Bicycle Retailer and Industry News - Supply chain

Vosper: Dealer supply chain mechanics are changing, maybe

Steve Frothingham — Mon, 10 Mar 2025 16:23:07 +0000

One of the interesting things about our quirky little industry is that the only things that change year to year — and even decade to decade — are its products. The actual mechanics of how those products get from factory to supplier to dealer and ultimately, to the bike-riding public, have remained essentially unchanged since the end of the Bike Boom in the early '70s and the rise of the Bike 2.0 era.

Initially modeled on the old Schwinn distribution network, the Bike 2.0 version was rooted in the industry’s migration to Asian manufacturers, the rise of the current dominant Quadumvirate of the Trek, Specialized, Giant and Cannondale brands, and the resulting increased lead times that resulted from having bikes designed in the US but manufactured literally half a world away.

The chain looked something like this: US-based brands sourced bicycle production in Japanese, and later Taiwanese, Chinese and South East Asian countries, which offered the hard-to-beat combination of much better quality with much lower prices compared to traditional domestic or European sources (although some European brands are currently challenging this model with near-shoring initiatives). Brands paid for those bikes with letters of credit drawn largely on U.S. banks, with occasional assistance from “business-friendly” Asian governments (more about that another time, maybe) and shipped them to the States via ocean freight.

On arrival stateside, bikes were transferred to suppliers’ domestic warehouses and from there to a network of participating — or “authorized” — dealers, who had pre-ordered them on extended credit terms. During that time, retailers were expected to sell the bikes to their customers and then apply the proceeds to paying their suppliers. If they were particularly successful in this, dealers could take advantage of anticipation discounts to boost their realized margins. Within the constraints of perfect competition, business was generally good. All parties in the supply chain made at least a modest profit on the result, especially the banks who financed all that credit in the first place.

The formula worked like a charm, until it didn’t.

Which brings us to the post-Covid reality of Bike 4.0. Dealers’ margins — both nominal and realized — are at all-time lows, virtually all bike brands compete directly with their retailers via D2C and click & collect operations, and, with a few notable regional exceptions, store traffic since 2003 has been in the dumps. Yet we’re still using the same basic Rube Goldberg supply chain system we’ve had in place for 50 years. It’s long, it’s clumsy, it’s expensive to maintain, and it’s increasingly outdated in the face of market reality.

Fortunately, we’re finally starting to see the first glimmers of potential changes to much or part of traditional supply chain mechanics. These ideas may offer some relief for dealers and suppliers alike. At this point these they’re still in their infancy, but they may be a sign of things yet to come. And there will be more.

Let’s have a look at two of them.

Bob Lickton’s “slotting” model

“This [proposal] may seem radical — but the current economic and market conditions call for changes in inventory turnover and merchandising.” —Jay Townley, Human Powered Solutions

No one has ever accused retailer Bob Lickton of thinking small. His family-owned retail operation, Lickton Cycle Corporation, has been in the Chicago area since 1929. Lickton himself has been active in the bike biz for more than 60 years, which makes him a veteran going all the way back to the Bike 1.0 era when he was a Schwinn dealer. More about this in a minute.

In 1979s, Lickton started one of the industry’s first catalog-driven mail order bike parts companies, Lickton's Cycle City. In 1995, he invented the bicycle shipping niche with his AirCaddy transport boxes and ShipBikes.com shipping service. And just last month (February), he proposed a market-disrupting change to the industry supply chain, with his BRAIN guest editorial, “It's time for bike companies to pay you to sell their bikes.”

In its broadest outlines, Lickton’s editorial states, “You must look at the big box retailers like Best Buy, Walmart and Target to see the solution to this terrible financial and inventory problem. They call it slotting, which means the manufacturer pays a fee to put their toaster or flat-screen TV in your store for a monthly or yearly fee. The manufacturer provides point of sales supplies or video displays and pays you a fee for the floor space (slot), which is deducted from your purchases or paid up front. As an agent for this company the dealer carries a small inventory for people to touch or buy.” The dealer would slot one or more of the manufacturer's bikes which they pay for in 30 to 90 days, Lickton told me in an email exchange. Moreover, “This system will work for the big companies and great for innovative or start-up manufacturers with handicap bikes for kids, special type electric bikes, cargo bikes, tri bikes and even tandems.”

If there is a price reduction by a manufacturer online, Lickton said, this price must be the same for the bicycle shop and any cost difference must be credited for bikes they have already purchased. If not, he emphasized, “the relationship would be broken.”

Finally, all inventory held by the supplier must be transparent and available to retailers, with nothing held back, as some brands currently do. “Independent bicycle dealers cannot spend time showing and explaining a bicycle and then the customer goes on line and buys it from the dealer's manufacturer,” Lickton insisted. “That is totally nuts. This is why manufacturers need to pay for the slot (space) in the dealer's store, just like the big box stores do.”

