Does The Bike Business Understand Economics?

 When I was an undergraduate, I knew a few business majors.  Some started off that way; others swtiched from fields ranging from biology to fine art because, well, they saw the starting salaries for folks with business degrees.  One thing I couldn't help but to notice was that the "B" majors--at least the ones I knew--hated Economics, which was a required course.  

I could understand:  As bad as I was at math, I was worse at economics.  Math by its nature is abstract, which is part of the reason I wished I could understand it better.  On the other hand, it seemed that economics was abstract because, well, it could be, if that was how economists wanted it.  Perhaps the business majors felt the same way.

After seeing those fellow students, it really came as no surprise, some years later, when some pundit--I forget whom--declared, "Most business people don't know a damned thing about economics, and most economists don't have a clue about business."  The first part of that statement, I think, could apply to six of the seven US Presidents who were businessmen before they ran for office.  (The exception, Harry Truman, failed at business but is generally regarded as a successful President, his decision to drop atom bombs on Japan notwithstanding.)  They showed the world that the United States (or any other nation, for that matter) can't be run as a business in part because it's an economy.  

One of those Presidents is, of course, Donald Trump. His tax cuts benefited people who didn't need them, and some would argue that they would have led to economic woes even if COVID-19 hadn't brought so much enterprise to a standstill.  

Another of Trump's economic policies that probably exacerbated the problems wrought by the pandemic were the tariffs he imposed.  He, like Herbert Hoover (one of the other businessmen who occupied the White House) passed them in the belief that making foreign goods more expensive would lead to more production in the US and "bring back American jobs."  That didn't happen in either case. Nearly every economist and historian now says that the import taxes passed under Hoover’s watch (known as the Smoot-Harley Tariffs) helped to tip the stock market crash of 1929 into a full-blown depression just as, I believe, Trump's tariffs will be see as an accelerant of the current economic crisis.

What Trump didn't seem to understand is that no matter what economic theories you follow, simply making steel from China or India more expensive isn't going to cause new mills to appear, or for shuttered plants to re-open or abandoned or demolished factories to be re-built in Pittsburgh or Youngstown or Gary or Lackawana--or anywhere else in this country.  Or, to put it in more technical terms, cutting off foreign supply does not lead to an increase in domestic capacity.

Photo by An Rong Xu, for the New York Times

I mention all of this because two leaders of the bike industry are showing that they are as ignorant of economics as Trump or Hoover.  At the Taipei Cycle Online Expo, Bob Margevicius said, "There's a gold mine today in the bike industry, but you have to invest." Component makers, according to Specialized Bicycles' Executive Vice-President, are "very reluctant to invest in additional capacity."

His belief was echoed by Ton Anbeek, the CEO of Accell Group, which owns, among other brands, Batavus, Koga, Lapierre and Raleigh.  Like Margevicius, he blamed the current shortage of bikes, parts and accessories on manufacturers' unwillingness to make more of them.  "To meet the growing demand in the coming years, we need component suppliers to invest in extra capacity to produce more critical components and parts," he urged.

While both of them are right, at least in one sense--that more products won't be available if more of them aren't made--they are missing a point:  Simply investing money isn't going to lead to more manufacturing capacity overnight, especially if new facilities need to be built.  Their exhortations will no more bring more bikes, helmets, tires or locks to bike shops or online retailers than Trump's tariffs will cause steel to be made in the US.  That might be the extent of my understanding of economics, but according to the old pundit, it's still more than what some businessmen seem to know!

Shelby Cycle Museum

More than two years ago, I wrote about a municipality that was best known for its epomymous bicycle company.

From 1925 until 1953, Shelby Bicycles were manufactured in the Ohio city for which they were named.  While most of their wares were sold under other names, such as Goodyear, Firestone and AMF, others bore the company's name and are prized by collectors for their stylishness.  One was even ridden to a transcontinental record.

While some manufacturers, such as Schwinn, Raleigh and Peugeot, were major employers, it can be argued that none was as integral to its community as the Shelby Cycle Company was to its town.

Restored 1938 Shelby. Photo by Aaron W. Legand

At the time I wrote my earlier post, the Shelby Cycle Historical Society, a tax-exempt organization, was forming and seeking members.  On Tuesday (perhaps appropriately, the day after Labor Day), it received a grant to create the Shelby Bicycle Museum on the grounds of the original Shelby Cycle factory.

