the state of the industry-

[jerk]

first of all let me begin by apologizing for not posting sooner. i promised the six people who read these posts that i'd have a second report from interbike in fairly short order but i lied. the fact is that things have not been really busy-i can blame that more on the season than on the economic downturn and stock market crashes of recent weeks, but it's too soon to tell if that's a lie. what i can tell you for sure is that the vast majority of bicycle manufacturers in october 2008; big guys, small guys, innovators, pretenders, imitators, upstarts, re-branders and brand builders- are all universally out of tune and out of step with the demands of the road bike market.

i am not in a position to let you guys in on all the dirty little secrets of the little bike shop that employs me but suffice it to say we sell a shit ton of bicycles. with road bikes in particular there are certain price points that produce large clumps of sales. $3600-$4000 is not one of those price points. retailers: if you are selling bikes that cost this much in large numbers it's because you are not doing your job right. this price is a ridiculous amount of money to spend on a consumer sporting good and almost without exception no client is buying a bike at this price point who scraped together his last nickel to do so. sell him or her the right bike! with rare contrary instances, this client will not balk at the price tag. he may however, balk at the fact that bicycles in the price range are not the best, tell no coherent story and reference nothing in ways of answering a consumer's more primal instincts. no one in the world wants to spend $4000 and get something that is second best- yet this is how every bike in this price range is marketed. as i walked the interbike show i was overwhelmed by the multitudes of second tier shimano componetry hung on second tier carbon frames who's only selling feature seemed to be they cost $3600-$4000 and that is at least $500-$1500 less than the top of the line model of which catalog, sales manager, pro-rider shop rat, every other form of sales proganda etc. etc. can wax eloquent and beautiful tales about the quality, history and performance of the product.

now as i implied, this is not a huge category for any bike shop. here at our shop we sell a lot more $2500-$3000 road bikes and $4000 and up road bikes than we do this wasted middle and my thoughts are that it has everything to do with the market. colnago is an easy target and one in which i feel authorized to attack due to my long relationship of shilling for the brand and their products on the interweb. i loved my c50 more than anyother bike i had ever owned and my extreme p is assuredly the most perfect and proper bike for the cyclist this self-aggrandizing, pompous out-of-touch with realty douchebag thinks he is. colnago has always been a brand that has never allowed distributors, retailers or anyone who's last name isn't colnago to make money on the sale of their bicycles. the best and brightest have tried it. neal todrys from todson has pushed kryptonite locks from having a monopoly on the lock category in the bike industry to if not the fringes, a much smaller minority share of the market with a strange israeli lock concern who's graphics feature rabid cartoon bulldogs reminiscent of the stickers sharing space on pickup trucks with those of calvin pissing on something. oh, you may not know this but the man also made you think $50 was reasonable for a multi-tool. of course the stupid thing has a frame allignment table in it and a full set of swiss thread taps but the topeak alien is still $50. THIS guy couldn't make colnago work.

now colnago has veltec as its us distributor. dismissing for a moment the grey market that allows any idiot with a dial-up compuserve account and a credit card access to colnago frames for less than wholesale; the state of the most storied brand in all of cambiago is thus:

an eps frameset retails for $6500
a c50 frameset retails for $5000
a cx-1 frameset retails for $3500
a masterxlight frameset retails for $2650

but ironically these guys are doing it right. given colnago's inability to supply in any reasonable manner; someone smart realized colnago is never going to be a volume bike. every framset listed above is going to require at least an additional $2500 to turn it into a rideable bike so all of a sudden we're talking about a line-up of four $5000-$12000 bikes. but here's the thing- colnago has done a great job of differentiating all these framesets on their merits. this is not a good, better, best line-up and at over 5g a pop it can't be. each bike is presented as the epitome of perfection for its given task as conceived from the 80 year old mind residing under the most storied of combovers. the eps is the stiffest, fastest most explosive sprinting bike in the world- too muck bike for anyone short of oscar freire and erik zabel so you know you need one. the c50 is the perfect stage race and modern classics bike-light enough, stiff enough and with a perfect ride quality; the best all-arounder in the world, don't ride one unless you are prepared to buy one. the cx-1 draws upon colnago's close relationship with giant and allows them to introduce a bike for a new generation of cyclists who want the lightest frameset available but are not willing to sacrifice one iota of drivetrain or torsional stiffness. it's colnago's lightest frame and is a no-holds barred race bike. it may lack the refinement of the eps and the c50 but when you're going balls out around a hairpin 80km into a 100km criterium who gives a shit about refinement? the masterlxight is quite simply the masterxlight. hand-brazed in italy, classic molteni, zabel and saronni panel schemes; it is the colnago everyone in the world has lusted for. it'll ride sublime and look even better. you want it. you need it.

