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<b>USA 2007:</b> NBDA: Stagnant Bike Sales

Sales & Trends

USA bicycle, bike sales

<b>USA 2007:</b> NBDA: Stagnant Bike Sales

COSTA MESA, US – Last year 18.2 million bicycles were sold in the US; the same number as in 2006. Moreover, the US bike sector was not able to change its most fundamental problem: the number of Americans riding bikes is falling. But is this trend about to be reversed with petrol prices going through the roof and a federal government that has budgeted significant funds for construction of bicycle-specific facilities such as bike paths?

USA: Bicycles Sold (in millions) 

2007
18.2
2006
18.2
2005
19.8
2004
18.3
2003
18.5

Source: National Bicycle Dealer Association (NBDA)

Will Americans abandon their precious cars and revert to bikes? Of course that will not happen – the infrastructure of most of the cities in this vast country is simply not suited for that – yet. But indications are there that something is shifting. Maybe the most pronounced signal was evident at the Interbike Show in September 2007. There I was amazed by the interest of dealers in city and trekking bikes. Instead of eying the latest features of mountain bikes or BMX I saw US bike dealers being enthralled by Dutch-style commuter bikes.

Sales by category

Looking at 2007 bike sales by category, it seems there is shift from sports-oriented mountain bikes, BMX and road racers towards more ‘mobility’ orientated categories. The ‘comfort’ segment increased its market share in 2007 by one percent to 15% of all bicycle sales. Hybrid/cross bikes (called trekking in Europe) also show an increase which is even higher than the comfort category: hybrid/cross grew 1.5% in sales to 16.5%.
However, the growth of the comfort category “may also be somewhat misleading,” says the US National Bicycle Dealer Association (NBDA) in its report on 2007 sales. The NBDA notes: “The ‘comfort bike’ category could actually be considered a modification of the mountain bike, and is comparable in many ways to low-end mountain bikes. ‘Comfort’ bicycles look a lot like mountain bikes, but feature soft saddles, more upright seating position and easier gearing than the traditional mountain bike.” 

According to estimates from the NBDA (representing bicycle stores, not mass merchants), mountain bikes represented 28% of all bike sales in the US. This success story, the focus of much of the specialty industry in recent years, is fading: the market share of these bikes stood at 33% in 2004.

But, as the NBDA states: “Mountain bikes continue to be the largest single bicycle category for specialty bicycle stores.” Sales of 700C road racers also declined last year. A 2% drop was noted from 17% to 15%, but it’s still much more that the 10.8% share this category ‘scored’ in 2004. But with the Lance Armstrong trend fading, the popularity of road racing in the US is also decreasing. The same goes for biking among youngsters. The category ‘Youth’ bikes had a share of 24% of all sales in 2004; only three years later this is down to 16.5%.

Specialty Bicycle Sales By Year, Units, 2004-2007 (in %)

Category
2004 Unit
2005 Unit
2006 Unit
2007 Unit
Mountain
32.9
28.8
28.5
28.0
Comfort
15.5
14.2
14.0
15.0
Hybrid/Cross
12.5
13.9
15.0
16.5
Cruiser
3.9
5.5
6.0
6.5
Road/700C
10.8
16.4
17.0
15.0
Youth
24.0
18.8
16.5
16.5
Other
0.2
2.4
3.0
2.5

Source: National Bicycle Dealer Association (NBDA)

Worries

Eying these figures it is not hard to imagine that some captains of industry in the US bike sector are getting worried about the future of their business. In particular, the fact that less and less Americans are riding bikes is a critical development. The NBDA report on 2007 bike sales says this: “43.1 million Americans age seven and older were estimated to have ridden a bicycle six times or more in 2005, according to the National Sporting Goods Association. This was up slightly from 2004, when 40.3 million rode a bicycle six times or more.

The peak participation year was 1992, with 54.6 million participants. It should be noted that the age limit on this number eliminates millions of young people who ride bicycles with wheel sizes 19" and under. Cycling is the seventh most popular recreational activity in the US, behind exercise walking, swimming, camping, fishing, exercising with equipment and bowling.”

However, there’s one notable fact not mentioned here: according to a survey of the National Sporting Goods Association bike use dropped by 17.4% in 2006! That survey indicated that in 2006, 35.6 million Americans over 7 years old rode a bike at least six times last year, down from 43.1 million in 2005.

These trends have prompted Shimano USA to take action. The component maker developed the ‘Coasting’ bike; a simple to operate 3-speed model totally different from the full suspension, 30 plus geared, carbon bikes widely on offer at bike shops. Shimano wanted to know why fewer Americans are riding bikes; the outcome of their survey indicated that contemporary models are too intimidating, both technically and price-wise, for the average American. Information on last year’s sales performance of Coasting bikes is not available, apart the results of a marketing campaign in 15 cities in the spring of 2007. Trek, Raleigh and Giant sold out the roughly 30,000 Coasting bikes produced.

