So it wasn't just my imagination when I looked up some local bike shops I used to frequent and found they had all been bought up by Trek. My small bike fleet was mostly Cannondales, a brand which appears to have its own unhappy story.
There’s another key player not noted here: the middleman/distributor. Shimano and SRAM don’t mainly sell direct to small shops, QBP (Quality Bike Parts) is basically the monopoly distributor or many components and largest supplier other than the main brand to stores. All-city, salsa, and most of the small foreign Made “American “ brands are actually owned by QBP, can’t forget about the, when looking at the bike industry.
“Spokes was previously a neutral vendor - sold multiple BIG brands (Giant, Trek, Specialized) but also some small brands. Now will only be a Trek store."
Is that how the free market works now? Block the competitor from selling products instead of making a better product. Also, make sure the competitor can't get parts to make their product. It's kind of like winning the 100 yard dash by tripping the guy in the next lane, or having your buddy prevent him from entering the stadium. That would normally be against the rules....but guess what - they got rid of all the rules because they say rules limit "freedom" (the freedom to cheat).
A "free" market is not free from rules, it is free to ALL sellers and buyers to participate in the market, not just the big ones. Economists are not stupid, they know that but many pretend not to.
One thing that I am surprised is legal is the ability of bike companies to dictate to independent retailers who they can sell to. For example some years ago I wanted to buy a Surly bike here in Australia but they were twice the price they were in the USA. When I tried to buy from US retailers they told me they were not allowed to sell to overseas customers. Eventually I found a small independent who was happy to ignore that nonsense and sell to me as long as I organized shipping myself. Bike was 50% of what it would have cost me to buy in Oz.
In Canada, the situation is even worse. There seems to be a monopoly of distributors. Prices for parts, accessories and clothing are obscenely high (regularly twice as expensive) compared to anywhere else, and choices are absurdly low. Often, when I search for a specific product, google would return results that seem to be from online stores by different independent bike shops but you quickly realize that it's the same choices, same inventory and same price, no matter the store. Even the webpage layouts for the products listing are almost identical from store to store.
I don't see the bike market as nearly as bad as other roll-ups. It is always concerning when there is vertical integration, such as manufacturers buying their retail outlets and cutting off the competition's market access. But there are a lot of bicycle shops out there; a friend owned a shop here in Portland, Oregon, and about 10 years ago he told me that there were about 90 shops here and that competition was brutal - he since closed. He was a Campagnolo specialist - a company that once dominated the high end (and is still there) but Shimano out-innovated and under-priced them. Shimano now dominates because they offer a wide range, from inexpensive to high performance, with great value at each level - and not by just rolling up the competition. There is a lot of competition for components and frames, aided by standardization. I'm not really seeing the component side as being a problem. In fact, innovation by outsiders is set to disrupt the market: Gates belts (instead of chains) with internally geared hubs (by Shimano, SRAM, and other premium suppliers) are set to replace derailleurs, chains, and gearsets/hubs as quiet, easy to use, low maintenance solutions.
The current growth in the bike market is with ebikes, and many of them are purchased off the internet (as I did last year). It turns out that with an electric motor to help it is much less critical to have many gear options or a perfect fit for a riding position so that fits with internet purchasing. The one problem with that is that local bike shops are increasingly unwilling to work on bikes not bought from them, and many owners are reluctant to work on the electrical systems. Still, with the premium pricing from the bricks and mortar shops I don't see anything but growth in direct sales.
Well written piece, but would contend that direct to consumer is not as niche as Stoller claims, and Canyon is already roughly the fifth biggest brand, right behind the big four (Trek, Specialized, Giant, Cannondale). There are other D2C brands and outlets as well, especially in the rapidly growing cheap ebike sector.
While I'm no friend of monopolies, Shimano is very very good at making products. There have been some groupset makers but they've made very little headway because while they are a bit cheaper, their quality is lower, and ultimately the value proposition is worse. Microshift is one example. Electronic groupsets like Matt mentions may have some monopoly pricing, but they're still limited to a small enthusiast market. It is concerning that Shimano is abandoning it's high end mechanical groupsets (which cost far less than their electronic gears), though some would say that's simply because there's nothing left to improve there.