My mentor and colleague Jay Townley has this to say about the proposal in his current Human Powered Solutions newsletter (scroll way down to find the article or search the page for the word “Lickton”): “This may seem radical — but the current economic and market conditions call for changes in inventory turnover and merchandising.”

As BRAIN editorials go, Lickton’s is outrageous in concept, absolutely disruptive in its potential impact on the entire specialty retail channel, and fairly short on details.

I reached out to him to find out more.

“The way we’ve inventoried bikes has changed,” Lickton told me in a long, rambling, rapid-fire phone conversation. “Back in the '70s [during the bike boom], Schwinn told us we had to take 300 to 500 bikes at a time when they were finally available, so we warehoused them at $5 a month. The best we ever sold of a preseason order was eight out of 10 before they came due.

"But you can’t do that nowadays. When you get a bike that’s, $3,000, $5,000 and it’s just sitting, you go crazy. And that has to change. My dealer friends say that in 2025, if you bought 10 preseason bikes you were likely to sell six or seven before they needed to be paid. And of course, the 2025 bikes are far more expensive.”

In its most basic form, the mechanics of Lickton’s proposal go like this: Bike shops slot one or several of each model the brand offers for display purposes, suppliers pay them for that privilege, and actual sales of those models are shipped by the supplier to the shop (for assembly) or direct to consumer, and the dealer receives (an unspecified) piece of profit on each bike sold.

That’s the bare-bones outline of the proposal. But the larger-scale implications of the process are downright earth shaking. For instance, in the long term, dealers’ store footprints will have to get smaller to reduce operating expenses, since they’re no longer displaying (much less inventorying) so much product. Since suppliers will now be carrying the lion’s share of the inventory, they will have to open additional warehouse/shipping locations so dealers can receive bikes 1–2 days from order date (Lickton suggests that instead of building more warehouses, suppliers simply lease bonded warehouse space for this purpose).

For myself as an industry observer, I don’t believe Lickton’s plan will come to fruition anytime soon, and for one overriding reason: The current supply chain ends up placing the huge majority of inventory risk squarely on dealers’ shoulders. (Of course suppliers carry a financial risk, on their own inventory too, not to mention the financial risk that at least some dealers might not pay them. But that’s a whole different order of exposure).

The Lickton proposal would transfer almost all that risk to suppliers. And there’s no way suppliers are going to willingly accept it. The idea might work for boutique brands, but there’s no way the Quadrumvirate or even the smaller bike brands are going to go along with it. An exception to this will be addressed in the next section of this piece.

I’ll leave the last word to Bob Lickton, who said, “The end game is, there’s no way we can continue on the current basis. The system has to change. I don’t see how the independent bike store can handle this level of inventory. I think it’s coming to a crunch; these things [as they are now] are not sustainable. It’s not just slotting: We need an overhaul of the entire channel model. All the brands that sell direct, like Canyon, would like to have representation in dealers’ stores. And this is the way they could do it.”

Intense/QBP Frame First initiative

“It's not just a different way to sell bikes, but a completely different way for dealers to operate. It’s a highly consultative sales process with the dealer at the center of everything.” —Mike Carr, Intense VP of sales & marketing

Announced in this press release last week, Intense Cycles and Quality Bicycle Products have teamed up to offer dealers the ability to build up Intense frames with a curated selection of high-end parts, sourced by the dealer via a special section of QBP’s website. But don’t call it another custom build program. According to Intense VP of sales and marketing Mike Carr, the preferred term is “optimized” or “personalized.”

According to the joint press release, the Frame First process works like this: The dealer helps their customer choose from among the Intense frames offering. If not in the dealer’s inventory, the frame is ordered from the Intense B2B site and is shipped to the dealer. At the same time, the dealer consults with the customer and orders a customizable build kit from the QBP website, which is shipped to the dealer from that company’s network of U.S. distribution centers. When the parts arrive, the dealer builds the bike, capturing the assembly profitability and delivering a unique and customized bike for the rider. The press release calls this “a premium purchase experience at a value price.”

So how is this initiative different from other brands’ custom build programs, and why am I writing about it in a piece about disrupting the industry’s supply chain? Two reasons. The first is that the entire initiative is dealer-centric from the get-go. The second is that the process eliminates the role of the assembly factory and essentially turns (a portion of ) those costs into profit for the retailer, who stands to make money on the frame sale, the parts kit, and the bike buildup. As Carr emphasizes, the program “is designed to empower IBDs and disrupt the broken industry model."

“We believe that this will still produce a bike that is cost-competitive with other brands’ models,” he said. “Also, for tariff reasons, we’ll get some savings by bringing in frames and parts rather than assembled bikes, and this will help us keep pricing competitive.”

The net-net on all of this is “Not just a different way to sell bikes, but a completely different way for dealers to operate. It’s a highly consultative sales process with the dealer at the center of everything, delivering significant margin with little to no working capital burden,” Carr said.

