Historical 2011

As it’s December; it’s time to reflect on 2011. What a year! Historic in many ways. For some of the major markets in Europe; Holland, United Kingdom, parts of Germany as well as France; 2011 turned out to be record-breaking. But in a negative sense. In particular, sales during the summer months turned out to be the worst in history. At least, that was the case in Holland where in July and August sales dropped by over 20% compared to one year earlier.

What happened then is still harming the business now and will also have its effects on the first months of 2012. Distribution channels are clogged up with unsold 2011 inventory, which is felt throughout the supply chain. And at one of the ends of that chain; in Asia it is felt maybe the hardest. Elsewhere in this issue it’s reported that bike export from Taiwan is down by 20 percent or so. The same goes for component makers that of course are also hit by a slowdown in orders because of the high inventory levels in Europe. This became abundantly clear during my visit to the Taichung Bike Week earlier this month.

But 2011 proved to be historic in another way. I can remember an interview that this trade journal published in the August 2011 edition. Its headline read: “The Annual Ordering Cycle Has To Change”. This was a quote from Georg Honkomp; CEO of the biggest retail cooperative in Europe – the ZEG. He is responsible for the sale of well over one million bicycles, through approximately 1,000 shops owned by ZEG member/dealers, who are located in some of the biggest bike markets in Europe.
2011 made clear that Georg Honkomp is not the only one who thinks that it’s really time for changes in the current ordering cycle. Forced by a range of issues from bad summer sales, high inventory levels, Basel III with banks limiting credit facilities, to dealers building up stocks, and not in the least by dealers themselves that are increasingly reluctant to order bikes 5 to 6 months in advance of the sales season, other captains of industry are adopting more or less the same view.

Next is of course the question how such changes must take place. That’s a particularly hard nut to crack. Component makers will not be willing to change their demands for forecasts 6 to 9 months in advance. As well, there’s another trend making things even more complicated. Bike sales are getting more unpredictable by the model year. Product managers have to have clairvoyant capabilities these days! Or is there another solution? Could production closer to market be that solution? Maybe 2012 will tell!