Some months ago, (and perhaps still now) one of the buzzwords bringing good fortune in the bicycle industry was 'high gas prices'. While the automobile industry was faring badly, the bicycle business was booming. Most prayed for lower gas prices, but the diametrically opposite people in the bicycle business secretly wished that it kept increasing. That seems like a cunning way of thinking, but in the end, business is business.
Now a bigger calamity might put all that to rest. Of course, you all know what I'm talking about! Just open the front pages of your newspaper.
But there could be a fair share of you who are still clueless about the breadth and depth of this huge financial mess. For the uninitiated in financial knowledge, just read this funny Subprime Primer put in simple stick figure terms.
Getting back, in the midst of such an issue of global proportions, I find it awful that very few in online bicycling circles (that includes publications, websites and blogs) are talking about the more pressing current state of affairs. Let's put Interbike 2008, Lance Armstrong and Britney Spears aside for a moment here.
The cold fact is that like all businesses, the cycling trade also depends upon such a thing as credit. And when credit stops flowing from markets, to banks, to businesses and to consumers, almost everything begins slowly heading downhill.
Now I'm not involved in the bicycling trade in any major way. Strictly speaking, I'm an outsider and that's the way I like to stay for now. But I did manage to chalk out a schematic of how money and goods and services flow in the bicycle business.
If you find anything out of place or not making sense, please feel free to correct me.
I'm not going to go into immense detail on every aspect shown in the graphic above. But just check out the overwhelming role that credit plays, not just in business but also in our personal lives.
Since the credit markets are at great distress, I see a lot of weaker brand names and small businesses having the possibility of being affected.
And the other funny thing is .... oil prices are falling as well, not rising.
I understand there'll be a good percentage of readers here closely associated with the bicycling industry. Here are some questions from me to you and to all in general to ponder over, discuss and intelligently comment on.
I think most of the questions, if not all, will be put forth from the perspective of those at the lower end of the supply chain. Bear with me on the train of thoughts.
How do you foresee the impact on the bicycling industry because of the global financial turmoil?
1. Will brick and mortar bike shops make enough money to sustain themselves? Will we see a lot of bikes selling for cheap just to get rid of excess inventory? And with lesser access to credit in order to get new line of bikes in, are we going to see some unusually empty bike shop floors early next year together with dwindling shoppers?
2. Will big brand names cut on the variety of lines of bicycles they offer to the public?
3. And what about the average consumer who won't be able to get a loan or credit with the same ease as in the past? With his buying power decreasing, what will the demand for bicycles be in the coming months? Don't you think the consumer mindset will be to hold onto money in these tough financial times? Shouldn't bicycle design itself change and strive to keep costs down instead of pushing for the high end bike sales.
4. And how on earth could we solve this? What can and should change in the way retail business is conducted today? Should the industry target more newcomers to cycling, as opposed to the ones who already have 400 bikes in the garage? Should bike shops focus more on service as opposed to emphasizing the selling of goods to make the margins? Should they charge higher prices on those services? And how will that decision affect the customer as a result.
5. Finally, as far as smaller brand names are concerned, how will they fare? Are consolidations of smaller bicycle companies by the bigger ones be the answer to saving them from possible collapse? The issue is in keeping the industry going, and maintaining people's jobs in these tough times.
Update : Oct 30,2008
Bruce Hildenbrand over at Active talks about Teamwork in the bicycle industry.
Thanks also to Bike Hugger for this video called Economy, Bike Industry. It looks like people are going to bring out more bikes from the garage to the shop for tuneups as the economy slumps.