It's All Your Fault (If You Voted A Certain Way)

A proprietor loses his businesses.  He points his finger. "It's all your fault!" he bellows.

In this case, though, he wasn't pointing to an executive, employee, family member or incompetent (or crooked) lawyer, accountant or bookkeeper.  Rather, he aimed his accusation at 25 million or so people.

What did they have to do with the demise of his enterprise?  (That rhyme was unintentional. Really!)  They all voted for what, according to the proprietor, was the slit to the throat of his company.

Hint:  They voted seven years ago, in the UK.

I am referring, of course to "Brexit:"  the decision to take the country out of the European Union (formerly called the "Common Market).  That meant the re-imposition of tariffs that membership eliminated on goods from most continental European countries.  Perhaps more to the point, it meant reels and reels of "red tape" that tied up shipments in ports and terminals or made it all but impossible to pass through.  It even made Brooks saddles unavailable England, where they have been made for more than a century and a half:  For about two decades, an Italian company has owned Brooks, so the company's saddles are shipped from a distribution center Italy, an EU country.

And many bike brands sold in the UK are based in European countries, even if the bikes or parts are made in Asia or other parts of the world.  One of those bike brands is Austrian KTM, distributed by Huddersfield-based FLi Distributors for the past eleven years.  They have just ceased trading. In announcing their demise, owner Colin Williams said, "If you voted for Brexit, realise (British spelling) this is 90 percent because of your decision back in 2016."

FLi is not the only bicycle-related company to close its doors since Brexit-related regulations took effect at the beginning of 2021--just as the worst of COVID-19 related shutdowns were choking supply chains.  I would bet that the owners and employees of those companies and Williams--along with many others in the bike business, cyclists and other citizens--are not the only ones regretting the Brexit vote.

Secondary Victims Of The COVID-19 Bike Boom?

The COVID-19 pandemic led, at least in places that weren't under hard lockdowns, to a kind of bike boom.  As public transportation systems shut down or imposed severe restrictions, people who hadn't been on bikes in years were pedaling to their jobs (if they had to work in person) or to shop or run errands.  And folks who were working from home were going hopping onto the saddle for exercise and to de-stress from being cooped up in front of a screen.

Like the Bike Boom of the 1970s, the COVID epidemic was great bike-related businesses--at least some of them, for some time.  During the first few months of the pandemic, bikes and anything related them were flying out shop doors and keeping Amazon delivery workers busy.  In time, though, some shops and web businesses became victims of cycling's newfound popularity.  Shops ran out of inventory as supply streams dried up.  Some kept themselves open by repairing bikes that people were resurrecting from basements and garages.  But as cables, tires and tubes became difficult to find, they took to cannibalizing other bikes--until there were no more bikes to "harvest."  With nothing left to sell or even use for repairs, a number of shops--including longstanding and prominent ones like Harris Cyclery--to close permanently.

Now there might be some secondary victims, if you will.  Among them is Moore Lange, a UK distributor that went into receivership last week after more than 70 years in business.  Their offerings included bikes and parts from a wide array of brands like Forme, Lake, Barracuda, Microshift and Vitesse. 

 

According to Moore Lange director Adam Briggs, the company's troubles can be traced, ironically, to supply streams flowing again.  Actually, the trickle or dry bed turned into a torrent:  "[L]ots of stock arrived in the first quarter of 2022," he explained.  "There was a year's worth of bikes arriving in the UK at that time"--just as the Boom was turning into murmur--"which meant there was a massive oversupply."

Apparently, in the UK as in other places, the demand for bikes and anything related to them is falling from its 2020-21 heights.  Distributors and some shops now are overstocked, at least in some items, which led to "significant discounts," according to Briggs.  Given that profit margins are significantly smaller for bikes than for other items, a decrease in sales has led to a "perfect storm" for some shops and distributors like Moore Lange. 

The company's inventory will be auctioned off.  If there is a silver lining in the clouds of this storm, it is for British cyclists who are looking for good buys on bikes and parts.

  

Bikes Not Going Their Way

 

For the past two years, you may have had difficulty in buying a bike—the one you want, anyway. If you managed to find your machine of choice, you probably had to pay more for it than you would have in 2019.

You may have had a similar experience in procuring parts to repair, refurbish or update your favorite ride—or even if you were looking for accessories like water bottle cages or a pair or riding glasses or gloves.

