The bike industry is "in chaos" says boss: so what do Trek’s plans to ‘right size’ mean for the industry… and you?
US company plans to cut spending by 10% and reduce the number of product options it offers by 40% – find out why this is important for you, even if you don’t ride a Trek
by ROAD.CC TECH
UPDATED TUE, MAR 12, 2024 12:23
In the latest development in the bike industry’s stormy commercial conditions, Trek Bicycle says that it plans to “right size” by cutting spending by 10% and reducing the number of individual products it offers by
40% over the next two years. This was originally reported by Bicycle
Retailer and Industry News (link is external).
For those not fluent in corporate jargon, rightsizing is “the process of restructuring a business to meet new objections and increase efficiencies”, according to Forbes (link is external). In other words, Trek is changing
things up to save money, although it says its overall strategy remains unchanged.
How do we know this? Although Trek has yet to announce anything officially, Bicycle Retailer and Industry News has got hold of an internal memo sent by company president John Burke to executives. Yeah, crafty. He said that
these changes are a response to slow sales and high levels of inventory –
the downturn in the bike industry’s fortunes, essentially.
John Burke said Trek would reduce overall spending by 10% with cuts to programmes and positions, with decisions on this made on or before last
Friday (8th March). As mentioned, those decisions have yet to be made
public.
Trek’s stock-keeping units (SKUs) in the 2026 model year will be 40% lower than in the 2024 model year. An SKU is a separate product that a company offers. If a particular product is available in several sizes and/or
different colours, that all adds to the number of SKUs offered.
Does this mean Trek’s 2026 bike range will be 40% smaller in two years? Possibly, but bear in mind that Trek has a huuuuuuge range. As well as the
road and mountain bikes you’re probably most familiar with, it also sells loads of city bikes, electric bikes, children’s bikes, cruisers, you name
it. Trek sells a helluva lot besides bikes too – everything from
stabilisers and kickstands to T-shirts and toe-covers – so let’s not get too alarmist. We’re unlikely to see the demise of the Madone, Emonda or Domane anytime soon.
John Burke is quoted as saying, “These are turbulent times in our business”, and he went on to say that the global bike market is “in chaos”
with high stock levels at wholesale and retail levels, leading to “significant and continued” discounting.
Judging by pretty much everything that we’ve been hearing since the end of the Covid-induced bike boom, that’s a fair comment. You only have to take a look online and you’ll see huge discounts right, left, and centre as companies try to shift stock that’s cluttering up warehouses and shops to make way for the new stuff that’s on order.
In the UK, the apparent impending demise of Wiggle Chain Reaction Cycles –
at least in its current form – is only exacerbating the situation. How does anyone compete with a massive powerhouse that’s having a final clearance
sale and selling off bikes at 30-50% off?
John Burke said that retail sales were below the levels forecast by Trek
and that the company had not hit its monthly sales goals for the past 15 months. Rather than simply hoping for better days ahead or continuing to
make cuts around the edges, he said Trek had to “right-size our business to the realities of the marketplace”.
In Trek’s case, reducing the number of products it’ll be offering also chimes with the company’s drive towards sustainability. Trek outlined its intention to launch a trade-in and refurbishment scheme last year,
initially confined to the United States of America, to cut down on waste
and extend the lifespan of its bicycles, even if that means making and
selling less. That said, whether Trek’s plans to rightsize result in producing less overall or simply offering fewer options remains to be seen.
What are the implications of Trek’s decisions? We’ve spoken to several industry insiders who, off the record, say that we could be about to see
many other major companies rationalise their activities to increase
efficiency.
During the pandemic, we saw a huge shortage of bikes and equipment. It’s
only three years since we ran a story on road.cc: Britain’s bike shortage, part 1: what’s going on, when will supplies return, and how can you improve your chances of bagging the bike you want?
Wow! Back then, bike brands could sell pretty much whatever they could
produce, and they were falling over themselves to add new production lines
and even build entirely new factories. How times change.
Are we likely to see similar moves from other big companies? Yes, even
though most will probably manage to enact their right-sizing strategies
more privately, without leaks to the media.
Bicycle Retailer and Industry News quotes Steve Fenton, owner of Pro-Lite Manufacturing (link is external), as saying, “I might be going totally against the grain with what I'm going to tell you, but I think it's the
right thing to do, and actually if I was in charge, I'd be doing it on a
much bigger scale. My opinion is that all (the big brands) have to do it.”
Is right-sizing likely to affect some areas of the bike market more than others? It’s possible, yes. Most mountain bikes tend to be more complex
than most road bikes due to their suspension systems; there are more parts involved. The same goes for electric bikes. Our industry contacts say that these sectors are likely to be hit by rightsizing more than road bikes
where the options on offer can be potentially reduced far less. That’s a
bit of a simplification, though. Different companies are likely to be
affected in different ways depending on their own particular exposure to overstocks in certain areas.
Naturally, we have contacted Trek for comment, but got a big “no comment” from those guys. Maybe they’ll release a full statement at some stage. We did, though take the opportunity to ask Ian Whittingham, Co-Founder/
Director of Sigma Sports, for his take on the situation.
“I think a lot of this makes sense,” he said. “I think it’s a good time to
reset and have a look at what you're offering, to consider whether you
really need that many colour options or model options within each range.
It’s probably quite a sensible move by Trek for their size business. It’s certainly something we've done in the last couple of years post-COVID. “We’ve been trying to curate our ranges a bit better than we might have done before to make sure we were in stock with the right stuff rather than
big, broad ranges of products.”
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