Steve Frothingham, Editor-in-Chief at Bicycle Retailer & Industry News

On this week's episode, Stephen Frothingham, Editor in Chief of Bicycle Retailer & Industry News at Outside, Inc, joins Randall to share his unique perspective on bicycle industry dynamics in general and the bike shop and OEM ecosystem in particular. Steve is an industry veteran who approaches his work with a warmth and curiosity we've long appreciated, and his reporting continues to serve as an influential resource for all of us who work in the space.

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[00:00:00] Craig Dalton: Hello, and welcome to the gravel ride podcast, where we go deep on the sport of gravel cycling through in-depth interviews with product designers, event organizers and athletes. Who are pioneering the sport

I'm your host, Craig Dalton, a lifelong cyclist who discovered gravel cycling back in 2016 and made all the mistakes you don't need to make. I approach each episode as a beginner down, unlock all the knowledge you need to become a great gravel cyclist.

This week on the podcast, I'm going to hand the microphone over to my co-host Randall Jacobs. Who's got Steven Frothingham editor and chief of bicycle retailer and industry news on the show to discuss his unique perspective on bicycle industry dynamics. The general bike shop and OEM ecosystem in particular, Steve is an industry veteran who approaches his work with warmth and curiosity that is so appreciated. His reporting continues to serve as an influential resource to everyone who works in the bicycle retail space.

I think you'll get a lot out of this episode, learning a little bit more of the ins and outs of the industry as it all trickles down and has an effect. On us as riders. Before we jump in, I do need to thank this week. Sponsor, dynamic cyclist.

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If that sounds like it's up your alley, I hope you give it a try again. They've got that free one week trial. So why the hell not. With that said, I'm going to hand the microphone off to my co-host Randall Jacobs. And jump right into this conversation with Steven Frothingham.

[00:03:11] Randall:

You're an old hand in the bike industry in the journalism space.

Give us a little bit of background about that.

[00:03:17] steve: , know, I started at Brain, I think I was the first editor hired back in think 92. And then I left and worked for the Associated Press twice and then came back into the bike industry to work for, be News for a few years. Uh, left them, went back to Brain, and then the company that owned Be News bought Brain. I ended up back in that same company again, which became outside. So it, yeah, it kind of feels like, uh, even though I don't work for ERs again, I feel like I'm back with the same crew. Uh, I literally was in the same, same desk, same office for a little while. So, uh, that, that seems to be, seems to be the pattern in my career here.

[00:03:55] Randall: Just to clarify for our listeners, brain is bicycle retailer where you are currently, uh, editor-in-chief. Correct.

[00:04:01] steve: Mm-hmm.

[00:04:03] Randall: Tell us a little bit about the nature of that publication. So what role does it serve in the industry?

[00:04:09] steve: well, when we started it in 92, you know, the full name is Bicycle Retailer and Industry News. And, uh, the, and was important back then because the, um, the other trade magazines, and believe it or not, there were three others back then were all print magazines. We were the fourth. Um, but they had this real focus on. Kind of this old school dealer thing, like, you know, we're gonna profile this retailer this month. We're gonna do a story on, know, uh, how to hire kids for the summer. We're gonna do a story about how to display your tires. Um, and we're not really gonna write about the industry, the supplier side. So we came along and we were bicycle retailer and industry news. And we used to kinda joke that what we're doing is reporting. We're telling the retailers what the, uh, suppliers are doing to them this month. Um, which is maybe a little bit too cynical, but we, we reported on what the industry was doing. We reported the news of what the supplier side was doing for the most part, which is what the retailers want to read. Um, most retailers, they might say that they'd like to read a story about how to merchandise their tires, but that's kind of broccoli. You know what they were, what really wanna, wanna have is the, uh, the steak and potatoes of, uh, finding out what one of their suppliers, uh, just bought another company or just went bankrupt or just switched factories in Taiwan or, or something like that.

And that's the kinda stuff that the, uh, the other titles we're not doing back in the nineties, which is why, uh, this is gonna bring out the competitive bike racer jerk in me. But we, we put the other three out of business in three or four years, I think. Um, it wasn't very long before Brain was the only, uh, industry title in the US and, um, to some extent we're still doing the same thing.

Obviously we've had to adapt to social media and the internet, which didn't exist when, when we started the magazine. But, um, we're still doing the same thing. We, we focus on news and, um, You know, we like to do some, we like to profile important retailers once in a while, but for the most part, uh, we still report on what the supplier side is doing with the knowledge that most of our readers are, uh, are retailers independent?

[00:06:37] Randall: I actually hadn't appreciated that you were on the founding team for bicycle retailer. So can you share a little bit more about that and who else was involved and how that came to be?