It's plausible that Trek is buying up shops to shore up it's brand against Canyon, while acquiring scale to get more leverage like Matt says.
This bolsters your case more than anything, but... "so the inability to get a bike into a local store means that Trek can foreclose competition from rival brands, especially the small new American ones like Kona, Surly, and All-City. " None of those brands are small independent companies anymore. Kona was just bought up by Kent Outdoors, and Surly and All-City have always been house brands of QBP.
I'm a runner. I also cycle. Both industries have a monopoly problem in retail. I think it's quite a bit worse in cycling, but you may want to look into running specialty stores, too.
In the early 2000s, Richmond, VA had 3 independent running specialty shops: 3sports, Road Runner, Runner Bill's. Now? We have 1.
2 of the 3 above stores failed. Another was bought out by Jack Rabbit Sports - which was then bought out by Fleet Feet. The new independent store - Lucky Road - is facing competiton from 3 Fleet Feet locations. You could say they've flooded the zone.
This isn't a good thing. Running specialty stores are community hubs. They're key to organizing group runs, supporting local races and running clubs, and promoting the sport. Corporate conglomerates - even if operated by locals - won't do this like an independent store would. That's bad for running as a sport, as an activity, and ultimately for people's health.
I grew up in a little town called Yardley, Pa and its a small rich little town but I always wondered why the bike shop there costs so much and now I know why. These monopolists will capitalize in a town like Yardley. But may I ask, what can local government do to combat the monopoly movement?
Mike's Bikes, a Bay Area chain, was bought last year by Pon Group, owners of Cervelo, Santa Cruz, and other bike brands: https://www.bicycleretailer.com/retail-news/2021/08/18/bay-area-retail-powerhouse-mikes-bikes-sold-pon-group-owner-santa-cruz-and.
So it wasn't just my imagination when I looked up some local bike shops I used to frequent and found they had all been bought up by Trek. My small bike fleet was mostly Cannondales, a brand which appears to have its own unhappy story.
There’s another key player not noted here: the middleman/distributor. Shimano and SRAM don’t mainly sell direct to small shops, QBP (Quality Bike Parts) is basically the monopoly distributor or many components and largest supplier other than the main brand to stores. All-city, salsa, and most of the small foreign Made “American “ brands are actually owned by QBP, can’t forget about the, when looking at the bike industry.
“Spokes was previously a neutral vendor - sold multiple BIG brands (Giant, Trek, Specialized) but also some small brands. Now will only be a Trek store."
Is that how the free market works now? Block the competitor from selling products instead of making a better product. Also, make sure the competitor can't get parts to make their product. It's kind of like winning the 100 yard dash by tripping the guy in the next lane, or having your buddy prevent him from entering the stadium. That would normally be against the rules....but guess what - they got rid of all the rules because they say rules limit "freedom" (the freedom to cheat).
A "free" market is not free from rules, it is free to ALL sellers and buyers to participate in the market, not just the big ones. Economists are not stupid, they know that but many pretend not to.
The most recognizable bikes around here are BlueBikes for short-term rent. That is a government supported Monopoly.
E-bikes are a huge innovation.
Local bike shop Bike Gallery in Portland, OR was bought up by Trek.
BikeSource was purchased by Specialized not Trek.
Bike brands have always “owned” the shops due to minimum inventory purchase agreements and financing.
One thing that I am surprised is legal is the ability of bike companies to dictate to independent retailers who they can sell to. For example some years ago I wanted to buy a Surly bike here in Australia but they were twice the price they were in the USA. When I tried to buy from US retailers they told me they were not allowed to sell to overseas customers. Eventually I found a small independent who was happy to ignore that nonsense and sell to me as long as I organized shipping myself. Bike was 50% of what it would have cost me to buy in Oz.
