in the warehousing sector have fallen by more than 41,000 jobs in the past year. Several big retailers say they’re winding down their destocking efforts, but it looks like they’re still resetting their logistics networks.” HPS Analysis: There are two issues here. First is the commercial real estate market, which is now moving into a bad patch that includes the availability of warehouse space and vacant office space, including whole buildings. Retailers, wholesalers and suppliers that over-expanded are now divesting if they can. The second is the big retailers like Amazon and Walmart shifting their focus from so-called “destocking” to “resetting their logistics.” The same things are happening in the bicycle business, except no one is talking about it. The lack of transparency is not at all helpful downstream for specialty bicycle retailers and their business planning going forward.

June 5: “FDNY: New York Fire Department links more deaths to lithium-ion battery fires.” Bicycle Retailer and Industry News: “More people in New York City have died so far this year because of lithium-ion battery fires than all of last-year, according to recently released Fire Department of New York statistics. Entering June, according to FDNY data, there were nine deaths and 64 injuries attributed to fires sparked by lithium-ion batteries. So far, 65 structural and 32 non-structural fires, and 97 investigations into lithium-ion battery fires, have occurred.” HPS Analysis: While it is true that only some electric bicycles and lithium-ion batteries for electric bicycles were directly involved, the fact remains that no matter how small the number, electric bicycles were involved in some of these tragic fires and fatalities. It is time the bicycle business stops saying “it wasn’t us,” and pointing its finger at other mircromobility devices, and takes full responsibility for the role electric bicycle products have played, and goes all-in to inform, educate and protect consumers and retailers. This includes finding out what the FDNY needs, and go all out to provide it.

June 8: “Nearshoring gains momentum in Mexico, and it’s China’s loss.Sourcing Journal: “As shippers reevaluate their sourcing options, Mexico is gaining ground as a nearshoring hub, and stealing import share from China. Shipment volume from Mexico to the U.S. increased 20 percent year-over-year, when measuring the 14-day average number of tracked shipments, according to FourKites data.” HPS Analysis: Mexico, as this article points out, is gaining as a nearshoring alternative to China for many products, but not bicycles. The manufacturing base and infrastructure for bicycles are in place in Mexico, with the important exception of bicycle parts and component manufacturing. The same is true of South Carolina and Georgia in the United States. Both states are sites of either established or new bicycle assembly and distribution facilities, but both also lack the essential support of bicycle parts and component manufacturing. Since the American bicycle product supplier association was absorbed into the larger of the two advocacy nonprofits, and seems to have lost any fire in its belly for nearshoring or reshoring bicycle manufacturing.   

June 8: “Canada wildfires: U.S. East Coast sees worst air quality in years.” BBC News: “Washington D.C. and Philadelphia experienced their worst air quality in years as intense wildfires in Canada continued to impact millions. The poor conditions have forced event cancellations and grounded flights across the U.S. Nearly 100 million people are experiencing very poor air quality in North America.” HPS Analysis: Global warming and the ramifications, including wildfires, are creating air quality problems that make it difficult if not impossible to ride bicycles outside. Bike shops are fortunate to have indoor smart-cycles, trainers and exercisers that they can offer as alternatives to outdoor bicycling. The Schwinn Bicycle Company needed cold weather winter business to keep the plant in Chicago operating 70 years ago, and also turned to indoor products. The indoor exerciser was created from the front “harp” of a women’s bicycle, and was introduced to consumers through Schwinn franchised dealers to address this. A lot has changed since then, but the increase in air quality problems makes all forms of indoor cycling a viable option, and an alternative for American bike shops to offer consumers.

June 9: “Why do businesses keep raising their prices?CNN Business: “After two years of surging prices, economists still can’t agree on what has caused the world’s worst inflation crisis in decades. While the usual culprits cited by economists include pandemic-era supply chain bottlenecks, the war in Ukraine, and various U.S. economic policies, others say it’s due to ‘greedflation,’ the idea that companies use higher inflation rates as an excuse to jack up prices and grow their margins. However, according to preliminary findings in a New York Federal Reserve survey, there might be something else at play. The survey of 700 businesses across New York, Atlanta, and Cleveland found that the strength of customer demand outranked all other factors that companies weigh when setting prices, including steady profit margins and overall inflation. That means a business can essentially set prices as high as it wants, as long as they aren’t so high that they drive away the customer base. In other words, it’s Econ 101: Good, old-fashioned supply and demand.” HPS Analysis: Our editor believes in Econ 101, and the law of supply and demand, and doesn’t think much of the theory of greedflation. While I am neutral about the question, I do note that more than 82 percent of the businesses surveyed by the New York Fed said demand factored into their pricing decisions, while 52 percent of businesses surveyed said they take the overall rate of inflation into account when setting prices. Retail prices appeared to increase with elevated consumer demand during the pandemic. Bicycle purchasers were willing to pay higher prices, until they weren’t. While inflationary prices may have eventually driven consumers away, that still doesn’t explain why they continued to stay away after the discounting and prolonged sales kicked in, and prices tumbled.

June 11: “Is doing business in China becoming impossible for foreigners?Economist Business: “Selective enforcement of draconian data and spying laws is scaring Western companies. Judging purely by the steady stream of Western executives crossing the Pacific, China is picking up where it left off before the onset of COVID-19. In the past couple of weeks, Elon Musk of Tesla met with officials in Beijing on his first trip to the country in more than three years. At the same time, Jamie Dimon of JPMorgan Chase, America’s biggest bank, was hosting a conference in Shanghai that brought together more than 2,500 clients from around the world. Hundreds of business bigwigs have made similar trips in the past three months. President Xi Jinping’s top officials have been greeting them with a mantra that after a pandemic hiatus, ‘China is back in business.’ Once the executives settle in though, many are finding the place a lot less welcoming. In April, the government strengthened an already strict anti-espionage law, and according to the Wall Street Journal, put China’s spymaster in charge of cracking down on security threats posed by American firms.” HPS Analysis: Over the last 40 years, Western companies and investment firms have conducted due diligence utilizing the Chinese offices of American and European companies. In March, five local employees of Mintz Group, an American due-diligence firm, were arrested over what many suspect was a potential breach of local laws related to data security. A month later, Chinese authorities launched an investigation into Bain, a consultancy with headquarters in Boston, over apparently similar transgressions. These cases have sent “chills down the spines of foreign executives.” American companies are separating their Chinese branches, making them independent, or simply divesting and leaving China. The American bicycle business is currently doing everything it can to resource elsewhere in Asia, but is finding itself continuing to need components and parts from China. “Decoupling” is proving difficult at best, and since many American bicycle brands are dependent on OEMs with manufacturing facilities in China and Taiwan, the process of re-sourcing is proving difficult and disruptive.  

June 12: “Ocean freighter ordered to pay furniture retailer $9.8M.” Sourcing Journal: “The Federal Maritime Commission (FMC) slapped Maersk-owned ocean liner Hamburg Sud with a $9.8 million fine after it found the German container shipping company refused to fulfill shipping contract obligations with a furniture retailer. Hamburg Sud must pay Florida-based online furniture and home goods retailer OJ Commerce (OJC) on the grounds that it violated the Shipping Act of 1984 by preventing the importer from accessing contracted cargo space for its containers.” HPS Analysis: While not bicycles or bicycle accessories, this judgment by the FMC is, in the opinion of HPS, just the beginning of more legal and administrative findings and judgments against ocean container shipping companies that got greedy, and in some cases were simply overwhelmed by the sheer volume of demand for container shipments from Asia to North America.   

June 12: “Breaking up is hard to do, particularly when there’s so much inventory at stake.” The Wall Street Journal Logistics Report: “Sports apparel heavyweight Nike is going back to some of the retail partners it has stepped back from, as it looks for help in clearing out its stacked-up inventories. The WSJ’s Inti Pacheco reports Nike’s moves toward merchants such as DSW parent Designer Brands and Macy’s, follow years of efforts to sell more of its products directly to consumers, aiming to keep a larger slice of sales than what could be earned from bulk sales to retailers. Now supplier-buyer relationships are changing in a shifting market dynamic that left companies swamped with inventory. Nike last year started cutting orders with factories, and put discounts on a wider assortment of merchandise, squeezing profit margins. Nike’s renewed embrace of the wholesale channel marks a gain for merchants like Foot Locker that depend on big-brand suppliers.” HPS Analysis: Sound familiar? A large multinational sporting goods brand increases direct-to-consumer (DTC) distribution prior to the pandemic, comes out of the pandemic with a huge, $8.5 billion inventory overhang, and needs to get back into some of its former brick-and-mortar retail distribution to increase sell through. And if you are scratching your head, yes, the Nike inventory value is larger than the total retail sales of the whole American bicycle business in 2022, estimated at $8.2 billion. The Nike ecosystem contains, in the opinion of HPS, all of the key elements that explain, at least in substantial part, why American consumer demand for bicycles appears to be declining.

June 12: “Adobe: online prices show encouraging trend in May.” Chain Store Age: “Digital shoppers had something to smile about in May 2023. According to the latest data from the Adobe Digital Price Index (DPI), based on Adobe Analytics, U.S. online prices in May 2023 fell 2.3 percent year-over-year (YOY), marking the ninth consecutive month of YOY price decreases. This decline was also the biggest decrease in online prices tracked by Adobe since the COVID-19 pandemic started.” HPS Analysis: Many bike shops still feel that online retail is their largest competitor. Online is every brick-and-mortar retailer’s competitor, and the most effective response is deploying an effective commerce-enabled website with social media connections as a marketing and sales component of your bike shop’s customer service. Consumers expect your retail business to be accessible to them 24-7, not only for shopping and acquiring knowledge, but also to make purchases, schedule service work, home delivery, and curb-side pick-up. Contact the NBDA (nbda.com) for referral to suppliers who can assist in shaping a bike shop’s online strategy and tools.

June 13: “The food delivery business is struggling to adjust to a changing consumer landscape.” The Wall Street Journal Logistics Report: “Chicago-based takeout pioneer Grubhub is laying off around 15 percent of its workforce, the WSJ’s Heather Haddon reports, as the company seeks to reduce costs to stay competitive in a market featuring well-funded rivals and foundering demand. Food-delivery companies’ sales surged early in the COVID-19 pandemic, but have since plateaued as customers resume eating out at restaurants. Grubhub was the market leader in its category, but has since fallen to No. 3 behind DoorDash and Uber Eats. Food businesses have had a tough time making the logistics that underpin their businesses pay, as consumer spending has shifted. DoorDash said last year that it would cut around 1,250 people, or six percent of its workforce. Meal-kit delivery company Blue Apron in December laid off 10 percent of its workforce, and last month sold its logistics assets.” HPS Analysis:  The most important take-away is “… consumer spending has shifted,” in this case from pandemic-created home delivery to in-person visits to restaurants for meals. This shift could work to bike shops’ advantage by shifting from home service and delivery and curbside, to consumers coming into bike shops to drop off and pick up service work.

June 13: “Retail alert – Is U.S. consumer spending shifting again?Sourcing Journal: “Just as retailers have readjusted their buying needs, consumers might be pulling back even further on their discretionary purchases in favor of needs-based purchasing. The possible shift in consumer behavior isn’t a new one for retailers. They already learned their lesson the hard way last year after overbuying on stock, only to find out that consumers had shifted their mindsets. The later-than-expected arrival of goods at stores resulted in a mad race to exit their excess inventory levels through promotions that lasted for several quarters, which hurt retail margins.” HPS Analysis: This shift in American consumer spending is important for brands, suppliers and bike shops to wrap their heads around. Consumers are essentially moving down-market to house brands and low-priced and discount retailers. Our analysis indicates the growing importance of the Circular Economy, and used bicycles and accessories that provide a lower-cost alternative to brand name and “luxury” brands. We are of the opinion that this has been a key contributor to the recent decline in visits to bicycle retailers, and to the bursting of the bike boom bubble.

