RVMS Blog: Welcome to Bike 2.0

Note: in the following weeks I’ll be covering the Top Ten Lies We Tell Ourselves In The (USA) Bike business. Here’s Lie #10.

The Lie: Reporting bad news might hurt the industry. Ignoring bad news will make it go away. And if you think otherwise, you must hate bikes.

The Reasoning: There, um, isn’t any.

It’s like a four-year-old who suspects there are monsters in his closet waiting to devour him. But whether they’re actually behind the door or not, he knows that they can’t hurt him as long as his head is tucked firmly under the covers. Make sense? Didn’t think so.

Case(s) In Point:

1. The Great 2009 Inventory Debacle. Bike suppliers (BPSA) carried record amounts of inventory into 2009, but said that was OK. Then they stopped reporting their inventory numbers for several months and hoped no one would notice when they had the exactly fame fifth-of-a-billion-dollars worth of inventory coming out of the prime selling season that they’d gone into it with.

Now, according to retailers around the country who spoke on condition of anonymity, a number of bike brands are offering discounts of 15-25% from wholesale on leftover ’09 and even current ’10 models…but don’t want to tell anyone because it might start a panic, OK? (Glub forbid we should drop retail prices and actually move any of those units.) So savvy retailers are snapping up discounted inventory, plus dating terms…and then selling it at full or near-full SRP to consumers as demand warrants, realizing fat profits in the process.

The punchline? Because there’s no real price incentive at retail, there’s no real stimulation of sales, and the net inventory situation is therefore more or less the same as it ever was…only with the suppliers giving their profit away to retailers and then paying the retailers to warehouse it for them.

So, largely due to an unwillingness to  deal with bad news like adults—to open the closet door and see for ourselves whether there’re any monsters therein—the inventory glut is going to be with us for many, many months to come.

2. LeMond v Trek Opening Arguments. You may be unaware that there’s been some boilover in the long-simmering dispute between Greg Lemond and the Trek Bicycle Company, and that Lemond attorneys have gotten the judge to more or less agree to turn the entire trial into a referendum on Lance Armstrong’s alleged ongoing record of in-competition doping. The reasons for this are pretty interesting, and if you want to read about it, the subject was well-covered, both by the excellent British semi-trade site Bike Radar and by a thoughtful, well-researched, 3,000-word analysis in the New York Daily News.

Now as cycling fans and/or people who actually make our living in this quirky little industry, you or I might think the looming specter of an acrimonious micturition contest between the two greatest champions in the history of American cycling might be considered at least newsworthy, if not actual Pretty Big News…if not for the pure courtroom drama of the thing, then at least for its potentially devastating impact on both US and world cycling.

But you won’t read about Lemond v Trek in the USA cycling press. Websites like VeloNews, Bicycling, Cycle Sport, Road Bike Action, all the usual suspects? Not a single. Freakin’. Word. And here’s the headline the industry journal of record, BR&IN, gave the topic (with zero mention of the Armstrong tie-in):

Trek, LeMond Case: Settlement an Option

That’s like the headlines on September 12^th 1989 reading

WTC: Window Damage May Be Less Than Expected

So who’s covering the actual event? Exactly one fan blog, that’s who: Red Kite Prayer (Disclaimer: I have a comment on that article under my own name and occasionally place pieces there, usually by disagreeing with my friend Patrick Brady and saying something snotty about it).

Read the article. Now read the Comments section. Even if the “traditional” cycling press try to shove it under the carpet and declare it’s “not real news”, the cognoscenti certainly think otherwise.

(Note: I don’t have an opinion on the merits of the case; my point here is that it’s both potentially huge and being ignored by the cycling press.).

The Reality: To paraphrase the Prophet Bobke Roll, Have a warm steamin’ cup of Grow the Hell Up. There is either bad news on the horizon or there isn’t. And no one likes bad news, because it generally means that prices and therefore profits tend to go down. So suppliers like to hide bad news it from resellers, and resellers like to hide it from consumers*.

Plus, as Fred Clements, who is president of the NBDA and sits on the board of the BPSA told me in a recent interview, “There’s even a perception among both suppliers and retailers that if you’re the bearer of bad news you’re somehow trying to ‘hurt the industry’.”

But as the internet makes the world more transparent, it inexorably makes the stonewalling of unpleasant information increasingly difficult, and its consequences increasingly disastrous. So why are we still hiding the elephant in the middle of our sport/industry/livelihood room and pretending that the Bad News doesn’t exist, and even if it does, it’ll go away if we just hide under the covers long enough?

Besides, whether it’s good news or bad, professional businesspeople working in a professional industry require professional-grade, accurate, and timely information on which to make professional—which is to say, informed— business decisions. The more timely and accurate that information, the more informed and therefore sound the business decisions will tend to be. Which means that as an industry, high-quality information can help us all benefit more from good times and get hurt a lot less in the bad.

So if we want to become a more professional (and ultimately profitable) industry, maybe we should start by growing the hell up and acting like one.

*Note to Consumers: Sure, there’s a short-term consumer benefit to an industry downturn as cyclists get to pay less for stuff for awhile, but there’s already plenty of price competition in the bike market, and margins all around are already among the lowest in the consumer products world (we’ll deal with those issues in more detail in Lies #9, 8, 3, 2, and 1, promise). And in the long run, a profitable cycling business is a healthy cycling community, with a lot of the business’ profits getting reinvested in things that directly benefit cyclists, from bigtime teams and local fun events to advocacy & trailbuilding, increased R &D that results in more new cool products that consumers like, to increased breadth of sizes, colors, and specialty products that encourage women and other emerging demographics to become more involved in the sport.