I can't help but to wonder how many other bicycle "company towns" existed late in the 19th, and early in the 20th, Centuries. In those days, bike manufacturers were smaller and their markets were mainly local: No giant (with a capital or small "g") manufacturer or conglomerate dominated the industry.

Who Owns The Road In Gaborone?

I own the road:  I pay road tax.

I've heard some version of this argument over the years.  What drivers often forget is that those of us who don't drive are paying all of the same taxes as those who use their cars to get to the corner store.  As I pointed out to someone who accused me of taking "his" parking space, the only tax I don't pay that a driver pays is the one levied on gasoline.  But, in a sense, I pay for it, as other taxes, at least to some degree, subsidize the relatively low cost of petrol here in the US, just as the deductions from my paychecks help to pay for road building and maintenance.

The "I pay, I own" argument is even more emphatic, or vehement, in those places where a newly-emergent middle class is forsaking two wheels and pedals in favor of four wheels and gas pedals.  That, of course, was the story of Chinese cities early in this century.  Now it seems to be the narrative in Gaborone, the capital of Botswana.

Whereas most people rode bikes to school or work just a few years ago, now the bicycle has a double stigma:  It is seen as archaic and something that you use only if you're poor.  

I've never been to Gaborone, but according to BBC correspondent Sharon Tshipa, it's "the worst place in the world to ride a bike."  Not only are the drivers as reckless as the worst kinds of teenagers, they are quite open in expressing their hostility toward cyclists.  Some even threaten or promise to mow down riders.

These dangers to bicycle riders’ physical safety and mental well-being are compounded by hazards to their internal medical condition. Gaborone has some of the world’s worst air quality.  The sheer volume of vehicular traffic would, by itself, be enough to degrade the city’s environment.  But a particular quality of the city’s fleet makes things worse.  While some new cars are imported from neighboring South Africa, many more used vehicles come from other countries, where they failed to meet emission standards.

Whether or not Gaborone is the worst place to cycle, it’s sad to see people forsake their bikes, and disturbing that such hostility has developed against remaining cyclists.  From what I understand, some Chinese cities are re-discovering the bicycle.  Perhaps Gaborone will do likewise one day.

Who's Paying Their "Fair Share"?

Sometimes a motorist's animosity toward bicycle riders stems from a negative experience with a scofflaw cyclist--or one who is following the safest and most sensible practices but somehow manages to inconvenience said driver.  Other times it comes from our actual or perceived "privileged" status:  While many of us are indeed better-educated and younger (I am, in spirit!) than the population generally, there are also some who pedal because, for whatever reasons, they can't drive.  

Notice a word I used in the previous paragraph:  "perceived".  Perceptions, as we all know, are not the same thing as reality.  More than once, I have had non-cyclists berate me and other cyclists because of inaccurate notions about us.  

I think now of a time when, on a narrow Brooklyn street, a man driving just behind me wanted to park in a space I was passing at that moment.  He leaned on his horn; I glanced back at him and lipped, "Excuse me."  Then he let out a stream of profanities and what sounded like a threat. 

I turned back and said, "Excuse me, sir?"

Then he went into a rant about how careless cyclists are because we "get to use the same streets but don't have to pay for them."  I asked him to explain himself.  "I have to pay all sorts of taxes to maintain these streets."

"I do, too.  We all do, whether or not we drive. All of that is funded from what's deducted from our paychecks--or what you pay if you're an independent business owner."

He had the frustrated look of someone whose anger had, against his will, been defused.  "Yeah, but I'm still paying more taxes than you."

"Probably not.  Do you have kids?  A mortgage? Any loans?"

He looked confused.


"I am a single renter.  And I can't claim the deductions that some people claim. I don't get those big refunds I hear about from other people--if I get a refund at all."

He actually seemed to be listening to me. "The only tax that you pay, and I don't, is for the gas in your car.  But even there, I pay, too, because the price of gas is subsidized.  Why do you think we don't pay 10 dollars a gallon, like they do in France and Germany?"

From there,  our exchange became less acrimonious, and I wished him well.

 

I thought about that encounter, again, when I came across a letter to the editor containing the "If they want to use our roads, let them pay for it!" canard.  It's amazing how the misconception that we don't pay our "fair share" still exists.

What bothered me almost as much is the editor's response:  That Oregon cyclists are indeed paying their share with the bicycle tax that was imposed two years ago.

What was that about two wrongs not making a right?