[00:06:47] steve: Well, I didn't have an investment unfortunately. Uh, I was, I think I was 22 years old or something, so I was just the first hired gun there. Uh, mark, who still writes for us, was the founding editor, uh, and a partner early on. There was another partner named Bill Sandler, who, uh, passed away quite a few years ago now. Uh, so Mark and Bill were, were really the founders um, Uh, I think they hired a, uh, an office lady named Kathy, and then they hired me. And, uh, that was kind of the start of the fun and, um, you know, and then the company went through various different ownerships, uh, some of which happened when, after I left, when I was, uh, outside the bike world for while. Uh, sometimes I forget it went through three or four different ownerships. Uh, when I came back it was owned by Nielsen of the famous Nielsen Ratings Nielsen, which, uh, owned, uh, trade shows including interbike. And, uh, we were actually operated by the National Bicycle Dealers Association, the nonprofit dealer trade group. Um, so we were owned by Nielsen, which was kind of renamed as Emerald Expositions. Uh, so I think my paycheck came from, now my paycheck came from the Mbda a you know, we went through quite a few years of being run by a very small nonprofit trade association. And then, and then it changed hands. Uh, M BDA a had some financial problems and, uh, we were not exactly helping things. So, uh, we got handed off to, uh, what was then called Pocket Outdoor Media, the company that owned Velo News. They owned Velo Press Draft, fleet Magazine. At that point, uh, Robin Thurston was a minority investor, I believe, in pocket outdoor media. And then, uh, you know, about a year or so after, uh, brain became part of that group, became the ceo, um, started raising money to buy a whole bunch of titles, which you've probably heard about, including Pink Bike Cycling Tips, um, some, uh, some bike events in Colorado.

And then eventually the big purchase was raising the money to buy outside Magazine. And, um, company Pocket Outdoor Media was, I think, I think Robin had actually hired a marketing company to come up with a new name for Pocket Outdoor Media, because people thought Pocket Outdoor Media was a billboard company. Uh, and the sales reps didn't like that. Uh, so they were, you know, doing the marketing thing of, of bouncing all these ideas off the wall, coming, trying to come up with a new idea and a new name. And then after they bought Outside magazine, they're like, well, why don't we just, you know, renamed the company outside? we became outside, which things have been moving very quickly. It's, you know, it's a big change for me moving from for a very tiny, little underfunded non-profit trade association from bicycle shops N bda, to working for this multi billion dollar startup basically a tech company. Um, change. And that's why the, the time, you know, I mean, I think back it seems like, you know, a decade ago, but it's only been like two and half years.

[00:10:23] Randall: So Robin Thurston is the current c e o of outside the group. And he previously founded is it, uh, map my.

[00:10:31] steve: Map my ride, map my run my companies, sold to Under Armor.

[00:10:35] Randall: I think that was like 160 million acquisition or something. I remember having this number offhand because it was part of my pitch deck for another company that I was trying to raise money for. It's like, oh here's a comparison point of this company that was acquired in the space.

[00:10:50] steve: Yeah, I mean map where I was kind of ahead of the curve with doing some of the stuff that Strava's doing now, and uh, now and outside. We have Gaia, which is a, mapping app that's primarily used by hikers and skiers. And then trail Forks, which was developed by Pink Bike as a mapping app mostly for mountain bikers.

[00:11:12] Randall: It's quite well regarded of, of seen in some of the forums. People are very keen on that particular application in the quality of the routes there

[00:11:19] steve: are really good. They do have their niches. I use Gaia for backcountry skiing and it, it works really well. And it's, uh, uh, you know, we could go way down a rabbit hole, but you know, why I choose to use Gaia when I'm skiing and why I use trail forks when I'm mountain biking and why I use, don't know what else when I'm road biking.

I don't know. But, you know, each has its own, uh, its own advantages in different spaces. So, yeah. Robin, made his fortune, I think, fair to say, selling that company to, uh, under Armour. And then he worked for Under Armour for a while. I think he was the Chief Technology Officer at Under Armor, uh, left and did some other stuff, and then eventually came back to this group.

[00:12:02] Randall: So you started when you were 22, essentially first hire for bicycle retailer, this fledgling industry magazine with a particular point of view that resonated with dealers. What drew you to this particular space? You studied journalism in college. Were you an avid cyclist?

[00:12:18] steve: Yeah. All that. Yeah. Uh, I was a cyclist. From day one, I started in B BMX when I was a little turd. Uh, I'm definitely, I'm totally of that age now where, you know, I'm 55 now and I go to the shows and I see these retro BMX bikes that some of the companies are doing. My light up, oh, there's that red that I wanted when I was, now I buy it. I've resisted so far, but yeah, I started in bmx. I did mountain bike races back in the eighties and road racing and, and, uh, and yeah, then I, I got a journalism degree and I did work completely outside the bike world for about 10 years, the Associated Press, covering presidential politics in New Hampshire where the presidential primary is a big deal.

So that was really fun. I think I covered three or four primaries in New Hampshire. Plus the usual AP stuff of plane crashes and lost hikers and syrup and lost mooses and stuff like that.

[00:13:18] Track 1: Standard, Northeast Fair.

[00:13:19] steve: Yeah. Typical New Hampshire stuff.

[00:13:21] Track 1: And remind me where you grew up.

[00:13:24] steve: in New England. Uh, I was born just a little north of where you are in Salisbury, Massachusetts. And, uh, my family moved up into New Hampshire when I was a teenager. And then when I came back, when I worked for the Associated Press, I lived in Wolfborough, New Hampshire for about 10 years.