June 16: “Retailers are trying to fix their supply-chain forecasts.Wall Street Journal: “New technology, analytical tools, and shared data with suppliers are aimed at making merchants more agile in how they handle inventories. Retailers are turning to new technology and greater use of data across their supply chains in an effort to fix forecasting tools that were effectively splintered during the COVID-19 pandemic. The efforts are aimed at closing gaps that emerged over the past three years as merchants veered between product shortages and overstuffed inventories in rapidly changing consumer markets. Now, even with those strains largely receding, companies are looking for better ways to manage the flow of goods on the fly, and make sure they have merchandise where it needs to be to boost sales and maintain margins.” HPS Analysis: while there might have been, HPS is not aware that any new technology or analytical tools were installed or employed by OEMs, brands, or specialty retailers during the pandemic. There have been some recent additions to the data analyzed by the principal trade association in the U.S., but there haven’t been, to our knowledge, any announcements of the supply side or specialty bicycle retailers taking significant steps to “…Fix Their Supply-Chain Forecasts.” HPS respectfully submits that this is a major oversight on the part of the American bicycle business. During the pandemic, Just-In-Time supply chain management, or JIT, including forecasting, was jettisoned in favor of Just-In-Case, or JIC supply chain management. Returning to JIT is an interim step that has to lead to researching, evaluating, and deploying new supply-chain and forecasting technology and analytical tools for the whole industry, from retail downstream to the component suppliers to the OEMs, or we run the risk of repeating the mistakes of the immediate past.

June 15: “New ports contract would raise pay 32 percent, bring dockworkers $70 million in bonuses.” Wall Street Journal Logistics Report: “West Coast dockworkers won a 32 percent pay increase through 2028, and will get a one-time ‘hero bonus’ for working through the pandemic under a tentative contract agreement reached with port employers, according to people familiar with the negotiations. The agreement announced June 14 must be ratified by employers and dockworkers, and includes improvements in benefits and other provisions reached after more than a year of contentious negotiations that led some importers to divert shipments away from West Coast ports, and led to fears of greater impact on U.S.-Asia trade flows. HPS Analysis: Finally! The West Coast dockworkers bargained in good faith when it counted most during the pandemic, with the surge in container ships overloaded with containers, driven by consumer demand from March 2020 until the last half of 2022. While 2023 saw some work delays as the final negotiations were wrestled with, the contract is a done deal through 2028, and the costs will get amortized into fees and charges and spread over the inbound container volume. Barring any future surges in demand, this contract should result in stability along the West Coast ports of entry for the next five years.

June 16: “CPSC will discuss lithium-ion battery issues and seeks panel experts.” Bicycle Retailer and Industry News: “The Consumer Product Safety Commission will meet publicly July 27 at its headquarters here to discuss lithium-ion battery safety. The 10 a.m. meeting also can be accessed remotely. The commission wants to hear from battery safety and fire prevention experts and learn about potential standards and designs for batteries, battery management systems, and other aspects of consumer product safety that might limit the risk of thermal runaway and fire. HPS Analysis: The NBDA will be represented by its president, Heather Mason, and will be supported by Mike Fritz, HPS partner and chief technology officer. Mike is an expert with over 30 years of engineering and product development experience with e-bikes and lithium-ion battery power systems for e-bikes. This public meeting, along with the submissions requested by CPSC in response to a petition to eliminate the footbrake requirement for certain sidewalk bicycles, as well as comments on the adequacy of 16 CFR part 1512 for bicycles, including electric bicycles, are the beginning of what will be a long and difficult period for the bicycle industry, including specialty bicycle retailers, who are going to have to continually fight for a seat at the CPSC table.

June 21: “Eurobike Starts: Inventory issues overshadow high sales forecast.” Bike Europe: “The sales momentum experienced by the industry has pushed up the expectations for the upcoming years. At the same time, the market is struggling with the long-term impact of the pandemic and unrestrained components sourcing and product in 2022. Reliable market data and careful planning will prove their value for many in the industry in the next one to two years. Sales might have gone through the roof during the pandemic, but its revenue might soon be lost for a substantial number of parts manufacturers, bicycle makers, and traders. How to find a stable market for all these components and bikes?” … “Extremely unbalanced situation: Market demand in volume might be less in Europe compared with 2023 and 2022, but it is still higher than pre-corona. Still, the supply chain is packed to such a level that parts makers decommissioned new product lines which became operational just after the high wave of the pandemic. Insiders stated during Eurobike that they expect that the extremely unbalanced inventory situation is going to last until the second half of 2024.” HPS Analysis:  If it wasn’t clear that the inventory “problem” is global, and not just an American thing the first five months of this year, it should be crystal clear now. Eurobike set attendance records, but as this Bike Europe report points out, industry insiders “… expect the extremely unbalanced inventory situation is going to last until the second half of 2024.” That, as it turns out, is in line with the predictions from industry suppliers at the NBDA Retailer Summit this past May. Given the size of the inventory problem that extends throughout Asia, Europe and North America, HPS now expects the other shoe to drop toward the end of this year.

June 27: “Sinking global trade is pummeling Asian exports and helping rewrite the math of consumer inflation in Western countries.” The Wall Street Journal Logistics Report: “Lower producer prices in Asia are cascading across supply chains, bringing relief in prices for home furnishings, electronics, and other manufactured goods. The WSJ’s Jason Douglas reports the impact of cheaper Asian exports may be more muted than in the past, however, now that the high-water mark of globalization has passed. Asian exports that soared during the pandemic started sliding late last year, as rising interest rates took some heat out of economic growth. The trade weakness is showing up in the prices charged for goods when they leave Asia’s factories. Chinese producer prices fell 4.6 percent in May compared with a year earlier. Similar gauges in other  Asian exporter economies are weakening, too, as lower commodity prices reduce costs,  and collapsing demand for goods saps companies’ pricing power.”  HPS Analysis:  What this means is that the replacement cost of goods is lower at the factory door and with lower-cost freight, the landed cost of goods is lower. This undercuts the value of the excess inventory in warehouses, creating a wind-fall profit opportunity for the importer, or will result in orders being cut and shipments delayed until current inventory can be sold through. If brands don’t communicate with specialty bicycle retailers, there will be no transparency or visibility for merchandise availability.

June 30: “ ’We will shut you down.’ FDNY issues vacate orders to two e-bike businesses.” Bicycle Retailer and Industry News: “The New York Fire Department issued vacate orders for two e-bike businesses in the city this week as the department stepped up inspections following a rash of fatal fires triggered by lithium-ion batteries. As of Thursday (June 29) afternoon, FDNY had made 38 inspections since last week of shops and other locations thought to be storing or charging batteries in unsafe ways. The department is encouraging citizens to report unsafe operations, and in many cases is re-visiting locations that were previously inspected and cited for violations.” HPS Analysis: New York Fire Commissioner Kavanagh confirmed in a video that was embedded in this BRAIN article that she will testify at the CPSC Public Meeting July 27. Commissioner Kavanagh made it clear that FDNY is stepping up its enforcement activity at the same time it is working to expand public education about safe charging and storage of lithium-ion batteries. The NBDA and HPS are lending full support to FDNY, and are encouraging the whole bicycle industry to do so as well.

Contact Jay Townley: jay@humanpoweredsolutions.com


I have been struggling to understand why American consumers’ demand for new bicycles (as defined by CPSC) has ebbed since the end of 2022. After digging into the available data and information emerging about the economy, the American consumer, and the dynamic changes brought about by the pandemic, I offer the following working theories for your consideration:

  • Future bicycle purchases were pulled into the pandemic years. Four percent more Americans seven years of age and older rode six days or more in 2022 over 2021. This can be interpreted as more people purchased during the pandemic, and now they are riding what they purchased. Replacement is pushed out to the future.
  • New bicycle riders who had never ridden before purchased during the pandemic. Some new riders continued to ride, but since they purchased recently, replacement is pushed out to the future.
  • As retail prices increased during the pandemic, fewer consumers were interested, as inflation dominated spending that shifted from goods to services, and within services during the last half of 2022 and first half of 2023. Note: While sales and discounted prices are attractive, the retail price points from which they are calculated have stayed elevated because of significantly higher landed costs during the pandemic. They have not yet been lowered to reflect lower replacement costs because of inventory.
  • The explosion of discounts is attracting some hardcore enthusiasts and some consumers with an interest in purchasing a new bicycle. They are generating some foot traffic and purchases, but are not attractive to the middle and low end of the new bicycle market that doesn’t have much disposable income. Overall, the sales and discounts have not quickly nor significantly reduced the large inventory overhang that amassed through 2021-2022.
  • The Circular Economy is now acceptable to a greater portion of American consumers, making used bicycles of all types and prices attractive. Used bicycles have increased in purchases by consumers. The bicycle industry can only estimate the number of used bicycles that are sold annually.
  • During the pandemic, a whole new category in the form of electric bicycles captured the imaginations of consumers. E-bikes had been available for over 20 years, but during the pandemic new subcategories were introduced, including low step-through, 20, 24 and 26-inch fat tire, folding, off-road with mid-drive and hub motors. The bicycle industry can only estimate the number of these new categories of electric bicycles that are imported into the U.S., with many being sold directly to consumers, and others being delivered directly to consumers via the de minimis exclusion.
    Note: I am using the definition of “bicycle” found in 16 CFR Part 1512 that includes pedal-only bicycles and bicycles equipped with a maximum 750-watt electric motor capable of reaching a speed of 20 m.p.h. with or without a throttle. So called Class 3 and out-of-class e-bikes are also shoe-horned in this definition.

Contact Jay Townley: jay@humanpoweredsolutions.com


5/2/23 Bed Bath & Beyond Claims Ocean Carrier Owes It $32 Million, Sourcing Journal: Bankrupt Bed Bath & Beyond wants at least $31.7 million from container shipping company OOCL. According to the complaint the New Jersey-based home goods retailer filed with the Federal Maritime Commission (FMC), the Cosco Shipping subsidiary failed to meet minimum quantity commitments (MQCs) under its 2020 and 2021 service contracts. The retailer also claims said that OOCL charged $6.4 million in demurrage and detention fees from August 2021 to June 2022, which were “not reasonable or fair” given the pandemic port congestion and labor disputes on top of policies that interfered with the handling of ocean freight and social distancing regulations. Another bone of contention in Bed Bath & Beyond’s complaint alleges that OOCL tried to “coerce premium pricing” by strong-arming the chain into premium rate contracts as a precondition to carry ”just a fraction” of the quantity to which it had previously committed. Bed Bath & Beyond says it paid a premium of $12.6 million to OOCL, which could have been avoided if the shipping company fulfilled its service commitments. “Respondent’s practices were knowing and deliberate, and were not due to an absence of available cargo space or necessitated by any other circumstances outside of Respondent’s control,” the claim said. The retailer called out OOCL for having “profited greatly” from the conduct, citing the carrier’s $7.4 billion in 2021 operating profit, a 642 percent increase from the previous year. HPS Analysis: The frustration with ocean carriers’ container rates charged during the pandemic runs deep and wide in the bicycle business. While building and adding more container ships and shipping containers to increased sailings between the American and Chinese ports to accommodate surging demand and volume from early 2020 through the end of 2023, the ocean shippers increased rates to record highs that some brands passed along as surcharges that were expected to be passed on to consumers in retail pricing. Ocean shippers invested the increased profits they made in buying port facilities, warehouses, trucking lines and airplanes. It took the bankruptcy of Bed Bath & Beyond to trigger the $32 million in claims against OOCL, but so far the higher ocean freight costs paid by the American bicycle business are included in the landed cost of goods that have contributed to the inflated retail prices of bicycles that are now being discounted to unload excess inventory. If the Bed Bath & Beyond lawsuit is successful, we may eventually see one or more large bicycle business importers bring claims against the ocean freight carriers.