Citizens and Business Owners

A motorist once accused me and other cyclists of using "for free" the things he and other non-cyclists pay for.  I pointed out that he pays only one tax that I don't pay:  for gasoline.  Roads and other infrastructure are not, as he and others believe, wholly funded by that levy on fuel.  In fact, in most US states--including New York--most of the money for roads comes from general taxes, whether at the local, state or federal level.

In essence, I was telling that driver that I am as much of a citizen as he is, and that cyclists pay their share as much as anybody does.  If anything, we are taxed more heavily because motorists can often deduct the expenses of owning and operating their vehicles.

Now, if cyclists are citizens, just as motorists are, what does that make bicycle shop owners?

Business owners.  Mostly, small business owners.

That is the point made by several bike emporium proprietors in a letter to Washington, DC Mayor Muriel Bowser.  In it, they point out that their interest in Vision Zero--which, they believe, Bowser's administration has been slow to implement--is for the benefit not only of their customers, but also the community as a whole.  They say a few things about themselves that, really, any conscientious small business owner could say:

Bikeshops are active in their communities. Although we compete for the same customers, we share the same goal: put more people on bikes. More people on bikes helps all of us as business owners and the city where our shops are located.

We provide emergency repairs and some of us provide free tool use to get our customers and neighbors moving again.

We donate to local charities.

We create jobs and train young people that have just started working.

We create positive activity in retail corridors.

We create sales tax revenue for the District.

In other words, they're saying that they are serving, not only cyclists, but the Washington DC community as a whole.  That also reinforces the argument I made with the motorist I mentioned at the beginning of this post:  Cyclists are part of the community, too:  We come from "every Ward and all walks of life," in the words of the letter.  We hold the same kinds of jobs, have the same kinds of families, live in the same kinds of places and have all of the same needs as other members of the community.  One of those needs is safety, and the one major difference between us and motorists, or other citizens is--as the writers of the letter point out--we are more vulnerable on the roads.

Oh, and we are customers, not only of bike shops, but the other businesses in their vicinity:  greenmarkets, book sellers, hardware stores, haircutters and beauticians, clothing boutiques, coffee shops, supermarkets and eateries of any and all kinds.  If I owned any of those businesses, I would want my customers to remain safe--and alive. 

Will The Idaho Stop Come To Oregon?

Until recently, I was a disciple of John Forester's "bicycle as vehicle" philosophy.  It's explicated in his "Effective Cycling" book, which--along with the C.O.N.I. manual (which has, possibly, the most beautiful cover illustration of any cycling book)--were my touchstones for cycling.

I haven't looked at the C.O.N.I. manual in a long time.  I'm sure it's still valuable, though some of its specifics might be dated. (To my knowledge, no new edition of the book, at least in English, was published after 1972.)  But I still check out Forester's book on occasion.  Some of its information is dated. That is inevitable, of course:  The book came out about 40 years ago, and, for example, much of the equipment he mentions is no longer made.  But I think his notions about how to cycle in traffic are just as dated.

But they were needed at the time.  As I've related in other posts, many was my commute or training ride in which I would not encounter another cyclist.  Most motorists--which is almost the same thing as saying most adults, as defined by law--didn't ride and regarded the bicycle as a kid's toy.  And if they saw an adult riding, they thought it must be for a bad reason, such as loss of driver's license or inability to afford a car.  The "car is king" attitude was, I believe, even more prevalent than it was now.  Forester was, I think, trying to establish the bicycle as a viable and valid means of transportation for grown-ups in the US.  Four decades ago, that meant cyclists asserting themselves themselves on the road and behaving exactly like drivers in the ways we took lanes, made turns and such.

The conditions at the time also meant that almost no policy-makers were cyclists.  So, whatever laws and policies were created in the name of "safety" were wrongheaded, if not flat-out malicious.  Thus, while folks like Forester advocated for more enlightened rules, they knew that they would be a long time a'coming, if they ever came at all.  Cyclists asserting their rights as operators of vehicles therefore seemed like the best way to "establish" cycling, if you will, in the US.

Now, I'm not sure that drivers' attitudes toward cyclists have changed much.  If anything, I think some have grown more hostile becuase they feel bike lanes are taking away "their" traffic lanes, and because they have the misinformed notion that we use roadways and other infrastructure without paying for it. In fact, a driver parking in Brooklyn (at the formoer site of the library I frequented in my childhood, no less!) made that accusation as he shouted other fallacies and epithets at me.  I waited for him; he probably expected me to punch him in the nose.  But I calmly informed him that the only tax he pays that I don't pay is on gasoline.  I don't know whether he was more surprised by what I said or my demeanor.

