Letter from America: USA’s Numbers Are Up!

It’s a pleasure to report good news about the United States bicycle industry. Despite the COVID-19 pandemic currently sweeping through far too many states, coupled with the shambolic response of the Trump Administration, bicycle sales in the first six months of 2020 have been sharply at odds with much of the nation’s sour health and economic news.
Bicycle shops, with few exceptions, were early-on declared ‘essential businesses’. By mid-April, as weather improved, consumers weary of various stages of lockdown began flocking to shops and mass merchants in droves. And as the month of May and June rolled by sales of bicycles skyrocketed as did fast-dwindling inventory.

Here’s some numbers to consider: In the first six months of 2020, units sold shot up 30.6% year-on-year (920,012 to 1,202,123); in the same period, wholesale dollars jumped 52% from US$557,636,494 (A$780 million) to US$845,605,578 (A$1.18 billion); and in June alone, wholesale dollars grew 92.2 percent to US$192,636,916 (A$270 million). Wow!

Let’s take a look at e-bike sales, the industry’s current darling. This category is generating headlines and digital gushing galore. If you follow global press accounts and industry buzz, e-bike sales have swept consumers off their feet. It feels like the thrill of a never ending love affair. However, while this love fest is in full bloom at the moment, let’s keep some perspective.

In Europe, where commuting is ingrained in the culture, e-bikes have been a retail boon. It’s akin to the mountain bike boom, which started in the U.S., but later became a global mainstay. Today, Europe is setting the pace with e-bikes, especially at higher price points.
American retailers, on the other hand, have been much slower to floor e-bikes for a variety of reasons. Poor quality products suppliers pushed years ago; a significant commitment in retail dollars and staff sales training; repair issues, and a general lack of consumer demand among other reasons. All that’s changed and it has changed quickly.

Ebike unit sales numbers remain small, but percentage rates look great. Call it the tyranny of small numbers. In the first six months of this year, suppliers sold 86,053 units compared to 37,163 during the same period in 2019—a hefty 132% increase. But when compared to the overall number of units sold by IBDs, e-bikes comprised only 7.2% of sales. Still that’s up from 4% in 2019. Hence the rate-of-growth is—at first glance—a startling 80%.

A few things to keep in mind: The above numbers generally represent sell-in to IBDs from brand name suppliers. Missing in the current infatuation with e-bikes are unreported sales online from companies like Rad Power, Aventon, FLX and a host of names you’ve never heard of, found on Amazon. While Rad Power and Aventon stand out for their relative sophistication and quality in the U.S., there’s a significant amount of junk being sold online. And that could bode ill for the category over time.

I was once told—and the story could be apocryphal—that Huffy executives estimated their bikes, once sold, would be ridden fewer than 100 miles before being shelved in the dark recesses of a garage. The industry often argued that low-quality bikes delivered a poor consumer experience making it difficult for IBDs to sell higher quality models. (And judging by the number of relics pulled out of garages recently and hauled in for repairs, there appears to be a grain of truth to that tale!)

But e-bike junk is no joke. Think repairs. Battery replacement and recycling. And the fact most legit IBDs are loath to touch them out of fear of liability if something were to go awry. Bargain-hunting consumers will be unhappy and that unhappiness could carry over.

Besides e-bikes, there are other issues to consider as we move through the year. Foremost may be the fact that an unknown percentage of sales made early in the season have pulled later season sales forward; that could be reflected in lower second half sales. We’ll see.

Another complicating factor is the presumed resumption of Section 301 tariffs the Trump Administration had imposed on Chinese-made bikes. The 25% tariff on conventional bikes was temporarily removed in January, but it’s slated to return Aug. 7. The exemption for e-bikes expires Sept. 19 and, given the current state of U.S.-China relations, it’s unlikely the exemptions will be renewed. We’ll see.

This could make forecasting difficult as suppliers race to get as much product to the U.S. before Aug. 7 and as they fret over 2021. Once the tariff is re-imposed, suppliers must pay the tariff within two weeks of accepting delivery, a clear hit to cash-flow particularly for smaller brands.

The tariffs also have forced some manufacturers to rethink their supply chains. For example, Taiwan is building more e-bikes than ever as it moves away from China; Vietnam, Cambodia and other Southeast Asian nations are seeing an influx of companies making saddles and other components. This ongoing disruption in the supply chain comes at a cost to U.S. consumers.

And as COVID-19 continues to roil the U.S. economy, as unemployment rates remain high, and with a worrisome presidential election in November, there’s no guarantee that the second half of 2020 will be as robust as the first.

Photo: USA and China Flags.jpg
Caption: The trade war between the USA and China is causing huge disruption to bicycle industry members in both countries.

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