It's less a crystal ball, and more the types of predictions you make after hour #4 on the bike (or beer #4 in the living room.) The spirit should be directionally right, even if the exact specifics are less so…
The Bike Industry Covid Hangover Will Be Brutal:
As has been documented again and again, the social impact of Covid made 2020 perhaps the strongest year in the history of the industry. Between PPP lucre and wild demand for bikes, both revenues and profits hit unprecedented and unanticipated peaks.
Alas, the piper must now be paid. Consider these dynamics going into 2021:
- Due to fantastic 2020 sales, on-hand inventory is scant at all levels (retail, distribution and manufacturing.)
- No one is being conservative in their 2021 demand projections. We’re amidst the biggest bike boom ever. Who wants to miss out? Because of this, the near-universal approach is to order 2021 inventory at sky high levels.
- Product demand is straining manufacturers like never before. Their supply chains weren’t built for quantum year-over-year growth. Factory expansion takes time…that is, if you’re even willing to invest in sizable capacity growth. After all, what happens if the boom withers? Because of this, production leadtimes are growing 4x-5x. That is, containers of components that would formerly take 75 days from order-to-delivery are now approaching 300 days.
- Everyone knows that everyone is ordering more than ever before. Everyone knows that leadtimes are spiraling out of control. The behavioral consequence is predictable: Brands know they’ll get less than they want and it will take longer than they want. So they order even more, further strangling the supply chain.
How will it all play out? The oldest adage is the only adage: Cash is king. Whether you’re a bike shop or a bike brand, in all likelihood you’re having to accept the fact that you’ll get far less inventory than you planned in the first half of 2021. With minimal inventory comes minimal revenue. If you weren’t able to sock away enough cash from 2020 to pay the bills in 2021, terrifying times await.
Expect to see bike shops shut their doors (or get gobbled up by their biggest creditors.) Expect to see vulnerable brands shut down. Expect to see price increases like you’ve never seen before. Expect to see the awed sense of dumb luck at being in the bike biz in 2020 morph into dumbfounded shellshock in 2021. With supply and demand this disjointed, the consequences will be severe.
The Best Dead Component That Won’t Be Resurrected:
Let’s not refer to them as “quick release skewers.” After all, the advent of disc brakes made it so you can’t flip 'em open like in days of yore. Still, a few brave holdouts like DT Swiss still offer thru axles with handles so you won’t get stranded if you cut a tire and you forgot your 5mm Allen at home.
Why did the handle die a few years back? Why must you now use a wrench to remove your thru axle? Part of it is tubeless technology. Sealant works for most punctures, most of the time – so pulling off your wheel in the middle of a ride is a far rarer need.
And part of it is trends in bike design. It’s all about integration now. Pretty soon, cables will be 100% internal. Stem, headset, headtube and fork will all flow as a visual whole. The front derailleur is becoming obsolete, and no doubt the cassette and rear derailleur will be next. The ethos of super-clean integration, it seems, won’t stand for the brutalist utility of the axle handle.
It’s a loss we’ve mourned. We get misty-eyed about the lore of the Croce d'Aune. We feel respect for the feat of the lightning-fast pit stop. We wish the handle would make a comeback, but we know it never will.
We Will See No Form of Cycling Marketing Remotely As Cool As This:
Our industry is full of “creators” i.e. nascent filmmakers who wring cash from the big brands for film projects and such. The output makes for fine distraction, as shown by Specialized and Rapha this year. Watch it for five minutes, talk about it for five minutes, then it’s gone forever – replaced by the next would-be Sundance entry…So much cash for such an evanescent thing.
Shouldn’t marketing go beyond? Shouldn’t content integrate itself into the lives of customers? How do content and activation become the very same thing?
We’ve never seen it in cycling (have you?) but brilliant examples exist in a way that blows so far past anything seemingly imaginable from cycling marketeers…
Company most likely to go on an acquisition spree: Zwift
Any discussion of Zwift must begin by giving credit where it’s due. It’s nothing short of miraculous that the company took one of life’s most dreadful activities – riding on an indoor trainer – and made it tolerable. Through “gamification,” Zwift eased our surrender to the Gods of Winter. Though it must be asked: Who amongst us finds game-like joy? Regardless of what’s projected on the screen, indoor training is Sisyphean donkey work. And that’s the great flaw in Zwift’s business model, regardless of $1 billion “unicorn” valuation ascribed to the company in its recent Series C capital raise.
Now $450 million richer, what will Zwift do to broaden its base, to deepen its relationships with its customers, and to strengthen profitability? The obvious investments are, well, obvious: Wall-to-wall advertising drives awareness, growing the mileage of its virtual worlds improves the online experience, and upgrading the graphics gets it closer to the gaming standards set by EA, Ubisoft, Rockstar, et al.
