TAIPEI, Taiwan (BRAIN) — Crazy. It’s the right thing to do. It’s a calculation.
These are the first industry experts who spoke to BRAIN at Taipei Cycle on Wednesday local time about Trek Bicycles’ decision to “rightsize” the company by 10% due to declining sales and bloated inventory. It was all about emotion (all but one off the record). .
“I might do the exact opposite of what I’m about to say, but I think it’s the right thing to do, and if I were in charge, I’d be doing it on a much larger scale,” he said. Steve Fenton, owner of Prolite Manufacturing. “My opinion is that[big brands]all need to do that.”
In addition to the spending cuts, Trek President John Burke told company executives in an internal memo that SKUs through the 2026 model year will be 40% lower than the 2024 model year, BRAIN reported Tuesday. thing.
“It’s crazy,” said one supplier who attended the show. “Of course, we hear from many customers that the situation in the industry as a whole is not good, but this is a serious surprise. I haven’t. It’s crazy.”
The supplier said it heard its customers loud and clear. “The inventory channel is still full. That means it’s still full. We still have customers with too much inventory.”
Burke’s comments about the global bicycle market being in “disarray” with high wholesale and retail inventory levels resonated with Fenton.
“I agree, because this industry is run by hobbyists, not businessmen. There are too many monkeys in this industry and not enough organ crushers,” Fenton said. “I think I’m speaking from experience, and you always have to face reality. You guys created this situation and we’re going to have a tough job fixing it.” Arrogance is one of the biggest killers in business.”
High wholesale and retail inventory levels have resulted in “significant and persistent” discounts, which another supplier said was painful.
“I think this is a continuation of the reckoning. It’s probably going to have some negative impact on the retail industry and the workforce. But I don’t necessarily think Trek is alone,” he said, requesting anonymity. said the supplier. “I think you’ll see that most brands have taken some measures and are trying to sort things out and pick up the pieces in the wake of the coronavirus. Many people are finding themselves putting themselves at undue risk. I think they realize they’re exposed, so they’re trying to overcorrect.” To avoid that happening again, build a more conservative portfolio.
“There are many different forms of disruption happening. And it’s truly unprecedented. This is something I haven’t seen in 30 years.”
Another supplier described the current state of the industry as “like it’s been wiped out and some people who maybe weren’t financially stable to begin with have been hit hard and now all of a sudden they have no idea how to improve their business. “I don’t know. I think so.” Having stores owned by Trek and Specialized, Giant and Pong has a huge impact on us as a small brand, and while we are looking to open in many locations, our direct business is bigger than ever. I must say that it has. ”
Another supplier said the tough situation will continue as discounts are not working.Quoted by Mr. Burke “Significant and sustained” discounting across the industry contributed to the decision.
“2-for-1 in Kona? 40% off Specialized? That’s wild. Everybody has to have a conservative attitude. We’re thinking of their world at Trek. We want our competitors to struggle. I don’t want to see you do that.”
Companies that can diversify their portfolios are best positioned to survive, two suppliers said.
“In our case, we have a diverse portfolio, such as the categories we sell, which are generally consumable, and we have a variety of sales channels, such as direct-to-consumer, direct-to-retail, and distributors, so we have a wide range of If we were just a tire brand selling to distributors, it would be different. So it’s beneficial for us to go back to economic principles of portfolio diversification. did.”
Prolite, which started as a wheel maker, now makes frames, indoor smart bikes, precision tools (including levels for Greenlee) and even pool cleaners for a Spanish company, Fenton said. . He says he was woken up by the coronavirus. .
“We’re doing very well in this business because we don’t just make bike products. Now, as long as we’re making bike products, we’re making money and we’re having fun,” Fenton said. he said.
“Specialized, Trek, Giant, all these companies have to stop kidding. Are we going to pick this up and go back to what we were before? That’s not going to happen. They did it. “Because there are so many low-end bikes flooding the market, it’s going to take generations for them to catch on. So, personally, I think it’s going to take a lot of generations to catch on because there are so many low-end bikes flooding the market. We believe that in 2019, this industry will look completely different. And we know what we’re good at. What we’re not good at is large orders. or acquiring a ton of merchandise. That’s never going to work for us.”