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

Why Interbike is in September. In Las Vegas. Pt. II

The immense crowd at ‘Cross Vegas

But Doesn’t Interbike Need Trek and Specialized (and Now Cannondale and Felt) to Survive? The Critical Mass Theory.

A lot of industry observers, including me, have despaired for the future of Interbike without some of the industry’s most powerful players on hand. (To be fair, Specialized has maintained a good-faith presence at the show for a number of years, and used that presence to their advantage this year to showcase their Globe line).

Well, those  observers, including me, were wrong. For the first time in awhile, retailer numbers at Interbike ’09 were up.

So, Short Answer: No.

There’s plenty of retailers and retailer dollars left over, even after the big companies have taken their slice of the pie, something on the order of half the total industry budget for bikes alone and far more than that for equipment; not to mention plenty of suppliers who want those dollars. As long as those numbers maintain a kind of critical financial mass, Interbike will do just fine, thank you very much. In fact, a number of distributors prefer Interbike without the Big Guns there, because it means that much more retailer attention for themselves.

The Longer Answer to this question involves a complex set of dynamics I call Bike 2.0 and discuss in more detail here. This bit may be a little, ah, statistically dense for most folks, so enter at your own risk. Basically, Bike 2.0 as of 2010 is a lot like how the bike industry would have developed over the past 30 years had the Schwinn leviathan not swum onto the sandy shores of the mountain bike era and promptly collapsed, crushed under its own bone-breaking weight like a freshly beached whale.

Meanwhile, Trek and Specialized (and Giant and Felt and Cervélo and Cannondale and other companies who go the dealer show route) have reached their own equilibrium in the one-upmanship earlier-than-thou (also known as the “get-to-the-retailers’-checkbook-first”) game. Presumably they might want to show new product even earlier than late July, but they’re prevented from doing so by three reasons:

• Shimano’s next-year prototypes aren’t available in sufficient quantities yet. And Shimano (not to mention frame factories) can’t have production protos available much sooner than late July because their own production backs up against the Asian Lunar (Chinese) New Year, a two-or-more-week rout celebrated sometime between late January and mid-February, depending. (For 2009, it started Jan 26^th; for next year, not until Valentine’s Day). The holiday leaves not just factories but entire towns deserted, rather like the nations of France and Italy in the first two weeks of August each summer.
• They can barely get retailers to show up in July by offering free airline tickets (for the high rollers, anyway) and free beer. Besides,
• I think there’s some of big bike race scheduled that month anyway. Hard to get those expensive A-List athletes to show up much before August, anyway.

And the punchline to the early dealer presentations is this: retailers aren’t stupid. After just a couple of years being trotted around the block, they know to hold off their orders until they’ve seen everything their Alpha suppliers have to offer. And then they hold off another big chunk until Interbike anyway, just in case something better shows up.

So what’s the big driver for Trek and Specialized (and now other companies besides) to spend literal millions of collective dollars schlepping bikes, retailers, and their own overworked staffs all over the country in a frenzied rush to accomplish nothing concrete, sales-wise? The answer is simple: retailer attention. By putting on their own show, the big guns can get hours and even days of buyers’ undivided attention, present their products in the very best light, and do a little beer-drinking together while they’re at it.

The late July/early August part is mostly because it’s the earliest they can possibly do so.

The Bottom Line.  Barring another Bio-style power grab (which you won’t even find references to on the Interwebs anymore), Interbike is doing just fine where (and when) it is.

Why Las Vegas? The Black Hole Theory.

Nielsen (the company that wons Interbike and a whole bunch of other shows besides) loves Las Vegas because it’s close enough for dealers from SoCal to drive in, and enticing (and cheap) enough to get less-local retailers to fly in. Plus from the show management’s point of view, it’s easy to work with: centralized services, a very effective infrastructure, and—given the fact that Nielsen hosts a half-dozen other shows there each year—god only knows what kind of illicit perks, kickbacks, comps, showgirls, drugs, leather-clad teenage boys, free show tix, in-room massuesses, and deposits into secret bank accounts in the Lesser Dutch Antilles are going on in the back room.

