Mid-Life Cycling

Mid-Life Cycling

26 May 2017

Are Bike Share Programs Cutting Giant Down?

For most Americans, a "traffic jam" consists of throngs of cars and other motorized vehicles crawling or standing still on major streets or highways.  In many places, they are a regular feature of what is called--without irony--"rush hour": the times of day when most people are going to, or coming from, work or school.

Until two decades ago, Chinese cities also had traffic jams.  Instead of cars, though, their streets were lined with bicycles.  About the only way an American cyclist could experience anything like it without going to China was to participate in a large organized ride like the Five Borough Bike Tours, where there are sometimes "bottlenecks".

Then, as China became more prosperous, people who used to ride their bikes to work started to drive--to work, and just about everywhere else they could.  Now China was experiencing American-style traffic jams its their cities.

So, a few years ago, some Chinese went back to commuting and getting around by bicycle, as it is faster, especially in the central areas of many cities, than driving.  Once again, there are bikes all over Chinese streets.

It sounds like things should be really good for bicycle manufacturers, doesn't it?  I mean, can't you see Giant, which now makes most of its bicycles in China, just raking in the dough?  

Believe it or not, Giant's stock has more or less flatlined this year.  Its price is now just about the same as it was in December.  Two other major manufacturers, Zhonglou and Shanghai Phoenix, both experienced surges in late 2016 but are now worth less than they were at the beginning of this year.

Giant's listlessness, and the tumble the other two companies have taken, can be blamed to some extent on the China's economic slowdown, which is part of the reason why the Chinese are buying fewer bikes than they did in 2015 or 2014.  More to the point, though, is something that is causing bike sales to shrink in other parts of the world.

In China, as in much of the West, more and more people are riding bikes.  Yet fewer and fewer are buying them.  That doesn't make sense (I am really, really trying not to use the word "counterintutitve"!) until you realize that many new bike commuters and even recreational riders in Shanghai and Hangzhou, like their peers in Paris and London and New York, are riding bikes from share programs.  

Is this cutting Giant down to size?


According to industry analysts, one of the reasons manufacturers like Giant aren't benefiting from the growth of bike share programs is that their production and marketing have been oriented toward bike shop sales, which have been falling--in part because of share programs, and because the ones who have traditionally spent the most money in shops, namely bike enthusiasts, are doing much of their shopping on-line.  

What that means is that companies like Giant didn't, until recently, produce bikes with the apps and other accessories demanded by bike share programs.  Other, smaller manufacturers--including a few start-up companies--have stepped in to fill the gap.  For example, the bikes in New York's, Toronto's and Montreal's share programs are made by Quebec-based Devinci.  While the brand has a following, mainly for its mountain bikes, it is not nearly as well-known as Giant, whose website lists 25 dealers in the five boroughs of New York City, and as many in the surrounding metropolitan area.  Devinci's website, on the other hand, shows only one dealer in New York City (Brooklyn) and one other across the Hudson, in Bergen County, New Jersey.

One of the reasons why smaller companies can fill those voids is that they don't have as much invested in manufacturing facilities as the big companies.  As a result, they don't have to spend as much time or money re-tooling in order to meet changing demands.  As I have mentioned in earlier posts, one of the reasons Schwinn is now a shadow of its former self is that it was slow to adapt to the changing demands of cyclists.  One of the reasons for that was that Schwinn had so much invested in an aging factory and equipment that couldn't produce the lighter bikes adult cyclists wanted.  Paramounts were nice, but most people who took up cycling during the '70's Bike Boom were looking for something that was agile and functional, but wouldn't break the bank:  In other words, something like the Fuji S-10S or Nishiki International.

Could it be that bike-share programs will turn Giant, Specialized and other "giants" (pun intended) of the bike industry into dinosaurs--or Schwinns of the future?


2 comments:

  1. Hmm, with Seattle's bike share program cratering, I'm dubious that bike share is going to make the bike giants (no pun intended) go away any time soon. Regardless of attempts to make them otherwise, bikes are VERY durable. My Falcon from 1970 is still going strong, as is my wife's Nishiki from 1971. Our least reliable bike is our four-year old Trek, which is a piece of poop that came from China.

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  2. Perhaps bike-share programs won't doom Giant, or any other big bike manufacturer. From what I've been reading and hearing, though, sales in bike shops are down. Share programs get at least part of the blame in cities like Seattle and NYC that have share programs. Now, whether that's true is something I can only guess. I would imagine, though, that share programs are hurting the bike rental business. To paraphrase you, that probably won't do much to cut the "giants" down.

    I get a little sentimental about Nishiki, as I had one. And I've always liked those old Falcons, especially the ones with the wraparound stays. In fact, I was tempted to buy one I saw on eBay. It was a basic model (no Reynolds tubing), but it was purple! But then the Trek 412 found me and became my latest project. (More about that later.)

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