The program will initially be available on Intense’s M1 Tracer, Primer, and “a new platform I can’t talk about yet,” Carr said, “as well as the brand’s dirt jump bike, all starting in model year 2026 at the end of March. We’ll also have Frame First on new e-bike models we’ll be introducing later this year,” he added.

“Because of the collaboration with our product managers and QBP's category business managers,” Carr said, “this program allows the dealer and the rider to select exactly the right products and they’re absolutely going to be compatible. Historically, other customization programs have been aimed at the very highest-end customers, while Intense now has it available throughout the line, and it’s the primary focus of the Intense offering. IBD profitability is central to the purchase journey. We’re even doing time studies showing how long it will take to do the various assemblies, which we will share with our retailers.”

I also reached out to QBP VP of sales Bill Schouman. “Mike and I had worked together previously at Specialized,” he told me in a phone conversation, “and we’ve stayed in touch. As the industry has evolved coming out of the pandemic, we agreed there are some real problems that need to be resolved. If you think about the sheer amount of discounting going on, it’s just not sustainable for anyone in the industry. So Mike and I started thinking about ways we could change the overall business model and offer an alternative.

“Instead of leaving the rider or the dealer to fend for themselves,” he continued, “we could combine our strengths to make it easier for dealer to do business in a way that they can make a sustainable margin. Now the dealer is able to offer a concierge experience that the high-end customer can’t get from any other brand.”

Schouman also noted that QBP may be able to scale and extend the curated build kit model to other brands, but there is a tremendous amount of engagement required to build a program like this successfully. “Conservatively, it’s a six-month process to get everything aligned,” he said, “both from the brand’s product manager to optimize the build list, to us [QBP] making sure we have the right parts available on a timely basis.”

The Frame First initiative is available through the Intense dealer network, Carr said, but also to any QBP customer interested in participating … which is yet another disruption of the traditional model.

Carr hastened to point out, though, that existing dealers will get preferred pricing and that “We reserve the right to accept or deny any prospective dealer, and we certainly have no intention of abusing our dealer network.”

As foreshadowed earlier, while they’re based on very different mechanisms, both Lickton’s and Intense/QBP’s initiatives would work by transferring (most) inventory risk from retailers to suppliers. That alone is a huge change from our current, half-century-old distribution model. But each concept achieves this result by entirely different means.

Moreover, these are just the first two attempts we’ve seen. As the Bike 4.0 model continues to evolve and if the market continues to be as challenging as it has been in recent years, I predict we’ll be seeing plenty more. And in the long view, that’s a good thing if our quirky little industry is to survive and, ultimately, to rebuild itself.

Responsiveness and domestic manufacturing spur Wolf Tooth growth

Steve Frothingham — Thu, 19 Sep 2024 13:19:15 +0000

IBD support and Right to Repair policies make fans.

A version of this article ran in the September issue of Bicycle Retailer & Industry News. If you are not receiving our magazine, please visit our subscription page.

MINNEAPOLIS (BRAIN) — Co-founder Brendan Moore characterizes Wolf Tooth Components as a product-first company. The brand's 2,000 selling SKUs — including about 500 chainring spec' variations alone — and 10 engineers among a staff of 87 full- and part-time employees certainly bear that out.

"There are a bunch of marketing-first companies out there," Moore said. "There are some good ones out there, where they just have somebody else make the stuff. That stuff's not that special, but they do an amazing job marketing. But we are not that."

With backgrounds in mechanical engineering in tech, Moore, along with fellow co-founders Dan Dittmer and Mike Pfeiffer, were cycling buddies who bonded over the need to create a narrow-wide chainring for fat bikes. Because of their backgrounds, they had manufacturing, design, and production connections to start their side gig in 2013 selling chainrings on the MTBR forum and then direct to consumer later that year when demand grew.

"There wasn't even a web store yet," Moore said.

Now there is — and a lot more, including components like pedals, headsets, dropper posts and levers, tools, and myriad small parts like chainring bolts, spacers, and tubeless valve stems. They even have their own bike line, Otso Cycles, which started in 2016.

"After six to nine months, it was like, 'This could actually be a job,'" Moore said. "We worked two jobs for a year and a half and two years between the three of us. We were still working our tech jobs and doing this in the morning, at lunch, and at night, so that we could reinvest everything into the company, every penny. We didn't take home a penny to build the company up in a very fiscally responsible way, just reinvesting. Then we jumped ship, left Big Brother — left the golden handcuffs, as they say — all three of us, which was pretty scary."

Made in Minneapolis

They landed on solid ground, designing and assembling all products in Wolf Tooth's 30,000-square-foot facility that it owns — "and we're packed to the gills," Moore noted. About 80% of its products are manufactured there with 17 CNC machines running on three shifts and another six or seven CNCs operating at an off-site machine shop it partners with on the north side of the Twin Cities. Some parts are sourced from overseas and elsewhere, but Moore said they make as much as possible in Minneapolis.

Additionally, Wolf Tooth works with U.S. molders and other domestic partners like Enduro Bearings.