[00:13:38] Track 1: So you and I when we chat tend to go off in various tangents so, where would you like to go? Or, or we can start with the email that you sent me yesterday about shaman cues.

[00:13:49] steve: yeah. I could interview you on that. What do you know?

[00:13:52] Track 1: Well, you're the one, the inside line. Yeah. You saw the press release.

[00:13:56] steve: the inside line yet. You know, I'm just starting my research and I'm, I'm going to Taiwan next week, so hopefully I'll learn a lot more over there. But, it looks like a fairly significant development, this cues thing. I was sitting through a, I think it was an hour long video recording from Shaman about it yesterday. And, I got antsy halfway through and started calling people and emailing people, and, uh, video was moving too slowly. So like, I need some more need. I need to check in with some people around the industry here to see what they think.

[00:14:27] Track 1: For those listening, shaman released a new, not just group set, but family of group sets on their kind of entry to entry, mid-level. And, it's significant for reasons that go beyond simply, here's some new parts.

They have a reputation for using constantly varying standards and interfaces and pull ratios, which is the ratio of cable pull to, gear shifting. so how much cable pulls results in how much movement of the derailer constantly varying that, not just year to year, but from group to group in order to avoid cross compatibility with third party components and even within their own groups so that brands don't mix and match.

Say you want a higher end quote unquote, set of levers connected to a lower injury derail because you don't see the value in the higher end derailer. Well, they preclude that by adjusting the pull ratios from group to group. And so what they've done with cues is make it such.

The pull ratio is the same across all the groups, even with different speeds. And the thing that the major differentiator between the different levels is the number of years. the cog spacing in the back is the same. , and I think that that's quite significant. and it signals something too. I think it's very much in favor of riders. And it helps shops as well. I think it helps the industry more generally, but it's also indicative of a shift in the power dynamic in the bike industry. , in many ways is the new shaman, they're in the ascendant. They have, , a number of standards that they have put out there that have gotten adoption, that they have defended through patents and, in some cases, litigation

and so I, I view it in the context of, innovation and competitiveness in the bike industry.

[00:16:09] steve: Yeah, that makes sense. I think even Shaman used the word realistic, meaning that the new groups, they like to say that the technology that makes them special is in the cogs. Not in the chain. not so much in the crank set or the derailer. which allows mix and match

so if somebody wants to spec a cassette, whether it's, Nine, 10 or 11 speed with a different crank, with a different chain, it'll still work okay, because there's nothing, it doesn't require any kind of special chain and the, the magic isn't in the chain. It's in the cassettes. So yeah, I think it's more realistic. I mean, obviously the development of this began before the pandemic and the part shortage that was through the pandemic. But, what happened in the pandemic with all these, new third party, fourth party parts coming up, getting a second look, people taking a second look at, whether it's micro shift or, uh, tetra breaks or whatever.

Anything they can get. this really kind of seals the deal. This kind of tells you that, , For the next few years, we're probably gonna see more and more of these mixed groups, at least at the lower price. this is all below 1 0 5 on the road, below Dior, 12 speed or 11 speed on the mountain bike side. So everything that was cheaper than Dior and down on the mountain bike, everything that was cheaper than 1 0 5 is now queues

[00:17:39] Randall: Which is to say en entry level to, uh, lower mid-level stuff, which is also good stuff. They have, clutch derails 11 speed. It does look to be quality components.

[00:17:49] steve: Yep.

[00:17:50] Track 1: Yeah.

[00:17:50] steve: it's not the electric shifting, it's not the 12 speed.

[00:17:52] Track 1: Oh, of course not. No. That, that stuff's still locked down. So, um, in fact, uh,

[00:17:58] steve: is a di two group as part of this, as the, um, more, more for the mountain bike, E mountain bike group, there's a DI two.

[00:18:06] Track 1: presumably sharing a battery, I haven't dived into that yet. Um,

[00:18:11] steve: the one that has the uh, uh, the front freewheeling system and the antilock brakes that they launched at Eurobike last year.

[00:18:18] Track 1: got it.

[00:18:19] steve: Yeah.

[00:18:20] Track 1: Yeah, it's, it's interesting. You, you'll, you may recall that in the past I was looking to, uh, create an open platform for bicycle electronics, and. And was trying to corral the support of that. Um, all those third parties that, that Taiwan vendor base that was shut out of the theam shaman duopoly. Um, I think, uh, probably a little bit before its time.

Uh, certainly the, the appetite wasn't there for investments. Um, there was, there was interest, but not in, not any investment dollars coming in from the Taiwan side at that time. Uh, but since then we've seen, I mean, electronic is, well now you have a protocol that you can lock down and so you don't have to vary.

It used to be that you vary pull ratios or some sort of mechanical, mechanical interface between components. Now you lock down the communication protocol and the power grid, and in that way you, you constrain interoperability between components from third parties. . Uh, and then you have a lot of patents around the grifter, which is, um, I would argue the, the center, the nexus of power in the bicycle industry, um, is arguably the road grifter, the road brake shift lever.

And with it now, the, you know, the, the cas and, uh, you know, with electronic, the electronic protocol, power grid, things like that. Because if you control, you know, even if you just control all, you've patented every single way that you can make a lever swing,

[00:19:47] steve: Right.

