Introduction
The old saying goes that history "repeats itself", especially for the ignorant or the unwary. I don't believe history "exactly" repeats itself, but mistakes forgotten are indeed often mistakes repeated. The bicycle industry is no exception.
The COVID Boom
The COVID pandemic changed many things, including the landscape for bicycle use and sales. As the pandemic took hold and governments worldwide ordered lock-downs ranging from "optional" to downright draconian, the demand for bicycles surged. Bicycles provided an excellent outdoor activity that could be done solo, or at the very least, at a healthy distance from other people. At first it seemed as though there might be a renaissance at hand for bicycling among people who might otherwise not be apt to try it. In some places bicycling, running, and walking were just about the only kind of leisure activity people could do under some of the more draconian lock-down orders.
Demand for bicycles boomed. Retailers and wholesalers ramped up orders and factories struggled to keep pace. Orders from retailers and wholesalers were filled on a delayed basis, with bikes arriving months after expected delivery dates. The bike industry struggled to keep up with the changes, all while selling more bikes in a few months than typically sold over the course of years.
But as the pandemic faded in the face of improving treatments and vaccinations for COVID, the demand for bicycles waned. Wholesalers and retailers became stuck with warehouses of bicycles they could not sell. Suppliers and factories received fewer and fewer orders. At the same time, demand for electric bicycles cut into the demand for conventional bikes, exacerbating an already difficult situation for retailers.
Today, even five years after the height of the pandemic, retailers and suppliers continue to struggle with inventory. COVID era over-ordering, delayed deliveries, and a drop-off in demand have left retailers flush with bicycles, but with fewer buyers. Electric bicycles also continue to make headway, sometimes replacing conventional bicycles for consumers.
For those who had been in the bike industry a long time, or those with some knowledge of its history, this all may have seemed familiar...
The End of the 1970s Bike Boom
In the USA between 1970 and 1975, a brief but noticeable "bike boom" occurred. Prior to 1965, adult bicycling in the USA was a very small hobby. Sheldon Brown recalls on his website that, at least around 1960, it was unusual enough to find another adult bicyclists that it was normal to stop on the street and talk to the person. Yet by the mid-1970s, Time Magazine described how bicycling had gone through the largest increase in the invention's 150+ year history. What came in between was the "bike boom".
In 1970, the vast majority of bicycles sold in the USA were still children's bikes. Out of the estimated 7.0 million bikes sold, 5.5 million were kids' bikes. The remaining 1.5 million was a mixture of adult balloon tire cruisers, specialty track bikes, adult road bikes, and other bikes. Only about 200,000 adult derailleur and internal gear hub bikes were sold in 1970.
Yet by 1972 - only two years later - total bike sales had doubled to 14 million. Of that total, adult lightweight bicycles sales had increased 40-times over - an extraordinary increase - to 8 million such bikes. Time remarked that for the first time since the 1890s, adult bicycles accounted for almost one-half of all production.
Bicycle demand began to wane in 1973, but then an oil crisis gripped the USA, somewhat bolstering the failing demand by encouraging adult bicycle use for hobby, and in the cities for transportation. The bicycle industry continued to ramp up production during the course of 1973 and into 1974.
Yet by 1975, the boom had turned into a bust. Demand for bicycles dropped, leaving retailers flush with inventory and forcing the cancellation of orders. Factories, which had ramped up production from 1972 through 1974, found themselves with bicycles they could not sell to wholesalers, stores, and dealers.
A 1975 Schwinn report nicely captures the atmosphere in which this bust took place. Each year, Schwinn dealers would meet to discuss business. The 1975 dealers' meeting must have included a great deal of discussion about market changes (the "bust") because the annual report from that meeting delves deeply into the state of the market.
Executive Ray Burch's introduction to the 1975 Annual Report describes a situation in flux. The economy had gone from inflation to recession over the course of 1974. In the second half of 1974, Schwinn had cut production back, but unsold inventory continued to pile up. In Burch's estimate, the bike boom had ended. He pegged the dates of the "boom" as being from 1971 through mid-1974. Burch raised the possibility that manufacturers had over-produced bicycles, at least in 1974.
Schwinn's studies showed that in 1970, about 17% of bicycle sales were aimed at people age 15 years and older. This jumped to 34% in 1971, increased to 50% in 1972, plateaued at 52% in 1973, down to 51% in 1974, and down further to 46% in 1975.