The Short Answer: It’s one of the few places big enough that retailers will actually go to. At least that’s what Interbike thinks. Plus there’s a huge inertial pull—sort of a reality-distorting black hole—surrounding Las Vegas that sucks all other thinking past its Event Horizon.

The Longer Answer. Interest in moving Interbike to someplace,  anyplace, other than Vegas comes up every couple of years. And Interbike does a survey.

Suppliers, for the record, uniformly hate Vegas—the heat, the dust, the unions, the prices, the sheer budget-numbing cost of moving all their people and stuff halfway across the country for five days. Retailers tend to hate it for most of the same reasons, plus it’s a crappy venue for bikes and a crappy excuse for a vacation besides.

But Interbike and the NBDA claim that a huge number of retailers prefer Las Vegas to the other locations big enough to hold the whole extravaganza under one roof (currently Denver and the new facility in Anaheim). So back to Vegas we go, year after year.

Interestingly, I’ve been trying literally for years to find out who these retailers are who demand Las Vegas as their destination of choice, just to see what kind of creature could like both bikes and that curious tumbleweed-infested patch of desert called Sin City. I’m sure they exist, these retailers, but in thirty years in this business I have yet to meet a single one.

The folks I see drinking and gambling far into the night (and sometimes when I get up early to make a 7:00 meeting, into the next morning, too) tend to be low-level employees on both the wholesale and retail sides of the business who treat a once-a-year trip to Vegas as a sort of combination paid vacation and five-day drunk. Store owners and senior distributor types have too much work going on to mess much with stuff like that. For them, Interbike is the toughest work week of the year, and one that comes after thirty or even forty days of show prep (or, in the case of retailers, summer sales frenzy) without a day off.

No wonder half the industry is sick the week after Interbike. It’s not the germs as much as it is sheer exhaustion.

The Bottom Line. Yeah, it sucks, and everyone knows it. But we’re going there again next year, and the next, and every year for the foreseeable future. And some people seem to like it. Besides, what do you think Interbike is about, anyway—selling bikes?

To learn more about Rick and his background, check out his bio here or go to his site here.

Why Interbike is In September. In Las Vegas.

Theories of Dynamic Tension, Critical Mass, And Black Holes.

In the wake of the, ah, mixed reviews that ensued from Interbike Demo East last week, now might be a good time to reconsider the whole Interbike question from an insider’s perspective…and why it makes almost no sense whatever that the biggest trade show of the year is held in the middle of September, without many of its biggest players, in the bike-unfriendliest district of what is already one of the least bike-friendly cities in North America.

Better minds than my own (which, I realize, could be just about anyone’s) have struggled with this problem, only to give up under the Sisyphean challenge of making sense of the whole messy thing. If I have succeeded where others have failed, it’s only because I realized early on the possibility—indeed the very probability— that trying to make sense of any and all questions concerning Interbike’s location in time and space are ultimately doomed, because in fact they make no sense whatever.

Like so many things in the bike business, understanding Interbike is like peeling an onion: by the time you reach the center, you discover there’s nothing there. That and the stink on your hands, of course. So here’s a series of three multilayered questions and answers designed to peel away the layers a diverse as misplaced corporate greed,  the rise (and fall) of the mountain bike, and the ever-changing dates for Chinese New Year (really!). All presented one at a time so you can discover for yourself the Great Nothingness which resides therein.

1. Why September? The Dynamic Tension Theory

The Dynamic Tension theory, for those of us old enough to remember Charles Atlas ads in the back of comic books and/or to’ve had sand kicked in our faces by bullies at the beach, involves equally strong opposing forces counterbalancing each other. Which, we might point out, accomplishing exactly nothing. In the case of bike business trade shows, those opposing forces are suppliers and retailers. But the results are the same.

