Consolidation grows apace

Everywhere else but the Netherlands, its becoming tougher and tougher to be a bike supplier. But is there a simple solution that could, overnight, improve all-round profitability?
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Mentioning no names, a number of well-known UK bike trade suppliers are either about to go under or will be bought soon.

One has debts of £1.75m and was put up for sale last year for £500 000. Its now reported to be available for a quid plus debts. As has been alluded to on the bulletin board a number of more successful bike trade companies have been around the plant to suss out the wisdom of taking on this famous British marque (NB its not based in Nottingham). One MD told BikeBiz today: Like everybody else we have been to see [Brand X] and have expressed interest. But theres no offer on the table as yet.

Another distribution company big into supplying a certain multiple is reported to have eleven containers full of bikes sitting on a dockside in London. The containers aint moving until bills have been paid but this company is so cash poor its currently paying off a sub-£5000 trade debt at £400 a month. Speculation has it that he former owner of the company, when it was in a different guise, is trying to set up a new distribution company to take on the brands concerned.

A large and well-known UK assembler is having trouble with deliveries because it is taking longer and longer to pay its UK and overseas trade creditors and is on credit stop with many suppliers.

One or two sexy US brands with European operations are so heavily mortgaged that the slightest drop in sales could put them into Chapter 11 bankruptcy. Their SEC filings (US Securities and Exhange Commission) make for grim reading.

One of the main lenders of a large worldwide bike group tried to line up new venture capital for the group last year but the VCs said the group was too highly geared and too much of a poor risk for most VCs to touch it.

None of this makes for pretty reading. In short, the global bike trade is imploding.

Looking on the bright side what may happen is that the multiplicity of companies operating now will be pruned right back, leaving more market share and more potential for profits for the survivors. Ideally, the ailing companies will be bought or rescued for peanuts by existing bike trade players. The bike trade DOES work to different rules to other industries and VCs and other outsiders who think they can make the bike trade adapt to standard business rules are usually in for a rude awakening within six to 18 months.

One smallish bike trade supplier who, whilst feeling the pinch, is, like many, able to continue operating independently and profitably believes the global bike trade could be made more profitable overnight were Shimano to introduce new components for an industry-wide February bike launch. In Northern Europe, and much of the rest of the world, this is a historically slack time for bike sales, and bike launches at this time especially mid to high-end launches would help to boost sales.

Bike sales would then continue into the traditional peak selling period of spring and summer. Sales of lower end product would kick in during the Autumn and pre-Xmas period. Retailers could then have clear out sales in January in time for the next February bike launch date.

Sounds too good to be true. Vote for this option on our online poll, or vote it down, its your choice.

And speak your mind on the bulletin board. But please dont speculate which companies are being alluded to above.

PS

All is not doom and gloom. Some of the traditional bike brands and supply companies may be under pressure but there are many customer-focussed, aggresive, go-getting, suppliers out there including some long-established bigger companies who continue to move the marketplace with their innovations, their verve, their ambition, and their enthusiasm.

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