The Bavarian state government has decided Bike shops are systemically relevant. They are therefore at least allowed to open their workshops during the coronavirus crisis in order to maintain the mobility of society. So far, so good. There's just one catch: customers are staying away. German city centres are currently in the doldrums. The really systemically relevant bike repairs are limited to a minimum, at least at most bike shops. Nobody can make a living from it. Rudi Eberl from Radsport 2000 in Kelheim reveals: "I normally make around 10 to 20 per cent of my turnover with the workshop. The rest comes from the sale of bikes and accessories." And that, just like the workshop, is currently lying idle. The crisis offer of many stationary retailers to deliver bikes to customers' homes free of charge or to send accessories to regular customers is not being taken up. Many bike shops are now facing the same challenge as bars, restaurants or clothing boutiques. With zero turnover and ongoing costs (rent, wages, insurance...), there is a risk of insolvency after a short time. Is there now a widespread death of retailers?
The industry is booming, but not for everyone
In general, the two-wheeler retail sector is on a sound footing. According to Two-Wheeler Industry Association (ZIV) sales of bicycles increased by 3.1 per cent in 2019. The industry is benefiting from the population's increased environmental awareness. Leasing models for bikes and the E-bike boom in recent years have created a gold-rush atmosphere in many a shop. Those who have capitalised on the trends in the market have recently been able to earn a lot of money with a stationary bike shop. However, direct mail order companies and online shops have benefited even more than retailers from the increased demand. Over 60 per cent of BIKE readers buy their accessories online. Around 30 per cent even decide to order a complete bike online. That's according to our annual reader survey. The reasons why more and more bikers are making their purchases online are clear: the relevant online giants such as Bike-Components, Bike-Discount or Fahrrad.de are undercutting each other, especially when it comes to accessories, with prices at which a retailer with a shop can barely earn a euro. Direct mail order companies such as Canyon or Radon also stand out in BIKE tests with a price/performance ratio that hardly any specialist retail brand can match.
Bike shops are annoyed
This is causing frustration in bike shops. During the coronavirus crisis, the gap between bricks-and-mortar retailers and online retailers continues to widen. Dirk Oswald, owner of the Funsport bike shop in Martinsried near Munich, expresses his opinion on this clearly and publicly on Facebook:
"...the internet retailers are currently doing the business of the century. They are currently buying up all the wholesalers, as everyone is lying on the couch with a tablet and ordering from the online giants. Nobody will have to worry about Canyon, Radon, Bike-Components and Fahrrad.de in the next few weeks."
Small bike shops, on the other hand, are. The longer the workshops remain in emergency mode and the sale of bikes in shops remains prohibited, the more threatening the financial situation becomes. Dirk Oswald is also specific about this in a comment on Facebook:
"As a Scott dealer (...), I only have to pay for the bikes delivered. But if nobody has bought them from me by October, then I won't be able to pay the 70,000 euro bill and I'll be broke."
Rudi Eberl's Radsport 2000 in Kelheim is also full of new bikes. He also says: "The goods here are partly paid for. As a small retailer, I can't sit out this crisis for long. Even emergency government aid of 5,000 euros won't solve the problem." Even if, like Dirk Oswald, you don't have to pay the supplier for your bikes until October, unpleasant pressure is building up in the market. If too many goods have to be sold in too short a time towards the end of the year, there is only one logical consequence: discounts, discounts, discounts... That's great for the end consumer, but probably also the coup de grace for retailers who were previously in difficulties due to the coronavirus crisis.
A radical change is imminent
Crises are always threatening first and foremost. The coronavirus crisis is killing people and temporarily paralysing the economy. Above all, the death of people is worth nothing and must be avoided as much as possible. But crises always accelerate development. They make it clear which business model works and what is really important for a society. Business models that already had a limping leg before the crisis are now being put to the test - earlier than the limping leg would have made it necessary. It is conceivable, even foreseeable according to Dirk Oswald's descriptions, that individual retailers are facing a difficult time, perhaps even bankruptcy. This cannot be glossed over. It's always tragic when livelihoods are jeopardised. But an industry that sold 4.13 million bikes (ZIV) in Germany last year (2019) will not die. The fear of many small retailers that their own livelihoods will be caught up in the crisis and that online giants or discount chains will take over the market can also be calmed.
