One of our beloved sales reps recently travelled to the UK for a family re-union after a few years of pandemic-enforced separation – a familiar story for many – and he had a great time. But he returned to a whole new world here. Popular e-bike models that were supposedly pre-sold for 2 years were now piling up in the warehouse and everyone in the office was worried about getting bikes out, not in! And on everyone’s lips: ‘cash flow’.
So what happened in those few short weeks?
First of all, we all knew it had to happen eventually – boom times have their ups and downs. Industry commentators had started speculating on the ‘when’ even last year. We continued to make hay while the sun was shining on us and took every opportunity to order and pre-order stock in the last 24 months, which helped fuel our sales thanks to a marriage of convenience between high demand and the fact that not all shops were ordering proactively. The sales fueled more purchasing and our inventory steadily increased – we now have more e-bikes in stock than ever before. The bears might be indulging in schadenfreude currently, just as the naturally optimistic industry members (that’s us!) have been guilty of ours at times in the past two years.
For two years retailers the wholesalers get a consistent message from the front – the bullish retailers (us) are doing well, selling strongly and asking for more stock. The bearish retailers have empty shops (but are still doing better than normal) and are telling the wholesalers that they could sell a lot more if only they could only get some more stock (but they can’t because they’re always several months late to the party). And this news of unsatiable demand is passed up the chain to manufacturers, who ramp up production. There’s a long lag between steps manufacturers take to ramp up production and the arrival of bikes en masse into New Zealand. And that lag is larger when every factory in the world is trying to do the same thing, leading to famously long lead times, such as a brand of saddles taking orders for 300 days in the future.
So by 2022 we have record numbers of bikes coming through NZ customs, some of which were ordered 1 or even 2 years prior! Popular models are sold out until 2024 – even today my backend ordering system shows that I can only order this popular model for delivery in Sep 2023 (that’s going to change I believe):
And then winter arrives, the first one for the bike industry since 2019. Sure, there’s a lot more going on than the weather – inflation, a war in Europe, the leisure class able to spend money overseas again – but overall it’s a completely normal thing for sales of bikes to dip in winter. Abnormal is the record levels of stock that arrived in the months before, not to mention the pipeline of sea containers of bikes daisy chained across the oceans and in the next 2 years production schedules. Saddle manufacturers didn’t have 300 days of sales contracted in the past. And maybe they don’t anymore…
Back to the first question – how did it all change so quickly?
To be fair, it had already started happening for certain categories of non-electric bikes, but here’s how it went with the e-bikes. Our favourite sales rep goes to see family in Europe and there are 2 years of back orders in place for a popular step through rail trail e-bike, including to us. He comes back and a container of them has arrived, the first of many. And those who are in line to take them fail to do so. Okay, that’s happened before, you simply ask the next person in line or offer extra bikes to shops like ours (who always were saying yes). But next person in line doesn’t want them either and I don’t need any extra because we’ve still got them from last time we took someone’s extras. Your bulls are stuffed with stock (yep, that’s us) and your bears are grumbling “well, it’s too late now”. If your customers don’t want them now, they don’t want twice as many next month. And what about the month after that? And just like that, 2 years of back orders fall like a house of cards and the bike is in stock in the warehouse. The one above sold till Sep 2023 may well flip to ‘in stock’ before we know it.
A popular electric bike is available in good quantities from a major wholesaler’s warehouse to support dozens of shops and millions of consumers. Not exactly a headline, that’s just how it’s meant to work and it’s good news for retailers and consumers. But cash flow… too many bikes pre-ordered to pile in on already too many bikes in stock has one predictable ending that was always coming. It’s sale time and it’s the consumer’s turn to have some fun after 2 years of a seller’s market!
So is that it? All over now? Back to buying cars instead?
Of course not – the e-bike industry was on a growth trajectory since before Covid and will continue to grow. And supply is still extremely lumpy. Perennial favourites like the Moustache xroad series are still on a pre-sale basis in most sizes. Some categories are still out of stock. But overall the supply/demand relationship has decidedly flipped. The RRP’s themselves continue to rise due to inflation but if there’s one thing I know from selling bikes, it’s that the supply/demand effect is stronger than inflation!
EBT Spring Cleanout Sale – Sep 10th and 11th!
To conclude, we humbly invite you to take full advantage of our supply/demand imbalance and help us to get our inventory and cash back in order! The offers are unprecedented and never to be repeated (says the unreformed optimistic e-bike industrialist).