Less obvious, though, is the need for Zwift to be brave in venturing beyond its core competency of software engineering. It’s not really a matter of which revenue stream – software or hardware – is more compelling. Rather, the core issue is that in 2021 the genuine technology winners are companies whose products represent full integration of software and hardware.
And while Apple and Tesla are golden illustrations of this full-ecosystem approach, two other brands represent Zwift’s most formidable competition due to their current technology and future potential: Peloton and Garmin.
Zwift’s first acquisition should aim to address its lack of in-home hardware, in order to put it on similar footing to Peloton. As it relates to market-tested hardware development, at the moment Zwift is no place remotely near Peloton, and even lags behind second-tier players such as Echelon Fit and Nordic Track.
In the classic conundrum of “build vs buy,” the latter makes far more sense here for one key reason: As mentioned previously, Covid is ravaging supply chains (after all, even Peloton can’t get its bikes made.) The idea of designing, prototyping, testing, and producing an all-new indoor bike in the current environment would be madness, especially if speed-to-market is a priority.
One attractive approach to taking on Peloton would be for Zwift to consider an acquisition of Stages Cycling. If you’re like most folks, when you think about Stages you imagine crankset-based powermeters for outdoor riding, not indoor bikes. But did you know that Stages manufacturers the indoor bikes for Soul Cycle and Equinox? It seemingly has a stable supply chain and a reputable line of products. The only weakness of Stages, it appears, is that it lacks in the fancy interactive software and UI you get in Peloton and others. But isn’t that a problem manageably solved by Zwift’s army of software engineers? It feels like a marriage of complementary strengths indeed.
Zwift’s second acquisition should aim to address its lack of relevance outside the home studio. Another truism of 2021 is the need for brands to be “always on.” Yet, currently Zwift is present in its customers’ lives perhaps 1 hour a day, 3 or 4 days a week (much less so in warmer months.) That’s not “always on” – it’s “barely on.”
The Zwift focus is on cycling and running. To be a technology company at the front and center in the life of a rider, you need to be the computer on their handlebar. The running equivalent is the wristwatch. The GPS and performance data must be accurate, the iOS app/software platform behind it must be sharp.
The shining star here is Garmin, with its market cap of $23 billion. While historically the meat of its business has been aviation, nautical and automotive – endurance sports is becoming a bigger thing for it. It acquired Tacx in early 2019, and it’s clear that bridging the realm between indoors, outdoors and wearables is a serious priority.
The insurgent brand best positioned to do the same, do it faster and do it cooler is Wahoo. Indoors, the Kickr family of smart trainers are best in class, and its Sufferfest iOS indoor training app is surprisingly sophisticated. Outdoors, the Wahoo Elemnt and Roam GPS computers rival Garmin for functionality and quality, with an arguably superior iOS app. And for runners, they have the Elemnt Rival wristwatch.
Unlike the $23 billion valuation of Garmin, Wahoo is still "middle market", i.e. possibly affordable. But every day Zwift waits, the price only goes up.
The Zwift brand has been thoughtfully cultivated, its following is undeniably impressive, and its online experience succeeds in fitting the needs of everyone from novices to pros. Yet its greatest challenge lies ahead as it considers how to meet its “unicorn” potential. It’s tough to see how it gets there (at $180 in best-case revenue per customer, per year) without a dramatic investment in hardware. Zwift has hardly made a misstep up to now. The toughest steps await.
2022 Cyclocross Worlds Anticipation Will Go Defcon 5
On January 29-30, 2022, Fayetteville, Arkansas will host the UCI World Cyclocross Championships. It’s a mere 30 minutes from Allied HQ, and we’re already counting down the days. Our hope is that it’s a post-vaccinated globe by then, and we’ll be welcoming countless thousands of fans from across the world – all overdue the tastiest dish of all – mud, frites, mayo, beer, songs and joy.
The racesite is Centennial Park, an amazing city park in the last phases of development. It’s over 200 acres of wooded hillside with a permanent world-class cyclocross course, a permanent world-class cross-country MTB course, upwards of 10 miles of purpose-built singletrack, plus multiple gravity lines. Built by one of the preeminent trail crews in America – Rock Solid of Copper Harbor, Michigan – it’s a site for all cyclists (and bike racing fans) to treasure.
One of the great cruelties of 2020 was how it forbade our ability to look forward to anything – ‘Cross Worlds is our rock. It’s an immovable beacon of hope and anticipation. Make plans to join us. Bring your gravel bike. Bring your mountain bike.
Mass Start Gravel Races Will Return, and Big Sugar Will Become an Instant Classic
Sponsor expos? Probably not. Post ride kegger? Don’t count on it. But the races themselves will come back in 2021 – no doubt about that. Forget the social spectacle. Instead it’ll be the purity of pinning on a number, suffering like hell, then going home. Straight, no chaser.
