There is something both complex and profound going on at your neighborhood bike shop. Several somethings, in fact. They’re not apparent up close; not visible within a single shop or city. To see what’s happening, you have to look at the national level. And almost no one is looking there, not even longtime industry boffins.
The first something is this: bike shops are dying.
Suppose you live in a medium-sized town with three bike shops, and one goes out of business. No big deal, right? But it’s a very different picture when you realize that in the last fifteen years, more than one bike retailer in three has already shuttered the doors and walked away. And bike shops continue to die, year after year, with no relief in sight.
Well, that’s not quite right. If the present trend continues unabated,
out to about 2020, that number won’t drop anymore. Because that number will be zero. that number will drop below 3,000 in the next eight years.
Fully 38% of American bike shops have gone out of business in the last fifteen years—almost 2,500 brick-and-mortar storefronts—since the retail base peaked in 2001. Or, to put it another way, we’ve gone from a high of just over 6,250 in 2001 to 3,950 today
That’s a lot of dead bike shops.
An interesting corollary to the downward spiral of bike shops is that bike shop revenues have remained relatively flat. You’d think the same value of sales split among fewer shops would actually mean more revenue per shop, not flat revenues. Same pizza, fewer slices, right? Let’s take a look.
The chart above left represents the number of bikes sold during the last thirty years. It’s not constant, though: at far left it shows the nationwide peak in the early Seventies, then skips about ten years, from 1973 to 1982. This was not just so we could skip the disco/polyester era, but because it’s all the data I have on hand these days.
You can see some other interesting things in that chart, too, like the mountain bike boom in 1982-87, and subsequent bust in 1988, followed by a comeback with the advent of suspension forks, and later, full-suspension bikes.
2000-2008 gave us the highest level of units sold since the early ‘70s, known in the industry as the road bike boom. (Some misguided observers have gone so far as to call this “The Lance Effect,” which seems a bit of a stretch considering the guy never won a single Tour de France.) And you can see the downward spike where the 2009 recession took its toll on bikes, along with everything else except bonus checks for hedge fund managers.
But back to bike sales. Note this chart is for units (which you or I might call “bikes”), and then only the relatively high-end units sold through IBDs (Independent Bicycle Dealers). Thirty years is a pretty long time. So let’s zero in on just the last twelve of those years, 2002-2014. As you can see, it’s been pretty much up and down, with sales varying by millions of units year after year. But in aggregate, the past dozen years, much like the past thirty, turn out to be flat as a skillet sitting on a billiard table in the middle of a hockey rink deep in the heart of Kansas.
So much for units. Now let’s look at the dollars. That’s the chart above right with two lines on it.
The blue line is for industry sales (IBD only, and, in addition to bikes, this chart includes equipment, service, and so forth). Although the line moves up in 2002-2005, it levels off (on average), the net result is that sales have been relatively flat over the past ten years.
At least that’s what shows on the bottom line as retailers do their year-end books, and that’s what the industry has been telling itself all this time. But when you adjust these figures for inflation, it’s a very different picture. The orange line represents adjusted-for-inflation figures and you can see the picture for yourself.
A dollar in 2104 was worth 24 cents less than in 2002. When we compare bike industry sales in constant (2014) dollars, a truer picture begins to emerge. In 2014 money, the industry has lost an average of
700 100 million dollars per year over the last twelve years; a little over three-quarters of a percent annually and a staggering total of almost eight and a half more than a billion dollars since Mario Cipollini was world champion.
That’s a lot of lost revenue.
So why are bike shop sales flat at the shop level? Turns out it’s not a case of same pizza, fewer slices. More like fewer slices, but a much smaller pizza, too. (Yes, there are fewer bike shops, but there’s also a lot less revenue over the past twelve years.) And accounting methods that work fine at the individual shop level have hidden this macro-reality from the industry for decades.
It’s the same for suppliers. Waves of industry consolidation in the early 2000s resulted in literally dozens of bike and equipment brands going out of business or being acquired. Or both—the brand died, its assets were purchased at fire-sale prices by the new owner and then brought back to life, a process usually kept from the sensitive eyes of the cycling consumer.
But in all cases, the bookkeeping is the same. And so are the results, once you adjust for inflation: smaller market, fewer players, and the illusion of stability. Pizza for everyone. Well, everyone who survived, anyway.
Of course the ultimate driver for the cycling industry is cyclists. So let’s look there, too.
In 2000, according to the NSGA (National Sporting Goods Association), we had just over 43 million Americans riding bikes (already a 23% drop from the peak year of 1995). Over the next 14 years, 2000-2014, that number dropped by 17% from 43 million in 2000 to just 36 million last year, a net loss of 37%. Or, to put it another way, seven and a half million cyclists have stopped riding bikes since the GW Bush administration.
I should mention that the NSGA defines “cyclist” as any American 7 years of age and older who rode a bicycle 6 or more days during the year. The reason I should mention this is if you go to the People For Bikes site, they use a different definition of “cyclist,” so their numbers are different.
But wait, as we say in the marketing game, there’s more. Because, as with sales dollars, the loss of cyclists has (until recently) only been shown as static numbers. However, just as the value of money continues to shrink over time, the US population continues to grow.