5/8/23 Foot Traffic in Free Fall Meets Dialed-Up Discounts, Sourcing Journal: Foot traffic started to pick up in April on the Easter holiday, but not enough to offset slower March trends. Unfortunately, traffic deceleration in the U.S. worsened for the week ending April 29. A UBS report from retail analyst Jay Sole said the decline was 27 percent from the prior week, with foot traffic decreasing 29 percent at specialty doors, and down 22 percent at department stores. The prior week’s foot traffic rate was down for both channels at 14 percent and 13 percent, respectively. He noted that even foot traffic at off-price retailers was down 15 percent from the prior week when this segment showed a one percent growth rate. Stubbornly high inventory spurred many retailers to roll out discounts and promotions in April. In a research note, Wells Fargo retail analyst Ike Boruchow noted conservative wholesale order books for spring and summer. On the big-picture front, these trends are likely to extend into the second quarter, which could mean the first half won’t be anything to brag about. April markdowns worsened from March, continuing the promo trend that emerged in November, Boruchow wrote. Inflation, lower tax returns, and cuts to the U.S. federal government’s Supplemental Nutrition Assistance Program benefits will create consumer spending problems for retail, he added. HPS Analysis: This headline covers all U.S. retailing, and sums up what has been happening in the specialty bicycle retail channels of trade, including outdoor retailers and bike shops. Public companies like Giant and Shimano expressed the hope after the first quarter of the year that the second quarter would bring spring business to clear inventory and set the stage for returning to some form of “normal” in the second quarter. That hasn’t happened. Management by hope is not a good thing, and it’s something HPS warns its clients about. Facts and good data are among the tools planners need to employ in crafting and directing good planning. Identifying and analyzing truth and reality, and reporting it in a timely fashion, isn’t being negative. It is being realistic and responsible.  

5/8/23 Consumers Reveal What Will Impact Memorial Day Shopping Choices, Chain Store Age: A new survey sheds light on the drivers of Memorial Day purchase behavior. About half (51 percent) of respondents do not plan on shopping for Memorial Day this year, according to a recent survey of over 1,000 U.S. adult consumers from Vibenomics, a Mood Media company. Of respondents who have or will shop for Memorial Day, 19 percent are waiting, and will begin the third week in May. About three-quarters (74 percent) of respondents who are shopping for Memorial Day will search for sales. Popular methods to find Memorial Day sales include in-store discounts, coupons, and special offers (80 percent), retailer membership programs (61 percent), rewards programs (50 percent), and bulk or discount coupons (34 percent). HPS Analysis:  Inflation has taken its toll on shoppers, and more than half (53 percent) planning to shop during the Memorial Day weekend say inflation will cause them to purchase slightly to much less, and four in 10 (39 percent) said inflation will have no impact on their holiday purchases. However, fear about inflation among surveyed U.S. shoppers is at the lowest level since October 2022, thought still high at 65 percent concerned. Overall, 32 percent of respondents believe inflation at its current high level will end in 10 months or less, and 28 percent think it will last one to two years. When asked how they feel about their finances, roughly six in 10 (62 percent) of respondents are neutral, and about one in five (21 percent) feel uncomfortable.

5/9/23 Cargo Data Confirms Second-Half Slowdown Fears, Sourcing Journal: After hitting a three-year low in February, import cargo volumes at U.S. ports have increased, according to new data. The number of containers traveling to U.S. shores is likely to remain well below 2022 levels heading into the fall peak season, according to the Global Port Tracker report released May 8 by the National Retail Federation (NRF) and Hackett Associates. A revised first-half forecast, previously projected at 10.8 million twenty-foot-equivalent (TEU) containers entering at U.S. ports, now expects 10.4 million TEU for January-through-June 2023, 22.8 percent lower than the first half of last year. Global Port Tracker has not released its projections for the full 2023 year, but the third quarter will likely see about 6 million TEU, 7.2 percent less than 2022. The first nine months of 2023 is projected at 16.5 million, down 17.8 percent year over year. HPS Analysis: Like the bicycle business, the U.S. ports held out hope during the first quarter that second half import volume would increase with the shipments to support the Back to School, Halloween, and Christmas holiday selling seasons. Congestion and delays have gone away as import levels have fallen with consumer demand. While West Coast dock worker labor contracts have not yet been finalized and signed, work stoppages no longer loom as problems because consumer demand has declined to the point where there is sufficient inventory on-hand and in-transit to adequately cover fulfilment at the point-of-purchase. It is highly probable that second half 2023, U.S. container volume will be below 2022 levels. Barring geopolitical issues, there will be no delays in shipments of bicycles or related products to and through U.S. ports the rest of this year.   

5/10/23 India is Making a Concerted Push to be the Top Manufacturing Destination for Western Companies Looking for a Backup to China as the World’s Factory Floor, The Wall Street Journal Logistics Report: The country has scored several coups recently in its effort to gain from a supply-chain strategy widely termed “China plus one.” The WSJ’s Philip Wenh, Vibhuti Agarwal and Greg Ip report that moves ranging from Apple’s decision to significantly expand iPhone production in India, to the 2021 choice by Denmark’s Vestas to place two wind-turbine plants in the country, have expanded India’s industrial base. India faces competition from other countries, and it must overcome entrenched problems that have kept it a bit player in global supply chains. But India is the only nation with a labor force and an internal market comparable in size to China’s, and decisions by big manufacturers like Vestas are drawing in more suppliers, helping establish supply-chain ecosystems. HPS Analysis: Many professionals in the bicycle business have traveled in India, and investigated the bicycle and e-bike manufacturing infrastructure and OEM capabilities. The largest Indian bicycle e-bike manufacturer, Hero, has established manufacturing and distribution in Europe, and continues to expand its presence. Several years ago Hero opened a representative office in the U.S., but to date has not managed to attract an appreciable customer base. One of the HPS partners has visited bicycle, e-bike and component manufacturers in India, and highly recommends their manufacturing and design engineering, as well as the up-to-date computerized (CAD/CAM) manufacturing. Port logistics and facilities are adequate. The problems are found in the bureaucracy and under-the-table bribes demanded by officials to do business and move goods. Bigs like Apple and Walmart have either figured it out, or have included this aspect of doing business in India in their cost of goods. In either case, this is still a problem for mid-to-small enterprises.

5/12/23 PeopleForBikes Board of Directors Approves Ambitious Infrastructure, Electric Bicycle, and Education Programs, Bicycle Retailer and Industry News: The PeopleForBikes (PFB) Coalition Board of Directors, composed of 20 of the bicycle industry’s top leaders, met in person for their semi-annual gathering on May 10. The board’s main topic of discussion was reviewing progress on the organization’s objectives for 2023 centered around PeopleForBikes’ vision: Transforming America into the best place to ride a bike in the world through infrastructure, policy, and participation. PeopleForBikes’ president and CEO Jenn Dice, vice president of marketing Jose Maldonado, and senior director for infrastructure Dave Snyder, walked the board through the organization’s upcoming campaign to make that vision a reality by engaging local communities to build 1,000 bike projects across the U.S. They also explored how to get the greater bike industry, everyday riders, and non-endemic partners, involved to support and fund the campaign. HPS Analysis: HPS is a member of PeopleForBikes and has signed the PFB Membership Agreement. However, HPS is concerned that PFB has not paid appropriate attention to analyzing bicycle industry and business data beyond 2016, and inclusive of the last five decades, for the data we know and need to understand. There is also the data we do not know, including sales of e-bikes. PFB has identified the e-bike category as the most important growth potential for the future, and is dedicating its upcoming SHIFT23 to everything electric. Yet it, as well as the rest of us, does not have reliable, accurate data on e-bike sales or imports into the U.S. HPS recently suggested at the NBDA Retail Summit that PFB aggressively pursue and advocate for immediate reform of the Harmonized Tariff Schedule (HTS) numbers, as well as the customs process and procedures specific to the importation of e-bikes and related components into the U.S. In addition, PFB and the industry at-large is blind to most of the DTC imports of e-bikes, and specifically all of the e-bike and lithium-ion battery and charger imports under the de-minimis loophole. HPS urges PFB to substantially increase its efforts to bring visibility to this blind spot and close this loophole this year.

5/12/23 In China, the Police Came for the Consultants. Now the C.E.O.s Are Alarmed, The New York Times: The China Development Forum, a high-profile, government-hosted conference with a who’s who of international executives in attendance, was a moment for Beijing to renew its efforts to win over foreign businesses. Businesses from outside China “are not foreigners, but family,” said Wang Wentao, China’s commerce minister. State media reported that the chief executives of Apple, Pfizer, and Procter & Gamble were at the forum, held in late March. Many of the dozens of business leaders there were on their first trip to China since the country had closed its markets to the world and derailed its economy with harsh COVID policies. Wang pledged to remove obstacles preventing firms from investing more. 2023, he declared, was “invest in China year.” The good will did not last long. The recent targeting of consulting and advisory firms with foreign ties through raids, detainments and arrests, has reignited concerns about doing business in China. Executives, whether at midsize manufacturers or large corporations, are exploring how to reduce the threats to their businesses and protect their employees. HPS Analysis: Western companies investing in China need the consulting and advisory firms to perform due diligence before they sign contracts and commit funding and long-term investment. By conducting raids, detaining and arresting the employees, including both Chinese and foreign workers, and confiscating computers and digital files of consulting and advisor firms operating inside China, the government is scaring off Western investors, including the European and Asian Bigs in the bicycle and e-bike business. HPS considers this to be shooting themselves in the foot and encouraging near-shoring, friend-shoring and re-shoring.

5/15/23 Vosper: 2023 is Shaping Up to be the Year of the Double Whammy, Bicycle Retailer and Industry News. In this article, Rick Vosper wrote: “Let’s face it. The first couple months of 2023 were some of the worst the industry has seen in years, if not ever. Sales were down, inventory was up, and even heavily-discounted product wasn’t moving off retailers’ floors. To give you an idea of the significance of the situation, let’s start by looking at a chart [see article with charts here] showing wholesale sell-in versus wholesale inventory, courtesy of PeopleForBikes and based on data from its participating wholesaler members, compiled by Circana (formerly NPD Group). Yes, you read that right. At the close of Q1, the wholesale side of the industry was sitting on more than three-quarters of a billion dollars ($765 million) in inventory. PFB senior research manager Patrick Hogan confirms that’s 181% of the inventory in February of 2018, and the highest inventory valuation since the organization (and formerly the old Bicycle Product Suppliers Association) began keeping records in 2016. It’s also nearly double the number of units, up 95% over February 2018 to 1.45 million bikes. As an industry old-timer going back to the early 1980s, I can’t recall a time when the industry was carrying anywhere near this level of product, ever.” HPS Analysis: We have been surprised by the number of folks in the industry who have had to go back and re-read this Op Ed by Rick Vosper. Not just because of the “…181% of the inventory in February 2018,” but also because of the 2023 retail sell through numbers “… lowest we have ever measured, going back to January and February of 2016.” The Spotlight State of the Industry panel at the recent NBDA Retail Summit included responses to the question: where are we now, and how should we look to the future? The answers were honest and blunt. The bottom line: it will take two to three years for the bicycle business to fully recover from the shakeout of 2023. HPS wonders if the NBDA objective of focusing on how the bicycle business survives and thrives over the next three years should be moved ahead of transforming America into the best place to ride a bike in the world.