[00:19:48] Track 1: and you know, and that, and then now you control this lever, well, that lever dictates that the caliper has to be from the same.

Producer as well, because of safety reasons. You can't mix and match a caliper with a different hydraulic brake system. And then for the electronic, same deal, you know, it controls like you, you just have a closed protocol and nobody else can connect with that. And now you control the interfaces between the levers, the cas, the derails, um, and the bike itself.

And now you can dictate, you know, we, we want this particular break interface. And so we see, you know, uh, flat mounts and so on. We see the new universal derail your hangar, uh, that STR introduced, which I haven't, I haven't gone deep on the patent yet, but I, I wonder, do you know if that precludes other companies from attaching a derailer in the same way if they, if they forego that universal hangar?

[00:20:45] steve: No, I think Sharon's being pretty open with, with giving licenses to it, but I dunno about other third party. I mean, and at what point are we gonna have another, you know, swam shaman lawsuit, like from back in the eighties or nineties, whenever that was, that the bundling, you know? So at what point did the electronic, um, protocols become open source because of an antitrust law?

The antitrust lawsuit? I think it's unlikely. Cause I don't know who would challenge 'em at this point.

[00:21:18] Track 1: it's, uh, the bike co.

[00:21:20] steve: you got something planned.

[00:21:21] Track 1: Um, you know, we're, we're a tiny little blip on, on the grander, um, bike industry and, uh, you know,

[00:21:29] steve: 1991.

[00:21:30] Track 1: yeah. Well, so is it, is it true or, or answer this however you like? Um, I have, I wasn't around, um, for. At the time that that was happening. And so I get, I have second in hand information from people who were there or were adjacent to it.

And then I have what I've read, but my understanding is, um, so was originally grip shift. Grip shift had a different way, uh, twisting the grip on a flat bar lever to shift a rear dera and Shao would try to preclude compatibility by again, changing the pull ratios so that Sam's grip shift wouldn't work with their deras.

But then also by having these bundling deals where they go to a bike company, an o e m, uh, original equipment manufacturer. So in this case, like thesis is a, my company is an o e em specializes an no e em truck as no em, and would say, okay, you can buy these components individually, but if you buy the complete group set I e you don't buy's thing, then you get a 20% discount.

I think is, is what it was.

[00:22:35] steve: Could be.

[00:22:36] Track 1: yeah, and there was an antitrust suit that STR filed against Shaman, um, and STR one. And as I understand it, that essentially funded Sam's early rise. That's the reason why we have STR in many ways.

[00:22:51] steve: all. I mean, I think there's some other money behind

[00:22:53] Track 1: Mm-hmm.

[00:22:54] steve: uh, yeah, that's always been sort of the, uh, the, uh, the urban myth. I don't know the, the STR used that money to go out and, you know, buy all, all the things that they've bought. Rock shocks, true native, um, zip

[00:23:11] Track 1: Mm-hmm.

[00:23:12] steve: whatever. And, uh, sax, which nobody really remembers now, but that was a pretty significant purchase. Uhs, not Richard Sax the, uh, frame builder from Connecticut, but, uh, sax of Germany, which, uh, made all the internal hubs and also made derailers and stuff,

[00:23:29] Track 1: And chains too. Right? Because I think.

[00:23:31] steve: chains, um, became s chains, which became Ram chains. Um,

[00:23:37] Track 1: are still made in Portugal, I believe.

[00:23:39] steve: I think so,

[00:23:40] Track 1: Yeah.

[00:23:41] steve: so yeah, they, they acquired that factory.

Haven't, you know, chain factory is no small thing. And, um, anyway, that's always been the, you know, um, the rumor Yeah. Is that they used that cash settlement or, or judgment from Shaman to fund those. Uh, I don't know how true that is. Like I said, I know that there is some other money behind Swam and there still is. Um, some of those companies that they bought were, uh, pretty distressed

[00:24:12] Track 1: Mm-hmm.

[00:24:13] steve: You know, rock Jocks had had an IPO that, uh, were living at the top of the world there for a couple years

[00:24:19] Track 1: The mountain bike. The mountain bike. Boom.

[00:24:22] steve: Yeah. And then that kind of crashed and that's about when, when into the Suspension Fork business.

[00:24:28] Track 1: Yeah.

[00:24:30] steve: So they've been pretty savvy about the, uh, the acquisitions they made Mo most of which were back, back in the nineties. Although, what have they bought recently? They bought,

[00:24:40] Track 1: Hammerhead.

[00:24:42] steve: hammerhead.

[00:24:43] Track 1: Yeah.

[00:24:44] steve: one.

[00:24:44] Track 1: Yeah.

[00:24:45] steve: Yeah. And, uh, and the Power Meter company. I don't, the power tab, which they kinda put

[00:24:51] Track 1: cork.

[00:24:52] steve: then,

[00:24:52] Track 1: Cork, um, was power meters. Um,

[00:24:55] steve: power Tap, which they bought from cs,

[00:24:58] Track 1: oh, that's right.

[00:24:59] steve: what was

[00:25:00] Track 1: Uh, shocks.