Anyway, while drivers might be hostile for different reasons than they were four decades ago, there are some changes in the wind.  There are, at least in a few places, a few policymakers who cycle to their offices, and perhaps elsewhere.  And at least a few of the drivers I encounter have ridden a bike, say, within the last month.  So there is a small, but growing recognition, that while bicycles aren't the lawless hooligans some believe us to be, we also can't behave exactly like motor vehicles and live to tell about it.

That bikes aren't the same as cars is a point made by Jonathan Maus, the editor/publisher of Bike Portland.  In an excelllent article he published the other day, he uses that point to advocate for something that has become one of my pet causes, if you will, as a cyclist:  the Idaho Stop.

As I've mentioned in other posts, the Idaho Stop is when you treat a red signal as a "stop" sign and a "stop" sign as a "yield" sign.  In essence, it means that you don't have to come to a complete stop at an intersection unless traffic is crossing. That improves our safety immensely because if we can cross before the light turns green, we get out in front of whatever traffic might approach from behind us, as well as oncoming traffic--which keeps us from being hit by a turning vehicle.

Maus wrote his article because a similar law is up for vote in the Oregon state senate.  Governor Asa Hutchinson recently signed a similar law in Arkansas, and Utah is considering something like it.  A few municipalities in the US as well as the city of Paris have enacted similar policies during the past decade.  But it's called "The Idaho Stop" because the Gem State has had it on the books since 1982, and for about a quarter-century, it was the only such law in the United States.

Let's hope that Jonathan Maus's words move the legislators of Oregon.  Let's also hope that as Oregon goes, so go New York, Connecticut, New Jersey, Pennsylvania, Florida and...well, you get the idea.

What Gears Are Turning In His Mind?

Some time in your childhood, you probably had, at least once, the sort of teacher who punished everyone in your class for something one kid did.  

That, I believe, is the sort of teacher Donald Trump would have been had he pursued the life of an educator.

At least, that is what I believe after seeing one of his latest threats. If he acts on it, some $11.5 billion in goods from the EU could be subject to retaliatory tariffs.  Among those items are hubs and sprockets.

So why does El Cheeto Grande want to slap punitive taxes on wheel goods and gears?  Well, he rationalizes this threat with a World Trade Organization ruling from last May, which found that Airbus had received illegal subsidies from European countries and gave the US the right to impose retaliatory tariffs.

What he didn't mention, however, is a more recent WTO ruling, specifically from last month:  Boeing, which just happens to be Airbus's main rival, received similarly illegal tax breaks in the US.  Thus, said the WTO, the EU can impose sanctions on imports from the US.

Now, I thought really hard about why freewheels, cassettes and hubs for bicycles--or motorcycle hubs or sprockets--are targeted for tariffs that are supposed to punish Europeans for supporting their aerospace industry.  All I could come up was this:  Aircraft have wheels, which use hubs.  And their engines use gears, i.e., sprockets.  So, perhaps, anything that could potentially help an A-380 take off, fly or land is fair game for new taxes.

Hmm...I'm not sure that works.  I must say I tried, really tried, to understand the logic of the threat. But then I remembered:  This is Donald Trump we're talking about.  

Taxes Were The Least of It

Yesterday was Tax Day in the US.  Except for those who are getting big refunds, nobody was happy.

Some of us look for good news on the day.  Alas, not much was to be found.  Two items made the woes of owing (and, yes, I was one of the people who owed--thank you, Donald!) trivial in comparison.

One of those stories is happening here in the US.  "Retrogrouch" confirmed rumors that I'd heard for some time:  Rebecca Twigg, one of the greatest American female cyclists--actually, one of the greatest American cyclists--is homeless.  She doesn't even have a bicycle anymore.

Of course, it's tragic for anyone to live on the streets, with only ragged blankets, large garbage bags and, if he or she is lucky, a refrigerator box, to protect him or her from cold, wind and rain, along with the dirt and other hazards imposed by other humans.  And Rebecca is not the first elite athlete or other celebrity to end up with nothing of her own and nowhere home.  But her story is especially disturbing because, if you were around during the '80's and '90's, you recall her as someone who "had everything going for her".  Her Olympic medals and other victories brought her endorsement contracts; her looks generated modeling gigs and her intelligence (and hard work) got her into college at age 14.



