Will It Lift The Bike Business? Or Will REI Fall Into A Canyon?

For as long as I can remember, someone has predicted the demise of the local bike shop.  The first "threat" came from mail-order giants like Bike Warehouse/Bike Nashbar, Bikecology/Supergo and Performance.  They offered high-end frames and components at lower prices (including shipping) than your neighborhood dealer--if indeed it carried those items or could order them.  

Later, the death-knell for The Village Spokesperson or its equivalent was supposed to have been sounded by Internet retailers--some of which, of course, were the online incarnations of mail-order firms.  Often, their prices were even lower, and their selections greater, than those of mail-order or brick-and-mortar businesses because they didn't need the warehouse space of mail-order companies and, well, because of sheer volume: A human doesn't have to be present when you press "click" to order that helmet or GPS device or when it's dispatched.

Indeed, some shops closed their doors when mail-order companies became known even to once-a-month, seven-months-out-of-the-year, cyclists. (Older mail-order concerns like Cyclo-pedia had much smaller, though very loyal, markets.) And others ended their runs when they couldn't keep up with Internet retailers, or when the COVID-19 Bike Boom went bust.  

But there were a few factors that kept other bike shops in business and encouraged the establishment of new ones.  One is what a remote shopping experience, whether via the US Postal Service or World Wide Web, could not offer:  personal service. While most mail and online retailers offered fit charts and guides for bikes, helmets, shoes and other items, they could not replicate the experience of trying them on in the store.  A related factor is the relationships cyclists build with trusted bike professionals:  For example, the folks at Bicycle Habitat understand my riding style and preferences, and how  they have changed.  Also, they and other shops I have frequented have offered me discounts as a repeat customer, so I find that I save little, if any, money when I shop from a screen. 

And let's face it, people like me simply feel more comfortable going to proprietors, mechanics and other shop personnel we've known for years or even decades. 

That last factor explains why some analysts and casual observers are again sounding alarms over "the death of bike shops."  The cycle brand Canyon has announced a partnership with REI Co-op.

Now, that doesn't mean you'll find Canyon bikes or accessories, or even a demo fleet, on your local REI showroom.  Rather, those stores will only handle warranty claims and do repairs--at a 20 percent discount for REI members-- on Canyon bikes.  In other words, REI is taking on two vital parts of a relationship between a bike buyer and shop.  I rarely have to go to a shop for repairs (only when I don't have the tool and can't justify buying it or, as when I bought Dee-Lilah, my custom Mercian Vincitore, I wanted an assembly job from someone who loves and appreciates Mercians), but it's good to know that I can get advice and answers from someone with expertise and that, should I have a warranty issue, someone can handle it for me. 

I think those are particularly important issues for customers and riders of Canyon, a direct-to-consumer brand. Few, if any, did a pre-order ride or fit, so I am sure that some ordered the wrong size or type of bike for themselves or someone else.  I would likewise assume that many Canyon customers have done little, if any, bike repair work and thus didn't assemble some or all of the bike properly.

Moreover, at least a few Canyon riders, like other cyclists, are also hikers, campers, skiers or participants in other outdoor sports.   Thus, they would feel comfortable going to REI:  Indeed, they may already be customers or even members.  On the other hand, they may be new to cycling and thus feel intimidated by bike shops, especially the ones that cater to dedicated cyclists.

All of that said, I don't think Canyon's partnership with REI will mean the end of bike shops as we know them.  But it could change the ways in which at least some cyclists get service, even if it begs the question of whether REI would hire or train mechanics--or press salespeople into fixing bikes.   

Trexit: Another Consequence of COVID-19

 Just before Christmas, I wrote about an irony of the COVID-19 pandemic:  The dramatic increase in bike-related sales has actually forced some small shops, like Larsen's Bicycles of Powell, Wyoming, out of business.  The same surge in demand that has filled the coffers of bike companies and larger shops has left smaller shops like Larsen's--usually the last to be supplied--without inventory.  

It seems, though, that some other shops are closing, or their owners are shifting their focus to related businesses, by choice. 

People often look at the price tags on bikes and assume that the bike industry is lucrative.  The reality is that margins on bikes are new bikes are smaller--and, the more expensive the bike, the smaller the margin.  Prior to the pandemic, the bike could stand on the showroom floor for months, or even years.  In the meantime, the shop's owner or manager had to pay all the overhead of running the business, not to mention the mechanic who assembled the bike.

In addition, most bike shop owners, like their counterparts in other industries, carry long-term debt, whether for the business itself or in mortgages for their business buildings or homes.  That is often a deterrent to any would-be buyer of a bike shop, or any other small business, and a reason why shop proprietors are running their enterprises long after their peers have retired from salaried jobs.

I have just described some of the reasons why I have no regrets over not opening a bike shop or a book store, even though I was offered opportunities to do both in my youth.  One retailer described the situation well:  "It just did start to feel like we were in the store-running business instead of the bicycle business."  Having worked in both bike shops and book stores, I realized that I love books and bikes, but had absolutely no love for "the store-running business."  That, in essence, is why Chris Kulczyki sold the business he started--Velo Orange--almost four years ago.

Unfortunately, according to that retailer, "the store-running business is where this industry is going."  That is one reason, I think, why some are leaving the industry. The retailer in question admits that he, and other shop owners, have benefitted from the current "boom." Their "store running" has allowed them to pay off old debts and put some money in the bank.  It's also allowed them to get out from under a pile of old inventory.  For the first time, many who opened bike shops during the 1970s and 1980s, can leave with a "clean slate."  

As sad as it will be to see some of those shops go, I really can't blame their owners for selling out or closing down.  You really can't blame anybody for quitting while he or she is ahead, especially if it's taken decades to get to that point.  Also, as more than bicycle entrepreneur has said, "I'm tired; it's time to retire."

Some of those shops were Trek dealers. In recent years, the Wisconsin-based company called in some of its debts by taking over stores, essentially leaving the proprietor with nothing.  Some shop owners were on the verge of such a fate early in 2020.  But the COVID-induced surge in demand allowed them to pay down their debts and allowed negotiate more more favorable terms to their Trexits.

From the Financial Times

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.