Thursday, June 12, 2008

Bike industry rant...

And now it hits home. Model years, huh. What are they good for. Absolutely nothing. Listen to me. Okay, so I took a little liberty from Edwin Starr. But really, model years are a bane to the bike industry. Maybe not "model years" per se, because some form of identifying production by specification needs to be made, but the method with which bike companies introduce new product and phase out old is absolutely ludicrous, especially to a small retailer like myself.

Here's how it works. The bike industry trade show, Interbike, is held once a year in October. This would be a great time for the industry to introduce new bikes that are available for sale at the same time - perfect for having new bikes in stock for Christmas. Then these bikes can be produced and available from the manufacturers through the summer of the following year. Christmas and summer - these are the main new bike selling seasons. Folks want bikes for Christmas presents and they want new bikes when the weather gets good. I don't know, I guess good weather incites people to get out on bikes and ride.

Makes sense, right? But no, that's not how it works, especially with popularly priced bikes. Bike manufacturers feel like they have to introduce bikes sooner, earlier, to get a jump on the competition. After all, if you are the first out with a new bike, why would you want to order "old" bikes. Early bird gets the worm.

So, bike manufacturers start introducing their new model year bikes in the spring and summer and running them through to the following Spring. And not wanting to get stuck with last year's inventory, they cease production in early Spring. The problem with this is bike manufacturers seem to be perpetually out of stock of important models during the summer when people want to buy bikes because of inevitable production delays. Maybe this isn't a problem for big shops who pre-season gobs of bikes and warehouse them. For a small shop like me, I can't afford that. I've got space for a limited number of bikes and have no warehouse space. I've got a few bikes in the shop that I can sell and then rely on special order to get bikes customers want. It costs more because of freight costs, but overall saves me money becuase I can maintain my cash flow.

New bike sales have been sparse at the shop, but literally, within the past two days, I "sold" three bikes, all of which I needed to order. Wrong! Only one of the bikes is in stock. I even tried to find an appropriate alternative and swap the trigger shifters for twist shifters, but no, that one's out of stock too. The other bike that is out of stock is unique in the bike industry by virtue of its style, component spec, and price so finding an alternative is unlikely. But these folks have their ecomonic incentive check and want to buy bikes and dangit, I want to help them spend it. Sure I want a bike sale, but I really want to see them riding their bikes because they want to use their bikes instead of their car.

The main problem facing bike manufacturers in their few attempts at eliminating model years rests with their vendors. Parts makers in Taiwan and China still rely on model years for their wares and their production is on a model year basis. They offer quotations based on these model years and even if a product remains unchanged, will want to requote based on their model year.

Typically, the schedule goes: bike companies go to Taiwan in October/November/December to begin negotiation for new model year bikes. Vendors present new products at this time. Bike companies either choose to use new parts or continue using existing parts if they will continue to be produced. Once parts are decided, price negotiation begins and may go on for months as bike companies try to whittle down the price to save NT$ 1 here and NT$ 1 there (an NT$ is a New Taiwan Dollar is NT$ 1 is worth about three and a half cents US). If you order hundreds of thousands of these parts, that NT$ 1 can add up to a lot of money. However, in many cases, you spend so much time chipping away at the price that you end up not seeing the bike for the parts.

Finally, you've arrived at a bike spec and a price so you coordinate production. Most of the new parts have product cycles that run from January or February through about March of the following year. That means you can begin complete bike assembly in March/April and new bikes begin arriving in May. That is in a normal year. This year, however, because of the dramatic increase in the price of raw materials and parts vendors unwillingness to quote on parts because of the volitile raw material price, this schedule got pushed back by months creating a hole in inventory through which I've fallen.

Ideally inventory and model years would coincide perfectly. But that doesn't happen very often and it's very common for bikes to be out of stock late spring/early summer - just when bike sales start to increase. In some respects, the bike industry has succeeded in spite of itself.

Guess I'll be busy today trying to find bikes for my customers or find a dealer who has the bike they want in their stock. Better they get the bike they want from someone else than not at all.

Even after rereading this post, it still doesn't seem to make sense with regards to the production schedule and availability, but after working for many years at the bike supplier level, I know of the perpetual problem and frustration of being out of stock of popular bikes at the time when people want to buy new bikes. And really, are rants supposed to make sense anyway?

And "introduction" does not necessarily equate to "availability." Introduction = hey, check out our new stuff, too bad it's not available, yet.

(What's playing: Sweet Ballroom Blitz)


First Flight Bicycles said...

its all like the fact that I just got a magazine for the month of August in the mail...gotta be the first. I was always happy with Electra just changing colors on the Townies every six-eight months instead of having "model years" made it real easy for us.

Marty said...

Yep, I understand your frustration! Intimately.