The reason for the situation I’ve described is the COVID-19 pandemic. It disrupted supply chains and even closed production facilities at the very moment when folks took up cycling as a way to avoid buses and trains or to get exercise or mental cleansing in a way that allows for social distancing.

But at least you could get something you could ride, whether or not it was your first choice, as long as you were willing to pay and could wait. 

The folks in Russia aren’t so lucky. (Ok, the Ukrainians have it worse, but bear with me!) The way things are going, they won’t be able to get bikes, parts, accessories, apparel—or much of anything—at all.

A number of bicycle and bike-related companies have suspended their operations in the country. The list includes SRAM, Trek, Specialized, Tern and Quality Bicycle Products (QBP). Also, leading bicycle tire manufacturers Continental, Michelin, Pirelli and Bridgestone have joined their ranks.  

Those companies, no doubt, were motivated by the difficulty of doing business in Russia due to banking sanctions and that some shipping companies, including Fed Ex and UPS, have stopped delivering to the country.  But one representative also says “there’s a social aspect too” in the companies’ actions.

Victims Of The New "Bike Boom"

If I ever get a regular writing gig, it's unlikely to be with The Wall Street Journal or The Economist.  I have, as far as I can tell, no business acumen and I passed the one and only economics class I ever took by promising the professor I wouldn't take another:  He could see that I simply had no mind for the subject.

All right, the story about the econ class was an exaggeration--but only a slight one.  One thing I'm pretty good at, though, if I do say so myself, is observing.  So now I'm going to present an observation I've made that pertains to cycling--and might be of interest to the folks at WSJ and The Economist.

One of the terrible outcomes from the COVID-19 pandemic is that, in the resulting economic free-fall, many businesses have gone under.  While some reporting, mainly of the local variety, has focused on the human costs of people losing their life's work (which, of course, is the real tragedy), the major media outlets have tended to focus on the types of businesses and industries that have been hardest-hit.  They include restaurants which, in many places, were forced to close or operate at greatly reduced capacity for weeks or months.  Also decimated have been clothing retailers and anything related to travel and tourism (think hotels, airlines and such).  During my rides, I have also seen a number of dry cleaners that have closed their doors for good:  People working at home tend not to wear suits, and there's not much reason to wear a fancy dress or gown when there aren't any weddings or graduations to attend.

But the observation I want to make is this:  The economic devastation has not only claimed businesses in certain industries; it has also discriminated by the size of the business.  While some large companies have gone to the dustbin of history, the economic downturn has claimed even more small mom-and-pop businesses.

One such enterprise is Larsen's Bicycles of Powell, Wyoming. For months, media outlets big and small (including this blog!) have been telling the world how the pandemic has been great--almost too good--for the bike business. While sales of bikes and all things related to them have sailed along at levels not seen in a long time, a basic law of economics has come into play:  scarcity.  So, neighborhood shops--and, in some cases, national and international web-based retailers--are running out of everything from handlebars to helmets, brake levers to bike locks--and complete bikes.  

One result has been an increase in theft, from individual bikes on the street to warehouse break-ins.  It's also meant that, because supply chains have been interrupted, those who are willing to acquire their goods honestly have long wait times.

Or they can't get anything at all.  That is what happened to Larsen's.  The only shop in Powell, a small city in cattle-ranching and mining country of northwestern Wyoming, completely ran out of inventory in May.  After they ran out of bikes, Nick and Vicky Coy tried to keep things going with repair work.  When they ran out of new parts, they harvested the good parts from used bikes until those ran out.  Without a solid plan for delivery of new stock, the Coys made the hard decision to close the shop Nick bought from founder "Buzz" Larsen 29 years ago, after four years of working for him.  He and his wife have operated the shop by themselves during that time.   Their last day of business will be New Year's Eve, two weeks from yesterday.

Vicky and Nick Coy, in their soon-to-be closed shop. Photo by Mark Davis of the Powell Tribune.

"It doesn't seem to be getting any better," Nick said. "Nobody can really say whether they're gonna have bikes this coming spring and summer."  Most tellingly, he added, "The whole business model has changed for small shops."