"What's made overseas, things like dropper posts, is all brought here for assembly," said Moore, who added some of the brand's 6061 and 7075 aluminum is imported from China, which has become more expensive because of recent tariff increases. "And we had to do that because we couldn't actually find a manufacturer to do the three main parts of that in the U.S., that could do it in our volumes. When we're ordering thousands of parts at a time, these vendors say, 'You're not going to order a million?' There are some people who don't like to hear this, but there are some things that really can't be made in the U.S. in a lower scale like we have. It's just how it is. If we have a great idea or a great design, we're not going to not do a product just because we can't make every part here. We're going to make every part here that's feasible to make."

Wolf Tooth ships roughly 50,000 component units a month, from a bolt to a dropper post.

"I have a lot of different roles, or, I guess, things that report to me here," Moore said. "Three of them are supply chain, shipping, and assembly. I was looking at those numbers just recently, looking at how we scale, and it's daunting, so you have to really step back and look at the things you can do, rather than worrying about the things that you can't."

Bike brand expands

One of those on the to-do list is finding a bigger facility or at least additional storage, especially with Wolf Tooth expanding its Otso Cycles models. Initially, Otso Cycles began with a fat bike and gravel model. It expanded into hardtail mountain and bikepacking models. Frames are constructed in steel. titanium, and carbon fiber and manufactured in Taiwan. Wolf Tooth also created a separate component brand, Lithic, a sub-brand of Otso Cycles. Its products, handlebars, rims, and carbon forks, are made overseas but designed in Minneapolis.

Otso's first gravel bike launched in 2016 and featured a frame designed to fit tires as wide as 2.1 and a fork that could clear up to a 29x2.1 wheel and maintain a 420mm axle-to-crown dimension.

"We had tire clearance three years before it became the norm," Moore said. "Early gravel racing was in our area, and so we had experience in it. You can take a cyclocross bike on gravel, but it's not really that great for it. You can do it on a mountain bike, but it's not really that great for it. These are the things that would make that experience better."

What Otso experienced during the pandemic and what followed is not unique in the industry, but it is especially challenging for a small bike brand.

"The discounting of the brands that are in trouble, which I won't name, it stinks," Moore said. "We just had a steel bike launch. It's a beautiful bike, rides really well, has a really cool design with features like a tuning chip. When it went to market, we had a dealer call us and say there's this other company discounting their Rival AXS bike by 50%. That's the same price as your GRX bike. And we're like, we don't play that discount game. That company selling that 50% off bike off is losing money, quite a lot of money. So that's the least fun about this. The bike side is just taking a long time. I'm hearing like next summer before it really kind of works its way out. That really means 2026 is the first potentially normal year."

Moore said the pandemic rush and post-pandemic crash has not affected the Wolf Tooth side as much because manufacturing mainly domestically allows for more volume control.

"The bigger challenge on the Wolf Tooth side was bigger customers getting into issues, mainly distributors, but to some extent dealers, where they got overstocked, but mostly not on our stuff. They're changing their buying behavior because they know we have short lead times and small batches."

Moore said Wolf Tooth's OEM business is growing, mainly servicing boutique brands. "I think the MADE.Bike show is probably our staff's favorite show because that is our crew."

Omni-channel approach

In addition to direct-to-consumer, Wolf Tooth is available through a multitude of North American and international dealers, and about 80 dealers carry Otso Cycles, mostly in the U.S. "I always tell people, in today's day and age, you can't tell a customer how to buy," Moore said. "You have to let the customer tell you how they want to buy your stuff. And if you don't do that, you might not be around too long."

Call it anticipating the next big thing, which Wolf Tooth made a habit of in its early days by investing in the 1x mountain bike drivetrain, manufacturing 40- and 42-tooth Giant Cog options for Shimano and SRAM 10-speed cassettes. "We weren't thinking that this is going to live forever and that Shimano and SRAM were never going to make this," Moore said. "When we were selling a lot of those, we took all that money and reinvested it into new product design.

"In one sense, we were lucky and super happy that we got to benefit from that conversion in the industry. But we were always like, what do we have to have in two to three years? It's been a transformation to get people to not think about either a Road Link (derailleur hanger extension that is still available) or the Giant Cog when they think about Wolf Tooth. Hey, we make dropper posts and headsets and really cool multi-tools."

An important factor in the design process is to make components repairable, which is important to the three founders who believe in sustainability and are also attempting to reduce plastic in packing materials.

"We have a deep, personal passion for that because it differentiates our products — our droppers, our pedals, all those things — by being able to repair those. It's not free or cheap to design that way and offer all those replacement parts. If you had a Version 1 dropper post, and we just launched a Version 2, you can literally swap in the cartridge and have a Version 2. This is not just a business opportunity. This is something we care about."

Any talk with one of Wolf Tooth's founders wouldn't be complete without finally asking what's on the drawing board. Moore wouldn't provide specifics, other than to say, "We have five products coming in the next year — five significant product lines — I'll say that."