5/15/23 U.S. Households Show Signs of Stress as New Delinquencies Rise, Bloomberg Markets: U.S. households showed signs of increasing financial stress in the first quarter, with credit card balances not declining in the way they typically do at the start of the year, and delinquencies rising for most types of consumer loans. Households added $148 billion in overall debt, bringing the total to $17.05 trillion, according to a report released by the Federal Reserve Bank of New York on May 15. Balances are now $2.9 trillion higher than just before the pandemic. Consumers typically build up more credit-card debt at the end of the year during the holiday season, and then reduce those balances at the start of the following year, sometimes with the help of tax refunds. But for the first time in 20 years, that wasn’t the case this year, suggesting some households are under strain from high prices, and may be relying on credit cards to maintain their spending. HPS Analysis:  Purchasing a bicycle using a credit card has become S.O.P. for most retailers, including bike shops and DTC’s. The overall delinquency rate remains low by historical standards at 2.6 percent. But the share of debt that became delinquent, meaning it was at least 30 days late, is rising for most loan types, including credit cards and auto debt. Bike shops will continue to need access to credit card financing, but delinquencies will contribute to interest rates pushing consumers back further from buying that new bicycle.

5/17/23 Taiwan’s Giant, Ideal and Merida Release Q1 Earnings Reports, Bicycle Retailer and Industry News: Taiwanese bike makers Giant Group, Ideal Bike Corporation and Merida Industry Co., LTD, each released their first-quarter earnings reports this month. Merida was the only one of the three to record a sales increase in the quarter, although its profits in the quarter were down significantly from the same period in 2022. Giant’s total first-quarter operating revenue declined 9.6 percent year-over-year, from NT$22.3 billion last year to NT$20 billion this year. Giant’s total profit from the first quarter was NT$88.3 million, down from NT$1.91 billion last year. Earnings per share declined from NT$4.83 last year to NT$2.13 this year. Merida’s Q1 first-quarter operating revenue increased 2.8 percent, from NT$8.2 billion last year to NT$8.4 billion this year. Merida’s total profit from the first quarter was NT$627.5 million, down from NT$1.2 billion in the quarter last year. Earnings per share declined from NT$4.04 last year to NT$1.89 this year. Ideal’s total first-quarter operating revenue declined 1.8 percent year-over-year, from NT$1.13 billion last year to NT$1.11 billion this year. Ideal’s total loss from the first quarter was NT$38.8 million, compared to a profit of NT$94.53 million. Earnings per share declined from NT$0.14 in Q1 last year to a loss of NT$0.17 per share this year. HPS Analysis:  As these numbers show, Merida (primary supplier to and 45 percent owner of Specialized) emerged as the only one of the Taiwanese Big Three bike makers that posted a sales increase in the first quarter of 2023, although significantly down from the first quarter 2022. Giant, Merida and Ideal are publicly-traded companies on the Taipei exchange, and their quarterly financial statements are a matter of public record. While remaining positive and optimistic, the financial data from the top three Asian OEMs is a clear indicator of the shakeout in the U.S. and U.K., and the downturn in the bicycle business in continental Europe. The only growth region appears to be mainland China. 

5/17/23 Pon puts Lithuania on the Forefront as Europe’s Next Bicycle Production Hub, Bike Europe: The announcement by Pon Holding to construct a new e-bike and bicycle factory in Lithuania started a string of reactions in this small Eastern European country. With this new dynamic, the country has put itself on the map as the next bicycle production hub in Europe. At the country’s investment promotion agency, Invest Lithuania, the Pon announcement was of the main reasons to study the international bicycle industry. Invest Lithuania also confirmed that they aim to step up bicycle manufacturing, in addition to the automotive industry, which is already strongly present in this Baltic state. Two well-known names in the automotive industry, Continental and Hella, are regarded as important foreign direct investors. For them, just like Pon, the strong presence of a manufacturing industry and logistic services have been important reasons to choose Lithuania as a production base. HPS Analysis: Pon Holding is an important player in both the bicycle and automotive sectors, and Lithuania is also attractive to Taiwanese investment and manufacturing for the European market. Taiwan has a representative office in Lithuania, and Lithuanian and English are the legal languages which make it convenient for Taiwanese to do business. It appears that the Pon investment in bicycle manufacturing will attract Taiwanese component manufacturers, which over time may become sources for the componentry required for North American bicycle assembly and, eventually, manufacturing.

5/19/23 Cars Still Dominate the American Commute Statista: May 19 was Bike to Work Day, part of National Bike Month, celebrated in the U.S. to promote cycling as a fun and healthy mode of transportation. According to Statista Consumer Insights, 73 percent of American commuters use their own car to move between home and work, making it by far the most popular mode of transportation. Meanwhile, only 13 percent use public transportation, while 11 percent ride their bikes. As the chart shows, alternatives to the car have become more popular since 2019, but none comes close to challenging the car’s status as the king of the American commute.

 HPS Analysis: There are several factors contributing to the low adoption of bicycles as a means of everyday transportation. For one, Americans are used to commuting longer distances than people in most European nations, ruling out the bike for many. And secondly, many major cities in the U.S. are not exactly bike friendly. The good news is the growth in bicycle use for commuting, up from less than five percent in 2019 to 11 percent in 2022/2023. Lilian van Ek Lilian, policy associate for the Department of infrastructure and Water Management, Embassy of the Kingdom of the Netherlands, presented the work she has done with cities in the U.S. including Washington D.C., Austin, Texas and Bentonville, Arkansas, at the NBDA Retailer Summit. She emphasized the importance of patiently combining the successes of European cities with U.S. city planners to create a uniquely American bicycling infrastructure.

5/23.23 Walmart Explores Bicycle Sourcing in India, Bike Europe: The largest volume seller in the U.S. is investigating opportunities to find new suppliers for some of its product categories, including bicycles, in India. Walmart has committed to triple its exports of goods from India to $10 billion each year by 2027. Earlier this month, Walmart Inc. president and CEO Doug McMillion reaffirmed its commitment during his visit to India, and said that India’s unique ecosystem of suppliers will help the company in achieving its goals. The company wants to build an ecosystem of suppliers and partners in India, including micro, small, and medium-sized enterprises. Other product categories included in the strategy are toys and shoes. The Walmart team met with representatives across key Indian programs and initiatives. The Indian bicycle industry has been investing in recent years to improve production quality, and to promote capabilities. HPS Analysis: As we noted earlier, Walmart has figured out how to do business in India as a buyer, and has established a supply chain that it will be expanding as it slowly withdraws and re-sources from China. The interest expressed by Walmart in the Indian bicycle manufacturing capability has undoubtedly been thoroughly vetted and tested, and there are probably Indian-sourced bicycle products already somewhere in the Walmart U.S. distribution system. Walmart has a number of simultaneous sourcing initiatives in process, for both the U.S. domestic and Indian markets. Walmart is currently purchasing from the Bicycle Corporation of American (BCA) assembly plant in Manning, SC, owned by Kent International. Kent also is a supplier of bicycles imported from a partner plant in China.    

5/23/23 CPSC Considers Creating New Bike Safety Requirements, Bicycle Retailer and Industry News: The Consumer Product Safety Commission (CPSC) voted May 19 to seek public comment on whether bicycle safety requirements are outdated, and if they adequately address e-bikes. In addition, commissioner Mary T. Boyle requested the agency’s technical staff conduct a study of e-bike “hazard patterns.” Under scrutiny is 16 CFR Section 1512, established in 1975, and as amended. The action comes after the CPSC was petitioned to eliminate the coaster brake requirement on certain kid’s bikes, which it also will seek comments on. The bicycle safety requirement comment period will begin when the CPSC’s formal notice is published in the Federal Register on May 25, and end 60 days later. The notice will explain how to submit comments, including submission of written comments through the Federal eRulemaking Portal, or by mail. The CPSC said commenters should evaluate whether compliance with these standards provides adequate safeguards, especially related to e-bikes. HPS Analysis:  This is huge, and one of the biggest issues and opportunities the American bicycle business has been presented with since the CPSC was first established, and announced the first mandatory safety standard it was developing for bicycles. The answers to the question of “… whether bicycle safety requirements are outdated, and if they adequately address e-bikes” will set the stage for a standards-setting process that will be international in scope, and challenge an under-staffed and under-financed CPSC to manage to a successful conclusion. It will be the mandatory safety standard for bicycles that are sold at retail to consumers, whether imported or domestically assembled or manufactured, going forward. The opportunity is whether the American bicycle business will step up and do the right thing for consumer safety.

5/26/23 Bike Share Schemes Do Create New Cyclists, Report Says, Cycling Industry News: The long-running debate on whether cycle share schemes have a material impact on cycling has a new bank of evidence to call on. A U.K.-focused report found that 53 percent of bike share users started cycling again after at least one year. A modest but useful seven percent used bike share to cycle for the first time ever. Attracting new riders is of course vital to cycling in general, and to the cycling industry specifically. Arguably, bike share has been doing a better job of it than some other aspects of the cycling world. Frequency was a significant success story, with 66 percent of users cycling more frequently since joining a bike share scheme. Those with interest in multi-modal trips will be interested in the finding that 64 percent of users combine bike share with other means of transport, largely bus or train rides. 71 kg of CO2 emissions are reduced on average each year per user as a result of the mode shift caused by shared bikes. In terms of sustainability, bike share was found to reduce car use. 37 percent would otherwise have made their most common bike share trip by car (as driver, passenger or taxi/hire vehicle). HPS Analysis: This report comes at a time when bike ride share is being severely challenged by the economy. Lyft owns Motivate, the largest bike ride share back-room, facility and bicycle supplier to 80 percent of the municipal programs in North America. Lyft just announced layoffs that have and will continue to impact Motivate and its ability to serve its municipal clients to maintain and manage bike ride share programs. Many in the bicycle business have been negative about bike ride share, and there is some validity to the complaints. However, overall bike ride share, as this study shows, has been positive for bicycling, and has contributed to creating a market for selling bicycles and related products and services. HPS urges all segments of the bicycle business to promote and assist bike ride share whenever and wherever possible.

5/30/23 There’s Nothing Minimal About an Apparent Loophole in U.S. Efforts to Stop Imports from China of Product Made with Forced Labor, The Wall Street Journal Logistics Report: Some 446 million packages from China entered the U.S. in the 2021 fiscal year as “de minimis” imports, meaning they were valued at less than $800 apiece, paid no tariffs, and required little paperwork. The WSJ’s Josh Zumbrun reports the category has emerged as a gap in effort to halt imports made with forced labor in China’s Xinjiang province, the home of the minority Uyghur people. It has led to moves in Congress to close what many lawmakers consider a loophole, potentially adding new trade compliance requirements for the shipments. The concerns have grown as trans-Pacific e-commerce trade has expanded. China’s Shein and Temu sell primarily online, and their trendy, low-cost apparel is often shipped directly to U.S. customers under the de minimis category. HPS Analysis: At the NBDA Retail Summit, I was asked by a retailer if eliminating the de-minimis loophole would also increase consumer prices, and be a contributor to inflation. The answer is yes. Eliminating de-minimis will increase the cost of imported merchandise, including e-bikes, lithium-ion batteries and chargers, and accordingly contribute to inflation. However, the positives are potentially very significant, including saving lives. Keeping in mind that this is still an unproven theory, HPS believes from the evidence we have been able to gather that a large percentage of e-bike fires caused by lithium-ion batteries and miss-matched chargers are the result of low-cost (below $800) e-bikes, lithium-ion batteries and replacement chargers imported under the de-minimis loophole. These hazardous low-cost imports originating in China cannot be identified because they are shipped directly from the source to the purchasing consumer. In this case the de-minimis loophole is the source of hazardous products that are taking lives and doing significant property damage. The cost of closing this loophole is not even close to the value of human lives saved.   