That change, Vicky explained, came about because companies like Specialized like to fill the big stores first. "If you don't have big preseason orders and say you'll take X number of bikes, then you're on the bottom of their list."  Also, she said, "They're selling a lot more parts and accessories online."  For shops like theirs, "The lack of repair parts is huge."

She summed up the result: "It kind of forces out the little guy."  In other words, shops like hers and Nick's are squeezed out.

The current pandemic has magnified the gaps between the rich and the poor, those who can work from home and those who must risk their lives for a paycheck, and between races and genders.  It's also exposed another chasm:  between conglomerates and small businesses--or, in this case, companies like Specialized, with their bicycle showrooms in urban and suburban areas, and rural shops like Larsen's.

The Future, For Now? Am I Responsible For It?

I'll take credit--but not blame.

No, I'm not channeling El Cheeto Grande.  Rather, I am here now to tell you that a line I tossed off in an earlier post has become a reality--better (or worse) yet, a business plan.

Last year I wrote about the then-new dockless bike share programs making their debut in China.  They have since appeared in European and North American locales:  In fact, there's talk of bringing such services to the Bronx and other parts of New York City not presently served by Citibike.

I called those dockless programs, which allow anyone with the company's app on his or her smart phone to pick up or leave a bicycle, "Uber for bicycles."

Now--you guessed it--Uber is getting into the bike share business.  I am not surprised, really:  If the future is in driverless cars (the Force forbid!) or fewer or no cars, it makes perfect sense for the company to look at other forms of transportation.

Uber is doing something to many other companies failed to do:  look at the industry, not the business, of which they are a part.  Some business writer, I forget whom, said the real reason why the New York Central and Pennsylvania Railroads--at their peak, the world's two largest corporations-- are in the dustbin of history (Funny, isn't it, to quote Marx when talking about business?) is that they didn't realize that they were not just in the railroad business--which was dying in the US--but in the transportation industry.  So, by the time they merged, it was too late to save either of them.

One of the better analogies I can think of in the bicycle world is Schwinn.  They failed to see their role in the bicycle industry, which changed dramatically.  That is why the company started by Ignaz Schwinn in the 1890s didn't start making (or even offering) BMX or mountain bikes until other bike makers, some of them newcomers, had already taken hold of those markets.  The company's management seemed to think that its industry consisted of making and selling people the bikes their parents and grandparents bought--the only difference being that it added derailleurs and skinnier tires to the two-wheeled tanks they'd been making.  

Which reminds me:  For all of the Varsities and Continentals they sold during the '70's Bike Boom, they really missed the boat when, a couple of years in, college students and other young adults started to demand lighter bikes, like the ones offered by European and Japanese makers.  

At that time, the only really lightweight bicycles Schwinn offered were the Paramount and, depending on how you define "lightweight", the Sports Tourer.  The  former was beyond the means of most young people, while the latter was indistinguishable, appearance-wise, from the company's flash-welded bikes.By the time Schwinn started to offer the Japanese-made LeTour and Voyageur, in 1974, the Bike Boom had already crested and people who wanted lighter bikes had already bought Nishikis, Fujis, Motobecanes and Raleighs.

Anyway, it seems like Uber is not falling into the same trap as Schwinn or the railroads.  They are debuting their new share program in Berlin, Germany and, I am sure, will expand into other places.  With the popularity of dockless share programs and the company's name recognition, it seems like Uber has an unbeatable combination--for now.

It'd be nice if they give me credit, though--although it would be nice to be compensated at least as well as someone who created one of the world's most recognized logos.

What Entrepreneurs Can Learn From The Bicycle

What is the greatest threat the hat industry ever faced?

No, it wasn't the Reign of Terror.  

Since you are reading this blog, you may have already guessed that it was--the bicycle!

Believe it or not, in 1896, supposedly sane and rational businesspeople actually believed that the bicycle would bring an end to la fabrication des chapeaux. Apparently, cyclists were wearing cheaper caps and saving their more expensive headwear for special occasions--or doing without it altogether.  One irate hatter even proposed asking Congress to pass a law that would have required every cyclist to purchase at least two felt hats a year.

But the makers of cranial coverings weren't the only ones who feared for their livelihoods because of the newfangled two-wheelers.  Before the bicycle craze of the 1890s, men went for a shave and haircut on Saturday afternoons, in preparation for a night out.  "Now they go off on a bicycle and do not care whether they are shaved or not," lamented one barber.