Complex products need local service points
A product as technical and maintenance-intensive as a mountain bike is impossible to sell on a large scale without a comprehensive dealer network. The right setup for the suspension, the correct adjustment of the gears or the bleeding of brakes is so complex that the vast majority of cyclists would rather have it done by a specialist dealer than deal with the matter in depth themselves. Of course, the exceptions prove the rule. There are many "heavy users" in the BIKE readership in particular who have fun with it, to work on the bike yourself. Broken down to the community of all cyclists, however, this is the minority. Online retailers may be unbeatable in terms of price due to volume advantages when purchasing. But only bricks-and-mortar retailers can offer fast service, personalised advice, free beer when visiting the workshop or a commitment to cycling in the region. You have to be honest: In many cases, the small local retailer cultivates the cycling breeding ground in which the big online mail order companies scatter their seeds and reap the harvest. If bike shops hadn't established the culture of off-road cycling over decades, direct mail order companies such as Canyon would sell significantly fewer mountain bikes. And if there is a chance in this crisis, it is that the big specialist retail companies such as Cube, Scott, Specialized, Trek, Ghost or Giant understand how important their specialist retail network is.
GloCALisation could occur
Wouldn't it be conceivable that the big players in bike retail listed above, whose products have similar economies of scale in terms of income as large online stores, could take pressure off the shoulders of small dealers? Wouldn't now be the time for companies like Cube to relieve their dealers of the risky task of stocking high-priced products? Why does a dealer have to order his goods six months in advance, constantly paying in advance, only to find himself in situations like the current one? Why does a bike company have to produce its bikes in Asia with an extremely long lead time? Futurologist Matthias Horx says that in the course of this corona crisis, there will be a GloCALisation, i.e. a localisation of the global.
"Global just-in-time production, with huge branched value chains in which millions of individual parts are carted across the planet, has outlived its usefulness. It is currently being dismantled and reconfigured. Intermediate storage, depots and reserves are growing again everywhere in production and service facilities. Local production is booming, networks are being localised and craftsmanship is experiencing a renaissance."
This is how Matthias Horx describes the future in his Website www.zukunftsinstitut.de .
And what does GloKALisation mean for the cycling world?
In principle, the first step towards Horx's bold theory has already been taken. The business model of producing frames and individual parts in Asia and shipping them to Germany by sea for months seems to be a thing of the past. It is not only Giant, one of the largest bicycle manufacturers in the world, that is planning to open a factory in Hungary in the near future. Other companies have also dared to take the step of bringing production back to Europe. Ghost has fully automated production of aluminium frames for its first hardtail models in Portugal. Series production of carbon frames is due to start soon in Belgium. The manufacturing industry is already returning to Europe piece by piece. Supply chains are becoming shorter, making lavish pre-orders superfluous. The risk of not being able to sell goods that have been ordered is drastically reduced the closer the order date is to the sales date. Production close to the site makes exactly that possible, namely targeted orders.
Short supply chains are the key to success in the future
It's not that far yet. But the coronavirus crisis could set the first stone rolling for the following future scenario: Thanks to short, effective supply chains, a bike will only really be manufactured once the end consumer has ordered it after receiving first-class advice from a local bike shop or online. The risky warehousing for bike shops and manufacturers becomes superfluous. This would eliminate the risk of bikers being sold a bike just because it is currently in stock. If retailers had to take on less risk when selling products because there is simply no more risk, this would have a further effect. Product manufacturers could offer every customer the same price for individual parts. At the moment, the big online shops get better prices because they take the risk of being stuck with the goods from the manufacturer on a large scale. If this risk no longer exists, it will make no difference whether a large online shop orders 1000 wheels or a small bike shop orders 13. The price remains the same. The gap between retail and mail order could close. The margin that a dealer earns per bike for his advice would, of course, become smaller. The price-performance advantage of direct mail order companies would thus become superfluous. Industrial structures would become leaner. And what Horx describes as Renaissance of craftsmanship would perhaps mean for the bicycle industry that the huge assembly lines, which are currently at a standstill at Cube, for examplebecome superfluous. This is because the money that retailers lose through a reduced margin on the sale of bikes could be earned back by assembling the complete bikes they sell themselves. The big brands would save themselves the immense investment in assembly lines. The retail trade will become more service-orientated in the long term. Isn't it precisely the service that bike shops offer that has made them officially systemically relevant in a crisis like this? Direct mail order companies without a dealer network could set up franchise systems to provide the service that these technical products need so much. This closes the circle.
The industry will help small retailers
Anyone who has the skills to repair a bike and offer their customers first-class service will survive this crisis. Even if the situation for bike shops like Rudi Eberl's or Dirk Oswald's is not rosy at the moment. The industry has an interest in maintaining its dealer network - and thus its proximity to the customer. It will support retailers in this difficult phase. Products for the 2021 model year will probably be delivered later than usual. Many bike models will simply be carried over from model year 2020 into model year 2021 without any changes. The industry calls such models "runners through". This could minimise the pressure to quickly push goods onto the market with discounts. And in an emergency, a number of manufacturers have indicated to BIKE that they will postpone pending invoices for delivered goods to a later date. Most shops are being shaken up in this crisis, but very few will go out of business. After all, nobody has an interest in drastically reducing the number of bike shops in the country.