From the moment she got on a bike as a toddler, she says, she knew she was "born to" ride.  And she exercised that birthright, if you will, to its fullest:  She was as fiercely competitive as she is talented.  Most of us envy people who find their "calling", if you will, before they can even call it that:  the painter who knew he would be creating his life on canvas at age 5; the teacher who knew she'd spend her life in the classroom when she was even younger than the kids she's teaching now; the doctor whose vocation was revealed to him not long after he learned how to read.  

I have known that painter and doctor, both of whom are gone now, and the teacher is a friend who just happens to be granddaughter of my friend Mildred.  Having such a clear vision of their lives at such an early age helped all of them:  They knew what they needed to do and focused on it. 

One difference between them and Rebecca, though, is that they found themselves in professions they could practice for their entire working lives (or, in the case of the painter, his entire life).  None of them (except for the teacher, if she decides to change careers) will ever have to experience something Rebecca, and many other professional athletes, had to endure:  a transition from a life of days structured around sport to the daily routines of a "normal" job or career.

In Rebecca's case, that career was in Information Technology.  She studied it (Computer Science) at Colman College after earning a bachelor's degree in Biology at the University of Washington.  There are people who love that kind of work; others, like Stuart--the Australian fellow with whom I rode in Cambodia--hated it.  I don't know whether Rebecca disliked the work per se or whether she simply couldn't abide being in an office and at a desk. In any case, in spite of her talent and hard work, she seemed to have difficulty in holding down jobs.  Or, perhaps, her trouble came because of her talent and hard work:  She may have simply felt that there was no "victory" at the end of it.

The prospect of not "winning" may also be a reason why she finds it so difficult to accept help.  Perhaps doing so would be an admission of defeat for her.  Also, bicycle racers tend to be rather solitary figures, and even in that world, racers like Rebecca are rather like monks:  Her best event, after all, was the 3000 meter individual pursuit race.

Anyway, I hope her story turns into something better.  I hope the same for la Cathedrale de Notre Dame in Paris.  At least the people in charge of it are already getting, and accepting help in rebuilding after the awful fire it incurred yesterday.  

My friend Michele and I exchanged e-mails about the news. Les francaises sont tres choques--The French are very shocked, she wrote.  To which I replied:  Tout le monde est choque.  La cathedrale est un tresor du monde--The whole world is shocked. The cathedral is a treasure of the world.



I mean, what building besides the Eiffel Tower and, perhaps, the Sacre Coeur de Montmartre, is more embematic of the City of Light?  I still recall, during my second day in Paris (more years ago than I'll admit), sitting in the square by the Notre Dame and listening to the bell on a warm June day.  I felt like I'd become, at that moment, part of a city that has become so much a part of me:  New York is the only city I know better.  

At least it seems that more of the cathedral can be saved than officials originally thought.  President Macron has vowed to rebuild it, and wealthy magnates as well as more anonymous citizens are already donating money.  However the work is done, the real restoration will not be on the structures themselves:  Rather, it will be a healing of the minds and spirits that have been so moved by its grandeur, the light coruscating through its stained-glass windows or the views from its towers--or simply by images of those towers, windows and the spire.  



Sir Kenneth Clark, often called the high priest of Art History, once said that he could not define "civilization" in abstract terms.  But, as he turned to the Notre Dame in his famous "Civilization" series, he declared, "I know I'm looking at it."

For me, a non-religious person, that's reason enough to care about the Notre Dame.   Taxes are just a pimple on the face of my life, which is part of the multitude which, I hope, have helped to contribute in whatever small ways to civilization or "the human project" or whatever you want to call it.

Lower Bicycle Taxes--In Belgium?

I've bashed the US President more than a few times on this blog.  But, to be fair to El Cheeto Grande, I must point out that he isn't the only one who's come up with a completely pointless tax on bicycles.  Oregon imposed their own state tax a little less than two years ago; other jurisdictions either have done, or are considering, something similar.

Of course, in the US, about three generations of adults didn't cycle. So, we are just starting to understand that the bicycle is a viable means of transportation as well as enjoyable means of recreation and exercise rather than just a kid's toy.

On the other hand, Europeans still see the bicycle as I've described it.  In some countries, masses of people never traded two wheels for four; in others (or in parts of some countries), the auto-centric culture hasn't persisted as long as it's had its grip on America.  Thus, to people to ride again, and safely, Europeans can tap into memory, if you will, that hasn't gone dormant or extinct.