Trek Bicycle and Bell Sports sue over cargo lost or damaged at sea

Steve Frothingham — Mon, 07 Nov 2022 19:09:27 +0000

NEW YORK (BRAIN) — COVID-19, massive consumer demand, and the war in Ukraine have upset the industry's supply chain in recent years. Rough seas also played a part.

Bell Sports and Trek Bicycle are among the firms suing shipping companies over containers lost or damaged due to storms in the North Pacific in early 2021.

Trek's suit:

The Maersk Essen 051, a 366-meter ship, lost more than 700 containers when it encountered heavy seas off Mexico on Jan. 16, 2021. The vessel was en route from Xiamen, China, to Los Angeles. Trek is among more than 30 companies suing Maersk, the ship's operator, and other related parties for lost or damaged cargo on the Essen.

Trek was part of an initial suit with fellow plaintiff Formlabs Inc. filed in January 2022 against freight carrier Flexport. That complaint demanded to recover $337,000 in damages. Trek's share of the total is not specified in court filings. The case is being consolidated with other related suits naming Maersk, Flexport and other companies related to the voyage. Other plaintiffs include Sunbeam Products, Bob's Discount Furniture, and Skechers.

Among the lost or damaged containers were four that contained a total of 8,200 cartons of Bell Sports helmets and accessories.

Bell's suit:

A month and a day after the Essen incident, the Maersk Eindhoven — also a 366-meter vessel that was en route from Xiamen to Los Angeles – lost about 260 containers in a storm near Japan. Other containers were damaged.

According to suit filed by Bell, among damaged containers from the Eindhoven were four that contained a total of 8,200 cartons of Bell Sports helmets and accessories. Bell and its insurer, AGCS Marine Insurance Company, are among at least 17 companies suing Maersk and others over the loss. Bell's complaint, filed in February 2022, said it lost products worth $256,000.

Other plaintiffs in that suit include Homegoods, Hallmark Cards, Wolverine World Wide, and Ashley Furniture.

A Vista Outdoor spokesman declined to comment to BRAIN about the suit. A company communication earlier this year mentioned the incident. The announcement said Vista Outdoor's procurement department quickly used an insurance payout after the loss to charter an airplane and fly replacement products to the U.S. "'It's a classic example of having to be creative and ensuring that we get the product where it needs to be and on time,'" the communication said, quoting David Stokoe, Vista Outdoor's vice president of strategic procurement.

BRAIN could not reach Maersk regarding the suits. Maersk's press office told Shippingwatch.com in February that such lawsuits are "a very common tool in the maritime sector" to invoke claims for compensation.

The years 2020-2021 were especially eventful for Maersk and the trans-Pacific shipping industry, with 3,113 containers lost at sea according to the World Shipping Council. In the prior two-year period, just 779 containers were lost. The council said that the containers lost in 2020-2021 represented less than one-thousandth of 1% (0.001%) of all containers shipped.

More inventory lost en route

In another more recent suit over goods lost or damaged in transit, Trek and its insurance underwriters at Lloyds filed suit in October against Union Pacific Railroad Company and others over damage to a shipment of bikes from Vietnam to Butler, Iowa, via the port of Long Beach, California.

It's not clear from court filings whether the shipment was damaged at sea or after it left Long Beach, but the suit says damages totaled $96,000; Trek is looking to recover the $25,000 deductible on its insurance policy with Lloyds, and Lloyds wants to recover the balance.

The suit was filed Oct. 11 in the U.S. District Court for Southern California. Union Pacific and its codefendants have not responded to the suit in court filings. They have until Nov. 17 to do so. A Trek spokesman did not reply to BRAIN inquiries for this article.

Bike.com and Denago boast experienced leadership

Steve Frothingham — Fri, 14 Oct 2022 11:01:14 +0000

A version of this article ran in the October issue of Bicycle Retailer & Industry News.

DALLAS (BRAIN) — New e-bike brands arrive by the boatload these days, but, if for nothing else, Denago deserves a second look based on its all-star leadership team of industry vets.

Denago is the house brand at Bike.com, an e-commerce site that’s been largely dormant since a group of investors bought the presumably desirable domain about six years ago from TABcom, the owner of multiple e-commerce sites, including dog.com.

Now the site is populated solely with Denago e-bikes and the brand’s related parts and accessories. After a relatively modest launch in April this year with one model, Denago became more visible this fall as it filled out its product line with more models in inventory.

While the business is built around the Bike.com domain, Denago’s leadership considers brick-and-mortar retailers a key part of its omni-channel distribution plan.

That consideration for IBDs comes from CEO Dave Duecker, a former vice president of product at Dorel Sports’ Pacific Cycle.

Duecker said he was recruited to join Bike.com after its owners asked him, simply, what he would do with the domain if he owned it.

Duecker said his answer was, “I’d create a brand and focus on e-bikes, which is still and underserved niche that’s still growing. And I’d go after the dealer market and offer them something they are missing,” he told BRAIN.