[00:25:02] steve: Jacquez

[00:25:03] Track 1: Yeah.

[00:25:04] steve: and uh, what was the other one I was gonna say they bought something else. Oh, time pedals.

[00:25:14] Track 1: Hmm. So that really gives them, you know, a lot of different, um, components and IP that they can then, uh, interconnect through that. The access, uh, protocol, which is a closed, I believe, ZigBee based, um, protocol. Um, and so, you know, getting back to, you know, open versus closed standards and ecosystems and things like that, um, it seems to be the trend in the industry as, as always to, um, to have walled gardens.

[00:25:41] steve: Yeah. And that's been fun. You know, it was fun to see when, when Hammerhead, was, had had some di I two integration that Shaman shut him down

[00:25:53] Track 1: Yep.

[00:25:54] steve: on after Bottom, which was, um, some pretty good industry gossip right there. Um, but yeah, I mean, everybody, it's been really fun speculating about what's gonna happen, you know, with RAM owning, uh, you know, the power meter company owning a pedal company, owning a, you know, power tap, which made, which used to make power meter pedals. Um, and then owning a, a head unit GPS company on top of that. And then, like you said, the whole integration with access and, uh, it's pretty fun.

[00:26:26] Track 1: Yeah, it's the full stack in a way. I mean,

[00:26:28] steve: them battling, you know, setting up this not only with Shaman, but with, with, uh, with Fox Factory also.

[00:26:38] Track 1: I'm waiting to, for, it seems very natural that a next step for them would to be, would be to buy, say a, a company that makes home trainers or even a company that does training software that, um, they might not want to go direct head-to-head with Swift, cuz Wif has such a dominant position in that space and they don't want to alienate them or get shut off of that platform.

But, um, it seems like a natural next step to get into this burgeoning home cycling, uh, space, which granted has. Tapered off a little bit since, you know, post pandemic, but I think is still, you're, you know, there's a whole, there's a whole range of cyclists who primarily ride at home and are doing competitions in virtual worlds, and I don't think that that's going to change as the technology gets better.

[00:27:22] steve: Yeah.

[00:27:24] Track 1: Yeah.

[00:27:24] steve: Yeah, that would make sense. I'm sure there's been all sorts of conversations and there's been a couple brands that have come and gone, um, that, uh, you know, maybe, uh, ceramic has kind of hit its lip and said, no, we're, we're not gonna bid on that one. Or we're not gonna, we're not gonna overpay for that one.

I don't know. But, you know, you can look at the, the number of indoor brands that have, uh, had financial problems in the last, uh, year and a half, and, uh, even once before that, that just disappeared. Um, have you seen a kinetic trainer on the market in a couple years? I.

[00:28:02] Track 1: Yeah. So what else do you see happening in the bike industry? Um, so obviously parts shortages were the big story during the pandemic. Now we have, uh, parts being, you know, liquidated through various channels and presumably is that's going to accelerate, uh, post Taipei show coming up in, uh, in Taiwan in, uh, the end of March

[00:28:25] steve: Yeah, I think so. I think there's still some, some shortages I hear on the road bike component side. I guess you'd know more about that than, than I would. Um,

[00:28:34] Track 1: saying group sets or.

[00:28:37] steve: yeah, and, and the bikes that those group sets. Hang on. You know, I think, um, know, if you talk to dealers, it's, uh, yeah, they have all the $900 mountain bikes.

They can, they can eat, uh, or even I think the 1500, $1,900 bikes, but the, um, the mid to high price mountain bikes are, are a little bit harder to get. And I think also the, um, mid to high price road bikes are hard to get. And, um, and there's kind of a shortage of, there's kind of a dearth of, of. Of really affordable road bikes.

[00:29:13] Track 1: Hmm.

[00:29:14] steve: I think, uh, there's not a lot of groups there, you know, I mean, tram's got and then, you know, shaman hasn't been, had a real good road group, uh, below 1 0 5 for years. So, you know, it'd be interesting and see how cues affects, affects that.

[00:29:34] Track 1: Well, and their, their transition to 12 speed too. Um, and they had a, a factory catch on fire just before the pandemic, right.

[00:29:43] steve: Yeah. What was that? It was a, was it like an ANOT factory or something? I know they were making some real high end stuff. Like they were making like the xtr crank, you know, when, when Xtr went to 12 speed, I think they couldn't get a crank for it for like two years. Right.

[00:29:59] Track 1: Hmm.

[00:29:59] steve: they were like, relabeling, theor, xt cranks. people were pissed about and Uh, yeah, I don't know. It it's, yeah. Fires in the bike in factory fires in the bike industry. That's, that's been, uh, yeah, that's been a gossipy thing going back, you know, 50 years. I think you can get some old timers telling you about famous fires and how they couldn't get such and such for, for five years after that fire.

And sometimes I wonder much of it's urban myth, you know, and people just blaming things on their inability to produce stuff. They blame it on a factory fire. Didn't you hear about that? Come on. Giant factory burned out last year. And uh, I think especially before the internet, who would check, you know, it's like, ah, I don't know.