(Imagine how he would react to today's young male denizens of Portland, Oregon and Williamsburg, Brooklyn!)

Shoemakers also complained they were losing business because people weren't walking.  Not surprisingly, cigar makers were in a panic:  Even in those days, before people knew about the health hazards of smoking, pedal pushers saw that cycling and stogies didn't go together very well.  Saloon owners said they were losing business because cyclists preferred other beverages to beer.  And, interestingly, booksellers complained that times were tough because people were riding instead of reading.

That last complaint seems really odd to me:  Cyclists, at least the ones I know, tend to read more than other people.  Perhaps things were different in 1896.

Moreover, I haven't seen that cycling keeps people from drinking beer.  Now, I can understand the panic of cigar makers:  I can't think of a single cyclist I've ever known who smoked them.  Then again, I've never known a lot of people who smoked cigars.  For the record, I've smoked two in my entire life, and don't plan on lighting another.

Jason Feifer, the Editor-in-Chief of Entrepreneur, talks about the "panic" I've described to make this point:  that change should be embraced rather than fought.  We may be experiencing another "golden age" of bicycling and, he explains, it presents all sorts of business opportunities, some in industries that have no apparent relation to cycling.  He draws parallels with other innovations that some companies should have embraced, but didn't--or did so when it was too late.  For example, he says, music companies should not have resisted streaming, any more than energy companies should have shied away from solar technology.

All you have to do is look at how many books about cycling and bike-themed beers are on the market to understand what he means!

P.S.:  A reproduction of the photo in this post hangs on my wall--next to my bicycles, of course!

A Libertarian Argument To Subsidize Cycling?

Like many bookish young people of my generation, I had my "Ayn Rand phase."  I actually believed (or, at least, thought I believed) that if you want something, you should pay for it and you should only get what you pay for.  If you can't afford more, I believed, it was your own damned fault.

Of course, to libertarians--a very loose term that is normally used to describe Randians--taxes are anathema. But most see them as, if not a necessary evil, then at least as a reality:  after all, we're not likely to privatize roads, bridges and such any time soon.  To the extent that they're willing to tolerate having their money "confiscated" by the government, they believe that people should get only what they pay for.

Every once in a while, I encounter that line of thinking when some driver swears at me or anyone else, upon learning I'm a cyclist, lapses into an anti-bike rant.  Every single time some motorist vented his or her rage at me for taking up space in "his" or "her" roadway--or at having part of it "taken away" by a bike lane--or questioned my patriotism or simply expressed disdain of me because I choose two wheels instead of four--he or she said something along the lines of, "Well, you don't pay taxes!"

As I have pointed out to more than one such driver--and in this blog--the only taxes that they pay and we don't are the ones added to the price of gasoline.  If anything, we might be paying higher proportions of our incomes in taxes, because drivers--especially if they are salespeople, contractors or work in other auto-dependent endeavors--can write off much of the expense of driving and maintaining their cars.  Moreover, they make heavier use of the infrastructure we and they pay for.

Even if they are misinformed about who pays and how much, most people with whom I've gotten into arguments or discussions about bike vs car taxes are pretty consistent in their beliefs about taxation.  Also, they seem to agree with me on this:  Taxation is an effective way to regulate behavior.  That is why people (some, anyway) donate to charities:  It lowers their tax bills.  In my city and other jurisdictions, it's also helped to reduce smoking, among other things.

If we follow this line of reasoning, one might expect that tax policy could not only entice more people ride bikes to work, it could also encourage employers to encourage their employees to pedal to the office or factory or studio or wherever they work.

Well, there is evidence that such policies actually work.  In 2003, Her Majesty's Revenue & Customs (Think of a British IRS.) enacted a regulation (EIM 21664), commonly known as "The Cycle to Work Scheme".  It allows employers to provide bicycles to their employees tax-free.  That is, tax-free for both the employers and employees, who do not have to declare them as part for their employment tax or as part of their taxable income, respectively.

Of course, certain conditions have to be met.  You don't get to deduct your custom Mercian or Bob Jackson--unless, of course, you are using it mainly for job-related travel and your employer provides it for that purpose.  HMRC doesn't expect employees to provide detailed records of how they use their bikes "unless there is clear evidence to suggest that less than half of the use of the cycle or equipment is on qualifying journeys."  Now, I'm no expert on US, let alone British, tax law, but I imagine (from my reading of the policy) that taking the bike on a charity ride or some other such event every now and again wouldn't disqualify the bike or the rider.