Duecker joined the company in October 2021. He was careful to say that Denago is not exclusively in bike shops.

“I believe in D2C (direct-to-consumer), I really do, it’s important,” Duecker told BRAIN. “But I also believe you need to have an omnichannel strategy with a physical presence in stores. You need to be where the consumer wants to buy. And especially with bikes, the consumer wants places where the retailers know a lot about the product so the consumer has a good experience.”

Duecker’s experience at Dorel was largely on the mass market and D2C side with Pacific’s brands. But Duecker also recruited some executives from the specialty channel.

“I thought it was important to find people who get excited about seeing people on bikes as I do,” he said.

The recruits include Jeff Weiss (Denago’s head of sales & marketing) who is the former CEO of Hero Cycles Intl and SVP of international sales at Dorel; Joe Werwie (Denago’s head of product) who is the former director of e-bikes and mobility at Dorel; Justin Christopher (Durango’s director of D2C) who is the former VP of e-commerce with Aventon and previously held various roles with Jenson USA. Finally, industry vet Steve Richey (Denago’s director of customer success) has held various roles in the industry, including being manager of new product development at Illinois Tool Works, the maker of Slime and Fix-a-Flat products.

Duecker moved from Madison, Wisconsin, Pacific’s hometown, to Dallas to start setting up Bike.com.

Denago started out with a $1,500 city e-bike, and a new $2,000 commuter model with 27.5 tires is now in stock. Denago planned to announce more models earlier this year but supply chain challenges slowed that rollout.

Now, Duecker said, there is “a very strong pipeline” of new models arriving from its contracted Chinese factory. He expected to have samples of other new models available early this fall with delivery by year’s end.

Duecker said delivery from China to U.S. ports has been relatively smooth and predictable, but domestic transportation has been more difficult and expensive. Like others in the industry, he said ocean freight costs have come down from their pandemic highs but are still much higher than pre-pandemic.

As it builds online sales and its dealer base, the company is building out its custom service staff and supply of parts in Dallas. It has signed with six sales reps groups nationally and is looking for more in a few territories.

Like several other newish brands targeting the IBD market, Denago is mainly focused on models in the $1,500 to $2,500 range, usually with hub motors to start.

“You can create a really solid electric bike in that price point,” Duecker said.

Denago had about 25 dealers lined up by early September, with more joining weekly, he said. In areas where the brand doesn’t have a dealer, it works with Beeline to do delivery and assembly.

US bike imports up 52% in Q1

Steve Frothingham — Mon, 06 Jun 2022 18:16:17 +0000

WASHINGTON (BRAIN) — The U.S. imported 4.7 million bikes in the first quarter this year, worth $565 million at port. In dollar value, that's up 52% over the first quarter last year and 143% over the same quarter in 2020, when the pandemic supply chain first slowed.

The first quarter this year followed massive import numbers in the second half of 2021 (see column chart at bottom). The third quarter last year was the largest, valued at $571 million.

The country of origin of bike imported has shifted significantly in the last four years, as the pie charts below show. Four years ago the Trump administration's tariffs on Chinese imports had not yet taken effect. Since then, the U.S. has sourced an increased number of bikes from Vietnam and Cambodia to escape those tariffs. However, Vietnam exports declined steeply in the second half of 2021 because of COVID-19 shut downs there.

Fox Factory’s annual revenues up 46%; execs see no letup

Steve Frothingham — Thu, 24 Feb 2022 23:45:30 +0000

DULUTH, Ga. (BRAIN) — Fox Factory executives said all orders for its OE bike products are pre-booked for 2022 and they expect no letup in demand until next year or beyond.

Fox announced Thursday that its revenues last year hit $1.3 billion, a company record and a 45.9% increase over its 2020 sales.

On a call with investors, CEO Mike Dennison said bicycle factories will continue to demand Fox, Race Face, Marzocchi and Easton components well into the future.

“While you might see bikes starting to show up in dealer showrooms a little bit more frequently, and a little bit better selection, there is a whole system behind that, from distribution centers to hubs, regionally and internationally, that is still fundamentally empty,” he said. “So I think we’ve got several — multiple — months of demand just to deliver the pre-orders, and then you have 12 or 18 months of rebuilding inventory.”

And beyond that, he said Fox’s customers are confident that there will be “new, fresh demand” for bikes well after the inventory is rebuilt.

Dennison said Fox has not been a choke point in the supply chain. Rather, the company has to be careful not to overshoot factories’ ability to find the other parts needed to complete bikes.

“We're doing a great job keeping up with our OEMs and the demand signal. The thing we always have to balance is what everybody else is doing: because, as much as we can build, if everybody else can't keep up with us, bikes can't be built. So we always keep an eye on that and make sure we are not outstretching everybody else,” he said on the call.