Next to Coasting there’s another category not mentioned in NBDA’s 2007 sales overview: electric bikes. Not a word is mentioned on what is considered to a product that could lead a worldwide trend comparable to mountain bikes in the last century. According to leading industry analyst Frank Jamerson, 100,000 electric bicycles and two million electric mini-scooters were sold in the US in 2006. The market for electric bikes is set to double to 200,000 units by 2010.

Value

Only 17% of bikes sold in the US in 2007 were distributed through independent bicycle dealers (IBDs). In units this totals 3,094,000. However, the NBDA notes: “In terms of value, IBDs accounted for 49% of the dollars, a dominant dollar share. Dealer price points generally start at around US$ 200, with the average at approximately US$ 453, though prices can range into the thousands.

While the number of specialty bicycle stores has declined in recent years to about 4,400 in 2007 due to consolidation, they are responsible for approximately the same amount of business through these fewer (but larger) stores, and this is the only distribution channel that maintained or increased average retail bicycle selling price in recent years. The recent trend has been for mass merchant gains in unit sales market share, but stability in dollar market share due to declining prices in the mass segment.

Approximately 73% of bicycle units were sold through the mass merchant channel (department, discount and toy stores) in 2007. With an average selling price of only $77 this represented 36% of the dollars.”
The NBDA further notes that sporting goods chain stores sold approximately 7% of  bicycles in 2007, and accounted for 9% of the dollars, at an average price of US$ 202. These are merchants that fall somewhere between mass merchant and bicycle dealers on the spectrum, and include merchants such as The Sports Authority, Champs Sports, JumboSports, Sportmart and Big 5.

The ‘other’ category sold 3% of the units, representing 6% of the dollars, with an average price of US$ 314. Specialty bike dealers commanded the vast majority of parts and accessories sales, and virtually 100% of the service market. They dominate the market in bicycles selling for $250 and up.

The NBDA estimates the total value of the sale of bikes and bike products in the US at US$ 6 billion in 2007, based on the retail value of the products and including all distribution channels. This is up slightly on the 5.8 billion estimated for 2006.

Imports

Almost all bicycles sold in the US are imported from Asia. 99.56% of the 18.2 million came from China, Taiwan and Hong Kong. The vast majority of the 15 million units sold through the mass merchant channel came from China and were imported and distributed by companies like WalMart, Pacific Cycle (Schwinn, Mongoose, Roadmaster), Dynacraft (Magna), Huffy Corp. (Royce Union), Rand and Kent.

The NBDA report further states: “Companies specializing in bicycles for the independent bicycle dealer channel include the so-called "Big Three" of Trek/Fisher, Giant, and Specialized. Other top players include Schwinn/GT (Pacific Cycle), Raleigh America, and Cannondale, in order by estimated unit market share. There is little brand crossover between these channels for most of the brands cited, though the Schwinn brand is now seen in both mass merchants and specialty stores with different models. Otherwise, it is uncommon to find brands from one channel being sold in stores from the other in any great numbers.”

Outlook

When I visited the Interbike Show in 2005 I heard a taxi driver complaining about petrol prices rising to over one dollar for a gallon. The current price stands at about four dollars. At the same time the US economy is burdened by a credit crisis that is hurting average Americans. Will this encourage more cycling?

To bring that about a mindset change has to take place. Americans (and the same applies for many Europeans) have to become more conscious of the mobility potential of bikes. Maybe with IBDs in the US turning more to commuter, city and trekking bikes, hopeful indications are on the horizon. Making America more bicycle-friendly is one of the industry’s key initiatives. And with a federal government spending money on bike paths as well as Washington DC starting a public bike rental program last May, maybe something is really shifting in the US bike market.

The Professional Dealer

In the last five years the number of US bike dealers dropped 17% to 4,451 in 2007. According to recent research from the NBDA (2005), the average specialty bicycle retailer has gross sales of US$ 550,000 per year, 91% of them had one location, and average store size was 4,000 square feet.

According to the NBDA’s Cost of Doing Business study (2005), the average bicycle dealer’s revenue is 48.8% bicycles, 34.8% parts and accessories, 9.5% bicycle repair, 1.3% bicycle rental, and 5.7% "other" (includes fitness equipment). The average store sells approximately 650 bicycles per year, carries five bicycle brands, and numerous accessories brands.

Recent trends are toward consolidation with retailers carrying somewhat fewer bicycle brands, sometimes at the urging of their suppliers. Gross margins on bicycles average about 38%, though the break-even point has been shown to be 43.3% for the average store (the average "cost of doing business"). Margins on hard goods are generally higher than those for bicycles (49.5% gross margin).

 

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