The short answer is, suppliers want dealers’ orders as early as possible in order to book their own orders for factory time and materials, and then have the retailers take delivery on their product as soon as possible. This accomplishes three important things: it streamlines the manufacturing process (meaning better prices and improved reliability of delivery), locks down as many of the retailers’ open-to-buy dollars as possible, and most importantly, puts the inventory in the retailers’ warehouses instead of their own.

Retailers, understandably, want to see suppliers inventory their own darn product and deliver it to their places of business as needed. That’s—according to retailers, anyway—what suppliers are supposed to do. (Suppliers, needless to say, have their own version of this theory, mentioned above, and which they propagate by means of non-cancellable advance orders and 180-day lines of credit. Both theories have their merits and disadvantages.)

“As needed,” for a big chunk of the country anyway, means March or April. In California it can run as late as May, which is when that quirky state’s joke of a “rainy season” ends. (In Seattle, on the other hand, it rains all the damn time anyway, so people tend not to care what month it is.) And for virtually all retailers, September is still a critical part of the selling season and one of their best months for making money. And as a result, one of the worst for having trade shows. This is one reason Interbike is always held in the middle of the week—so retailers and their staff can get back to work as soon as they blow town in a haze of jet exhaust and beer fumes.

For years, bike industry trade shows were held in January (BDS) or February (the old Toy & Bike Show in midtown Manhattan), or even (in the case of the now-defunct CABDA show), as late as March. Retailers would slog through the snow and ice (or go to sunny Long Beach where the BDS show was held, literally, in a basketball rink that  always smelled funny), order up what they wanted for the coming season, and expect to have it delivered a couple months later.

They didn’t get it, of course, but that’s what they expected.

Now here’s the longer answer. The balance of power in the industry was changing. Prior to, say, 1980, you had Schwinn Bicycle Company of Chicago on the one hand—Schwinn being the equivalent of modern-day empires like Trek, Specialized, and Easton-Bell Sports, all rolled into one and ruled like a kingdom by whichever male member of the Schwinn Family Trust happened to be dictator-for-life at the moment. And on the other hand, you had, well, everyone else.

Schwinn was so powerful, in fact, that they could book their preseason orders pretty much whenever they wanted, and with the actual product largely sight unseen, and leave the scraps for the peons.

But in the 1980’s two things happened: the rise of the mountain bike, and the collapse of Schwinn family. Some historians correlate these events to a higher degree than others, but the net effect was the same either way.  Schwinn had a massive, vertically integrated, almost industrial revolution approach to supply chain management. The new breed (like Specialized and GT and, later on, Trek and Cannondale) had much less interest in being in the manufacturing end of the business. They saw—correctly as it happened—that Asian-sourced manufacturing was not just cheaper, but ultimately better than Made-In-USA  product (with the possible exception of the old Schwinn Paramount factory, which survives to this day as the artisan brand Waterford). But Asian manufacturing meant longer lead times—that ocean’s not going to cross itself, you know. And lacking the power of suppliers to compel retailer orders the way the old Schwinn had, that meant earlier trade shows.

The Bottom Line. Strategically, Interbike is all about getting retailers to the show. Everything else is window-dressing: deliver enough retailers ready to buy stuff, and suppliers will flock to Tierra del Fuego on Mother’s Day. And the current fourth-week-in-September dates represent that point of dynamic tension between the latest date suppliers can wait for retailers’ orders, and the earliest date when the retailers are willing to show up and deliver them.

Tweaking these dates get you into hot water no matter which way you jump. Move them up a week and you’re in the middle of the High Holidays for those of the Jewish persuasion. Push them back a week into October and even more suppliers will defect and decide it’s more cost-effective to put on their own shows, as any number of big (and even not-so-big) suppliers are doing.

Some folks might even say naive things like, why don’t we time our trade shows/model-year introductions to generate excitement among consumers and maximize increase sales industry wide? But as shown above, that would just be silly.

Next week: Part II

To learn more about Rick and his background, check out his bio here or go to his site here.