Waistlines, Supply Lines and Stock Market Declines … Marc’s 2022 Predictions

Santa Fe, New Mexico

It’s January of a new year and most global citizens earnestly hope for some sort of resolution to the COVID pandemic and the personal paradox of how to live with it.

Resolutions have been made as many cope with COVID-15—that’s the 15-pounds-plus (6.8kg) most Americans have cinched onto their already copious waistlines. (US adult obesity rate is 42%! Yikes!!)

Most of those resolutions will soon be discarded. It’s just what humans do.

And, of course, those of us who tinker with keyboards are compelled to offer some sort of prognostications as to what a new year could bring.  So let me begin, in no particular order…

Cargo Bikes

I’m giving a shout-out to cargo bikes, particularly those attached to a motor.

This segment of the market is under-reported and studiously ignored by mainstream suppliers. Ditto for dealers. But keep an eye on such delivery giants as FedEx, UPS, DHL and the many small-time delivery services that have erupted during the COVID pandemic.

Mainstream delivery companies are embracing them, particularly in dense city centres where traffic congestion, despite COVID, is a pox upon mankind.

Western Europe, of course, is leading the world in transforming last-mile delivery of goods. The European Union’s enlightened (more or less) approach to cycling in general, targeted subsidies and attempts to get delivery vans out of city centres is bearing fruit.

e-Cargo bikes are also a boon for some consumers – those who sell one car and buy a cargo bike to take kids to school, to shop for groceries, or just to haul stuff for friends.

As a side benefit, these bikes help clear up some bad air in city centres making them more walkable and enjoyable.

Let’s be clear – these aren’t commuter bikes with racks. Take a look at Urban Arrow, Tern’s model, Riese & Müller , Yuba, Xtracycle and others; serious bikes for serious cargo.

Investors take note; sexy category this is not, but it’s a category that’s growing. It offers a long-term upside and some of these companies are ripe for acquisition.

Stationary Bikes

Anyone who plunked money into Peloton Interactive last year is tallying losses today.

On 11th January 2021, Peloton was trading on the NASDQ (PTON) at US$152.76 (A$211.68) per share. One year later, on 7th January 2022, it was trading at US$35.58 (A$49.38) – a 77% hit. Ooops!

PTON’s stock price, a media darling during the pandemic surge of 2020, peaked and then began a steady decline throughout 2021. So beware of media darlings.

Not to pat myself on the back (but if I don’t, who will?), but I argued in a column for Bicycle Retailer & Industry News that for those who like to invest, “get in early and get out fast”. Even now, I’m unsure whether PTON is worth buying. In somewhat colourful language, I argued that I’d rather shoot myself in both upper thighs than spend time sweating inside, attached to a screen listening to some trainer scream at me.

The Peloton boomlet did inspire any number of competitors to up the ante on stationary bikes, especially those connected to the internet. And dealers stocked whatever they could get hold of to put bikes in living rooms. That boom has passed and eBay is littered with stationary bikes looking for suckers who think they have the discipline to knock off that COVID-15 pedalling a stationary bike.

Yes, there are the dedicated aficionados who sweat bullets on these things. But let’s be honest, that market has long since been tapped. Adding significant numbers of Peloton-like enthusiasts comes at an increasingly higher cost per individual.

More Disruption

After chatting with a few industry insiders and perhaps, more importantly, paying close attention to the financial pages, shipping indexes, and international politics, it’s fair to say supply chain disruption, raw material costs, global inflation, consolidation, trade tariffs, a few bankruptcies and geopolitical tensions (China-Taiwan, Russia-Ukraine to name two) will keep the industry on its toes in 2022.

For suppliers, getting the right components at the right time to finish a run of frames will remain a challenge. Getting those finished frames on a boat, to a port and then to dealers should keep anxiety levels high.

But it shouldn’t be as bad as 2021 (fingers crossed). Still, material costs, especially for batteries, are rising and that will have an impact on the e-bike market.

While the industry has engaged in some creative spec’ing, much to the delight of companies like Tektro, FSA, MicroShift and others, price increases at the consumer level are up anywhere from 7 to 15%. And more price hikes are in store.

Suppliers, in general, booked handsome profits in 2021, saving large sums on advertising, marketing, and on trade and consumer events.

What are they doing with some of those profits? Buying up dealers who are either upside down financially or finding dealers with multiple outlets in key markets eager to sell.

Buying and protecting market share – that’s what Trek and Specialized seem to be doing – is a risky business. Pon and Giant also are playing in this field. But consumers are fickle!

It appears, however, to be more akin to buying distribution and repair points as a more sophisticated model of selling consumer-direct versus clunky click-and-collect programs.

More importantly, this model cuts out dealers as middlemen, saving on dealer margins, improving inventory and business management, and no longer having to hand-hold grumpy retailers. 

E-bikes and More

The e-bike boom is real.

Online sales at the lower end are skyrocketing (think Rad Power) and keeping a viable level of e-mountain bikes in stock on dealer floors, particularly in the Western US, is a challenge.

While all suppliers of note have commuter bikes for sale, e-MTBs is what the US industry and dealers are pushing.

Moving a $2,700 commuter bike – whether it’s a Trek, Specialized, Giant, Cannondale or … – remains an upsell.

Consumers can buy e-MTBs and have it all in one package. Okay, a clunky package if commuting … but still.

However, fast-rising prices for these bikes is a concern. Like stationary bikes, there will come a point where this market flattens rapidly.

The hope among the majors is that youngsters riding cheaper e-bikes sold online will upgrade to more expensive rides as adults. Frankly, that’s not a bet I would eagerly take. Again, consumers are fickle.

Another possible issue is the cost of batteries and the potential liability issues surrounding them. When companies suggest charging e-bikes outside and under a consumer’s watchful eye … well, that does raise some eyebrows.

But it’s Western Europe that’s embraced e-bikes for commuting, and why not? The commuting culture exists and e-bikes just make it easy, particularly considering Europe’s sometimes sweltering summer humidity.

In the US, despite ample breast beating by PeopleForBikes and other like-minded groups and a derailed subsidy program, commuting remains a niche in a culture more interested in pick-up trucks powered by batteries.

So keep an eye on geopolitics, worldwide trends, and perhaps consider what a Black Swan event could do to the market and your business.

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