Sunday, November 12, 2023

Microshops and Major Chains: Economies of Scale in the Bike Industry

 If anyone really gave a crap, that could be the title of a doctoral thesis or seminal study of the current state of bike retail economics. However, just as bicycles themselves are everywhere you look and yet often never seen until after the moment of impact, so does the sprawling global bicycle economy never outshine the public's concern with the global petroleum economy. I'm in the business, and even I can't be bothered to dig up statistics, if there are any, to support my observations.

Occasionally I will do a web search to see what bike shops are operating in a 50- to 100-mile radius, more or less. Who is still open? Who is new on the scene? From one search to the next, which of the new startups kept going? For most of the current century, I noticed small, very focused shops starting up in small towns that weren't always on major through roads. Some had luxurious looking websites while others were distinctly more quirky. At the same time, the consolidation trend among the major players had been driving big shops into more concentrated population areas. Most of the big shops are bike-only, but some multi-sport shops have managed to retain their accounts with Specialized or Trek, at least for now. With those two, you're only as good as your last quarterly sales figures. If you can keep up your representation while still selling downhill skis and hockey equipment, great.

Support from suppliers turned into demands for fealty way back in the 1990s. It wasn't complete and abrupt, so some of us managed to drag out the divorce, but seeing the end of the relationship as it played out in 2021, the path becomes clear. In the current climate, some small manufacturers have considerable prestige in their categories, but boutique builders are usually not for the poor and middle class. The major chain brands offer a full spectrum from the staggeringly expensive down to the pricey-but-approachable and cheesily equipped low end bikes. The microshop end of the retail spectrum may not be cheap, either, although their low overhead can allow for some very competitive prices if the sole proprietor can get by without hiring expensive help.

All help is expensive. As soon as a small shop needs a staff of more than one, overhead ratchets up. Each employee adds at least their payroll costs. On top of that, they cost money to train, and every staff member represents another chance that someone will make an expensive mistake, too. These days, with so many generations of parts and so much need for systems to be perfectly coordinated, it's really easy to order something that doesn't match, if you're in a hurry and trying to juggle too many responsibilities at once.

Because I wasn't a bike nerd from early in life, and I'm not much of one now, I learn new history every day from bike nerd social media. Often it's historical tidbits about small bike brands from back in the last century. Some were very small, artisan outfits. Others were small factory operations. From the late 19th Century into the early 20th, bikes played a solid role in European colonialism. Motorized vehicles weren't ubiquitous, so the force-multiplying capability of the bicycle made it a legitimate and respected tool. Bikes held a big role in citizen transportation in Europe and the UK through the end of the Second World War. Throughout the period, with the primary material being steel, production of bikes was highly scalable from a local builder up through big factory operations like Raleigh. Even in the US, before the explosion of affordable automobiles, bikes played utilitarian roles in areas where the distances covered and loads carried fit their small size and low horsepower.

Bikes illustrate the problem common to all human powered vehicles: the vehicles change shape depending on their intended use. You wouldn't take your $14,000 S-Works Tarmac to the downhill mountain bike course any more than you would show up at the nearest criterium on your $9,000 Trek Rail. And I just noticed: Mountain biking is still cheap fun! Only $9,000 as opposed to $14,000. That's a whopping five grand in your pocket to spend on beer or put toward a tricked-out van to drive to trail systems around the country. Those examples are less than a sliver of the variety of shapes and sizes of machine that can be called a bicycle. They do represent the challenge facing a shop because their support needs are quite different. You will spend a lot more money over the brief, tumultuous lifespan of your mountain bike than you will on the road bike in the same amount of time. Whoever does your maintenance and repairs has to be ready for you. Trash a rim so that the tubeless tires no longer seat? Thrash your rear suspension pivot bearings? Blow up a shock? Snap a derailleur hanger and bend a $750 rear derailleur? Gotcha covered! Maybe.

Granted, most riders don't fall into that price range, but occasionally someone will treat themselves to a really nice bike without considering the downstream -- or downhill -- costs of ownership. Even the mid range will take a bite out of your paycheck. And it all has to work pretty near perfectly, or it doesn't work at all. What you'll limp out of the woods on is one thing. What you'll put up with day after day in your chosen form of active leisure is something else entirely. That POS needs to shift cleanly. The dropper post needs go up and down like an elevator in a classy hotel. The rear suspension linkage can't be sloppy. All of the bike's joints need to move as smoothly as a leaping gazelle in the prime of life, before it becomes creaky lion bait. Someone has to keep that mechanism in satisfactory condition so that you can take it out in the dirt and pound on it again. Maybe that's you. Maybe that's someone else. Whoever it is needs tools, parts, and work space.

