Saturday, January 11, 2014

Predictions for the 2014 American Bicycle Market

Having studied the U.S. bicycle marketplace for the last decade, the Gluskin Townley Group has learned to respect trends as powerful predictors of future business performance…and they also tell a very important story.

We have followed this story for the half-century of our own experience in the bicycle business and concluded that it is time for the rest of the U.S. bicycle industry to tune in and really listen to the factual story that has led to the flat U.S. bicycle business that can now only grow if it changes the way it does business to get in step with the changing demographics and opportunities of the New America.  Many industry stakeholders hear and feel the winds of change and there is a new level of concern for what is coming and what is already here, but not sufficiently understood.

After much internal conversation we recognize the time is right for us to embark on predicting what we are confident in based on our study of economic data, the American bicycling consumer, technology, and the demographic trends that firmly supports our findings.  However, we also recognize that the world is in constant upheaval and presents different challenges and opportunities on an almost daily basis. So, we also present the following predictions with a level of caution that comes from the wonder of never-ending surprise and opportunity.

Weather will play an important and growing role in the American Bicycle Business in 2014 but needs to stop being a whipping boy and given more than lip service!   Weather has been blamed for all that ails the U.S. bicycle business…but in reality is only one misunderstood and misused factor that needs to be taken into account in planning and forecasting. 

While vitally important, Weather isn’t the only factor affecting the American bicycle market and business, and hasn’t been for over a decade.   Yes, Mother Nature has her own time table and sense of humor when it comes to the weather, but global warming and climate change have made weather an important factor impacting the U.S. bicycle business and thanks to the federal government it is a factor that can be planned for with a higher degree of reliability than in the past.  It will still cause inconvenience at its best and disaster at its worst. However, for outdoor activities such as bicycling weather is a constant that needs to be understood for what it is and taken into account in both short and long term planning.

The Federal Government has made vast improvements in weather forecasting and the bicycle industry, like the apparel industry, can and must make better use of these tools to forecast and plan for their businesses. Retailers can use these tools to plan their merchandising around local weather forecasts while suppliers and distributors can do so for their regional or national forecasts.

Where to look? You can begin by visiting www.noaa.gov through which you’ll be able to find weather forecasting tools and services that will help you plan for your annual product portfolio, allowing you the flexibility to change your product selection from season to season.

Remember this quote…”After you determine the product or service you have to sell, you’d better find out who buys what you’re selling.  What are the customers?  How do you reach them?  Above all, are there enough of themAnd is their number expanding or shrinking?”  The quote is from Kenneth W. Gronbach author of The Age Curve: How to Profit from the Coming Demographic Storm and we have emphasized the last two questions, the answers to which are the foundation for our next prediction. 



The American Bicycle Business continues to struggle with sales of new bicycle units in 2014.  Retail dollars generated by the sales of new bicycles have steadily increased over the last decade, particularly in the bike shop channel, but we caution that 2014 might see the end to this trend as well.

In answer to Gronbach’s first question: “…are there enough of them?” Generation X, the generation that is driving the U.S. bicycle business right now – today – is at least 11% smaller than the previous generation that drove the bicycle business ten years ago!  Unless the bicycle business changes the way it does business – it is going to attract, on average, fewer shoppers and customers by continuing to do the same things it did ten years ago!   The result has been the flat to declining U.S. market for new bicycle units that the industry has experienced since Generation X took over as the drivers of the retail market from the Baby Boom generation. 

In response to Gronbach’s second question: “…is their number expanding or shrinking?” there won’t be more Generation X’ers… they have all been born, and this is a demographic fact of the American Bicycle market, that has to be dealt with by the bicycle business changing the way it does business if it expects a different, or better result..    

For both the supply side and retail channels this is a matter of reaching out and attracting more shoppers for new bicycles, and increasing conversions and close rates.  In short…the bicycle business needs to become more inclusive and less exclusive and invite everyone to shop for a new bicycle so there are more conversions to an actual purchase!

Women become the New Majority in more aspects of the American bicycle market in 2014.  Women currently represent 51 percent of the U.S. population and were 53 percent of the voters in the 2012 Presidential election. They also hold the purse strings and influence or make 80-85 percent of household purchases. The American Bicyclist Study reports that women make up 55 percent of Generation X bicycling consumers.

With these four data points as background, it’s important for the industry to recognize and act upon the fact that women are fast gaining share of American bicycle riding participation and they are seeking, creating, and carving out their versions, not the mainstream bicycle businesses version, of their bicycling lifestyle in the communities in which they live.
 