continued:

[jerk]

nd veltec will suffer to the whims of colnago's supply, and probably not have large quantities of frames untill 2010 product is already announced and showing up at the gp de puta...and a really, really big shop will feel they've had a successful year if they sell a dozen colnagos. but this price point ain't where the vast majority of cyclists shop and everyone knows it. most manufacturers are not in colnago's position. they need to play to the middle as well as the super high-end. colnagos have always been stupid expensive. they've never chosen to compete against production bikes, but there was a time when we sold a ton of serottas and eddy merckx corsas and pinarello stelvios as viable and similarly priced alternatives to the offerings from the big guys.

so how do the smaller builders try to compete today? by fixating on how cheap they can provide an ultegra sl equipped carbon framed complete bicycle. now in most cases these bikes are excellent but the competition is fierce and the overall market segment is very small. the price point just below this is far larger and far more lucrative and would allow these same manufacturers to vastly expand their business. how tough is it to hang sram rival on a carbon bike frame, come up with some design or at least some story about how this bike ain't worse than your super-duper $10,000 offering just different, jazz it up with some awesome paint and go for the goddamn jugular of specialized and trek where they are killing it with mediocre garbage?

i don't have the answers but some guys seem to "get" it and that's where our little bike shop is going to spend its resources. pinarello has moved from framebuilder to bike manufacturer in recent years and their bikes are going to do very well. a $2000 bike that looks and rides like a dogma and a $3000 one that looks and rides like a prince is a great recipe....just skip the shit further up until you get to the real deal with princes and dogmas and pinarello will do fine. ridley is another company that is doing the right thing. the vast majority of the race bikes they sell in their home market are entry to mid-level. the noahs and heliums do well elsewhere in europe but not at home. ridley's stigma in its home market is that it is a bike for privateer racers and small trade teams. the bikes are durable, handle well and are light enough-but the cost is no object belgian cyclo-sportif guy looks to italy if multitudes of euros are going to be blown on a bike. for this reason, ridley is taking a cautious approach to the american market- there is more money in selling noahs than compacts and building the brand from the top down is a good business model when attempting to establish a brand. nonetheless, ridley's entry and mid level bikes are so popular in their home market because they are so damn good. i wouldn't be caught dead riding a bike that retails for $1500 because i'm an effete snob who thinks $600 is a good price for a cycling jacket that works in a 10 degree temperature range....at least until i saw the ridley compact. same tube shapes and geometry as the damocles yet realized in hydroformed aluminum instead of carbon so it'll ride the same but be bit stiffer and heavier- full carbon fork including the steerer tube and a campy ten speed mirage gruppo that replaces some of record's carbon for another type of composite (plastic) but maintains the same mechanisms in all the places that matter. plus it's got solid wheels, the same paint job as the lotto-predictor pro bikes and oval stem, bar and seatpost. i begged and pleaded and we'll have this bike again this year except with a 105 kit. see, you sell a bunch of these bikes and the consumer's next bike will be a helium or a noah- he or she won't get on a giant or a specialized after riding a properly designed european race bike for a few seasons. works for us, works for the athletes and works for a company like ridley trying to take it to a bigger stage.

merckx is another interesting story. merckx has had a bicycle factory under his house since he retired and he asked ugo de rosa what the hell he should do with his life...or so the story goes. he employs a bunch of people and they've made some of the finest metal race bikes in the world for the last 10 years. the corsa, the mx leader, the team sc, all of these bikes were top of the line, priced competitivly and offered a viable alternative for the consumer to domestic and italian offerings, then carbon came along and it spelt the death of any large scale market for these bikes. a chocolade jaques team issue made to measure scandium premium may very well be the best bicycle currently being raced professionally in europe- but i can't convince anyone to buy one and i am really fucking good at my job. eddy built his own carbon facility in italy which continues to make some of the most technologically advanced frames in the world. the axm and the exm are pretty close to perfect bikes- but they are ungodly expensive, somewhat rare and hardly going to sell the way corsas and team scs once did. so eddy with some arm twisting enlisted the help of pinarello- they'll make his new bikes and he'll have viable offerings yet again for the us market. interestingly, these pinarello built merckxs will not be offered for sale in europe. there he seems to be pursuing a different model for the time being. much of this has more to do with his own legal and moral responsibility to keep his belgian factory up and running; but it will be interesting to see how successful the new line is in the us. i personally like the new bikes and hopefully we'll do well with them. i predict we'll see them augment his european offerings in the near future. nonetheless, when i personally go to eddymerckx.be i really, really want to own a premium classic.

