Cycling Industry Will Bounce Back in Q2/Q3 of 2009

During the summer of 2008, the bicycle industry was booming. High gas prices and nice weather across the U.S. inspired enthusiasts, fitness riders, and wannabe bicycle commuters to drive less and ride more. In July, QBP reported a surge in sales of 27 inch tires and tubes, a size once popular among bikes that today spend most of their time gathering dust in the garage or basement. People dusted them off, tuned them up, and began commuting by bike. Bike manufacturers adjusted by offering new models designed to get people around town.

As the economic situation worsened last fall, gas prices eased and consumers began snapping their wallets shut. Still, the word on the show floor at Interbike in late September was that the major bicycle manufacturers were scrambling to lock up the materials they needed to fulfill a large volume of 2009 pre-season backorders. Lance Armstrong had just announced that he would race again in 2009, and Lance is very, very good for business. The energy at the show was remarkable; it's rare to see bike shop owners in such a good mood.

Later last fall and early this winter, the general American retail situation has blackened. Holiday sales were down 2.2%, which doesn't sound like much until you consider that holiday sales usually grow and that they make up 25-40% of a retailer's sales for the year. Still, the bicycle industry is quite aware that it has an off season from November through March. Meanwhile, gas prices have fallen below $2 a gallon.

So it was interesting to read in the January 2009 issue of Bicycle Retailer and Industry News that the bike industry is not, in fact, recession proof. Matt Wiebe's article "Wishful Thinking: Bike Sales Up in Recessions" cites industry data gathered by the Gluskin-Townley Group: "Every recession since the ’70s bike boom has cut into industry sales, in some cases substantially—bike sales dropped from 14.1 million units in 1974 to 7.3 million in 1975."

A quick scan of keywords "bike", "industry", and "economy" on bicycleretailer.com shows a conflicted story. One story as far back as June shows that 150 bike shops closed between 2006 and 2007, leaving 4,451. This decline continued a trend: "Between January 2001 and January 2008, the number of specialty bike retailers fell from 6,259 to 4,394, which equals an average attrition of 266 storefronts per year." Gluskin-Townley speculates that 3,800 shops will survive into 2010. Anecdotally, I've been told by industry old-timers that the shop count is falling as the bike industry consolidates. To improve their margins, shops are aligning with frame manufacturers, selling only Trek or Specialized. Consolidation is common in business these days, as it pays to be big. So a decline in the number of shops doesn't necessarily reflect poor sales, just part of a larger business trend.

Yet I'm optimistic that cycling will rebound in mid-2009, at least as an activity. Though gas prices are expected to remain low for 2009, many commuters will stick with it for environmental and budget reasons. People more recently effected by the recession may try to reduce their monthly expenses by selling off cars and dusting off old bikes. Neither of these effects will inspire bike sales, though shops and book publishers may see an uptick for bike maintenence.

The reason cycling will recovery in 2009 is that the race scene will be so compelling. Take a look at the Tour of California, taking place now. Take a look at the roster: all the big names are back, either out of retirement or off doping suspensions. The list of racers who could win the Tour de France is longer and more varied than in years:

• Lance Armstrong (out of retirement)
  
• Levi Leipheimer
• Ivan Basso (off doping suspension)
  
• Floyd Landis (off doping suspension)
  
• Alberto Contador
• Christian Vande Velde
• Tom Danielson
• Oscar Friere
• Cyril Dessel
• Carlos Sastre
• Tyler Hamilton
• Alejandro Valverde (not racing ToCA)
  

The list of racers who could win stages is much longer, with these highlights: Boonen, Zabriskie, Horner, Popovych, the Schleck bros., Cancellara, Voigt, J.J. Haedo, O'Grady, Hincapie, Cavendish, Kirchen, Rogers, Kloden, Farrar, Hushovd, Pena, Sevilla, Rodriguez, Mancebo.

This year's Tour is going to be 100% nuts. Excitement is already building as the Tour of California begins to reveal team dynamics and each rider's motivation and fitness. Fans will perk up as the weather warms and they get back on the bike. Those who still have jobs will tire of not spending and, caught up in pre-Tour mania and anticipation of Lance in France, they will return to their cycle of spending habits.