5/30/23 Fitch Revises Accell Group Outlook from Positive to Negative, Bike Europe: The ongoing supply chain challenges have impacted Accell Group’s financial position to such an extent that the international credit rating agency Fitch has revised its outlook for the bicycle manufacturer from positive to negative. The negative outlook reflects limited visibility over Accell Group’s working capital-related cash outflows due to persisting supply chain challenges. These have “materially eroded the company’s liquidity headroom and free cash flow generation, as well as weakening its deleveraging prospects,” wrote Fitch in a report recently. The Fitch outlook formally applies to Sprint BidCo BV, the new holding company of Accell Group that delisted the company in August 2022. Accell Group was delisted following the takeover by a KKR-led consortium last year. HPS Analysis: Accell Group is one of the largest bicycle manufacturers, importers and bicycle and e-bike brand owners in the world. It was taken private when it was acquired by KKR in 2022, so we are not sure exactly where it now ranks relative to Pon, Giant and Merida. That, we gather, is one of the reasons for Fitch to revise its outlook from positive to negative, reflecting a limited visibility over Accell Group’s “working capital-related cash outflows due to persisting supply chain challenges that have materially eroded the company’s liquidity headroom and free cash flow generation.” HPS takes all this to mean that since Fitch does not have access to the earnings statements filed by public companies, it is downgrading Accell Group, but remains positive in its longer term outlook for the company.     

Contact Jay Townley: jay@humanpoweredsolutions.com.


4/07/23 Can we call monetary policy a “blunt tool” anymore … Marketplace. The Fed raised interest rates from basically zero to about 5 percent in the past year, but the unemployment rate is still historically low. Can we call monetary policy a “blunt tool” anymore? Maybe it’s just dull and rusty. Fitch Rating economist Olu Sonola told Marketplace he started wondering whether COVID has messed with macroeconomic theory the same way it’s messed with downtown office buildings. “What the pandemic has done is introduce a number of variables and elements into the equation that the people who wrote macroeconomic textbooks just didn’t think about,” he said. Most econ textbooks don’t have chapters on revenge travel, boomer retirements, or long COVID, which have kept labor demand higher and supply scarcer. Anil Kashyap, a professor at the University of Chicago’s business school said part of this is just delayed pain. Multiple companies are still paying workers with the help of low-interest loans they took out before rates spiked. “There’s a bunch of businesses that have loans and bonds that were about zero that are going to need to refinance,” Kashyap told Marketplace, and “when they do, they’re going to face a much higher cost of capital.” HPS Analysis: Peter Drucker warned: “The greatest danger in times of turbulence is not the turbulence – it is to act with yesterday’s logic.” Olu Sonola may be among the economists who have figured out that the pandemic did introduce a number of variables that not only make it impossible to go back to the way it was, but have made the tools employed by the Fed to tame inflation less effective. Add to this the bicycle businesses that took low-interest loans to finance high-cost inventory, paid outrageous transportation costs, and acquired premium warehouse space. Many of these companies are now facing a pile of excess inventory that is going to have to be refinanced at much higher interest costs, if the businesses can even find the required refinancing. This all leads to the potential for long term turbulence.

4/08/23 The very busy ports of Los Angeles and Long Beach are effectively shut down LAist. The ports of Los Angeles and Long Beach were effectively shut down April 7 because of worker shortages. The lack of activity at the ports – typically some of the busiest in the world – comes as contract negotiations have been underway for months. Shipping operators say the shutdown is because of a work stoppage by union dockworkers, but the union disputes that claim. The Pacific Maritime Association (PMA) put out a statement April 7 saying that the ports had been effectively shut down after the International Longshore and Warehouse, Local 13 (ILWA) union took a “concerted action to withhold labor” at the ports the nights of April 6 and the morning of April 7, leading to widespread worker shortages. According to the PMA, the lack of workers the night of April 6 meant “a majority of the jobs for last night’s shift went unfilled, including all jobs for cargo-handling equipment operators needed to load and unload cargo.” The ILWA, which represents 22,000 members at 29 West Coast ports, says its workers are not withholding labor. In a statement, union officials said that on the night of April 7 thousands of dockworkers attended a monthly union meeting, which they said in a statement is a “contractual right.” The said workers took April 8 off to observe religious holidays. HPS Analysis: During the last quarter of 2022, the shut-down of the two busiest ports on the West Coast would have been national news with headlines in every major media source in the country and statements from the White House. The fact that this was not headline news, and went almost unnoticed, is testament to how much the economic situation has changed in the first quarter of 2023. Overall consumer demand has ebbed, and as a result imports have subsided, and the pressure on the supply chain has deflated to the point that the shut-down of the two busiest ports for imports into the U.S. didn’t raise an eyebrow anywhere, including the bicycle business. The dockworkers contract expired in July 2022, and negotiations have obviously gotten a bit testy, but the greatly-reduced pressure on the supply chain will lead to a new contract by this summer.

4/10/23 The fastest-growing industrial production line in the U.S. right now may be the building of the factories themselves The Wall Street Journal Logistics Report; Assembling Factories. Construction spending related to manufacturing reached a record $108 billion in 2022, with new factories rising in urban cores and rural fields, desert flats and surf towns. The Wall Street Journal reports that much of the growth is coming in high-tech fields like semiconductors and electric-vehicle batteries that are backed by government incentives. But it is also being driven by companies that once relied exclusively on lower-cost countries for manufacturing and now are responding to shifting supply-chain imperatives. Such companies and brands are found in apparel and the bicycle business. Arnold Kamler, CEO of bicycle company Kent International, which started assembling bicycles in South Carolina in 2014 from Chinese-made parts, is quoted as saying, “We are hoping some of our competitors will join us in producing bikes here, which would encourage more companies to make the component parts here.” HPS Analysis: Reshoring, as HPS has opined in this newsletter, is difficult at best. Kent International is a supplier to Walmart, and responded to the largest retailer of bicycles initiative to support American made products by working with the state of South Carolina to open Bicycle Corporation of America (BCA) in 2014 as the largest bicycle assembly operation in the U.S. It has been a struggle, including the imposition of punitive Section 301 tariffs on imported componentry from China. While Kent still imports the majority of the complete bicycles it sells to Walmart from China, it has sustained BCA, and is working hard at encouraging Japanese, Taiwanese and Chinese component manufacturers to commit to manufacturing facilities in the U.S. that will be the foundation of reshoring bicycle manufacturing. The quicker the whole of the American bicycle business joins together to make this happen, the quicker reshoring of bicycle manufacturing will become a reality.  

4/10/23 Banks are spooked and getting stingy about loans – and small businesses are suffering … NPR Economy. Weeks after the collapse of two big banks, small business owners are feeling the pinch. Bank lending has dropped sharply since the failures of Silicon Valley and Signature Banks. That not only hits businesses, it also threatens a further slowdown in economic growth while raising the risk of recession. Credit, after all, is the grease that helps keep the wheels of the economy spinning. When credit gets harder to come by, business starts to squeak. Even before the two banks failed last month, it was already more costly to borrow money as a result of the Federal Reserve’s aggressive interest rate hikes. Other lenders are now getting even stingier, spooked by the bank runs that brought down Silicon Valley Bank and Signature Bank. The Federal Reserve Bank of Dallas surveyed 71 banks late last month, and found a significant drop in lending. Weekly loan data gathered by the Federal Reserve also shows a sharp pullback in credit. HPS Analysis: The SBA defines a “small” retail business as one doing $7.5 million in annual gross revenue or less. This means the vast majority of bike shops in the U.S. are “small” businesses, and if they rely on a line of credit from their local bank, they need to communicate their requirements going forward and determine (1) if they will be considered eligible for a loan and/or line of credit and, (2) if their bank will have the liquidity to offer loans to “small” businesses and, (3) if they will be able to afford the interest rates that their bank is going to charge. It is a balancing act, and bike shops and “small” suppliers will need to watch their financials carefully to maintain revenue coming in balanced against the cost of doing business, and maintaining a positive cash flow as consumer demand and economic conditions evolve between now and the rest of this year.  

4/11/23 Pon.Bike turnover doubles to €2.4 billion in 2022 Bike Europe. According to Bike Europe, 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 following the acquisition of Dorel Sports and the ever-increasing demand for e-bikes. CEO Janus Smalbraak also states that order books are currently full. The article goes on to state that the revenue of the bicycle division almost doubled from €1.3 billion in 2021 to €2.4 billion in 2022, due mainly to the acquisition of Dorel Sports, which was bought for US$810 million (€740 million) in early January 2022,  about 14 months ago. Pon is now considered the largest bicycle manufacturer in the world. Pon.Bike has given the starting signal for the construction of a state-of-the-art bicycle factory in Lithuania, where around 500,000 e-bikes and other bicycles will be produced each year. In addition to the manufacture and sale of bicycles, Pon.Bike is also active in parts and accessories, and new services such as leasing and subscriptions. Smalbraak is quoted as saying, “The hefty investments in cycling infrastructure, particularly in Europe and the U.S., will continue to give the sale of e-bikes, in particular, extra support. The economy faces headwinds in 2023, especially in Europe and the U.S. Economic slowdown will also affect us, as well as the still faltering delivery of parts here and there. At the same time, we have started the year with full order books for our automotive, bike and equipment and power divisions.” HPS Analysis: Pon is a privately held company, and this kind of detailed financial information is not normally available to the public. Smalbraak has been interviewed in Australia and Europe, and has been very forthcoming in discussing their Pon.Bike subsidiary. Bike Europe declaring that Pon.Bike is, by their calculations, “… the largest bicycle manufacturer in the world” is significant. Cannondale is the Pon.Bike brand competing as a multinational with Trek, Specialized and Giant. While Trek owns two bicycle manufacturing plants in Europe, it is still Giant’s largest OEM customer, and is dependent on OEMs in Asia for most, if not all, of its branded bicycles and e-bikes sold in North America. Specialized is 49 percent owned by Merida, the second-largest OEM in Asia, and the source of a large percentage of Specialized brand products sold in North America. Giant Manufacturing Company has been considered the largest bicycle manufacturer in the world, and all of its brand name bicycles and e-bikes sold in North America are imported from Asia. The bottom line – currently none of the top four specialty bicycle brands, Trek, Specialized, Giant, or Cannondale, are manufactured or assembled in the U.S. However, when Pon acquired Dorel Sports, it also acquired a warehouse and assembly facility under construction in Savana, Georgia. That facility has since been completed by Pon.Bike, and is currently operating. Pon.Bike owns 17 bicycle and e-bike brands, and it is just getting started in the U.S. Pon.Bike may be able to convince Asian and perhaps European component manufacturers to come to the U.S., and with Kent International, may represent the financial investment in the U.S. market that will foster reshoring of bicycle assembly and manufacturing.

4/12/23 Uber is funding an e-bike trade-in program to curb battery fires CNN Business. Uber is funding a new program that aims to get electric bikes with dangerous non-certified lithium-ion batteries off New York City streets. The company said April 12 that it will soon allow the thousands of New York City delivery workers who use e-bikes the ability to trade-in their bikes for newer, safer models. The news follows a string of fires caused by lithium-ion batteries. Part of the issue is that not all lithium-ion batteries are created equal. UL-certified electric bikes and scooters from reputable retailers undergo extensive battery safety tests. But other online marketplaces, which some delivery workers may have turned to for more affordable options in the absence of company-provided options or subsidies, often make it hard to tell the origin of these products, and the quality of their batteries. To get more UL-certified e-bikes on roads, Uber is now partnering with e-bike company Zoomo to offer credit to delivery workers willing to swap their existing e-bikes for ones with higher-quality batteries. It will also offer rent-to-own pricing models and priority access to repairs and services. Uber is also piloting a trade-in program with The Equitable Commute Project, a non-profit, to provide a discounted UL-certified e-bike in exchange for a noncertified e-bike. HPS Analysis: Uber is funding a trade-in program that can actually work to prevent lithium-ion battery fires. Much of what the New York City Council has passed into laws that take effect on or about September 16, 2023, are going to be difficult to enforce, and are forward-facing. They will do little or nothing to eliminate the noncomplying bad actors that are already in use, and that will be shipped into N.Y. City over the next five months, and pose the most risk. The Uber trade-in program will get these noncomplying bad actors off the streets and into a recycling program where they will no longer present a risk to public safety. The American bicycle business and its trade associations need to offer as much assistance to Uber as possible to make this program a success.