I heard that like the van sneaker factory burned down last year. Didn't you hear about that? That's why I can't get those van sneakers I've been looking for. before the internet it was pretty hard to look that up. Now it's a little bit easier, you know?

[00:30:55] Randall: Now you've been, so I think probably both of us have been talking to a lot of dealers lately for different reasons. Um, with, with me, we've been building out our, our dealer network for our logo spiel program. Um, and I'm curious to hear, I'll share a little bit about what I've been hearing and I'm curious how that, um, relates to, you know, some of the things that you've been hearing from dealers.

So some of the things I've heard is, um, well one, you have, uh, essentially you weren't able to get product for a long time. A lot of dealers over ordered or ordered the same thing from multiple sources, hoping to get it from somewhere, um, sooner rather than later. And then all of it got dumped on the, on dealers in the fall and over the winter at exactly the time when.

you know, nothing is selling generally, it's, it's the, the doldrums of the, the bike, uh, selling season and cycling season in North America anyways. But then also, you know, people, uh, with, with the country opening up post covid, um, you know, the bike boom was, was coming to an end and it wasn't clear. You know, where things will, you know, how that will level off and how much lag there will be, where everyone who got a b wanted a bike, got a bike and you know, the, you know, at at what point and, and you know, the secondhand market will start coming down in price and that'll become more compelling.

So how long will it take for this lag of, of certain types of components to work its way through the space? Um, and it's been interesting too, you see, um, an ex, am I right that there's an acceleration of the big brands buying shops?

[00:32:27] steve: Uh, depends on what time scale you're looking at. I, you know, I don't, I think, um, I think that's slowed down in the last six months or, or nine months. There was a big acceleration, you know, in, in 21, especially, uh, I think it was 21 when, you know, track had been buying shops left and right. Uh, specialized had not.

[00:32:50] Track 1: Yep.

[00:32:51] steve: um, when Mike's bikes sold to, uh, to pawn in, I think, I wanna say that was 2021.

[00:32:59] Track 1: Pawn being the owner of, uh, Cervelo Santa Cruz and a handful of other brands. And Mike Spikes being a big multi-store chain, mostly in, in the NorCal, um, you know, bay Area. Yeah,

[00:33:12] steve: Yeah. And they were the, I think the single biggest specialized dealer in the country and one of the, or maybe the most important markets in the country, the

[00:33:19] Track 1: I think, I think Eric's was their biggest, I think Mike's bikes was number two.

[00:33:24] steve: could

[00:33:24] Track 1: but certainly the Bay Area is huge and a lot of, um, you see a lot of. S works, you know, $15,000 bikes rolling around the Bay Area.

[00:33:35] steve: Yeah. Yeah. There's a lot more of the high end stuff than, than Eric's sell, I'm sure.

[00:33:40] Track 1: Yeah.

[00:33:41] steve: Um, and it did, and it did kind of seem like Specialized had all their eggs in that basket. Um, they didn't have a lot of other dealers. It was just Eric. I mean, uh, Mike's just ruled the rot anyway, so Yeah. Specialized really woke up. Uh, that was, that was the wake up call for Mike Ard was, oh my God, we're, we're losing our distribution. Um, and it came on, they lost some other big dis uh, big retail distributions like, uh, um, ables in, in, uh, hill Abel down in Austin, Texas, which was a huge specialized dealer that Trek walked in and bought, um, all of a sudden specialized, lost its biggest dealer in Austin, Texas, which is another, you know, another one of the handful of very biggest markets in the country.

[00:34:27] Track 1: And growing, growing rapidly with a lot of deep pocketed folks as well who tend to buy their, their high-end stuff. Yeah.

[00:34:34] steve: So all of a sudden specialized, uh, said we've gotta get into buying shops. And, uh, they were running around buying a lot of shops. Um, I think they did not have the system set up that Trekk did for, uh, processing these shops once they had acquired 'em. Uh, so it was a little bit more chaotic, whereas I think Trekk had built up to it slowly and they had, you know, from what the stories I've heard of, you know, TREKK has these SWAT teams that come in when they buy a shop.

You know, there's just woo uh, you know, 20, 20 people come down from Waterloo and, and fill up the hotel rooms and whatever town that they just bought the dealership in and just handle that transition. You know, they usually shut down for a week or so, pop up some new signs, change over the website, uh, make some people some offers, and, uh, and they're, you know, kick out all the other brands and, uh, they're up and running again in a couple weeks. And, um, They've got it down to a science now and uh, I don't think specialized ever quite got to that. It was more like, uh, yeah, okay, we bought you, um, keep running. We'll talk to you in a few months when we need something from you. Uh, that was some of the impression I got anyway. I think specialized also was overpaying for some of the shops from some of the stories I heard, but, um, but I think it all slowed down a lot last, last year, I think with the, um, you know, with the economy and I think, um, the cashflow for companies like Specialized Amtrak I think became harder.

And there's been a handful of acquisitions in the last nine months, but it, it really slowed down a lot um, I haven't heard it very many recently. We don't hear about 'em all cuz both, both track and specialize. Uh, tend to be really quiet when they buy a, a shop or a chain of shops. Uh, but I haven't heard many rumors in the last three or four months.

