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The Association of Cycle Traders
This is a trade facing website.
Visit the ACTís consumer site at thecyclingexperts.co.uk.

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8 Jan 2019

Bicycle Retailer & Industry News investigates the new reality of the bike market in exploring the journey taken to get to where bikes are today.

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The new reality of the US bike market

Posted on in Business News , Cycles News

Industry veteran Rick Vosper gives his insight into the US bike market, part one explores the concepts of Bike 1.0, Bike 2.0 and Bike 3.0

In his most recent article published on Bicycle Retailer & Industry News (BRAIN), Rick explores a new reality of bikes through the fresh market dynamic and the journey taken to get to where bikes are in the 21st century. Whilst he focuses on the US industry it has a number of interesting parallels this side of the pond too.

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Rent bikeRent bikeVosper defines the period between the 1950s and 1975 as the era 1.0, a post-war period of relative stability. During this time Schwinn was the single and only market leader controlling both the supply and retail landscape of bikes. Schwinn's organised, managed and marketed integrated supply chain maintained by the network of semi-independent retailers led to the formulation of the modern independent bike retail landscape.

Unfortunately, as times changed and the world evolved Schwinn's control in the market landscape declined resulting in the death of era 1.0. This launched an era of mountain bikes and perfect competition (era 2.0).

Parallel to the start of the 2.0 bike era, the world saw the life and death of the Bike Boom. During the success of Bike Boom, there was an increase in power held by independent importers and distributors as the lightweight drop-bar imports claimed a significant space in market share. This was a trend that skyrocketed and continued even after the death of the Bike Boom by the introduction of Asian bikes from Japan, later Taiwan and finally China.

The bike landscape had been set up perfectly for the mass introduction of mountain bikes in the early 1980s with the manufacturing of high-quality bikes produced by companies such as Trek and Cannodale.

The success of the mountain bikes was not solely based on the new category of product but on the generation of improved brands and a new business model focusing on manufacturing and finance. Brands such as Trek, Specialized, Giant, Cannondale, Shimano and other major bike industry player you see today came of age during the era 2.0.

The perfect competition as a concept sits at the epicentre of the era 2.0.

The perfect competition - a concept where no one brand or brands can achieve enough share to dominate and thereby control the market. Profits are low throughout the supply chain, and consequently both brands and retailers lack resources to overcome the inertia of a perfect competitive market.

A perfectly competitive market has just four requirements:

  • A large and homogeneous market
  • Information availability
  • Absence of external controls and low barriers to entry
  • Cheap and efficient transportation

It is for the perfect competition that the mountain bike and post-mountain bike eras saw rapid innovation, many of which collectively define spaces in the current bike market today.

The end of era 2.0 and the dawn of era 3.0 saw the contraction of the bike industry in 1998 with more than 1,300 storefronts failing in 2001. This number was in a continual decline, dropping steadily over the next decade to fewer than 4,000 retail locations in 2014.

At the turn of the century due to saturation, three factors led to the birth of era 3.0 as the mountain bike and suspension mountain bike markets faded in succession.

Era 3.0 is made up of three defining characteristics:

  • Finite and a declining number of dealers
  • Contraction and consolidation at the supplier side of the business
  • Rise of internet commerce
This is what Vosper defines as the new reality (era 3.0). 

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