so what does all this mean? nothing really- except when you think with your own bike collection in mind, or browse the interbike galleries sometimes it's interesting to see what lies beneath the surface. my job is to get people on bikes and get'em to ride'em so they keep buying more bikes and more bike stuff. finding good bikes at good prices help that and that's what interbike was about for me this year. i think we have the ammunition to make some good choices here that'll help the business and get folks on great product.

jerk

[hampco]

good stuff here, j-man - thanks for sharing

[cny rider]

I won't even pretend that I could offer a meaningful comment here, given the awesome post above.
I'll just say "Thank you."

[dave1215]

thanks for sharing. man, you can take a breath now.

are you saying that the retail bike business is about
selling branded commodities (chiquita versus dole bananas)
which come in differentiated categories
to meet different price points (organically grown bananas)?

[1centaur]

Being out of touch with realty should work fine until 2010.

Dole organic bananas taste best

I really like the CX-1.

For the first time ever I actually like a Ridley, the Noah, but not quite enough.

The mediocre garbage from Specialized and Trek is also something else: safe. For that buyer, reaching a little or a lot, there's comfort in the design, liability and manufacturing expertise of the big companies, and in not buying a bike you have to explain when you don't really know how. There already are a ton of bikes at similar price points that are as good if not better in components and paint and maybe even construction, but they're not big enough to get race cred and demand inventory slots; they are for brave and lucky and thoughtful people on a budget who have the right LBS and the right instincts and march to their own tune.

[Polyglot]

Colnago has always been a brand that has never allowed distributors, retailers or anyone who's last name isn't colnago to make money on the sale of their bicycles. the best and brightest have tried it.

Been there and done that! Your description is right on. Ernesto has a typically Bianzolo tendency to feel that any money being earned by anybody else through the sale of his products is money that has been "robbed" from his pockets. Normally, in business, a producer should always be happy when their distributors and/or dealers are selling and earning well on your products. Ernesto feels that anything more than the most limited margin is unfair towards him (this from one of the very few frame-building millionaires!)

[dwightskin]

Few questions:

1) Where's the grey market? How does Sierra Trading Post end up with Colnago's and Pinarello's?

2) Where is Colnago heading for Team Sponsorship. I think they lost Milram, Rabobank, Tinkoff. Seems like they need that sponsorship to support their high-end brand.

3) I thought you were a jerk, not an effete snob. You and Robin Williams look good in your $600 cycling jackets.

[caleb]

nonetheless, when i personally go to eddymerckx.be i really, really want to own a premium classic.

When I go to gitabike.com the Premium Classic isn't listed.

Is anyone importing it? Any idea what it's supposed to cost?

[Blue Jays]

Interesting update, thanks for the perspective!

[KeithNYC]

Jerk I'm one of the six people who read your posts and I check daily for the next even though I know it will take a month. Next time I buy a bike I'm taking the train up to Boston- seriously. You'll have to slap something together for me for well less than 3 grand though- but I know you're the man who'll do it right...

[jerk]

When I go to gitabike.com the Premium Classic isn't listed.

Is anyone importing it? Any idea what it's supposed to cost?

gita is importing it but not stocking it. the thing is (gulp) $3100....worth it though. yes i can get you one. check this out:

jerk

[Polyglot]

Few questions:

1) Where's the grey market? How does Sierra Trading Post end up with Colnago's and Pinarello's?

2) Where is Colnago heading for Team Sponsorship. I think they lost Milram, Rabobank, Tinkoff. Seems like they need that sponsorship to support their high-end brand.

