Could a Global Bicycle Purchasing Index (GBPI) have mitigated or prevented the extreme overstocks that we have seen in recent years?
“Yes, I am convinced of that. In supply chain theory we know the bullwhip effect. An extreme spike in demand is always followed by a rapid decline and it then takes a while for the market to stabilise. In the past five years, a large group of manufacturers kept ordering during the spike in the market, knowing it would be followed by a sharp decline in demand. But they didn’t act accordingly. A good PMI would certainly have helped them to cooperate within the supply chain and understand how cyclical the sector works.”
“Instead, we have seen procurement teams engaging in discussions driven by emotions. The GBPI would have prevented the panic buying that led to a crisis. The bicycle industry is not in transition as many insiders suggest; it is merely the next phase of the bullwhip. The industry has benefited from the coronavirus sales boom and will now experience several years during which business performance will be less favourable compared to the previous period. Never forget that the underlying growth drivers remain intact.”
“My advice is to be patient and try to stimulate cooperation when you are a long-term investor in this industry. Collaboration will bring more value to the supply chain and your ROI, instead of reacting to daily rumours and panic.”
In close cooperation, Eurobike, Bike Europe and the German market research institute IFH Cologne developed the Global Bicycle Purchasing Index (GBPI). The system of index used is closely related to the well-known Purchase Managers Index (PMI).
Why is the PMI considered a crucial indicator, and what valuable insights can it offer to the bicycle industry?
“Sourcing professionals and procurement teams will be the main users of such an index. This information is key for their planning, contract management and sourcing strategies. The information is also relevant for other professionals in the industry. It further gives you an insight for capacity planning and inventory management, while financial managers use the information for budgeting and risk management.”
'The bicycle industry is not in transition as many insiders suggest; it is merely the next phase of the bullwhip'”
“Outside the bicycle industry, even authorities and market analysts at financial institutions use PMIs in various sectors or countries. A PMI is, of course, not the only indicator they base decisions on, while it also depends on the authority and reliability the PMI has built over the years.”
Can you give us some background on the Purchase Managers Index (PMI)
“A Purchase Managers Index (PMI) is a good indicator for future market developments. Some of them are famous, like the S&P 500 in the US. These are closely monitored by a wide range of market analysts and trend watchers so discuss them on various platforms. The information provided is an early indicator of how sectors develop and have a wide reach. This is very important for industry insiders, but also for private equity and financial institutions. PMIs are available for many industries, countries and regions in the world.”
“A PMI is usually made up of five components. The first one is the level of orders received -- that’s including the number of orders in production. Another important indicator is the level of inventory, an indicator that is especially relevant for the bicycle industry. The number of bicycles in stock at retailers is always seen as a relevant indicator of the market. However, if you have to look further ahead, I always refer to the level of components in the pipeline or stock at the bicycle factories. That’s an important sign for future market expectations. Another important element is the level of employment, and the last one is lead times.”
Why do industry professionals and market analysts use a PMI?
“It is an important business tool for making a benchmark, above all. How does my company generally perform compared to the benchmark? Management can then use it to determine how efficient their procurement process is. Part of the index is, for example, the cost development in the sector. The purchasing components determine 70-80% of the turnover value of the bicycle. Especially if you look at the main components, such as batteries or the motor, a company can see whether its cost structure is too far off the benchmark. Perhaps that gives them opportunities to improve their margin.”
“The bicycle market is cyclical and seasonal. The industry experienced high economic growth in the past decades. First of all the rise of the e-bike market was followed by the sales boom during coronavirus. However, we also know that the bicycle industry is rather sensitive to consumer spending and the industry is in strong competition with other modes of mobility. Dealing with macroeconomic fluctuations in combination with cyclical development makes it a big challenge. Electrification and sustainability are regarded as the main growth drivers in the long term. All issues that play a role on their own.”
“A PMI gives you a tool to see how the sector moves. For CFOs, supply managers and purchasing managers it is important to know where the market is moving and where the market power lies. During the coronavirus pandemic, the market power lay with the manufacturers. Production of bicycles was no problem, as long as you required a discount from your component supplier. They could ask any price they wanted. The current overcapacity in production has made the market power shift to the retailers. A PMI helps you to indicate where exactly the market power is.”
“Bicycle brands and OEMs usually order components six months, perhaps even a year in advance. That tells you all about the market forecasts for 2026, 2027 and even 2028. So it gives you an outlook and a substantiation of which direction the market is developing. In that regard, a PMI is a mood index, not science. The introduction of innovations anticipates market expansion and that’s reflected in the volume of new orders. The index tells you where the industry is in that cycle. It gives you a much better substantiation, also for investors and other stakeholders.”
Live Premiere at Eurobike 2025
The first results of the Global Bicycle Purchasing Index (GBPI) will be officially presented at Eurobike 2025 as part of the conference program (more details):
Wednesday, June 25, 2025
12:30 – 12:50 p.m.
Hall 8.0, Yellow Stage
Join the Buyer Index initiative and help shape the future of the bike industry. Professionals working in product management, purchasing, or procurement are invited to take part in the survey here: https://ifh.survalyzer.eu/dmmotkokxe