Dealers must have complained about inventory stacking up in 1974, because the 1975 report discusses the piling up of inventory and what to do next. Schwinn also studied the impact of the oil crisis and growth of households owning more than one automobile. Schwinn attempted to measure the number of bicycles actually in use in the USA (not just bought and sitting in a garage), but found that number difficult to determine. Schwinn tried to rely on U.S. News & World Reports for that statistic, but still had difficulty getting any kind of precise reading on bicycle use.
Schwinn's reports show it operated at somewhat reduced production in the second half of 1974 and into 1975. Ray Burch's report also notes that regular production levels would not be resumed until dealers had reduced inventories to a more sustainable level. Schwinn's reports also contain a measure of internal debate whether market "saturation" had taken place, or whether demand might rebound in 1975 and 1976. Gloomier estimates also questioned whether the newly-found adult bike market might not actually be permanent.
Schwinn also studied inventory on the floor of Schwinn dealers nationwide as of January 1, 1975. Although this did not capture all shops, it at least gave Schwinn a snapshot of what was sitting on the floor of retailers selling Schwinn products. Around 387,500 bicycles were sitting inventoried across just over 1,600 dealerships on January 1, 1975. By the standards of the time, this was a massive number. Schwinn somewhat tried to sugarcoat this by claiming that it was "normal" to have about 300,000 Schwinn bicycles sitting unsold. Still, even by Schwinn's generous allowance, there was a substantial amount of overstock.
Other brands with substantial sitting inventory were Raleigh, Peugeot, Nishiki, and Ross. Considering that Schwinn dealerships were encouraged not to sell other brands, this did not give a complete picture of the number of "other" brands sitting unsold. The largest American makers of bicycles at the time included Murray, Huffman ("Huffy"), AMF, Schwinn, Columbia/Westfield, and Chain Bike. All were suffering in the bust. Schwinn's closing remarks from the meeting admitted that a "reappraisal" of the US market was required.
Eventually production and demand would gradually balance out over the course of the late 1970s and early 1980s. But much damage had been done. Large numbers of 10-speed style road bikes (and 3-speed internal gear hub bikes) had been produced. Yet many remained unsold or months or even years after the end of the boom. Unfortunately, these bikes were ill-positioned to take advantage of the growing interest in BMX and mountain bikes that occurred in the late 1970s and into the 1980s.
A Lesson Missed?
What, if anything, can be taken away from all this? First, the bicycle industry has continued to be subject to "whiplash" supply and demand. When a boom hits, or a pandemic drive up demand, the industry engages in one-step-behind production, which then meets a cliff when the boom goes bust. This happened in both the 1970s boom and in the COVID boom. Demand for bicycles seems to be very "elastic", as an economist would say - that is, highly sensitive to price changes and even outside forces.
Second, the current market environment is even more chaotic than its 1970s-era ancestor. At least in the 1970s, there was a degree of centralization in bicycle producers that gave them the ability to study and respond at all levels to market changes. These companies may have been somewhat slow-moving dinosaurs, but at least they had the ability to control supply at the level of raw materials and component consumption. In contrast, most bicycle producers today only produce a frame, which limits their ability to respond to market changes because they have so many more supply and component orders than their 1970s counterparts.
Third, retailers still face the sharp-edge of the market. Bicycle retailers, particularly those with physical shops, have to deal with overhead and expenses in the face of small margins and wildly changing demand. Plenty of retailers went under in the 1970s bust, and so too did plenty of them in the post-COVID bust. Unfortunately, the small businessperson always seems to shoulder the lion's share of the risk. Dealers today are just as apt to try to "read the tea leaves" of boom and bust as they were at the 1975 Schwinn annual meeting.
Fourth, there may be a more predatory aspect to today's bicycle market. The 1975 Schwinn meeting shows that Schwinn did care about the success of its dealer network and at least made some effort to make them successful. Certainly a shop had to earn and perform, but Schwinn at least was trying to give information and tools to its dealers to cushion the bust. Today, bicycle wholesalers and suppliers seem to deal with retailers more at arm's length. If a bike shop is successful, then great. But if the shop goes under, time to just move on to the next one that will buy. Some even go so far as to compete with retailers by offering internet direct-to-consumer sales.
In the end, I don't think much has been learned from these bike "busts". Perhaps for awhile the post-COVID bust will stick in the minds of retailers and producers, but 10, 20, or 30 years from now, we'll probably still be talking about bicycle market whiplash, and the occasional cycles of boom and bust.