The final monster gravel race on the calendar is the Big Sugar, right here in Allied’s hometown of Bentonville, Arkansas. While 109 miles is short by gravel standards, these aren’t ordinary miles. The Big Sugar takes place in the middle of the Ozarks -- an endless expanse of punchy climbs, deep red dirt, and softball-sized stones. It happens in late October, with no small chance of rain. It turns what’s sure to be a grind into an altogether mystical experience of self-abnegation.
The cruelest way to climb 8,000ft is one 200ft climb after another. Unlike bigger mountains where a moment of weakness liberates you to go slow allllll the way to the top, Ozark climbs rarely take more than a few minutes. The shame of being dropped transforms into anger while the group lingers in sight. The opportunity to dig deep to rejoin confronts you over and over again. There is no steady state here.
For the pros it’s sure to be a slugfest. Most races put a premium on power or endurance. The Big Sugar demands heaps of both. And for the rest of us…it’ll be a day you won’t forget, even though you might want to.
The Rise of the Utility Bike Will Go Full Throttle:
The most persistent symptom of Covid fatigue? Allied Dreams of Cities – the biggest ones we know. In pre-virus times, we’d cook dinner on the weekends with college football in the background. Now it’s Slow TV.
Little has brought more pleasure than Tokyo at night in the rain. And Tokyo in daytime. And on its sunny days. There’s an ambient thrall to the lanterns and neon and slow-panning contemplations of ramen bowls and fish-on-ice.
Clouds over the Manhattan skyline? We’re ashamed to admit how far you can get into 10 hours of it.
Covid might’ve been the impetus for people to flee major metros. Surely in the not-to-distant future, nostalgia for the walloping buzz of it all will bring people back in desperate droves. A flood of untapped vacation dollars awaits. Zillow servers will doubtlessly run hot from people in search of below-market condo steals.
This re-adoption of urban life will see countless jettisoned habits brought back into practice. But some, perhaps, will return more slowly than others. Just as the stairs might look more attractive than the elevator, the case for the subway car will be harder to make. Cities are making aggressive investments in active transportation infrastructure, scooter-share networks continue to explode, eBikes get cheaper, and various forms of city-centric bikes gain an ever-higher profile.
The bike brands that stand to benefit the most from this new normal are a mix of the long-established and the recently-founded. It’s telling that each of these brands stresses direct-to-consumer sales. The idea of selling through typical bike shops is either completely eschewed, or sparingly used.
- Pedego was growing like mad prior to Covid thanks to its franchise model (which led to rapid and widespread expansion) and affordable price points for bringing eBikes to the masses.
- The small wheels and folding design of a Brompton make it ideal for the tight confines of big city, studio apartment living. Even more, its sophisticated brand is pitch-perfect for urban dwellers.
- Rad Power Bikes has the widest range of eBikes on the market, with prices half (or less) than eBikes you’d consider from Specialized or Trek. The brand is honed for millennials – get on their site and you feel like you’re in a Michelob Ultra ad.
- Yuba Bikes make the most impressive range of cargo eBikes we’ve seen. How many groceries can you fit in a Yuba? All of them.
Tao Geoghegan Hart Wins the Tour de France:
OK, ok that’s a clickbaity headline. But the underlying truth has some merit. The all-time most likable winner of a Grand Tour has a hard name to pronounce, but a heart of gold that makes him the easiest rider to root for in the whole pro peloton. For anyone who lives in middle of a major metro, the rise of Tao is proof that lack of open roads and real climbing is no match for native talent and a ferocious passion for the bike. His evolution from London crit-racing grom to King of the Giro d’Italia was a story that brought heaps of joy across the world. It was the closest we got to a genuine antidote to the slings and arrows of 2020. The BBC wrote a super article (with great photos) here.
History doesn’t look kindly upon riders who win the Giro as their first Grand Tour, then try to achieve the same success in Le Tour. In fact, in the last 60 years it’s only happened four times: Merckx, Pantani, Roche, Nibali. Some stout names there. Which makes us want to see it happen for Tao that much more. Here’s to hoping (in 2021 or beyond) he becomes #5. A serious QB controversy awaits at Team Ineos.
The Tokyo Olympics Will Happen, and the Omnium is the Race You Must Not Miss:
The best bike race at the 2016 Rio Olympics (and maybe the whole 2016 season) was the Men’s Omnium, won by Italy’s Ella Viviani. It was made up of six different events, and not unlike a stage race, the momentum swung wildly until it culminated in a nasty crash courtesy of Mark Cavendish.
The races are like a short, wholly anaerobic Fight Club – the best-possible cure for the drowse of a 6 hour road race. Even better for 2021 is that they’ve stripped out the time trials from the Omnium and made it four mass start events instead. Don’t miss out.
Normalcy Is Coming, But It’s Not Here Yet:
A saying to live by: Expectation is the killer of joy. And while 2020 felt like one endless hangover, we're resisting the temptation to start counting down the days to mass vaccination. Patience is a virtue. Friends, hang tough. Do what you’ve gotta do keep your chin up.