Forty-four years ago, when I got out of college and based my personal economy on using a bike for transportation, I realized that I couldn't count on a shop for repairs, because I had to leave for work before they were open and didn't get back from work until they had closed. Already steeped in a self-reliant philosophy from my early mentors, I invested in tools, and tried to keep commonly needed parts on hand. I wasn't likely to break anything unusual on my commutes, so I only needed inner tubes, maybe a tire, and cables. Racing, I might break something more unusual, but more likely it just picked up another battle scar and kept going. It wasn't until I rode in the local cyclocross series that I tore off a derailleur and learned about that little peril of trail riding.

I couldn't afford to ride mountain bikes these days. Not the way they're being ridden now, anyway. Biking was great for a working class person when the equipment was solid and simple, because the biggest expense really was the purchase of the bike itself. Learn to maintain it, and decades of fun stretched before you. When it moved off road, potential damage increased in frequency and expense, but a smooth rider might still enjoy many trail miles without having to fuss too much over maintenance or replace an expensive part. You had to work within the limitations of the simple equipment. More demanding riders pushed for better adaptive equipment to meet their needs, driving the costs up for everyone, and flushing casual participants out, or relegating them to crappy, cheap versions of the state of the art. Now your routine expenses include renewing your brake fluid and rebuilding hydraulics as necessary, replacing your tubeless tire sealant at the recommended intervals (LOL), and rebuilding your shocks at the appropriate times, on top of gear adjustments, chain lube. Fine if you're into that, but added costs that the ancestral bike never had.

All of these factors are widening that gap between the small specialist and the corporate cornucopia. In an area like ours, no longer truly rural, but still with a much smaller year-round population than summer population, survival depends on being able to exploit different revenue sources. Some of our winter customers are also summer customers, whether their primary residence is here or not, but a good percentage seems to come only for one season or the other. We couldn't survive as a bike-only shop, let alone as a narrowly focused category shop. In bike season we still have customers who need service in several bike categories, but we only have the same space and limited personnel to meet those needs when demand is at its highest. In bike stuff demand tends to go from nil to highest overnight some time in the spring, and remain near peak until late summer or early fall. I wouldn't have time to rebuild your entire suspension in peak season even if we did have the parts, tools, and dedicated work space. And in what you consider the off season, we're servicing a completely different set of customers with completely different workshop needs. So the fickle and needy bike customer looks elsewhere for quicker gratification.

In the outdoor outfitter store where I worked for a few years in the 1980s, we had some climbing hardware, an ice axe, and a few pairs of top-of-the-line full-shank leather boots. We almost never sold any of it, but customers looked for things like that as proof of our worthiness to sell them fabric-and-leather lightweight hikers, day packs, synthetic-fill sleeping bags, and cheap tents. It enhanced their shopping experience, and didn't cost us too much, because the equipment was changing fairly slowly at the time. Once in a while we would sell a pair of the heavy boots to someone who couldn't be talked out of them, even though they would have been better served to get a mid-weight, even if it was full leather, but that was very rare. Otherwise, they just stood proudly at the top of the boot display, showing that we really spoke mountaineering here.

In the bike business, browsers will judge the worthiness of a shop by what bikes and accessories are on display. Because the up front cost is much higher, and bikes are made obsolete every year by their manufacturers, we can no longer keep what we called drool bikes in stock to impress the tourists. If your drool bike is out of date, it makes you look as bad as if you didn't have it at all. I've had strangers greet me perfunctorily, cruise the lineup, and walk out with a smug smile. They don't want to engage until they've judged us by appearance. If we don't display whatever the secret token is, we're not worth their time. I'm not much of a people person, so I don't mind when someone doesn't want to talk, but as a clinical thinker, it provides me with information about the impression we create. Is it worth what we would have to pay to set a more attractive tableau for these browsers? The calculation never ceases, but so far the answer is no. We continue to hang on in the precarious gap, neither micro nor major, pulling in bare sustenance.

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