4/14/23 Industry groups react to Congressional scrutiny of de minimis Sourcing Journal. Industry trade groups are addressing concerns raised in a congressional letter to the Department of Homeland Security, which fingered companies like Shein and Temu for exploiting the de minimis “loophole” that allows smaller shipments from China to enter the country unchecked. Under Section 321 of the Tariff Act of 1930, as amended by Congress and signed into law by President Obama, overseas makers can send shipments valued under $800 to a shopper’s doorstep without having to report data on county-of-origin or manufacturer. It is estimated that 2 million direct-to-consumer (DTC) shipments a day, or 730 million per year, are entering the U.S. annually under the de minimis exception with no customs inspection, and paying no duty or tax. The letter underscores the rising alarm on Capitol Hill about the issue, focusing primarily on the issues of forced labor coming out of Xinjiang province in China. In addition to Shein and Temu, Amazon and the Footwear Distribution and Retailers of America (FDRA) are supporting the de minimis exception, and cautioning Congress from harming American shoe brands and consumers by doing away with de minimis or reducing the allowable value. HPS Analysis: The problem for the American bicycle business is the number of low-cost dodgy e-bikes, and more importantly replacement lithium-ion batteries and chargers, that are coming into the U.S. DTC under the de minimis exception. The lobby for continuing the de minimis exception with the current $800 value is well funded by some very large companies. PeopleForBikes (PFB) has come up with an excellent suggestion to simply add e-bikes, lithium-ion batteries and chargers to the list of items exempt from de minimis, allowing the shoe retailers and clothing brands to continue DTC sales. HPS and others believe the low-cost dodgy e-bikes and replacement lithium-ion batteries and chargers entering the U.S. DTC under the de minimis exception are the primary cause of the fires and deaths in New York City and elsewhere in the U.S,. and urge the bicycle business to get behind the PFB initiative. 

4/18/23 U.S., allies, weigh how to reduce economic ties with China Wall Street Journal Economy. The U.S. and its allies are grappling with how to pare their economic relationships with China, attempting to limit ties in certain sectors they view as strategic, while preserving broader trade and investment flows with the world’s second-largest economy. The Group of Seven (G-7) advanced democracies, consisting of the U.S., Canada, France, Germany, Italy, the U.K. and Japan are, growing concerned that China, a dominant supplier of many goods and materials, could cut off key exports in the event of a conflict or another pandemic, as Russia did with natural-gas exports during the war with Ukraine. “So the lesson from that for all of us has been: Let’s do that hard work now on the front end,” said Wally Adeyemo, deputy Treasury secretary. The International Monetary Fund (IMF) released a report the week of April 10 echoing its previous warnings against carving the global economy into competing geopolitical blocs by the U.S. and China. Such a split would lower global trade and growth, the multilateral financial organization warned. New laws enacted last year offer major subsidies to lure key clean-energy and semiconductor technology companies into the U.S. The administration has restricted the export of advanced semiconductors and related equipment into China, and is preparing new curbs on investment in the country. HPS Analysis: The G-7 is way above the reach of the bicycle business, currently import dependent, with the majority of imports originating in China. The twist is the majority of the Chinese bicycle/e-bike export manufacturing to the U.S. is still owned or controlled by the Taiwanese. It is now well known that China considers Taiwan, an independent democratic island, a part of mainland China, and has threatened invasion to get it back. With this said, high-end bicycle products consumed in the U.S. originate in Taiwan, and mid- to low-priced products originate in Chinese manufacturing facilities. An example is Giant Manufacturing Co., a Taiwanese public company headquartered in Taiwan, has seven manufacturing facilities in China. Bicycles and related components and accessories certainly aren’t semiconductors or microchips, but they are an important non-tech industry to Taiwan. The G-7 focus on China and the growing anti-China political actions on the part of the U.S. make it vitally important for the whole of the American bicycle business, including all channels of trade, to join together in supporting a near-shoring and re-shoring initiative. 

4/18/23 This is what Americans really think about climate change … Electrek. Pew Research Center surveyed nearly 11,000 American adults in March and the results revealed how Americans view climate change. Nearly 7 in 10 Americans (69 percent) want the U.S. to take steps to reach net zero by 2050, thus adhering to the Paris Agreement. The same percentage (69 percent) also wants the U.S. to prioritize developing renewable energy over fossil fuels. Two-thirds of Americans said that big businesses and corporations aren’t doing enough to reduce the effects of climate change. Of Americans, 58 percent feel their state elected officials aren’t doing enough, and 55 percent believe that the energy industry isn’t doing enough to address climate change. Around 50 percent of Americans think they’re personally doing enough to help reduce the effects of climate change. Americans’ political affiliation, and whether they acknowledge climate change, is a serious problem that affects how they perceive climate impacts at the local level. With this said, Pew found that the majority of Americans are wary of moving completely to renewable energy. Around 3 in 10 (31 percent) want the U.S. to completely phase out fossil fuels. Adults between the ages of 18 to 29 are more open to the idea of phasing out fossil fuels altogether. HPS Analysis: Tell me if you think HPS is wrong in thinking that climate change and weather are two of the 10 most important topics for, and influencers of, the bicycle business going forward. I have not yet witnessed the American bicycle business declare its 100 percent support for the Paris Agreement, and embrace all aspects of sustainability. But as Gen Z gains more influence and purchasing power across the economy, the bicycle business, like all businesses, will have no choice if it is going to remain relevant to consumers. The current economic situation affords the bicycle business a huge opportunity to break-away and get out front on environmental issues and initiatives.

4/19/23 Utah is in a state of emergency as melting snow is likely to cause months of flooding … NPR Weather. A state of emergency was issued in Utah April 18 by Governor Spencer Cox after record levels of snow have started to melt, causing flooding. The melting could continue for months and cause avalanches, landslides, mudslides and rockslides, the governor’s order said. The Utah Division of Emergency Management has already deployed more than 1 million sandbags throughout the state to prepare for the flooding. HPS Analysis: Utah is a great place for bicycling, and months of flooding has the potential to keep too many bicycles in storage. The bicycle business can’t do anything about the snow-melt induced events, but it can tap into the National Weather Service (www.weather.gov) and provide up-to-date advisories to bicycle retailers and riders in and around the state of Utah to avoid hazards, and direct them to safe routes and trails to ride. The National Weather Service Climate Prediction Center Long Range Forecasts are posted regularly, and provide 8- to 14-day precipitation and temperature outlooks, as well as monthly and seasonal precipitation and temperature outlooks. The National Weather Service Climate Prediction Center is a resource bike shops can take real-time advantage of to provide a service to customers’ growing need to know what the weather conditions are for bicycle riding in their communities.

 4/19/23 U.S. economy stalls as credit narrows, Fed’s Beige Book says … Bloomberg Economics. The U.S. economy stalled in recent weeks, with hiring and inflation slowing, and access to credit narrowing, the Federal Reserve said in its Beige Book survey of regional business contacts. “Overall economic activity was little changed in recent weeks,” the Fed said in the report published two weeks before a meeting of the policy setting Federal Open Market Committee. “Several districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity.” Overall price levels rose moderately during this reporting period, though the rate of price increases appeared to be slowing,” the Beige Book said. Consumer spending, which accounts for two-thirds of the US economy, “was generally seen as flat to down slightly,” the Fed said. Wages remained elevated, but showed some moderation, and the labor market showed signs of loosening up, according to the report.  HPS Analysis: This is the first Beige Book since the banking crisis precipitated by the SVB collapse that showed lending volumes and loan demand generally down, and lending standards tightening in several districts. Keep in mind that the Beige Book is generally reporting what the Fed wants to achieve with its interest rate increases, with the stated goal to put the brakes on consumer spending, and slow down business expansion, neither of which is helpful to bike shops or the specialty bicycle channel of trade.

4/20/23 The question isn’t whether to shop, it’s whereBloomberg. After a brief burst of in-store activity, there are signs consumers are returning to their online spending ways. Are retailers ready for the next wave of e-commerce? The long-running tussle over how people shop, online or in-store, has a new wrinkle. Coming out of the worst of the pandemic, stores got a new lease on life. Shoppers freed of mask mandates bumped up traffic, and retail landlords experienced the kind of swelling demand they had all but forgotten. The respite has been brief, with signs that people are returning to their old online ways. And really, that reversion seems inevitable, given how accustomed we’ve grown to the ease of online shopping and free returns, a process that the pandemic only turbocharged. Now, as the dust settles from the whiplash of COVID spending habits, the real test of strength for retail’s online businesses is beginning. Data last week showed back-to-back declines for retail sales at primarily brick-and-mortar stores, while spending grew online. Year-on-year online prices have been falling for seven consecutive months, drawing shoppers. The question this raises is whether traditional retailers have successfully absorbed the lessons of the pandemic, and whether the billions of dollars pumped into e-commerce technology and supply chains will be enough for them to hold on, or even flourish, in the next era of online shopping. There’s little doubt that stores will always have a place in our modern era of retail, though their ubiquity and utility are changing. Stores have more success now as a “vibe” that embodies the company’s brand, and as a place to show off new merchandise, and quickly exchange or return products. As retail companies struggle to find the right online-offline balance, our shopping-scape will continue to morph even as our passion and need for shopping remains intact. HPS Analysis: What this article is confirming is what HPS has been advising bike shops since pre-pandemic – become omnichannel, and develop a commerce-enabled website with supporting policies and procedures. The NBDA has a group of associate members that provide all the online, web, and omnichannel development services required, and they will help shops with a budget to make it happen. The April 14 article in Bicycle Retailer and Industry News (BRAIN) announcing that “Erik’s Bike Shop now selling Specialized bikes online” signals this trend, along with the graph at the bottom-left of the interview on page 16 of the May 2023 print issue of BRAIN. The article is titled “Better decisions with more data sources,” by Ray Keener. The graph at the bottom of the article is titled, “Pre-Pandemic & During & Post-Pandemic.” In referring to this graph, Patrick Hogan, PeopleForBikes senior research manager, told Keener “Potential customers didn’t think their local bike shop would have bikes in stock, so they planned to buy a bike from another source. You can see by the graph that Amazon was the big winner.”

4/20/23 Quality Bicycle Products releases 2022 Impact Report …BRAIN. Quality Bicycle Products is releasing its first ever annual Impact Report. In it, readers can learn about the company’s B Corp score, DEI (diversity, equity, and inclusion) initiatives, sustainability practices, community-building efforts, and advocacy work. The report features digestible infographics, the voices and action of changemakers within the company, industry and communities, and goals for the journey ahead. “We hope that, as you scroll through this document, you find inspiration and gain a better understanding of what we’re all about at Q. This report highlights where our values and priorities are as a company, and showcases all of our incentives in one place,” said president Rich Tauer. Click here to access the whole QBP Impact Report. HPS Analysis: Qualifying to become a B Corp is a big deal, and HPS will strive to follow Q’s example as it grows, but we would like to know why more companies the relative size of Q have not applied to be certified as B Corps. Q is now the only business of any size in the American bicycle business that is a B Corp, and we respectfully submit that while difficult,  it is the responsibility of everyone in the bicycle business to seek and attain what Q has. We urge everyone in the global bicycle business to read the QBP Impact Report, as we stand on the edge of a turbulent and challenging time. The bicycle business talks about diversity, equity and inclusion, while a B Corp takes action and publishes an annual B Corp score, including its DEI initiatives.