Such is the case in Belgium.  That country has more bicycle-related events, from races to randonees to rallies, and more talented cyclists, per capita than just about any other nation.  I haven't spent a lot of time there, but it's easy to see that bicycles and velocipedic culture are never very far from Belgians' consciousness.

That might be the reason why some law makers over there understand that the way to build useful and sensible infrastructure, preserve a country's bicycle industries and, well, encourage people to ride, is not to impose more taxes on bikes, whether at the retail level or when they enter the country from someplace else.  

Bicycles parked by medieval houses in Ghent, Belgium

At least, that's the impression I have after the Belgian parliament voted through a bill to impose a lower sales tax for bicycles and e-bikes than the current Value Added Tax levied there and in other European Union nations.  If approved by the European Commission, the surcharge for bicycles and e-bikes would be lowered from the standard VAT of 21 percent to 6 percent.

Belgian politician Laurent Devin has been championing such a measure for some time.  Other political leaders agree, including Ahmed Laaouej, agree.  He  leads the Belgian Socialist Party, which happens to be the second-largest party in Belgium's parliament.

While some EU member states have been able to reduce the VAT on bicycle repairs, no other country has attempted such a widespread reduction on the taxes levied on two-wheelers.  In 2017, 445,000 bicycles were sold in the country, of which 218,000 were e-bikes--in a country of 11.35 million people.  On a per capita basis, that is roughly the same number of bikes sold in the US, but Belgians, like other Europeans, tend to keep and ride their bikes longer than Americans, so fewer are first-time bike buyers than in the US.

Performance: The End Of An Era?

When I first became a dedicated cyclist, as a teenager, I discovered the mail-order catalogues.  They had all sorts of exotic bikes and parts, most of which I couldn't afford and weren't found in the local bike shops.  I pored over those catalogues the way other kids devoured comic books or teen magazines--or the way some young person in a remote village might indulge him or her self in magazines filled with images of the latest fashions from New York or Paris.

Before the '70's Bike Boom, there was Gene Porteusi's Cyclopedia, that printed cornucopia of, seemingly, all things bike-related.  He was one of the old-timers who kept the flame flickering during the Dark Ages of cycling in the US.  

Somehow I don't think much of anything changed in his catalogues during their history.  For most of his career, he was dealing with a small audience--few American adults were cycling during the quarter-century or so after World War II--and a limited selection of goods.  Actually, in the later years of Cyclopedia's run, he limited his selection:  He didn't offer any Japanese parts, not even a SunTour derailleur, even after people started to choose them for custom-built frames.

For making those wonderful V-series and Cyclone derailleurs, and other great stuff from the Land of the Rising Sun, widely available, much of the credit goes to the mail-order companies that launched in the wake of the Bike Boom.  I am thinking now of Bike Warehouse, which later became Bike Nashbar; Bikecology, renamed Supergo; and, possibly the 800-pound gorilla among them:  Performance Bike.

Well, it looks like Nashbar is the last catalogue standing.  Well, not exactly:  Nashbar still exists, but I reckon that hardly anybody shops from its catalogue anymore. For all I know, they might not even have a printed catalogue these days:  I'd guess that, save for their outlet store, all of their sales are on the web.

And the web, ironically, is one of the things that destroyed the other two.  Actually, Performance took over Supergo.  But now it looks like Performance is nigh:  Its parent company filed for bankruptcy protection last fall, and all of its retail stores will close next month.  In addition, over 100 staff members have been laid off at Performance's Chapel Hill, North Carolina headquarters.

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Although you could buy stuff from Performance's website, it never seemed to generate business in the same way that other retailers' websites did for them.  Plus, the web made it easier to order from overseas retailers when they offered better prices or the exchange rate was favorable. As an example, during the past few years, it's often been cheaper to buy Shimano components--Performance's bread-and-butter, if you will--from UK retailers like Ribble or Chain Reaction because, in addition to the favorable exchange rates, US customers benefited from not having to pay the value-added tax (VAT) levied on purchases made by native or European Union customers.

The coup de grace for Performance, though, might have been tariffs the Trump administration imposed last year on bikes, e-bikes and products related to them.  An already-reeling Performance was hit with higher overhead costs and, from what I've read, had no choice but to raise prices.  That, of course, would drive away an already-dwindling customer base that was attracted mainly by the company's low prices.