When we correct for population growth, the percentage of Americans riding bikes in 1995 was more than one in five—21%. By 2000 it had dropped precipitously, to just 15%. From there to 2014, it continued to decline to 11%, or just more than one in ten. So it is absolutely correct to say that only half as many of us are riding bikes as twenty years ago. Or, to put it another way, on a per capita basis, half of American cyclists have quit riding bikes in the past 20 years.
That’s a lot of missing cyclists.
The only bright spot in all of this is the three groups whose participation has increased in the past fifteen years. The first, as you might expect, is white men aged 25-45. For us roadies, that’s the famous MAMIL designation—a term already so hackneyed it has its own Wikipedia entry—plus our colleagues on mountain bikes.
The second group is women, in more or less the same age groups. This is especially interesting and, depending on your sense of humor, even amusing.
Here’s why: in testosterone-poisoned industry rife with sexism yet frantically scrambling to come up with more women’s-specific products, it’s surprising the industry has yet to discover that 48.5% of cyclists in the 2012 NGSA report are already women. So when the industry wails about “bringing more women into the sport,” what they actually mean is “bring more women into bike shops where we can sell them stuff.”
Not that there’s anything wrong with that. The bike business, like any other business, is based on selling stuff. But they’re two very different goals. Here’s a newsflash, industry: women are already “in the sport,” and their numbers are effectively at parity with men’s. They’re just in it on their own terms, on bikes that come from someplace other than bike shops. So, you want more women going to bike shops, you might start by reformulating the problem you think you’re trying to solve.
The third group showing growth is what might be described as middle-class-and-up—household incomes of $50,000 and above. In 1993, there were twice as many working-class cyclists with HHI (household income) below $50 thousand as affluent cyclists. Aided by the effects of inflation, those lines crossed in 2000, and by 2007, the positions had more than reversed. So while cycling participation has fallen very significantly overall, it’s also become more gentrified. Average price per bike has, too. Problem is, it’s still a zero-sum game. For every affluent cyclist gained, a working class cyclist has been lost. Worse than that, in fact, because the total population of cyclists now is 37% smaller in absolute terms—50% less per capita—than it was then.
I mention this because it allows us to finally see a more complete picture of what’s happening to the retail side of the industry. Fewer bike shops selling fewer products to fewer people but at higher price points. Fewer slices in a shrinking pizza, but with (slightly) more goodies on top.
If I had to guess, the anchovies represent helmet mirrors.
Some significant amount of those goodies are also being skimmed off by online vendors and high-end sporting goods stores (REI, Scheels, and others with IBD-grade bike departments).
Since most of those businesses don’t publish their earnings, there’s really no direct way to measure their impact on the rest of the business. There are, however, some indirect ways to get a peek at what’s going on. Instead of looking at what customers are buying from other channels, we can look at what customers aren’t buying from bike shops. The technical term for this is perturbation, which is one of those words that’s not nearly as dirty as it sounds.
In the chart above, the terms “Enthusiasts,” “Moving Ups,” and so forth are categories based on how many times the customer rides per month, how much their most expensive bike costs, and how many times they visit their local bike shop. The names are pretty self-explanatory except “Moving Ups,” which refers to riders whose habits indicate they’re somewhat likely to get more involved in this whole bike-riding thing and might be easily enticed into buying their first set of high-end stuff.
As you can see, visits from all groups are down an average of 59%. Except that’s just an average of the percentages for each of the groups. If you think about it, Infrequents are the smallest group; there may be more of them, but they make the fewest visits to bike shops in the first place and, when they do come in, they spend the least money. So if they’re down 78%, it’s not such a big deal.
On the other hand, the 53% and 68% drops in the Enthusiasts and Moving Ups, respectively, are where it stings the retailer. In theory, we’re buying higher-priced stuff more frequently.. But the problem is, we only came into our local shop four times in 2014 as opposed to (almost) ten visits during 2000.
That’s a lot of lost visits.
And it’s a lot of lost sausage off the top of the retail pizza. Of which an unknown but presumably sizeable portion is going to online retailers.
A couple years ago, a “reader survey” poll by a large online mountain bike magazine which shall go nameless here indicated that more than half its readers “always” or “mostly” made their purchases online. Now, that’s not exactly a statistically valid methodology (it was one of those multiple-choice “click the button” things and obviously applied only to one magazine’s online reader base), but between this information and the shop visits data above, there is certainly a strong indication that some large serving of pizza toppings are ending up in the mouths of businesses who are not traditional bike shops.
Here’s the bottom line: the number of cyclists is plummeting. The cyclists who remain are coming into bike shops less than half as often than they did fifteen years ago and buying some seven hundred million dollars less each year. Not surprisingly, bike shops are failing at an alarming rate nationwide in consequence, and the ones that survive are struggling just to keep their noses above water.
Here it is again with some numbers plugged in. Over the past fifteen years, cyclists (actual riders, not riders per capita) are leaving the sport at a rate of 1.5% per year. Bike shop revenues are dropping eight-tenths of a percent per year in real dollars. The net result is that bike shops are closing their doors at a hair over 3% per year. And that leads us to the single most important question for those of us who like to ride bikes:
Is all this just a normal business process, no different than what’s been happening to grocery stores and hobby shops and all kind of other businesses, or is there something unique and special about what’s happening to bike shops?
That depends on how unique and special you think bike shops are.