Notice the word "equipment" is included. It includes helmets that conform to European standard EN-1078, child seats, lights (including dynamos), bells and bulb horns, reflective clothing and front, rear and spoke reflectors. So it won't pay for your lycra "Sky Team" kit, cycle computers or training.

According to a study the Institute for Employment Studies released last year, there have been more than a million successful applications for Cycle to Work since 2007.  According to a survey of 13,000 users, nine percent were non-cyclists before they became part of the "scheme", and respondents, on average, said they are now cycling more than twice as many miles as they pedaled before the scheme.  Even among already-committed cyclists, about two-thirds said they'd increased the amount of riding they did before they entered the program.

The IES said that even if five percent of participants--9200 people--cycled 30 minutes a day as a result of their involvement in the program, their reduced absenteeism and increased fitness saved 72 million GBP a year.  That's 7826 GBP (10173 USD at current exchange rates).  How many programs, in any country, save that much money per person?

Ironically, that is the most palatable argument you can make about taxes to a libertarian (or my younger Ayn Randian self):  Something saves tax money, and reduces the tax burden on people.

Now, about a single-payer national health care system....

We'll Miss Chris!

F. Scott Fitzgerald opened his short story Rich Boy with what has become one of the most misquoted lines:  "Let me tell you about the very rich.  They are different from you and me."

Well, not many people people in the bike business are among the very rich.  In fact, a joke I heard from people in the industry goes like this:  "You can end up with a small fortune in this business.  How?  Start with a big one!"

Don't get me wrong:  Some people have done very well for themselves, whether by opening a bike shop that offers the right things in the right place at the right time, or by being distributors or importers.  But whatever money one makes in the two-wheeled trade does not come easily:  Running a bike shop entails long hours (especially during cycling season) and the overhead costs are high.

So, the people who choose to go into the bike business are different, if not from you and me, then at least from people who go into other industries or professions.  I am thinking now of a shop in which I worked for a time:  One of the partners was a fellow who spent years working in shops, mainly as a mechanic, and decided that he wanted to open one of his own.  The other was a retired Wall Streeter who, after a couple of years, was unhappy that his investment didn't yield a bigger and faster return.  He didn't realize that such was the nature of bike shops, and the bike industry in general.

Of course, that former Wall Street denizen's motivation for opening a bike shop was entirely different from that of his partner.  He was not entering the world of cycling; rather, he thought he saw another business opportunity.  I can't really fault him for that:  All of his years on "The Street" conditioned him to think that way, if he hadn't already had such a mindset.  On the other hand, the mechanic genuinely loved bicycles and cycling. (I know: I raced against and rode with him.)  As some might say, cycling was "in his blood".

Chris, with his son.  From the Velo Orange blog.

Another such person, I believe, is Chris Kulczycki.  Many of you know him as the founder of Velo Orange.  As he often said, VO began with a "part time gig" after selling another business he'd started.  He brought it in some bike parts and accessories, mainly for touring and randonneuring, from Europe and Japan.  Some of those items had not been made in decades and, in some cases, the companies that made them hadn't been in business for as long.  

Then, of course, he started to have parts and accessories made after the designs of those vintage items.  The result of his work, and a few other like-minded people, is that we have more choices about the kinds of bikes we ride, and about the way they look, than we did fifteen or twenty-five years ago.  Gone is the tyranny of the racing bike/mountain bike binary that dictated most of what was made and sold during the 1980's and 1990's.  We also are free of the dictate that everything must look like carbon weave or be finished in black.  (Isn't it ironic that the most expensive bikes had such a palette decades after Henry Ford said that customers could get the Model T--the first car for the masses--"in any color as long as it's black".)

In other words, Chris not only has a passion for cycling, he also has a particular love of particular kinds of cycling (and bikes) that were all but unknown to most Americans when he started Velo Orange.  And it has paid off, for us and for him.  

As for him:  It's paid well enough that he's retired, after selling the company.  All I can do is hope that he and Annette enjoy their retirement, which they have certainly earned!  And that his cancer doesn't return.