So, for better or worse, we may be witnessing the end of an era: the one of the mail-order catalogue, in the bicycle industry as well as in other businesses.   

More Bike Lanes, Fewer Commuters

In yesterday's post, I mentioned a Seattle train station where bike parking "sucks".

It may be one of the reasons why the number of Emerald City commuters who get to work by bike fell by 20 percent from 2016 to 2017.

Still, Seattle remains one of the top US cities for bicycle commuting, at least in terms of the percentage of people who say they go by bike.  Its decline was, however, more precipitous than that of the US as a whole, where bicycle commuting fell by 3.2 percent during the same period.

The USA Today article in which I came across these statistics said the declines came in spite of the increasing number of bike lanes and other efforts made by cities to become more "bike friendly".  To be fair, the article also points out that the price of gasoline has dropped during the past several years, which enticed more people to drive.  It also points out, as I pointed out in yesterday's post, that some passengers of Uber, Lyft and other "ride shares" are using those services in lieu of cycling.

One thing the article hinted at is something I've long suspected:  that, in the years before "ride sharing" services became popular, bicycle commuting might have been increasing in dense urban areas, but not in suburban and rural areas.  In the suburbs, as I pointed out in yesterday's post, there isn't bicycle parking at rail and bus stations commuters use to get to their jobs in the city.  And, in rural areas (and outer-ring suburbs), some commutes are simply too long to do by bicycle.  

Here is something else I've noticed:  People who move to the city to be near their jobs are mostly young and making relatively good salaries.  Some of them commute by bicycle, though most take mass transit or "ride shares."  But once they get married and have children, they want to buy houses.  Unless they are making very high salaries, that means moving some distance from the city.

So, my analysis, for what it's worth, goes like this:  Whether bicycle commuting increases or decreases from year to year, it will mainly be a practice of young, affluent and single people in central areas of cities--unless society, the economy and policies change.  Until housing in cities becomes more affordable, and tax policies don't encourage fossil fuel consumption, the typical bike commuter will be putting his or her laptop in the front basket of a bike-share bike he or she will ride to the office.

How Will Brooklyn Pay For A Tax Against China?

About three weeks ago, I wrote about ways in which the recently-imposed tariffs on Chinese goods could affect the bicycle industry.

I presented as clear a picture as I could, not being a bicycle industry insider or an economist who specializes in trade policy (or any kind of economist at all).  So, today, I am going to share part an Inc. article Norman Brodsky wrote based on his conversation with such an industry insider.

Brodsky's friend Ryan Zagata is the founder and owner of Brooklyn Bicycle Company.  I've never ridden any of their machines, but they are praised for being very good at what new urban cyclists--particularly commuters and utility cyclists--want.  From all accounts, their bikes are comfortable and practical.  What I know is that they are stylish enough that one of their models is sold at the Museum of Modern Art's gift shop.

Plus, I must say, Brooklyn's prices are actually quite reasonable.  That could change, although Zagata doesn't want that.

He told Brodsky that a typical model from his company costs about $200 to make.  Right now, he pays $11 on import duties for such a bike, but the new tariffs could hike that to $61.

That leaves him with a dilemma:  Does he absorb the increase or pass it on to customers?  Of course, he could also "split the difference" and increase consumer prices, but by a smaller amount.

None of those options is particularly appealing because, as anyone who has worked in the industry knows, it's a low profit-margin business.  The retail markup on bicycles, percentage-wise, is not nearly as high as it is for such items as clothing and luggage.  Every shop in which I worked made a much greater proportion of its income from repairs or the sales of accessories and parts than it did from selling new bikes.  As I understand, that is the case in just about all bike shops. That's why you don't see year-end half-price or 75 percent off sales on bikes. 

Brooklyn Bicycle Company's Driggs 3

Brodsky asked whether Zagata could have his bikes and parts manufactured in another country like Vietnam.  It wouldn't be worthwhile, Zagata says, unless the move would shave $50 or more off the cost of producing the bike. More to the point, though, are the difficulties that come with such a move: among them,  the research and development--and travel-- costs of sourcing a new factory and having samples made and tested.  Also, he points out, every new model from a new supplier has to be sent to the Consumer Product Safety Commission for testing.  

In addition, moving production would mean losing the relationships they have with suppliers, who understand what Brooklyn Bicycle wants and needs.  "Will a new manufacturer understand what we're looking for and give us the same level of quality?" Zagata wonders.