The American bicycle business made a conscious decision to focus on the sport of bicycling and not the activity and to also leave unchallenged the Endemic Prejudice that has become pervasive throughout the bicycle business.  The combination has chased some women away from both bike shops and bicycling altogether.

With women becoming the new majority on their terms, the American bicycle business needs to move quickly to catch up and learn to play a role, or it will be left behind and may be made irrelevant, in whole or part, by the new majority!

Minority-Majorities emerge as drivers of more local and metro-urban bicycle markets in 2014. Over the last two decades bicycling has become an activity of upper income, college educated, white, male Americans.  Women are quickly closing the gender gap and having an influence on the bicycling lifestyle, but the “sport” of bicycling is dominated by upper income, mostly white American households.  . 

However, the American Bicyclist Study reveals that the profile of adult cyclists, living in the top 12 metropolitan cities, is significantly non-white. This New Coalition is most evident in metro markets that are currently or on their way to becoming minority-majority populations.

The American bicycle business needs to get its head around the new American Coalition and the fact that there is no longer one big market, but a multiplicity of neighborhoods and communities with diverse populations driving shop local and buy local movements.  Here again, the American bicycle business needs to move quickly to catch up and learn to play a role, or it may find itself left behind and irrelevant. 

Children and Juveniles will continue dropping out of bicycling in 2014During the twelve month period from 2011 to 2012, 3 million Americans 17 years of age and younger dropped out of bicycle riding participation.  If the current trend continues there will only be an estimated 6 to 7 million Americans 17 years of age or younger participating in bicycling 6 or more days per year in twenty years. 

This is an urgent and negative trend that the American bicycle business needs to understand and determine a corrective, or at least a positive course of action within the near-term to attract younger riders and families to the activity.    

Used Bicycles will continue to increase the stress on new bicycle forecasting in 2014.  Used bicycles have been rising as a significant factor in the American market since about 2007.  By 2008 several research firms reported used bicycles as accounting for 25% to 30% of bicycle ownership.  Used bicycles represented 9.1 million, or 36% of bicycle ownership in 2012 and 7.6 million or 26% of bicycle ownership in 2013. 

With this market penetration used bicycles have had a definite impact on the new bicycle portion of the American market and are a definite factor in the problems forecasters and planners are having in looking ahead and ordering closer to the right quantities of imported bicycles – which account for over 98% of American market consumption of new bicycles. 

In Conclusion:

We see two distinct bicycle businesses emerging in 2014…one big, traditional and flat with no growth, and the other embryonic and small, but all about growing locally.

Janus, the Roman god of doorways and beginnings, is known to have two faces, looking in opposite directions – we imagine he is looking back at the past and ahead to the future.

Changing demographics and the resulting New American Bicycle Market have generated a wide disparity of responses from the traditional bicycle business…and from the new wave bicycle business that has emerged ”under the radar” and off the books as far as American bicycle business data and statistics are concerned.

What we see emerging in 2014 because of what we are calling the new wave and the differentiation between them are at least two distinct and definable American bicycle markets, each with their own economics and economies.  

One is the established, traditional bicycle business that is clearly larger and well established, but is looking back to what was and the way it was.  We predict that this larger American bicycle market will continue to struggle in 2014.  One of the signs of the struggle will be the consolidation that has already started, and is a function of expanding market share by acquisition, but not actually growing the overall size of the American Bicycle market.

We also see the traditional, mainstream bike shop channel of trade continuing its two decade flat, no growth trajectory in new unit sales, with the possibility of a decline in both units and the retail value of new bicycles during 2014.  Making a real profit on the retail sales of new bicycles will slip further from possibility for bike shops, increasing the pressure to make a fair profit and living on the rest of the typical bike shops retail revenue. 

We look at the other face of 2014 – the New Wave Bicycle Business and Economy, and see it looking to the future and new and innovative ways of creating individual bicycling lifestyle solutions, and actually growing the size of bicycle market in cities and neighborhoods…in other words, on a local basis. 

This emerging new wave business will remain small in 2014, and largely under the radar, but will begin to challenge the traditional, main-stream bike shop channel as cities become the drivers of the new American bicycle business.  This isn’t to say that smaller towns and cities won’t grow as bicycle markets – but they will have their own shop-local buy-local flavor and response to providing individual bicycling lifestyle solutions! 

For more information contact:

Elliot Gluskin
Managing Partner
The Gluskin Townley Group

Jay Townley
Partner
The Gluskin Townley Group

www.gluskintownleygroup.com

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