Fox’s bicycle product category sales increased 57.8% last year, to $579 million, up from $367 million in 2020. Fox’s other division, Powered Vehicles, saw a sales increase of 37.5% last year, to $720 million.

Dennison said the raw material and component supply chain remains “a daily battle” for Fox. While Fox manufactures in Taiwan, the U.S., and Canada, it relies on parts from China.

“I do worry about things like brownouts in China manufacturing, where they are cutting energy back, so we have to keep an eye on that ... and we have to keep an eye on magnesium and magnesium supply. But so far the team has handled (the challenges) well. I don’t think the supply chain has got any easier and that will probably continue for the first half of next year from what I can see so far.”

$2B by 2025

Fox has set a goal of reaching $2 billion in annual sales by 2025. More immediately, it is forecasting full-year 2022 sales of $1,435 million to $1,465 million and non-GAAP adjusted earnings per diluted share in the range of $4.90 to $5.20.

Fox's shares are traded on NASDAQ under the FOXF symbol. Shares closed up 6.6% Thursday, at $124.66. The NASDAQ Composite Index closed up 3.34% Thursday.

Fox Factory: We're 8-10 months from fulfilling current orders

Steve Frothingham — Mon, 09 Aug 2021 17:05:08 +0000

The company's bicycle-product division just recorded its sixth consecutive record sales quarter.

SCOTTS VALLEY, Calif. (BRAIN) — Fox Factory's sales in its Speciality Sports Group, its bicycle-product division, were up 64% in the second fiscal quarter and 73% for the first half, compared to the same periods last year.

Bike-related sales, through the Fox, Marzocchi, Easton and RaceFace brands, totaled $138.7 million for the quarter and $257.2 million for the half.

The company said it was seeing strong demand especially in the OE channels for its bike products. The second quarter was the 6th quarter in a row to hit record sales in the SSG.

On an investor call, CEO Mike Dennison said that at the current pace, it will take 8-10 months for Fox to fulfill pre-orders for bicycle products and another 12-18 months to replenish depleted inventory channels at the distributor and retailer level.

Australian distributor acquisition

On May 21, Fox's Australian subsidiary paid $486,000 for Sola Sport Pty Ltd., which had been the distributor of Fox's bicycle suspension in Australia since 2008 and also distributed Marzocchi, RaceFace and Easton Cycling products.

Dennison told analysts on an investor call that the purchase was "more strategic than financial."

For the first time, Fox Factory, company-wide, crossed the $1 billion sales threshold on a trailing 12-months basis.

He said Sola, based in Sydney, "gives us a foothold in Australia, which we believe is an important market for Fox, in both for SSG and PVG (Powered Vehicle Group) going forward."

Company-wide sales

In the first half, the SSG provided 42% of the company's sales, with PVG providing the remainder.

Company-wide, Fox Factory first-half sales were $609.3 million, an increase of 65.8% over the first half of 2020.

For the first time, Fox Factory, company-wide, crossed the $1 billion sales threshold on a trailing 12-months basis.

Company-wide gross margin increased 110 basis points to 33.9%, compared to 32.8% in the same period last fiscal year. Net income was $44.3 million, or $1.05 of earnings per diluted share.

E-SUV sales stand out

Dennison told analysts that he was bullish on what he called the market for "E-SUVs", which he described as "more burly e-bikes that can carry kids and groceries and surfboards and everything else.

"That category has been on fire and it continues to be on fire .... people are thinking about other ways to be mobile ... they are thinking about electric cars for sure, but also thinking about electric bikes."

Shimano first-half sales up 73%, income up 152%

Steve Frothingham — Tue, 27 Jul 2021 13:01:13 +0000

Company makes little mention of supply challenges in its half-year report; raises full-year sales and income forecasts.

OSAKA, Japan (BRAIN) — Shimano only briefly mentioned the global bicycle part shortages in a typically terse first-half financial results announcement, which reported that sales in its bicycle product division were up 73.4% in the first half of its fiscal year, compared to the same period in 2020. Operating income in the bicycle division was up 152.1%.

Shimano raised its full-year net sales forecast to 500 billion yen ($4.5 billion), up 9.8% from its earlier forecast. It raised its operating income forecast to 124.5 billion yen, up 18.6% from its earlier forecast. By comparison, Shimano's 2020 net sales were 378 billion yen and 2019's number was 290 billion yen.

Bike-related sales in the first half this year were 212 billion yen and operating income was 58 billion yen. Shimano's fishing equipment sales were up 38.4% to 52 billion yen.

Company-wide, net sales were up 65.2% to 264.7 billion yen and operating income was up 144% to 70 billion yen.

In a brief overview of the cycling market, Shimano said demand remains high in all markets. It said some of its factories "experienced temporary shutdown due to the lockdown," an apparent reference to the closure of Shimano's Malaysia factories in June.

"However, against the backdrop of the new normal, interest in and demand for bicycles and fishing continued to be high, and the Shimano Group increased production capacity at the factories in Japan and overseas," the company said.

