[Closed] How does the bike industry handle the current business boom?

Hopes respond to your question.

https://www.hopetech.com/news/have-you-opened-the-factory-yet/
Have you opened the factory yet? No one seems to have any stock of Hope products.

More and more we are being asked these questions regarding availability and supply. Although we closed following the first lockdown in the UK, we slowly opened again during April with COVID secure measures in place. These measures did initially restrict our production although we gradually managed to get manufacturing back to pre COVID levels.

By this time, the boom in cycling had really taken hold and all our distributors and retailers were clamouring for product from all their suppliers, but the story is very different in many parts of the economy.

Locally we are also seeing the other side of this with Rolls Royce, BAe and many of their subcontractors in the area announcing layoffs and factory closures following the huge downturn in the civilian aerospace market.

With this at the forefront of our minds we are still very cautious in any expansion of staff and production capacity, although since the summer we have been investing in new machinery and taking on manufacturing staff to scale up the production. The total investment so far has been around £1.5 million. The factory already operated 24-7 but we are adding additional staff to some of the night shifts to help increase production. To help with efficiency we have also paused some of our new product launches, but we hope to bring these exciting new products to market sometime next year.

It’s not likely to be a boom, it’s more of a bubble with supply compounded by factory output issues. There’s quite a lot of stuff online with industry people talking about it.

If they up output capacity too much they’ll wipe out their extra profit now and then be left with excess capacity and costs when normality returns.

It’s not likely to be a boom, it’s more of a bubble with supply compounded by factory output issues. There’s quite a lot of stuff online with industry people talking about it.

If they up output capacity too much they’ll wipe out their extra profit now and then be left with excess capacity and costs when normality returns.

There's a lot of talk in business (not cycling in fairness) about a negative association with purchases made during lockdown, post-covid. I'm not sure there's much hard science on it, just theory and assumption, but once it's actually resolved there will be the obvious boom in products and services that were 'banned' during lock-down (Pubs, Clubs, Cinema etc etc etc) which leaves less money for stuff that boomed during it, but more than that to some people some things will always have a near subliminal association with the Covid era.

I don't think it will result in a reduction in the cycling industry, but I think it's unlikely the boom will be permanent.

If I were in the business of making bikes or bike bits etc, I might be offering my workforce unlimited over-time, night shifts etc (if they don't already) but I'm not sure I'd be bold enough to invest in new machinery / much recruiting unless there was already scope for it pre-covid that the increased cash-flow makes possible now.

The vast majority of production capacity will be OEM stuff for low-end bikes. The high-end aftermarket stuff is a small niche. The OEM stuff will be covered by contracts where the manufacturer guarantees a specified quantity and price. There is probably a small buffer of excess capacity, but if their factories are running at full capacity and they have meet their existing contracts, they are probably better to reduce discounts for volume than spend millions on increasing capacity for demand that is a short-term blip. A lot of the extra bike sales over the last year will probably hit the second-hand market once the pandemic is over, so the manufacturers are probably worried about a post-covid slump in sales.

Demand's gone nuts, we've seen it in our business too. But most think that once everything gets back to how it used to be then demand will just go back to where it was before, hence no need to start an expansion plan that'll not be needed in a few months time.

Equally there'll be bits of kit that are on 12 month lead times so unless you know how long the pandemic will be you wouldn't commit to a spend on something that may well be not required when it turns up.

General business thinking is cut promotions in order to not create even more demand you can't service and also maximise profitability and claw back the costs / loss of profit from the shutdowns last year.

The bike industry has certainly put prices up and I can't see them coming back down very quickly when all this is over. I expect they're hitting reset and aiming to make less bikes with more profit in them, that'll shield against a flooded second hand market over the summer.
Plus side of all this is that there may well be some second-hand bargains to be had.

I expect they’re hitting reset and aiming to make less bikes with more profit in them,

Making fewer bikes would mean closing factories, which they won't want to do unless there is a huge slump lasting years. Once the boom is over, they'll be watching cashflow. If demand slumps, they'll slash prices because they need to pay bills to keep the factories working. Low demand = low prices. High demand = high prices.

Thanks all, forgot to go back to this.

I find price rises as demand rises just the most **** -y behaviour - I know its market dynamics, price things at a level for which people will pay, but I hate it.

I suppose to an extent it must be true that it is a bubble. Totally unforeseeable (to quote In the Loop) pretty much as well.

So we are basically saying there will be only a modest increase in production, no real investment as such, price increases to maximise profit (and maybe temper demand a wee bit, but let's face it, its gouging).

Is it even possible for someone to come in and steal the established players' egg and chips? A Disruptor? haven't really thought it through, but I've bene in enough companies who kept building a higher and higher dam as the flood of change was arriving, whilst some others rapidly built boats, flicked the finger, and sailed off into the new horizon as the old players drowned.

I also suspect (hope!), that this is not a bubble, that just enough folks get a sniff of just how fabulous cycling is, to want to move onwards and upwards, not only for the industry as a whole, but for overall societal impact (i.e. **** off entitled car obsessed gammons)

hmm

Santa Cruz SEO talks about this on the Vital pod...
https://www.vitalmtb.com/features/Santa-Cruz-CEO-on-the-State-of-the-Bike-Industry-The-Inside-Line-Podcast,3030

IIRC he basically says they're staying cautious but best-case scenario is a longer term bump of about 20 per cent to the overall consumer base.

Basically, I doubt bike companies will go nuts and over-extend themselves. If anything they won't expand production enough and we'll still have scarcity of new bikes.

At worst there will be a few more sales bargains at the end of 2022, which might tempt some of the new riders to upgrade. Especially the ones who've paid over the odds for other people's old shit on eBay.

I suspect that Brexit and sky-rocketing shipping costs from the Far East are a much bigger factor in the current pricing changes than profiteering off Covid based demand. I've seen plenty of non-cycling related stuff go up in price recently.

I also hope that enough of the people who tried cycling last year stick around for the long term, the number of kids I saw learning to ride for the first time partly thanks to quiet roads and furloughed parents was particularly heartening.

I find price rises as demand rises just the most **** -y behaviour – I know its market dynamics, price things at a level for which people will pay, but I hate it.

Why don't you start a bike company and sell bikes priced at what you think is reasonable?

I find price rises as demand rises just the most **** -y behaviour

It might be, but as others have pointed out, a lot of the price increases are not just down to capitalist greed, increased production and shipping costs play a part.

And I expect manufacturers and distributors
are enjoying getting their own back on all of us who have insisted on getting the cheapest online deals that we can over the years

Although pricing based on demand rather than cost is frustrating, I can see why as a retailer you would take advantage of the current situation. A lot of people have excess cash and time at the moment and might have been the type to always search out the cheapest price and the best deals. I know I rarely pay anything near RRP for most non essential products I buy but that's not really an option at the moment, it's difficult for me to complain that I can't get 50% off any more.