State of the Industry and Coming Challenges

My daily work is as a PLM. I’d love to start a serious conversation about what trends are seen in the “high-end”/'enthusiast" custom market and where you’re honestly expecting to go in 2024.

  • For most bigger brands 2022 and 2023 were really difficult. Did the custom brands experience the same thing?
  • In MFG we got pinched on raw materials (ABS, magnets, etc). What did/do you experience now? How far out are you planning for changes in costs? (e.g. we provide a yearly forecast and update monthly)
  • Cost of acquisition skyrocketed during 2020 - 2022. It’s lower now but still quite high and limits profitability. How does this apply to your biz?
  • The return on Facebook/Instagram investments tanked (ad purchases, stories, etc). TikTok was better but is already starting to feel saturated.

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Thoughts from a finance guy that’s missing out on MADE so I’m cruising the forum instead:

  • Supply side: The supply chains for mass market vs custom overlap some but also deviate quite a bit. Especially if components are excluded. We pay for raw material (metal) cost through Paragon/Columbus etc. so that could be easily tracked. Food for thought: high inventory = buyers market, acquiring stock to build bikes should continue to get cheaper.

  • Margins: For a custom frame, materials are proportionally low and markup/labor/owners pay proportionally high, as components of the sale price. Meaning supply chain price increases have a smaller impact on the bottom line.

  • Customer side - economic purchasing power: Covid was economically hard on some people, but also prosperous for others. Customers that can afford custom bikes are largely in the prosperous group. They’re also least affected by this recession that isn’t happening and the interest rate increases. Paying cash (or paying off credit card monthly) = interest rates don’t matter. Leaving $5k-$10k purchase on a credit card for an extended period = interest rates matter a lot.

  • Customer side - Demand: Others can answer this better, but gut is telling me it’s stable. Exposure is probably increasing but some people are probably pulling back discretionary spending.

  • Risks: Market Saturation/Reputation: How many people on the forum started building during Covid? (Me raising my hand, I don’t sell anything though). Customs bikes are a decent sized market but still small in the big picture. A large increase in builders - not just a couple but many dozens, would 100 even be a stretch? What serial number are the Cobra frame fixtures up to in only 3 or 4 years? - does thin the market. And if those new builders sell goods of a lower standard, (HUGE asterisk, all speculative, haven’t heard anything like that), consumer demand could take a hit.

  • Fun fact from one of your slides above: Many companies are more or less required by their banks to sell off the portion of their inventory above 12 months of expected sales at deep discounts or at cost. Banks stop lending money to companies with too much inventory on hand. How can you pay back the bank if you can’t sell your goods? If you can’t sell it, can anyone? The slide shows 14 month inventory levels. Get ready for some deep discounts.

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I think Joe posted a video (story or reel?) and I believe the Cobra frame fixture serial numbers were in the mid-90s. He sold 3 last week including 1 to Canyon which I thought was very interesting. Good for Joe and Cobra!

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I’m definitely not a finance guy and appreciate the insight!

Ooooh I’ve been seeing deep discounts for the past 10 months (40%+) and significant discounts (25%+) for the past 14. I actually just did a quick UK comp yesterday and saw that a few brands have raised their MSRP by 5-10 GBP in order to make the discount even more attractive – I wonder if that really works?

I’m not sure how far brands can go and still make some profit. Between buy-back $$, cost of acquisition, high shipping rates through Q1/Q2 things are rough.

As for 2024 + Demand: I’m working on 2 things for a big box retailer and the forecast has just been halved. I’m sure their data team is far stronger than ours so I’m taking this as a gentle sign that the bike industry probably won’t be out of the woods until 2025 – at least for the recreational cyclist. For the “enthusiast” I’d guess there’s still a bit of pent up demand . . . my only source of data for this, though, is looking at Shimano, BTI, JBI, QBP’s out-of-stock list and the current delivery dates. IIRC in 2021 Tektro (OEM not aftermarket) stated that they were at capacity/sold-out through Q3 2023

With only anecdotal evidence I think the boom in E-Bikes will help small frame builders in an indirect way.

Almost every bike company of all sizes is dumping recourses into E-Bikes and with the squeeze on resources happening this has forced them to almost totally stop building bikes for the core enthusiast.

This problem is years in the making. Three years ago I broke my steel hard tail and the only big name option was a Karate Monkey. That frame is $1000 now…

This squeeze lead me to buy a Reeb and that made me interested in frame building.

I think there are a lot of core riders that are being left out with the trends and they will be turning to small companies to get what they want

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I am definitely noticing a down turn here for myself in Australia. I’ve chatted with a bunch of distributors and bike shops and they are all looking for customers.

I’ve reached the end of my build que and have had very little enquiries this last 6 months. The ones I’ve had have mostly been weird project bikes like a 36" wheeled road bike and tandem cargo bike. I could take those on but I’m just not interested in going further down the weird project bike path as a business. Stand alone projects they are cool as hell but my time is limited between my day job and my side hustle.

I’ll use the down time to refine my designs and rebuild my jigs and clean up my workshop etc. Time I just don’t get when I have a bunch of bikes to build.

I do think that rash of customers we had through the covid years means they are a year or two out from the big brands customers being ready for a new bike. Hopefully by then the new to the scene punters have discovered other brands and our corner of teh market as well. It’s hard yards here as our market is relatively small and the number of people who one, don’t know about custom bikes, two, don’t trust we can do better that the big marketing companies or three, don’t see value in a niche market frame. That’s on me to educate as much as possible but with a zero ad budget it’s very difficult to get that message out.

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