[00:36:26] Track 1: I've heard, granted, I don't know the, uh, the dates on these, but as I've been talking to dealers, I've heard about offers being made, but those offers may have been made, you know, six, nine months ago, a year ago or something like that. Um, but there's definitely been a lot of, um, a lot of conversations being had along those lines over the past year, year and a half or so.

Um, and it's interesting, you know, there's this long standing conversation in the bike industry about, um, you know, the dynamic between, or the balance between, uh, direct to consumer sales over the internet, which is growing for obvious reasons. And the pivotal role that the bicycle shop, particularly independent shops play, um, as a hub for the cycling community.

And how do you. You know, how do you maintain this critical bit of community infrastructure, um, in a, in a world where, you know, increasingly people can buy things very conveniently over the internet and have it delivered, um, you know, directly to them. Now there's, you know, service has for a long time, um, been the bread and butter of shops.

And a lot of shops pre pandemic were at least telling me, um, that they, as much as they spent a lot of their money on having bikes on the floor, most of their income, most of their net profit was coming from, um, service and parts and accessories. Uh, which is in some ways, you know, supplemental to service.

Cuz when you go in for maintenance, you're getting chains and, and other service parts. Um, but how do you, how do you see that evolving over time from your vantage point?

[00:38:07] steve: It's been hard. I mean, uh, when you hear that, you think, well, why don't you do a service only place? And,

[00:38:15] Track 1: of folks are

[00:38:17] steve: a few folks are, I'm not finding a whole lot of great examples of people that have been raging successes doing that. Um, Uh, you know, the whole, the whole mobile service thing has been at best for the last two or three years. Um, you know, I know that, um, a few people that have gone that way in, um, in the Boulder area haven't been hugely successful. I think there might be a couple that are still running, but, um, the problem is that you just lose that volume. You know, whether you make a lot of money on a bike sale or not, it's still, you know, thousand, 2000, 3000, $5,000 bike sale.

You know, for some shops in Boulders, I know you were and visited some of them, you know, they pretty regularly are selling 10,000 and

[00:39:08] Track 1: sure.

[00:39:09] steve: uh, bikes. And, you know, the profit margin on that not be huge. And you might say, well, why does that guy even, you know, still sell mo bikes? Um, he can make more money building a wheel or, you know, just charging someone a few hundred dollars to install a new campy group on a moot spring. Um, but he nee he needs that, that dollar volume, uh, from the bike sale to pay the rent. Um, so there, there haven't been as many examples of that as you would think. you know, going back five years, going back 20, 30 years, people have been talking about, well, hey, we make all our money in service. Why don't we just do service hasn't worked for many people. Um, I think people expect bike shops to have bikes and, uh, I think the bike shops need that, that volume to make it work. Um, you know, some shops have been, have found some supplemental income doing more different types of service, whether it's, you know, whether it's bike fits, whether it's click and collect fulfillment. Or, uh, doing warranty service. You know, I know I, I talked to a guy at Caba who does warranty service for one of the better known to consumer e-bike brands. And, uh, he makes a pretty significant, high margin chunk of money, uh, just from dealing with warranty service from people that buy these bikes online and then have, have whatever troubles and the, uh, the brand reimburses him, uh, pretty generously.

[00:40:46] Track 1: Yeah.

[00:40:47] steve: so there's all sorts of, uh, kind of ancillary things around the edges that people fill in, but that guy, he still sound a lot of bicycles.

[00:40:55] Track 1: Mm-hmm.

[00:40:56] steve: Uh, he still has a warehouse full of 'em, and, uh, um,

[00:41:01] Track 1: as do a lot of people right now, especially as we, we were saying on the, on the more entry level, um, in particular,

[00:41:09] steve: Yeah. So I don't know. I haven't seen, there's, there's examples here and there. Yeah. Of, of the people who are, who are focusing on the service or are looking into, you know, more of the showrooming, uh, fulfillment click and collect kind of models. And there, you know, there's a million different models as you know,

[00:41:27] Track 1: Mm-hmm. Well and, and click and collect and,

[00:41:31] steve: not, I'm not finding, but like wholesale, you know, all the bike shops going outta business and all of a sudden we have a whole bunch of just little fulfillment showrooms around. Um, is happening, but not on a huge scale, you know, I mean, what specializes do, I don't know how many of these fulfillment centers they have. Uh, that's one of the things they did up in Northern California where, um, after they lost Mikes was opening up these little fulfillment centers. They would just rent a warehouse space in the, you know, in the business park somewhere and hire a couple people to assemble bikes and give 'em a truck, and they would run around and deliver 'em.

[00:42:10] Track 1: Oh, that wa that was basically, um, velo, fix's pitch to the OEMs in the day. Yeah. Uh, Veli fix, uh, being a van based service operator,

[00:42:21] steve: Yeah.

[00:42:21] Track 1: I know you know this

[00:42:22] steve: to be doing a better job of that than, than maybe be, was, um,

[00:42:29] Track 1: velo fix. I,

[00:42:30] steve: model.

