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.
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.
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