Why Interbike Is In September When Bike Model Years Start In July

Here’s a hint: It involves a planet with five sexes, plus Chinese New Year.

We’ve all grown used to bike brands introducing their new models during or right after the Tour. But then everyone waits around for another couple of months, until Interbike, for the industry’s big sales event. And to top it off, riders who might want to actually buy the new stuff often can’t get their hands on it for a couple months after that.

It’s like you get to open your presents on Christmas morning … but you can’t play with them until Groundhog Day. So what’s up with this craziness?

What’s up is that while you’re waiting for those cool new products, there’s a frantic—and almost entirely hidden—mating dance going on up and down the supply chain among retailers, bike brands, the Asian factories that make most of our bikes, and the component manufacturers that supply the factories. Plus you the consumer, of course, who’s the ultimate source of demand for the whole Rube Goldberg contraption.

Speaking of Rube Goldberg, now imagine a planet with five sexes. What would hookup bars look like? Well, that retina-searing image also represents a pretty good peek inside the bike industry kimono as to what’s going on each year between July and October. Here’s why:

The huge majority of bike sales represent a seasonal and highly weather-dependent business. We were blessed with a great spring last year, for instance, and by May 2012 there weren’t nearly enough bikes in the channel to meet demand.

Other years, the weather turns bad (rainy weekends are an especially effective sales-killer) or the economy goes sour, or both (as they did in 2009), and we have way too much inventory in the channel. That stuff ends up getting discounted to make room for next year’s models. Good news for bargain-hunters, maybe, but the whole business stands to lose tens of millions of dollars in retail sales as a result.

From the point of view of industry salespeople, product managers, and inventory planners, the key to a successful year is to build up a large but finite supply of bikes during September-April to meet in-season demand, while still leaving enough flexibility in the spring months to increase or cut back on production as needed.

Factor in the four-month window between placing POs and actually having bikes available at retailers, and the job becomes something like shooting fish in a barrel … only blindfolded and facing backwards on a fast-moving roller coaster while an army of winged monkeys hurl constant barrages of both insults and poo.

But back to the Rube Goldberg hookup bar. Within its five-way squeeze play, consumers have most of the power and flexibility. They can walk into their LBS during selling season and—assuming everyone else has done their jobs correctly—ride out on the shiny new-model-year bike of their choice.

After that, things get a little more complex.

Moving upstream along the sales channel, retailers need to have bikes available when customers want them. They also want to wait as long as possible each summer before placing orders for the entire next year’s worth of product, too. After all, they’ll be the ones left holding the bag if those bikes don’t sell.

But it takes months of off-season production to build up enough inventory to last through the intense spring/summer selling months. And bike brands don’t want to just fill up warehouses with product and hope bike shops decide to purchase it. They want firm, non-cancellable orders in hand before making a final production commitment with their factories. (Suppliers call this pre-season ordering practice “risk-sharing.” Retailers call it “extortion.” But it happens in all kinds of seasonal industries, not just bikes.)

Factory and component manufacturers, in turn, want to keep their production schedules filled and steady, so they need commitment from bike brands as far in advance as possible.

So what’s all this got to do with Interbike, and more to the point, why is it in mid-September? Turns out that’s the magic time when these various conflicting interests—retailers, bike brands, factories, and component suppliers—all come together. And that, in turn, happens because of Chinese New Year.

Yes, really.

For those not familiar with the Asian calendar, the Lunar New Year falls between mid-January and mid-February. This year, for instance, the year of the Dragon started fairly early, on January 23rd. Next year, the year of the Snake, doesn’t start until February 10th.

Throughout the Asian world but especially in China and Taiwan, things pretty much shut down for a month. The official holiday period may vary between a few days and a week, but millions of factory workers—and between 150 million and 200 million total humans—travel to their home villages (Chunyun) for New Year festivities. And back again afterwards.

From a bike-building point of view, the bottom line of Chunyun is that if you want your bikes to ship from the factory before the New Year’s holiday (so they’ll be at retailers’ before the season starts in late March/early April), you pretty much have to place purchase orders by the end of September.

So Interbike becomes the last-ditch chance for retailers to take a look at what’s available industry-wide before placing their “final” orders for the season (there are still opportunities to make adjustments in-season, but those are limited). Bike brands fine-tune POs to their factories based on this information.

Then a big red imaginary button gets pushed somewhere, and something close to a billion dollars worth of bike production is collectively locked and loaded. And then all the players hold their collective breaths until April or May when it becomes clear what sales for the season are actually going to look like.

Meanwhile, development of the two-years-from-now models has already begun. Industry standard is a 14-month dev cycle, so 2014 bikes were already in their initial design/engineering phases back in May of this year.

And later this week, when bike shop buyers and industry salespeople are busy sniffing spokes and talking prices, product managers and factory reps will be huddled up in conference rooms … sweating the details on bikes the rest of us won’t even get a glimpse of until after next year’s Tour.

Follow me on Twitter: @rick_vosper

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9 comments

  1. michael

    great write-up, excellent break down of the retail supply chain.

    i would just add, apparel manufacturers are on the same product cycles. and trust me when i say, that 14 month development cushion sometimes goes by so quickly that it seems like it’s just a week or two ;)

  2. rickvosper

    Right, Michael. In fact, it’s not just apparel– the production cycles for non-bike items are their own world, and different types each have their own set of sourcing dynamics. But 14 months is pretty common regardless of the product developed.


    1. Author
      rickvosper

      @Chris: Eurobike has assumed increasing importance in the last five years as the “first-look” show, simply because it’s a month earlier than Interbike. For bike biz execs and product managers it can be a real pain, because they’re in show mode more or less constantly from July through October.

      But the bottom line for USA-based bike brands is that Interbike is where their USA-based retailers are. As long as there are sales to be made, the brands will be there.

  3. Alex TC

    Very interesting all this, thanks Rick. Does the same happen on the euro market, with Eurobike and stuff? Is it all one giant, all-encompassing operation for the northern market or the whole cycle is different for different markets? I`m also curious about the southern market since season here is inverted. Must be one big and complex operation to deal with american-and-euro markets and also worldwide exportation and importation considering this seasonal cycle and all. Whew!


    1. Author
      rickvosper

      @Alex: Short answer is that Europe is a completely different animal, in my experience. A lot more inventory is held in warehouses, since bike shops are much smaller there and just don’t have the space. Also, European bikes are often shipped to retailers in “long-pack” (90% pre-assembled) containers. A number of manufacturers are now doing initial assembly in Europe too, which changes the entire timeline.

      The growing importance of the Southern Hemisphere has stirred a lot of talk internationally. Among other things, there’s hope the antipodean season will help smooth out the workload at Asian factories.


    1. Author
      rickvosper

      @armybikerider: Pretty much. The Chinese New Year celebration happens whether manufacturers attend Interbike or not. So the show still becomes the de facto deadline.

  4. Alex TC

    Thanks Rick. I´d imagined that Europe was another story indeed, considering distribution, logistics and storage differences – though seasonal factors are equal, that´s not everything. Very good to have an idea on how these things work ;-)

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