Tuesday, October 07, 2008

Bike industry economics

It seems like I've been linking a lot lately to Chris Matthews's blog. He's been in the bike biz for a while and works for Specialized in Morgan Hill, California. In this post, Chris writes about the credit crunch and how it might impact the bike business.

  • Banks are not lending to each other, let alone to individuals or businesses.
  • Bike shops purchase their inventory on credit provided by the bike companies. The bike shops pay the bill in the spring.
  • Many bike shops have to borrow cash so they can operate through the slow winter season. If banks aren't lending, bike shops can't pay the rent and might close up shop. Maybe the inventory is sent back to the bike company, or maybe it's all sold in a fire sale. Either way, the bike company loses revenue.

Gigantic names in the financial industry have disappeared over the past few weeks because foreclosures went up from half a percent to one percent since 2007. What minuscule percentage of local bike shops need to go belly up before the big bike brands themselves become insolvent?

More at Chris Writes. And in case anybody hasn't noticed, European banks are failing too.

@cetera ­

Another type of economic stimulus: Bicycling bandit steals and tries to use ATM card.

Back to Streetsblog: They used one of my photos in a post about bikes on Amtrak.


Arleigh said...

This would be the rare moment that folks that are Trek/Specialized/Giant dealers or better yet concept stores... are laughing.

They get better terms. They don't owe on that product for 30 days to 6 months. Buy now, and pay when the season is up and bills can be done.

Yokota Fritz said...

Chris is writing from the perspective of the supplier, not the retailer. His employer provides the credit, and if the dealers don't pay the bills he'll be in the same position as all of those banks that are failing around the world.

bikesgonewild said...

...fingers crossed, that everyone in the business can cooperate & stay solvent...

...in cycling, we've entered the era of "mega brands", if you will, but let's hope those "big" names can't use this crunch to manipulate the smaller shops into compromise...

...hate to lose the individuality that so many small shops offer due to the trickle down effect of american economics' poor business model...

Ron said...


Thanks for the link to Chris's blog. Similar writing on mine today, care to share your thoughts?