This will be an interesting season

It's no secret that there's a huge shortfall in supply right now. Tried buying an 11 speed chain lately? Or a tire? Various bike industry articles talk about how to secure online sales when there's no inventory available, and about tremendous sales growth for Shimano and MIPS (a helmet component). It was the best of times, it was the worst of times.

76% growth for Shimano sounds exciting, but managing that kind of growth in a mature company with 100% physical product is a Herculean job. We're not talking about app downloads here. Most companies in Shimano's situation (capital intensive, mature, with an established supply chain) would have a hard time managing 10% of that growth. The infrastructure required of making what Shimano makes wants to work beyond 90% of capacity day in and day out. A large part of the gap between 90 and 100% capacity has to do with switchovers (going from making one product to another) and maintenance downtime. You don't make it to Shimano's level of company performance with an extra 15% capacity in your pocket. Your suppliers don't either. I don't know much of anything about mining and smelting, but I imagine that none of the industries upstream in Shimano's supply chain (metals, bearings, plastics, carbon fiber) have an extra 15% capacity. Global shipping sure doesn't seem to have an extra 1% of capacity right now let alone 15% or 76%. 

I use Shimano as my example here but the same goes for any company. And this is why you get situations where Cervelo has a new bike model that's ready for the market except they can't get parts to build and ship them. I've heard that new orders for saddles, without which you have trouble shipping a bike to a dealer, have a 70 week lead time. One of our suppliers says he's ordering and paying for stuff that he won't see until 2022.

There is the problem of double counting demand, where you as a cyclist go into a shop and say "have you got this chain, I'd like to get one?" They don't so you go to the shop a few blocks over and ask the same. And so on with all of the shops in your area, none of which have the chain. So now 6 shops (I assume you live in DC or Boston for this) perceive a demand for chains. Multiply this by all the cyclists in your area needing chains (which sounds like it's going to be all of them soon), and you over count demand by the average number of shops that a cyclist goes to to try and find the chain to buy. But there's still no chains, and demand for more than can be supplied, double counting or no.

There's lots of chatter in the industry about the "inevitable" looming oversupply hangover on the other side of this. I generally agree that there will be oversupply, and managing decline is even worse than managing steep growth. How many brands make it to that point is a good question. Without product moving from one side of the counter to the other and going out the door, there's no cash flow. Without cash flow, there's no business. So my crystal ball is understandably reluctant to give a clear answer on that. 

With the QuickShip™ builds (which we just had to take a bunch of builds out of since I wrote this as component availability decreases by the minute) and encouraging a more curated product selection particularly in hubs, we're still putting stuff into the FedEx truck daily at pretty exciting rates. We'll ride that horse until it breaks. The long and short of this is that I'd encourage people to be prepared to prioritize "having something to use" over "having exactly precisely what I want" for the foreseeable future. We as cyclists can get pretty picky indeed, and that's not going to be an easy itch to scratch. I don't love having mismatched and weird tire combos on my bikes right now, but you know what I do like? Tires. I like having tires. 


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  • Hoogle Da Boogle on

    “Tried buying an 11 speed chain lately?”

    ? Jenson USA, 24 bux. Also, just bought some new Conti GP 5000s off some small site called “Amazon”. Some of the stuff is out there…ya just might have to pay through the nose. Nonetheless, it’s been a good time to have “too many bikes” and a big ol’ “spare parts bin”. Anyway, I hope your season is both “interesting” and prosperous— I’m still enjoying the heck outta my 5 year old November “Nimbus Ti” wheels.

  • kcl on

    I’m feeling pretty fortunate right now that I purchased a bunch of tires, tubes and other components I knew I’d eventually need during a couple of bike store closing sales a year or two ago. I also tend to gravitate to significant on-line sales – when I could buy 2 tires for the price of 1 on PBK I would occasionally jump on the deal especially if it involved Vittoria (although I wish I’d purchased more latex tubes).

    When I bought the stuff it was pre-pandemic so it was all about saving dollars. I was able to provide my riding buddy with a couple of items he was in need of so paying it forward a bit.

    Given the current supply issues I will definitely do some strategic purchasing as things move back to normal as protection against this happening in the future (and given what I’ve been reading/hearing lately it is only a matter of time).

  • Dave on

    Patrick – Yeah. That supply/demand equation doesn’t give up easily. I can’t say that I’m super comfortable with just marking stuff up willy nilly, but when you’ve got limited stock and no ability to resupply your hand gets forced a bit. Over this winter and spring we’ve had some rims that people either wanted to buy just for rims or to have as unusual BYO stuff. Our dollar (not percent, which I don’t even know what it is on a rim sale) margin on a rim sale is pretty thin indeed. If there’s velocity there, and we can have replacements on the shelf in 4 days plus have made some money, great. I’m not looking at margins too closely in a liquid market with velocity. But when we can take $30 on a pair of rims that now leaves us without the ability to sell a full set of wheels? Nope. So in a few instances people offered to cover our opportunity cost for selling them rims and not wheels and we took it.

    That’s a bit of a different example to chains, but it’s not completely outside of it. The cost of getting parts inventory now is just beyond. You have to stalk every distribution outlet like a mad person to try and get stuff. What used to be an almost sort of enjoyable thing to do, order inventory, while I’m having coffee in the morning has turned into this really frustrating and challenging blood sport. So from that perspective, I can’t begrudge anyone wanting to get paid for going through that because it sucks.

  • Patrick Carlin on

    I just discovered what you’re talking about with chains. Not only are they hard to find but the one’s that are available cost twice as much as they did a year ago!

  • Dave on

    Mike – It worked out well, we got lucky on that one. That’s NOT been the norm lately.

    Catherine – I feel for you. Not being able to ship a bike because no seat post clamp (or any of the other parts that could hamstring the whole thing) and having a bunch of WIP is maddening. I’ve got a set of wheels built, waiting for an axle end cap and it’s driving me loco, and that’s tiny in comparison to what you’re open to.

    The funny thing is that we haven’t yet seen a move toward de-prioritization of choice. I had a conversation yesterday where I explained the position we’re in and my friend said “well you always offer them the option of the quickest available substitute, right” and of course we do. The customer response to that offer is one of three things: “thanks, I’ll take that,” “no thanks, I’ll wait for what I was originally after,” or “maybe now’s not the time to get wheels.” “Thanks I’ll take that” is a distant third among them. Far be it from me to pass judgement on this, but it’s notable and surprising.

    The immediate thing that this tells me is that all these purchases are discretionary – to make something that works work better, or look better, or be lighter, etc. When your chain breaks and you can’t get another, that’s not discretionary except if use of the bike n question is itself discretionary (which, really, is the case most of the time, although it doesn’t feel like it). So non-discretionary is likely to erode the preference stiction first/immediately. Whether discretionary ever erodes the preference stiction will make an interesting thing to watch. “Interesting” being an “interesting” way to describe watching our business and livelihood evolve, but hey we like to keep some cool-headed detachment around here.



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