He might have been thinking of Fuji's experience around the turn of the millennium.  They were one of the last major Japanese bicycle manufacturers to shift their production to Taiwan.  As a result, they didn't have the sorts of relationships enjoyed by other companies who shifted their production earlier.  Fuji's once-stellar reputation fell; it has recovered only during the last few years.

Finally, Brodsky inquired as to whether Zagata could manufacture his bikes in the US. Even if he made the frames, and assembled the bikes, in the US, he'd still have the same problem with tariffs.  "There's nobody in the United States making rims, hubs, spokes, saddles, chains, drivetrains--all the things we'd need, in the quantities we'd need them."  He still would have to import those components, he said, and they would be subject to the same tariffis as bicycles.

(He is right about the lack of American component-making  capacity.  Hubs are made here, but they are all high-end items like Phil Wood and Chris King:  a set would cost nearly as much as most of the bikes Brooklyn offers.  The other components, to my knowledge, are no longer made here:  even Sun Rims, designed in the USA, are made in Taiwan or China.)

At the moment, Zagata says he can't do much more than "watch my competitors."  Without a doubt, many other small- to medium- size business owners (BBCo., at $2 million a year, is considered in the latter category) could say the same. 

What--If Anything--Wii This Trade War Cost Us?

I passed the only economics course I took as an undergraduate by promising the professor that he would never, ever see me again if he gave me credit for the class.  If I were to fail, I warned him, I would be forced to take the class again and he might get stuck with me for another semester.

It worked.

Well, all right. It didn't quite go that way.  I passed the class, but I didn't make any such promises or threats.  I think the prof, though, realized that I had absolutely no talent for the subject to which he devoted his life and I wanted to return to school the following semester.  In short, he seemed to feel pity for me, and might've added, oh, a point or two to my final grade.

Anyway...The point of this is that I should not, under any circumstances, be mistaken for an economist.  And, no, I didn't play one on TV. (How does one play an economist on TV?)  So, take anything that resembles economic or business forecasting on this blog with a large bottle of frame prep solution.

As you all know, El Cheeto Grande is proposing tariffs on Chinese imports.  They are in retaliation for similar fees China imposed on imports from the US--which, in turn, were a reaction to earlier tariffs Trumpf slapped on Chinese goods.

The difference between the first and second round of Trump Tariff Punch is that the later round includes a greater number of products than the first, from which consumer goods were mainly absent and, instead, included farm products and basic materials such as steel.

Although details of the second round haven't been made public, some folks who know more than I know say that simply because the second round encompasses about twice as much of what the US imports from China (by monetary value), it's likely to include consumer goods.

As to which consumer goods might be affected:  No one has said outright that bicycles will be in the crosshairs, but it's hard to imagine that they won't be.  The tariffs might even include "bike-related imports", as more than one article put it.  

So, even if you don't buy a Chinese-made bike, there's a good chance that some of the accessories or parts you hang on it will have that tax levied on it.  For example, of my six bikes, four are British (Mercian), one American (Trek) and the other Japanese (Fuji).  I don't have any Chinese parts on them, and about the only accessories from China I use are the rack, lights and handlebar wrap on the Fuji. So, if I were to buy those things today, I wouldn't be affected much, if at all.  

But in spite of my efforts to buy from companies based and operating in countries where workers are paid decently and are guaranteed some basic human rights and protections, I find that I am not "innocent", if you will.  Turns out, my Giro helmets are made in the land of Leninist Capitalism.  So are my riding glasses, gloves and a few other things I use while riding.

What gets taxed, of course, will depend on how the categories of taxed goods are defined.  If there's a group called "bicycle-related goods", or something similar, watch out!  On the other hand, the law might specify certain categories of bicycles defined by price point or wheel size, as is done in places where there is a sales tax on new bicycle sales.  Naturally, none of us would like that tax, but at least you have a clearer idea of what will and won't be taxed.

Now, if this tariff were in the works during my youth, I would have scoffed:  "Well, I don't buy such crap bikes."  These days, though, it's hard to avoid buying Chinese unless you are shopping near the top of the price scale.  Some of those bikes and parts with familiar names you've long known may no longer be made in Europe or Japan or the USA--or even Taiwan.  They may be produced in Chinese factories.

My prediciton:  Some bikes and "bike-related products" will be affected.   But I think they will be a result of falling into larger categories of imports that are affected:  Somehow I don't think that the folks who are charged with turning El Huffy's Twitter storms into international trade law are thinking about bicycles in particular.