[00:42:30] Track 1: yeah. I had spoken with Velix a couple of times, and not only could I not understand the value to us as an o e em as a brand, but I couldn't understand a, you know, they, they required a huge upfront and, uh, investment from their franchisees to not just buy a van but outfitted a particular way and have it beli, fixed, branded.

Um, and then, you know, you're paying a, uh, I think an, um, it might have been an upfront fee and then a recurring fee, and then a percentage of your income. To this company and this company, uh, is supposed to drive business to your franchise, but really in a way, they're kind of intermediating you. And at the end of the day, you know, and the co I, I'm curious, what do you think about this?

Um, I, I had always talked, uh, spoken to the van based folks that I knew and said like, you know, at the end of the day, your, your brand is yourself and the quality of service and your engagement with your local community. And, you know, there's no big, um, company, uh, I think can substitute for that. And I think the bike space is, is that might be more so the case than in other spaces.

Like you have this particular mechanic, uh, because the difference between a good mechanic, a skilled mechanic, a mechanic who cares, uh, and, and does a good job, um, and is engaged in, in their community. The difference between that and. Somebody who doesn't, somebody who doesn't have the skills. Somebody who, you know, it could be the difference between a safe bike and an unsafe bike amongst other things.

Yeah. Um, well, so another topic that you and I have touched on in the past is, uh, you. The supply chain and risks to the supply chain. Uh, I've seen a couple of articles, I believe in your publication, uh, talking about, um, the increasing concerns about exposure to, uh, growing hostilities between, uh, the US and China over, uh, Taiwan.

And I'm curious, what have you been hearing, seeing, uh, with regards to, um, any sort of changes being made on the, uh, upstream for a lot of companies, um, both, um, OEMs who are sourcing in Asia, but then also say Taiwanese companies and so on, uh, who are producing, um, you know, what, what changes are you seeing?

Are people, is that accelerating at all with the, uh, increasingly hostile rhetoric?

[00:45:07] steve: Uh, yeah, but you know, slower than maybe I would've expected. Um, and that, you know, that might not be due to reluctance, but just the fact that it's, it's a hard task, um,

[00:45:19] Track 1: Yeah.

[00:45:20] steve: setting up a, a bike factory or, uh, in a new country and building the infrastructure around it, uh, to make that work, particularly during a pandemic.

[00:45:30] Track 1: Yeah, yeah.

[00:45:31] steve: so, you know, going back to stories I was writing two years ago, you know, I, I think I saw just recently that Velo Saddle opened their factory in Vietnam, I think it was,

[00:45:44] Track 1: Makes sense.

[00:45:45] steve: that they had been working on for like three years. Um, and then they just, they were ready to turn it on when the pandemic started, and then they just, um, sat on those plans for a couple years. But yeah, Velo moving outta Taiwan supplementing their Taiwan factory with uh, a Vietnam factory is a big deal. And, um, You know, and at Eurobike last year, I had a lot of talks with people about, them setting up different factories in Eastern Europe to serve the European market. Um, but, uh, you know, we just saw investing in a new factory in Taiwan, so, uh, there's not a, there's not a mess exodus yet, and I think people are, are finding it's, um, fairly hard to operate in some of these other countries.

Cambodia, I think, turned out to be more of a challenge than some people thought.

[00:46:44] Track 1: Sure

[00:46:45] steve: Um, you know, there's stuff moving towards Malaysia and Singapore, I think. Um,

[00:46:52] Track 1: in the.

[00:46:53] steve: Vietnam has been up and down. They had more covid problems than, than some areas, I think. yeah, it's a very slow movement. I think, you know, um, you know, Trek hasn't broken ground on a giant new factory in, in Waterloo, as far as I know.

Or, or, or in Mexico or in, uh, Bulgaria. You know,

[00:47:16] Track 1: Well, that, that's a whole, I mean, it's a related conversation, um, and a whole other can of worms that we can crack open. Um, so one, you know, we, we have looked, um, at various times over the years at what it would take, um, both for us to do more production domestically, um, but then also, um, for more production to be done domestically in a general sense.

And, uh, I'll give an example. Um, recently I was looking at, uh, you know, developing and sourcing a metal frame, either steel or titanium. Um, we'll, we'll stick with steel. It's an easier example. So, um, called, uh, a few different outfits and, uh, well one, there isn't really anyone who's mass producing steel frames in the US When I say mass producing, like doing, you know, thousand of units at a go.

Um, with the exception of maybe Kent.

[00:48:09] steve: Detroit.

[00:48:11] Track 1: Uh, Detroit bikes

[00:48:13] steve: Mm-hmm.

[00:48:14] Track 1: they, and they're serving as a contract manufacturer?

[00:48:17] steve: Mm-hmm.

[00:48:20] Track 1: Might ask for an intro at some point. Um,

[00:48:22] steve: That's Tony Kirklands,

[00:48:24] Track 1: oh, okay.

[00:48:25] steve: who bought, um, he and his partner bought time,

[00:48:30] Track 1: Mm-hmm.

[00:48:30] steve: is making carbon frames in Europe somewhere. Slovenia,

[00:48:36] Track 1: Okay.

[00:48:36] steve: of those European companies,

[00:48:37] Track 1: Yeah,

[00:48:38] steve: Um, and then that company ca