4/21/23 A corporate credit crunch is just getting started … Bloomberg. There are worrisome signs of corporate distress in the wake of the banking crisis, raising the specter that a pullback in lending will drag down the economy. A month after the collapse of Silicon Valley Bank, the U.S. appears to have avoided the worst-case scenario, a rapidly-escalating financial crisis, and markets have responded. And yet, just below the surface, signs are mounting that credit is drying up in pockets of the economy at a worrisome rate. Small businesses say it hasn’t been this difficult to borrow in a decade. The amount of corporate debt trading at distressed levels has surged about 300 percent over the past year, effectively locking a growing swath of businesses out of financial markets. Bond and loan defaults have ticked up, and the Federal Reserve says banks have tightened lending standards. Corporate bankruptcies are on the rise, too, particularly in the construction and retail industries. HPS Analysis: There has been a dark shadow growing in my mind ever since it became obvious that record amounts of inventory have been backing up in the American bicycle business channels of trade, as retail sales have declined to the lowest level since the trade association started record keeping in 2016. I have repeated Bill Austin’s mantra that “inventory is evil!” as often as I can. This is true in part because if it isn’t turned into cash, it eventually has to be re-financed, and that becomes increasingly difficult, and weighs negatively on the financial statements of large and small business when consumer demand keeps ebbing. The U.S. economy has reached a point where credit lines to small businesses are becoming non-existent for a combination of reasons, while consumers are turning back to online retailers. The NBDA has formed an alliance with the League of American Bicyclists at just the right time for combining resources to reach out to both bicycle-ebike riders and non-riders to bring the JOY of cycling back to American communities, and in the process turn inventory into sales and participation opportunities.  

4/24/23 NY Sens. Schumer and Gillibrand advocate for lithium-ion battery federal legislation … BRAIN. New York Senators Chuck Schumer and Kristen Gillibrand said during a news conference April 23 that they support federal legislation to regulate lithium-ion batery safety standards in the wake of increasing fires caused by the devices. N.Y. Fire Commissioner Laura Kavanagh accompanied Schumer and Gillibrand at the news conference, as did the family of a Queens 8-year-old girl who was killed last fall in a fire started by a lithium-ion battery. ”Without federal legislation, and so many of these batteries come from across state lines, or made overseas, or made in China, we will not have a complete and strong solution,” Schumer said. HPS Analysis: A house bill had-been introduced by Representative Ritchie Torres (D-N.Y.) when this news conference took place, and Senators Schumer and Gillibrand subsequently introduced a companion bill in the Senate. Commissioner Kavanagh said during the press conference that New York City has experienced 63 fires and five deaths caused by lithium-ion batteries this year. HPS is of the opinion that Senator Schumer is correct, in that it is going to take federal legislation directing the Consumer Product Safety Commission to remove e-bikes that do not comply with UL 2849, and lithium-ion batteries that do not comply with UL 2271, from exposure to the public. The legislation also needs to exempt e-bikes and lithium-ion batteries from the de minimis exception. Uber also has the right idea, and while waiting for congress to pass legislation, the bicycle business needs to join the effort to subsidise a complete e-bike trade-in program, and a lithium-ion battery replacement program that includes chargers, matched to compatible electric propulsion systems and recycling.

4/25/23 Shimano bike-related sales fall 17 percent; operating income falls 32 percent in Q1 … BRAIN. Company-wide, Shimano is forecasting that net income will be 46 percent below 2022’s results this year. Shimano’s first-quarter net income in its bike division fell 16.8 percent from last year, while its operating income in the segment was down 31.8 percent. After issuing a negative forecast for the full-year performance at the end of its fiscal year, Shimano again revised its forecast for ordinary income and net income for the first half of this year, and its forecast net sales for the full fiscal year. HPS Analysis: There is more, and it boils down to the largest bicycle component manufacturer to the world-wide bicycle business is forecasting a down year. HPS thinks the real story is told in the chart that accompanied this article in BRAIN more so than the press release or the bits that attempt to put a happy face on this situation. Take a good look at this chart that Shimano attached to the press release:

From the left, the chart starts at the first quarter of 2018, two years before the pandemic, and it shows both Shimano revenue (in millions of yen) and operating income (in millions of yen). You can see the dip when COVID-19 hit in Q1 2020, the growth in both revenue and operating income to Q4 2022, and the drop off and decline in Q1 2023. The percentages in the press release and the BRAIN article are all from Q1 2022, and not the peak revenue and operating income in Q2, Q3 and Q4 2022. Shimano is following accepted accounting practices and norms, but this chart leaves little doubt that there was a lot of money made during the pandemic. It is also interesting to note that at the end of Q1 2023, Shimano still had lead times out into the end of 2023 and early 2024, and in April 2023 lead times on most components were within 90 days. In these challenging times, a great deal more transparency would be very helpful to the overall American bicycle business, including bike shops.

4/26/23 Rad Power Bikes lays off employees for the 4th time in the past year … GeekWire. The Seattle-based e-bike company confirmed the latest round of cuts on April 26. It did not provide an updated head-count, or information on what positions are being affected. Rad Power Bikes slashed 100 positions in April 2021, then made another 63 cuts in July, and had its third round of layoffs in December. The company now has around 400 employees, according to Linkedin. “We hoped the changes we implemented last year would put Rad in a better position to withstand the current economic downturn,” the company said in a statement to GeekWire on April 26. ”However, given current market realities, we are forced to further reduce the size of our team. This unfortunate measure is necessary for Rad to correct course and become a sustainable, enduring business.” Rad launched in 2007 and began selling e-bikes directly to consumers through online sales in 2015. It grew into the leading e-bike seller in North America and raised $304 million in 2021, part of two separate cash infusions to fuel its capital-intensive business. Rad was valued at $1.65 billion in October 2021, according to PitchBook, making it one of a handful of “unicorn” startups in the Seattle region. HPS Analysis: Rad Power Bikes has been in business for 16 years, and in addition to its DTC business it operates seven retail/service centers around the country. Its rapid growth during the pandemic has been impressive to watch, and its being valued at $1.65 billion in October 2021 put it up with Giant, Specialized and Trek. When PeopleForBikes dropped the NBDA from its board of directors in February 2021, the seat was offered to Rad Power Bikes. The list of investors is also impressive, and includes Fidelity Management & Research Company, Counterpoint Global (Morgan Stanley), Vulcan Capital, Durable Capital Partners LP, The Rise Fund (TPG’s multi-sector global impact investing strategy), and funds and accounts advised by T. Rowe Price Associates. In addition to layoffs, Rad has faced multiple challenges recently, including a wrongful death lawsuit, a lawsuit related to property damage, and the recall of nearly 30,000 units due to a safety issue. Along with Aventon, Super73 and Juiced, Rad Power Bikes has led the New Wave of DTC retailers that surged, marketing and selling moped/motorcycle-inspired e-bikes in the U.S. market from mid-2020 through the present. The American bicycle business is experiencing a shake-out, and some of the New Wave DTC brands were bound to experience difficulty. We will have to see how Rad Power Bikes management guides the company in the difficult months ahead.

4/26/23 Record number of foreign brands at Sea Otter Classic … Bike Europe. With the U.S. lacking a well-attended Eurobike-like event, Sea Otter is now a must-attend event of the North American cycling season for brands, industry leaders, top retailers and the media. That the show has an international draw was confirmed by CEO Frank Yohanan, “This year we had 125 brands from foreign markets in attendance, a record.” This year, the vast majority of the top brands sold in North America were in attendance with more than 1,000 brands on display. This is an increase from approximately 900 at the previous edition in 2022. There were a few notable absentees, including Trek and the Pon.Bike family of brands. There was also a record attendance of more than 80,000 visitors, including a strong influx of European and Asian C-level leaders who can now travel freely, and wanted to check in with North American customers following the global pandemic. The industry-level discussions centered around two prime topics in and around the tents and displays at Sea Otte, the reflection of first quarter results on 2023 figures, and the potential e-bike sales this year. It seems that most companies are planning for lower sales versus 2022, which came in at a healthy $7.4 billion (€6.8 billion). Most industry leaders are hoping for a modest 10 percent increase in revenues compared to the pre-COVID runup results in 2019, which had sales of $5.7 billion. The retailers are in most cases overstuffed with inventory that came in during the second half of 2022, and most of this bike inventory is still sitting at retailers’ showrooms waiting to move in Q2, when sales are strongest for most of the country. This issue is compounded by excess inventory sitting at supplier warehouses that will likely take most of the year to ship to retailers, and ultimately sell to consumers. While U.S. inflation has slowed somewhat to a more modest five percent clip, the higher costs of company borrowing in the eight to nine percent range, combined with excess inventories, will likely result in more bikes being sold at a discount, which will mean retailer and brand margins will likely compress in 2023, hurting earnings for most brands. The second topic of discussion was how much further would e-bike sales grow in 2023. In 2022, e-bikes accounted for 19 percent of the total market in revenues, or approximately $1.4 billion in value. This represents only 6 percent of unit sales. It feels like everyone is optimistic that e-bike sales still have room to grow to somewhere between 22-25 percent of forecasted 2023 dollars. HPS Analysis: Mix 80,000 cycling enthusiasts with 1,000 brand sellers, including 125 brands from foreign markets, interpreted through a European filter, and you get an overly-optimistic reading of the U.S. bicycle market at the beginning of the second quarter of the year. The Bike Europe reporter has good data that seems to be accurately presented, but the financial impact of the bank crisis on the small businesses that make up the majority of the American bicycle business is, in our opinion, under-reported or misunderstood. A 10 percent increase in American bicycle business revenue in 2023 is beyond modest. It is, in our view, an impossibility. We see the probability of growth in the e-bike segment, with some gain in 2023, but 22-25 percent of 2023 dollars is a bridge too far.  

4/27/23 Lyft says it will cut more than 1,000 people in new round of layoffs … Wall Street Journal Business. It’s been a tough few months for Lyft. The budget shortfall of $2 million that led Minneapolis to suspend its bike-share program, which was managed by Lyft, has transit advocates worried more cities could follow. In 2018, Lyft acquired Motivate, the largest bike-share operator in the U.S. When it took over the company, about 80 percent of all bike-share trips were in cities where Motivate was in charge. The latest cuts impact 26 percent of the company’s more than 4,000 employees. Lyft said it is also scaling back on hiring, and eliminating over 250 open roles. In a securities filing, the company said it would incur $41 million to $47 million in severance and other related costs in the quarter that ends June 30. While Motivate employees have not been specifically referenced so far, there is concern in the bicycle ride-share community that Motivate may be downsized or withdrawn from certain markets. HPS Analysis: Between 2010 and 2021, people in the U.S. have taken 500 million trips in total on shared micromobility, station-based bikes, dockless bikes, and electric scooters. Some bike shops don’t like bicycle ride share, while others support it in their communities. Our common objective, between all channels of trade and all organizations is simple: get more Americans on bicycles. Bicycle ride-share programs accomplish this objective in large measure. While Lyft and Motivate are for-profit corporate entities, their demise and leaving bicycle ride-share programs across the country abandoned, is a large step backwards. The bicycle business can reach out to the North American Bicycle and Scooter Ride Share Association (NABSA) to determine what can be done as a community of interest to provide bicycle ride-share services to millions of citizens living and working in cities across America.     

4/27/23 ‘Mobility’ market remains a good long-term investment, financial advisor says … BRAIN.John Bastian is bullish on the long-term prospects for the global bicycle industry. But he’s cautious on its short-term prospects, as world events roil the marketplace. Speaking at the recently concluded Sea Otter Classic Summit, Bastian, director of Baird’s outdoor products sector, used a slide to offer some perspective on the financial scope of the industry, a $70 billion global sector. And, he noted, cycling is the second-highest participation activity in the U.S., with only hiking ranking higher. Baird, however, said the current environment for mergers and acquisitions is suffering from the ongoing war in Ukraine, persistent inflation, fears of a recession, higher interest rates, and turmoil in the small to mid-size banking market best highlighted by the sudden collapse of Silicon Valley Bank. In short, he said, “investors are sitting on a lot of dollars.” Despite financial headwinds blowing across all markets, Baird is “bullish” long-term on investments in the “mobility” market, a phrase seen often in Europe but less so in the U.S., Bastian said. He noted in a series of slides that the cycling and outdoor markets tend to be “recession resilient,” participation rates appear to be higher than pre-COVID numbers, and trends in the electrification of wheeled products is accelerating. “People went to spend more time on their hobbies and that’s driving the outdoor segment,” he said. Bastian cited demographics as an important factor, and referenced the e-bike trends in Europe and Asia compared to the U.S. He pointed out that non-cyclists make up a significant portion of new entrants into the e-bike sector. “To be clear, we expect strategic and existing investors to continue making investments,” Baird research finds. And e-bike brand winners are attracting private equity investment with the top 10 brands controlling 70 percent of the U.S. market. HPS Analysis: John Bastian and Baird’s presentation about the mobility market is a breath of fresh air, and I am sorry I could not attend the Sea Otter Summit to listen to him in person. From the BRAIN article, I surmise he presented sound research and logical analysis of the mobility market both short-term and long-term, with a realistic view of what the American mobility sector faces the rest of 2023.