There is a huge amount of Grey Market in the case of Colnago, whether it is from Britain (Maestro), Switzerland (Bellati), Canada or Italy. In the best case scenario for the official distributor and dealers, the grey market accounts for 10% of all sales in the USA. In the worst case it may account for as much as 25% of sales. That is huge, especially when you are already obliged to accept lower than average mark-ups as it is. In Europe, both the distributors and the dealers can work based upon stock held in Cambiago, so they do not have the carrying costs of inventory and the frequent and sudden devaluation of models that have been supplanted by new ones. As an example, Colnago launched with much fanfare the E1 model, only to yank it from the line-up after less than 2 years, leaving the distributor and dealers holding bikes that were immediately devalued in market value. Colnago then brought out the almost identical Cristallo, again to much hoopla, to once again pull the bike in favor of the CLX. The costs of these withdrawals to European dealers and distributors was negligible at best, but to the American dealers and distributor was tremendous. These are also the same bikes that end up at Sierra Trading or Competitive Cyclist or others with sufficient monetary clout to be able to clear out large quantities of these "obsolete" bikes.

Another problem is that Ernesto is accustomed to getting complaints of the low sales prices of his bikes here in the US from Europeans who see the close-outs on the obsolete items (see above) as well as due to the fact that listed European prices all include VAT taxes which increase the price by 20% on average. If you compare prices net of VAT, the European prices are considerably cheaper. Then add to this the fact that many who buy these high end bikes prefer to buy the frame via the internet to avoid paying local sales tax, it makes it harder yet for a local US shop to do something. Given that duty is rarely collected on shipments of bikes made through the post office, most individuals can buy a bike cheaper in Europe have it sent over.

There is then also the risk of currency exchange. Just think that in the last two months alone the US $/Euro exchange rate has varied by more than 20% (The US $ is worth 20% more today than it was worth two months ago!)

As for sponsorship, the teams were not lost, but rather a conscious decision was taken to let the sponsorships lapse. In the case of Milram, it certainly didn't help that Zabel is now the spokesman for another brand and that Petacchi is no longer around. In the case of Rabobank, the double Rasmussen debacles were not overly helpful (first the disaster in the time trial of 2006 and then the withdrawal in 2007); and in the case of Tinkoff, you simply have a sponsor who is not at all steeped in the history of the sport. Secondly, you must also realize that Colnago is quite able to verify the impact of his sponsorship of specific teams by the number of "team replica" bikes that he sold. The return on investment is simply not there. If it were, the fact that there were more Colnago bikes than any other bike among the pros should have meant that their sales should have at least remained steady if not seen a bump up over brands like Pinarello and De Rosa with a far lesser presence.

[caleb]

gita is importing it but not stocking it. the thing is (gulp) $3100....worth it though. yes i can get you one. check this out:

jerk

$3100 is retail for the frame and fork? Ouch. That's a tough sell sitting next to an Indy Fab Ti Crown Jewel or a Litespeed Icon. I really like the geo, but that's steep.

[Keith A]

Just wanted to thank the Jerk (and the others) for sharing their insights into the bike industry.

[frenk]

The Jerk would have got some satisfaction from me as I would have bought a team issue chocolade jacques premium. Unfortunately I wasn't able to find one...
But I'm happy with the Extreme-P as well :thrasher:

Great posts as always, jerk, thanks. :adore:

[Watoni]

$3100 is retail for the frame and fork? Ouch. That's a tough sell sitting next to an Indy Fab Ti Crown Jewel or a Litespeed Icon. I really like the geo, but that's steep.

Right on, Craig ... I would buy a Pinarello Paris over a Prince, though ...

As for the price on the Premium, all things Euro jumped before the latest swings (upward) in the dollar ... Pegs are $600 more than last year, probably the single biggest % rise ever ... Campy prices are just silly ... Oh, well ... Glad I still have 9psd DA and 10 spd Campy for now

[Vancouverdave]

So, other than US distributors such as Gita, Torelli, and Sinclair, who seem to be able to keep prices from cratering via mail order, why does any American bike shop owner within a mile of sanity sell any Italian bike brand?

[Athame]

Bless me Jerk for I might have sinned: I'm thinking about not getting a second Axiom Race and in stead an S2.

Am I in for penance or--either way--is it a clear cut case of absolution?

[Athame]

Bless me Jerk for I might have sinned: I'm thinking about not getting a second Axiom Race and in stead an S2.

Am I in for penance or--either way--is it a clear cut case of absolution?

Penance: Ridley Noah or Helium.