In Canada, the situation is even worse. There seems to be a monopoly of distributors. Prices for parts, accessories and clothing are obscenely high (regularly twice as expensive) compared to anywhere else, and choices are absurdly low. Often, when I search for a specific product, google would return results that seem to be from online stores by different independent bike shops but you quickly realize that it's the same choices, same inventory and same price, no matter the store. Even the webpage layouts for the products listing are almost identical from store to store.
I don't see the bike market as nearly as bad as other roll-ups. It is always concerning when there is vertical integration, such as manufacturers buying their retail outlets and cutting off the competition's market access. But there are a lot of bicycle shops out there; a friend owned a shop here in Portland, Oregon, and about 10 years ago he told me that there were about 90 shops here and that competition was brutal - he since closed. He was a Campagnolo specialist - a company that once dominated the high end (and is still there) but Shimano out-innovated and under-priced them. Shimano now dominates because they offer a wide range, from inexpensive to high performance, with great value at each level - and not by just rolling up the competition. There is a lot of competition for components and frames, aided by standardization. I'm not really seeing the component side as being a problem. In fact, innovation by outsiders is set to disrupt the market: Gates belts (instead of chains) with internally geared hubs (by Shimano, SRAM, and other premium suppliers) are set to replace derailleurs, chains, and gearsets/hubs as quiet, easy to use, low maintenance solutions.
The current growth in the bike market is with ebikes, and many of them are purchased off the internet (as I did last year). It turns out that with an electric motor to help it is much less critical to have many gear options or a perfect fit for a riding position so that fits with internet purchasing. The one problem with that is that local bike shops are increasingly unwilling to work on bikes not bought from them, and many owners are reluctant to work on the electrical systems. Still, with the premium pricing from the bricks and mortar shops I don't see anything but growth in direct sales.
Well written piece, but would contend that direct to consumer is not as niche as Stoller claims, and Canyon is already roughly the fifth biggest brand, right behind the big four (Trek, Specialized, Giant, Cannondale). There are other D2C brands and outlets as well, especially in the rapidly growing cheap ebike sector.
While I'm no friend of monopolies, Shimano is very very good at making products. There have been some groupset makers but they've made very little headway because while they are a bit cheaper, their quality is lower, and ultimately the value proposition is worse. Microshift is one example. Electronic groupsets like Matt mentions may have some monopoly pricing, but they're still limited to a small enthusiast market. It is concerning that Shimano is abandoning it's high end mechanical groupsets (which cost far less than their electronic gears), though some would say that's simply because there's nothing left to improve there.
It's plausible that Trek is buying up shops to shore up it's brand against Canyon, while acquiring scale to get more leverage like Matt says.
https://www.baltimoresun.com/business/bs-bz-race-pace-bicycles-sold-trek-bicycles-20220110-xqfnohvbnbbudpknfwogex3vfu-story.html
This bolsters your case more than anything, but... "so the inability to get a bike into a local store means that Trek can foreclose competition from rival brands, especially the small new American ones like Kona, Surly, and All-City. " None of those brands are small independent companies anymore. Kona was just bought up by Kent Outdoors, and Surly and All-City have always been house brands of QBP.
I'm a runner. I also cycle. Both industries have a monopoly problem in retail. I think it's quite a bit worse in cycling, but you may want to look into running specialty stores, too.
In the early 2000s, Richmond, VA had 3 independent running specialty shops: 3sports, Road Runner, Runner Bill's. Now? We have 1.
2 of the 3 above stores failed. Another was bought out by Jack Rabbit Sports - which was then bought out by Fleet Feet. The new independent store - Lucky Road - is facing competiton from 3 Fleet Feet locations. You could say they've flooded the zone.
This isn't a good thing. Running specialty stores are community hubs. They're key to organizing group runs, supporting local races and running clubs, and promoting the sport. Corporate conglomerates - even if operated by locals - won't do this like an independent store would. That's bad for running as a sport, as an activity, and ultimately for people's health.
I grew up in a little town called Yardley, Pa and its a small rich little town but I always wondered why the bike shop there costs so much and now I know why. These monopolists will capitalize in a town like Yardley. But may I ask, what can local government do to combat the monopoly movement?