5/1/23 Regulators seized First Republic Bank and sold it to JPMorgan Chase, the latest attempt to end the U.S. banking crisis that began in March …The New York Times. First Republic failed despite receiving a $30 billion lifeline from 11 of the country’s largest banks. It will go down in history as the second largest U.S. bank by assets to collapse. HPS Analysis: It isn’t over ‘till it’s over. We will have more analysis for you in The Micromobility Reporter June issue.

Contact Jay Townley: jay@humanpoweredsolutions.com


The NBDA News Hour focuses on the news and articles contained within The Micromobility Reporter, getting a more in-depth view from a first-hand seat with the experts on the Human Powered Solutions team. This week’s topics include the major trends for early 2023 featuring 33 top items to watch, bicycle industry in a state of continuous oversupply, e-bike safety bills passed in New York, and consumer spending habits.



Rick Vosper’s Op Ed in the March 13 online issue of BRAIN shined a bright light on the fact that the American bike shop channel of trade has too much bicycle inventory because, “year after year, we keep ordering too many bikes,” and then scramble to put them on clearance. “And this insanity has been business as usual for our quirky little industry ever since the end of the Great Recession in 2009,” Rick wrote.

I believe he peeled back an inconvenient truth about the bike shop channel, and the mainstream top-tier brands fighting over bike shop floor space through restrictive and one-sided authorized dealer agreements, until the Covid-19 pandemic drove seismic shifts in consumer buying habits and demand.

From 2009 until 2020, the mainstream top-tier bicycle brands were aggressive in their efforts to “lock down floor space of key dealers in each market, thereby denying their competition access to those dealers” and their floor space.

Rick is careful to acknowledge that the tactic of restricting competitors’ access to floor space, and having too much inventory that had to be put on clearance year-after-year, may not have been a purposeful strategy, but “the net effect” was the same.

“In military parlance, a scorched-earth policy is a strategy that aims to destroy anything that might be useful to the enemy,” he wrote. For seven years, from 2009 until 2015, the mainstream top-tier bicycle brands slugged it out over bike shop floor space, and lashed out at any bicycle brand that attempted to get a piece of “their” floor space.

In the fall of 2015, Trek announced a Direct to Consumer (DTC) program as a marketing tactic that we assume was intended to change the game. In the five years between 2015 and 2019, Trek was alone among the top-tier bicycle brands in facing off in the new DTC market segment with Canyon, the European DTC brand that had entered the U.S. market.

Just over four years ago, in March 2020, a black-swan event, Covid-19, locked down the U.S. market. By the end of the second quarter, the global pandemic triggered increased consumer demand for goods, served to shift buying habits, and drove a surge in demand for bicycles that included new DTC bicycle and e-bike brands.

The mainstream top-tier brands found themselves in a different and more digital competitive environment. Cannondale announced a DTC program in 2020, and Specialized in the first quarter of 2022.

Bike shop gross margins on the sale of new bicycles struggled during this whole period, and in 2015 Trek began to aggressively purchase authorized dealers. 

Specialized began to acquire authorized dealers in 2021. Cannondale Sports Group was acquired by PON Holdings in 2021, followed shortly thereafter by PON acquiring Mike’s Bikes, a Northern California chain of bike shops that since has acquired an additional chain of bike shops. From this we conclude that Mike’s Bikes will be PON Holdings / Cannondale Sports Group’s entity for acquiring bike shops, although there is no announced policy or strategy, and we cannot yet define one.

It should be noted that Giant is definitely one of the top four mainstream bicycle brands in the U.S., but has not been buying its authorized dealers, and has maintained delivery of its DTC program through authorized dealers.

In his March 13 article, Rick also cites bike shop data from Georger Data Services (GDS). This Table has been constructed using the GDS data from the article.

The original purpose was to graphically show the number of bike shops in the U.S., and to also quantify the number of bike shops owned by mainstream top-tier bicycle brands, those that are independently-owned authorized dealers, and those that are independently-owned that are not authorized dealers of any of the four mainstream bicycle brands.

366, or 5.3 percent, of American bike shops are owned by one of the mainstream top-tier bicycle brands. Another 67.3 percent are independently-owned authorized dealers of one of the top-tier bicycle brands, bound by an authorized dealer agreement. This totals 72.6 percent.

1,876 American bike shops, or 27.4 percent, are independently-owned, and are not bound by authorized dealer agreements to any of the four top-tier brands, although they may have buy-sell or other types of dealer agreements with one or more of the estimated 400-plus bicycle and e-bike brands currently doing business in the U.S. market.

Before March of 2020, HPS believes that the majority of the 7,000 bike shops that GDS estimates existed in the U.S. when the pandemic was declared, were struggling to make a net-pretax profit on the sale of new bicycles.

As the 2021-2022 NBDA Cost Of Doing Business Study shows, the “typical” bike shop realized a net-pre-tax profit on the sale of new bicycles during the sales surge.

Keeping in mind that “typical” is the median, and the Cost Of Doing Business Study represents a mix of all the types of bike shops shown in the table. It is the net-pre-tax profit that bike shops will need to preserve in 2023 and going forward.

So far I have been referring to mainstream top-tier bicycle brands, including Trek, Specialized, Giant and Cannondale, as shown in the Bike Shop Count table. All four were founded between 1971 and 1975. All four became multinational pre-2000. Trek started to acquire retail stores in 2015, followed during the pandemic by Cannondale and Specialized (but not Giant). Trek led in establishing a DTC program in 2015, followed by Specialized and Cannondale during the pandemic. Giant’s DTC program only delivers through its authorized dealers.

A few of these new brands modified their distribution as the pandemic surge faded to include bike shops for delivery, service, and retail sales. Aventon and Flyer are examples. This in turn has placed the mainstream top-tier bicycle brands, and all the other brands selling through bike shops, in direct competition with each other, and created opportunities including profit and growth potential, for bike shops.

New bicycle and e-bike brands emerged between 2008 and 2016, including Rad Power Bikes, Super73 and Juiced, just to name a few. All of the “new” brands are built on complete DTC distribution that has changed the game relative to the competitive bicycle and e-bike retail landscape. This emerging new wave has also played a role in completely revising the bicycle/e-bike standards and regulatory landscape that is just getting revved up.

During the sales surge created by the pandemic, a lot of money was wasted. A lot of money was also made up and down the supply chain. BRAIN’s reported bicycle import data for 2020, 2021 and 2022 in the March 2023 print issue shows the world average cost per unit at $84.31, $96.93 and $146.17 for each of the three years. Note: I acknowledge that this could be F.O.B. or C.I.F. since it is not specified.

That means that from 2020 to 2022, the world average cost per bicycle unit increased by $61.86 – a 73 percent increase in three years! Inland freight and other costs were added, plus applicable surcharges, until a suggested retail price was paid by consumers.

Keep in mind that this analysis applies only to regular, or so-called acoustic bicycles, and does not include electric bicycles, primarily because of the convoluted and confusing customs data that is currently available, and that is virtually unusable. However, the average imported electric bicycles generally have a much higher value than the average non-electric bicycles. While the increase in value may not have reached 73 percent during the pandemic, it undoubtedly showed an increase because of raw material, component, U.S. duty (when applicable), and transportation costs. These costs, like with regular bicycles, were passed along in pricing to retailers and consumers.

Experts who have followed the NBDA Cost of Doing Business Study for decades have commented on how robust and profitable the “typical” bike shop and “high-profit” bike shop KPI’s were in the 2022 study, based on 2021 data. I have already commented on bike shops having to do everything they can to preserve this level of net-pre-tax profit.

Now let’s look up-stream from bike shops to the brands. Giant is the only one of the four top-tier brands in the U.S. that is public, but its financials are aggregated world-wide so there is no visibility for U.S. operations. The bottom line – there is no transparency so we can only make assumptions.

I believe a reasonable assumption is that none of the top-tier, or Big Four as they are sometimes called, wanted to lose profitability during the pandemic despite the turmoil. While the top-tier brands paid more than they ever had for imported products, they passed the increases on in the cost to retailers and consumers.

This leads to “greedflation,” and “price-price spirals.” Keep in mind that I have worked for one of the Big Four, and have an appreciation for how hard it is to accurately forecast and maintain any kind of profitability and growth in a competitive situation where there is cyclical over-stock-discount-to-clear-inventory, and profitable years are few and far between.

Greedflation is simply raising prices as long as consumers will pay them. I think it is a safe assumption that some and perhaps most brands, including those in the top-tier, and most retailers, raised prices during the pandemic because consumers were buying everything they could get their hands on, and paying whatever the price was.

Greedflation goes hand-in-hand with kicking just-in-time inventory management to the curb, and adopting just-in-case inventory management, as well as allowing the Bullwhip Effect to control the forecasting and ordering process. It was good for about nine to 10 quarters, from Q2 2020 through Q3 2022. I don’t think it was by design as much as it was the expedient thing to do under extremely turbulent and uncertain circumstances.

Right now, the bicycle business is going through a slump driven by the continuing turbulence, and evolving uncertainties. Greedflation drove retail prices up to levels that a growing number of consumers will not pay, and this is reflected in the discounting and pricing dynamics we are experiencing as the first quarter gives way to the second quarter, and the hope that Spring will bring back consumers to ride and purchase bicycles. As you know by now, HPS does not believe in management by hope.

By now you have noticed that raw material, ocean shipping, and domestic shipping costs have all decreased and some, like ocean shipping, have dropped like a rock since the end of last year. The price-price spiral is an economic term referring to companies hiking prices beyond an increase in their costs. Some economists are predicting that some companies have pushed their margins higher, and will continue to do so even as their costs fall away. If bike shop product costs do not go down as costs up stream go down, I am sure you can figure it out from there.

The problem is the inventory that was purchased when both product costs and logistics costs were high. I have said it before – brands and retailers paid more for the landed cost of products from late 2020 to late 2022 than ever before. Some of that high cost inventory is still in warehouses waiting to be sold at discounted prices.

The recent banking failures and the Fed’s latest interest rate increase have created a new set of uncertainties about the cost of money, and whether banks will be willing and able to refinance carry-over inventory that has been devalued, and continue to provide business loans going forward.

The future is what we make of it! Peter Drucker warned, and my thanks to Joe Marcoux (www.joemarcoux.com) for reminding me: “The greatest danger in times of turbulence is not the turbulence – it is to act with yesterday’s logic.”

Part of a business plan is quantifying simple things like close rates, and educating and training staff, including the owner, about the power of greeting and increasing close rates. Experts like Joe Marcoux and the NBDA can help, as can becoming a member of an NBDA P2 Group.

Bike shops must protect and generate cash flow and positive profitability. The hard work is crafting a written business plan that is shared with family and staff, and tracked, reviewed, updated, and revised every month, and more frequently if possible.

My good friend and colleague Fred Clements also opined during our latest podcast that what bike shop owners need to do is bring the JOY! Bike shops should not be gloomy places reeking of despair. This is the time for owners and managers to lead and spread the fun, the excitement, the JOY of changing people’s lives, and providing them with a product that will make a difference to them, their families, and their communities.

Contact: jay@humanpoweredsolutions.com