Shimano announced last week that its Malaysia factory would be re-opening. It also said it was investing about $300 million in factory upgrades in Japan and a new factory in Singapore.

Shimano re-opens Malaysia factory

Steve Frothingham — Tue, 20 Jul 2021 12:51:02 +0000

Editor's note: This story has been updated to remove the first-quarter financials, which had previously been reported. Shimano's first-half financials will be released in early August.

OSAKA, Japan (BRAIN) — Shimano has re-opened its factory in Malaysia, according to a report out of Europe. The company's factory there had been closed since about June 14, and had operated at 60% capacity for two weeks before that, due to the COVID-19 pandemic.

Bike Europe reports that Shimano has announced it is “pleased to announce the resumption of our factory operations from 15 July, as per the permission of the Malaysian government.”

How e-bike brand Rad Power shortened its supply chain by more than 50 days

Steve Frothingham — Tue, 13 Jul 2021 12:20:47 +0000

EVERETT, Wash. (BRAIN) — Like all bike companies, Rad Power has struggled to deliver enough bikes to meet demand for the last year and a half. But the Seattle-based consumer-direct powerhouse recently trimmed weeks off the transit time for its e-bikes by using an alternative seaport.

The company’s solution was visible to anyone watching the Port of Everett on Monday afternoon when the 111-meter (365-foot) cargo ship Eemslift Nadine arrived carrying 64 containers of Rad Power products. The Eemslift Nadine left Taicang, China, on June 24.

Rad Power expected to have its containers unloaded and the products in its warehouse by next Tuesday. From factory door to U.S. warehouse, that’s about 54 days faster than if it had shipped with a larger vessel into a major port, Rad Power COO Mike McBreen told BRAIN.

Rad Power has typically used the Seattle port, but in the last year, it has been backed up for weeks, with lines of ships waiting to unload cargo. Those delays aren’t far from the only factor contributing to bicycle product shortages, but they contribute significantly.

From factory door to U.S. warehouse, that’s about 54 days faster than if it had shipped with a larger vessel into a major port, Rad Power COO Mike McBreen told BRAIN.

McBreen lives in the hills just above the Everett port and he could see what was happening with his own eyes as he pedaled his Rad Power around the area.

The Everett port, less than 40 miles from Seattle’s, generally handles smaller ships and “breakbulk” cargo: goods that are not necessarily in standard containers, but are on pallets, bags, boxes, crates, or are just oversized large items like trucks and steel girders.

“I was riding one morning and I looked down and there was a breakbulk ship parked at the terminal and then in the distance there was a cargo ship that had been parked behind our house for about a week waiting to get a berth to go into the port of Seattle,” he said.

Breakbulk ships like the Eemslift Nadine are often around 300 feet long, while full-sized containers ships like the ones that comes into Seattle are often 1,100 feet long or more.

McBreen set out to determine how to get Rad Power bikes on the smaller breakbulk ships that could use the Everett port.

He was well-equipped: McBreen has spent his career working in supply chain, for Nike, Wolverine, Payless Shoe and other companies before joining Rad Power about a year ago.

“I reached out to a couple of shipping companies and then talked to some vessel owners that do this for a living. That eventually led to an opportunity to use these utility lift ships as an alternative supply chain that both adds capacity to the global network and allows us to use a different port that wasn’t being used and overcrowded like Long Beach, Seattle, and Vancouver. It was a matter of thinking differently,” he said.

Ultimately, Rad Power chartered the Eemslift Nadine, sharing space with a machinery company whose cargo will be unloaded at Long Beach. The company had to arrange to purchase containers outright, rather than using containers that belong to the shipping company. (Rad Power plans to sell the containers immediately to a third party).

On the China end, Rad Power had to arrange to have the bikes shipped from the Taicang port, instead of a more common larger port like Shanghai.

McBreen said the alternative shipping method added 35% to the company’s regular shipping costs, but he said it was worth it in the current climate and the company isn’t increasing retail prices as a result.

He expects to use the same method several more times this summer with several cargo ships arriving in September.

Other challenges

Rad Power is one of the fastest-growing consumer-direct e-bike brands in the U.S., and probably the largest. It brought in a $150 million investment last winter.

To diversify its sourcing and to escape the tariffs that the U.S. imposes on Chinese e-bikes, the company is increasingly moving production to Vietnam and Cambodia, McBreen said.

Rad Power is notable for using standardized components, including motors, batteries and drivetrain parts, on many of its models, simplifying production and inventory. McBreen said that practice has helped it during the pandemic sales surge because Rad Power has been able to make large long-term contracts with the suppliers of its batteries and motors, for example. Still, he said the company has begun to diversify its components somewhat in an effort to be less vulnerable to shortages, and upcoming models will reflect that.

With the wisdom that comes from a career in the supply chain, however, McBreen said he’s cautious to remain humble.

“This is where the humility comes in: You may think you have it figured out but then anything that can possibly get in the way will materialize, and you’ll have to deal with it."