It’s crystal ball time. The 2024 retail season is over, and lots of people in my world are wondering aloud what 2025 is going to be like on planet bike.
A quick recap on 2024. It was bad. The demand for bikes was low, following on from the pandemic seasons when demand spiked. Suppliers over-forecasted and that created a massive inventory glut and subsequent stretch of relentless discounting that destroyed retail margins and punished everyone by diverting what demand there was into that excess inventory. So everyone in the industry was hurt by it. Everyone has been waiting to see if the inventory glut has dissipated enough to get the bike business back to “normal.”
So, will 2025 be normal?
I’ve done some research, listened to some smart people, and applied the basic economics education I have to come up with an answer. That answer is no.
Here’s where we are. Bike shops, in general, are not currently overstocked. That’s good news for them. Suppliers, unfortunately, ARE still sitting on perilously large inventories, and that’s a time bomb that more or less has to go off at some point.
Even as 2024 ebbs away, both Rocky Mountain and GT Bicycles have announced “restructuring” or “streamlining,” with GT ceasing production of new bikes. On the supply side, I expect these not to be the last chickens returning to the roost.
The shops have, again by and large, made better choices over the last six months. They’ve resisted the pressure to take more stock. Because margins suffered so much last season, cash flow isn’t great. The shops aren’t sitting on reserves they can deploy to take advantage of wholesale discounts AND they want more control of their destinies. That means getting to inventory levels and carrying costs that make more sense relative to the demand they expect. Even if demand reverts to the mean, it doesn’t make sense to most owners to overstuff the stock room.
So that leaves suppliers holding the bag, which, if you’ve been following this story long enough, you know they just won’t do. They are also, increasingly, cash poor, and with shops opting to get off this merry-go-round, they’re going to have to come up with some creative solutions.
Also, the suppliers aren’t the most creative.
They’ve been addicted to cramming their forecasting mistakes into the retail channel for a long time, and the only other button they’ve got on their control panel is DISCOUNTS. I expect to see a lot of friction between suppliers going direct-to-consumer with discounts, and retailers who want to get more margin out of their own sales this season.
The exception will be the company stores. I’d expect to see the big companies continuing to try to own as much of the retail landscape as possible, though that expansion will slow. As I’ve already said, the suppliers aren’t flush with cash and interest rates are still relatively high.
And that brings us to tariffs. We’ve all heard tariffs are coming, and that may be true, but I don’t think anyone can tell you, confidently, how they’ll affect the picture. What tariffs add to the equation is uncertainty, and I think we all know how uncertainty plays out in the economy. It tightens things up.
The incoming US administration will no doubt exert some very real pressure to lower interest rates, and who knows? Maybe some freeing up of cash will make the bitter pills yet to be swallowed go down a big easier. Maybe 2025 will be a great year for bikes.
But my crystal ball suggests there’s more rough road in front of us. That may be good for consumers. There should continue to be hard downward price pressure, assuming that’s not offset by higher prices as a result of tariffs.