Inventory problems plague the bicycle sector: “The biggest crisis ever in the bicycle industry”

analysis The bicycle industry is still recovering from the turbulent Covid times, but now it faces the next problem. While shortages were unprecedented, there are now surpluses worth dying for. It does not seem that this problem will disappear at the present time, but may even worsen further. Cycling He explains.

In the spring of 2020, COVID-19 hit in full force. Lockdowns, curfews and other measures that limit social contact are the order of the day. In the Netherlands and Belgium, we are lucky because we are still allowed to move freely abroad. The popularity of cycling has suddenly risen to unprecedented levels: cycling is more attractive than ever.

This is a huge opportunity for the bicycle industry, but it is also a problem. When coronavirus disease 2019 (COVID-19) broke out in Europe, it had already been a problem in (Southeast) Asia for some time. There, the response to the virus was so severe that many factories closed for a longer period of time. The result is production backlogs, while demand in the West increases dramatically.

This increased demand coupled with a production backlog is disrupting the supply chain. Many brands do everything they can to source and offer as many products as possible. Producers are increasing their production chain and investing in additional machinery. At a lower level, bike makers also place a lot of orders. Everyone in the bicycle industry is seizing every opportunity to source products and respond to growing demand.

Many cycling brands have increased production in every way possible – Photo: WielerFlits/Ties Wijntjes

This focus on the short term is not accompanied by consideration of the months and years that will follow the Corona pandemic. Because the concerns that COVID-19 is causing for society as a whole appear (thankfully) limited. Little by little, society shuts down again and we return to the “old normal.”

This realization dawned too late in the bicycle industry (which has never been known for its ability to think ahead), so manufacturers and sellers continue to produce and buy voraciously, while demand stabilizes in the years following the Corona pandemic. The market is saturated and demand is declining to a level equal to what it was before the Corona pandemic. Indeed, this decline continues, partly due to the sharp rise in energy costs and inflation in recent years.

The bicycle industry is declining from a massive deficit to a massive surplus. Production (capacity) has increased but demand has fallen again. Storage at your local bike repair shop is often full and major brand warehouses are filled with products.

The latter in particular is a big problem. At the Taipei Bike Show, we learned that several million tires from the mid-range and high-end segments of leading bike brands around the world are accumulating dust in one way or another. Together, these elements represent a value estimated at several billion euros.

Export figures from the Taiwan Bicycle Association and the Foreign Trade Bureau also show there is a problem. Since Taiwan has several component manufacturers from which major consumer brands purchase products, its sales figures can be seen as a harbinger for the industry as a whole. Taiwan's bicycle industry exports fell by as much as 21.29% from January to August last year. From this we can safely conclude that the bicycle industry is going through a difficult time.

Unpredictable
This is the current situation. But where is this crisis headed? This seems to be a question that no one has an answer to. Cycling He asked several insiders in and around the Taipei Bike Show, which showed that their expectations varied greatly.

The stock issue was a much discussed topic at the Taipei Bike Show – Photo: WielerFlits/Ties Wijntjes

This is also because the issues vary greatly between brands. Some bike brands have endless surpluses, while this is often much lower for smaller parts manufacturers.

For example, there are those who claim that the Dutch market problem can be partly solved within a few weeks, provided that the weather is good for a few weekends in a row and people can find a local bicycle repair shop en masse. This may at least stabilize stocks somewhat locally, but this will not be enough for the entire market.

Yong Liu, one of the CEOs of Giant Group, was also rather positive in a conversation with NieuwsFiets. “We expect inventory levels to decline during the second or third quarter of this year, mainly due to increased demand.”

Photo: Cor Foss

However, the view that this is a problem that will continue to develop and even grow currently has widespread support. In fact, during the Taipei Bike Show, some spoke of the bicycle industry's “biggest crisis… ever.”

Because there are already some companies that are in dire straits. For example, NOS previously reported concerns about troubled Heerenveen-based Accell, whose portfolio includes the KOGA and Lapierre brands. Just under a month ago, a reorganization in which between 100 and 150 jobs were eliminated was already causing unrest. Behind the scenes, major discounts are being made at leading cycling brands.

But despite all the problems, there is one factor that offers a form of hope: the quietly improving economy. After three quarters of contraction, the Dutch economy grew slightly again in the last quarter of 2023, CBS reported. Additionally, the Federal Reserve stated in its latest estimates that the economy is expected to grow 1.1% again this calendar year. Purchasing power also rose again after a year of decline of 2.7%. A glimmer of hope, but perhaps not enough to eliminate massive inventory surpluses.

Is the consumer the third party laughing?
How this inventory problem will develop remains a matter of speculation, but for now one player remains largely out of the picture: the consumer. Prices have not risen more in recent months and years than in other sectors. On the contrary: e-bikes, for example, were sold at deep discounts, as Financieel Dagblad reported last year.

Will high-rise bike inventories shrink again soon? – Photo: WielerFlits/Ties Wijntjes

However, some brands are very cautious about this as it may cause a ripple effect. For example: If bike brands reduce their sales prices, they also make it more difficult for their dealer network, who will have to follow these price cuts in order to compete.

Only one outcome affects consumers: failure to deliver the product. Many brands are postponing the launch of new models to get rid of existing inventory and also to give bike makers the opportunity to do so. On the other hand, the consumer does not notice it immediately, because what he does not know does no harm. In other words: You won't miss a product demo you didn't know was coming.

It may not be a stranglehold, but it looks like the stock issue will have a grip on the bike industry for some time to come. This poses many challenges for the industry. Although no one knows for sure what will happen next with this stock issue.