GT and Cannondale, who both fall under the Cycling Sports Group, are turning their back on the traditional model year structure and will replace it with a version that aligns itself with the calendar year. Most brands currently release new frames in mid-summer, however, following feedback from dealers, Cannondale and GT will now take dealer orders in Q4 with new models coming as the next calendar year begins.
The reason for the change mainly comes down to discounting. Dealers felt they had to discount at the start of the riding season - spring and early summer - to clear out the stock before the next model year was released under the current model.
With COVID disruptions further exploiting this model and leaving a number of bike shops without stock to sell until the new models dropped in summer this year, Cannondale and GT saw it as an opportune moment to change their model system and try to disrupt the traditional industry cycles. They said they will "take a leadership position in changing a broken system that continually leads to inventory and cash flow issues for both suppliers and retailers." Cannondale are keen to stress that while this move isn't in response to COVID, it has given them time to reflect on a new way of operating.
On top of this, if they did manage to sell out all of the old models, dealers were then left twiddling their thumbs and waiting for the new models at the busiest time of the year. An additional annoyance for shops was having to send a staff member along to a dealer launch in their busiest period, leaving the shop short-staffed in the meantime.
CSG claims there are 4 main benefits for dealers with the new model:
Improved margins - Dealers can sell bikes at full price throughout the year with no need to discount in the spring to offload stock.
Inventory at the start of the year - Dealers will have stock of new bikes from the start of the season in spring through to its peak in summer.
Easier to manage a business - Dealers can focus on selling in summer, not attending launches for new products.
Innovation aligned with consumer demand - Cannondale and GT believe that most people are paying attention to innovation at the start of the season, when its new product will just have been released.
Alongside the new release schedule, CSG is now planning on only updating mid-to-low end bikes on a two or three-year cycle. There may be colour changes to keep the line fresh but variations on spec will be kept to a minimum.
There are certainly some drawbacks here for CSG, primarily if there are mid-season updates to key components such as drivetrains or suspension, their models for that year may miss out and seem less appealing in comparison to their competition. However, the group is aware it's taking a risk but hopes to be disruptive enough to carry the rest of the industry with it. Russell Merry, General Manager of the UK market for Cycling Sports Group told
Cycling Industry News, "Clearly, it’s been too hard to be done and the whole industry has been operating a broken model for decades. This is a once in a lifetime event and we intend to help all the links in our business chain be more profitable by being the most progressive and responsive supplier."
The brands have already taken model years off their websites and will begin dealer events in October this year for next year's models.
Few in the bike industry are making big money. Those that do, like racers, have a 10 year career where they can sustain the performance needed to get awesome pay. Most people in the industry take a pay cut to work in the field they love. I left a cycling clothing brand because I could make 30% more outside the cycling industry. I didn't get a position at Santa Cruz because I was asking 15% more than what their budget was for a position. Maximizing profits isn't evil or greedy. Thank goodness we have companies trying to increase their efficiency and maximize margins for struggling bike shops facing a tsunami of online retailers.
Nothing about margins in the industry is better or worse than others. They’re pretty small margins on a pretty small market.
If companies charged less you’d either have no shops to service them because cut out the middleman or you’d have brands come out with one model in three sizes because they have to play it safe.
Something tells me the laser cat graph reading wheel path analyzing shock strokers of pb wouldn’t have the latter option
For what it's worth medium volume retail tend to operate with margins at about 33% (meaning a markup of 50% over wholesale). I would expect complete bikes to have at least a 50% margin at full msrp with aftermarket parts falling closer to traditional retail.
Also people need to realize that % is there so you can actually have a local shop and knowledgable employees. Direct to consumer business models will never true your wheel, service a complicated shock, or figure out what else is wrong with your bike.
@thenotoriousmic car dealerships are paid a bonus based off of of numbers sold, so they are incentivized to offer a discount to make manufacturer's quotas. This does not exist in the bicycling world so a discounted model on the floor comes at a large cost to the shop. Anything approaching a 30% discount on a mid-high end mtb means the shop is selling it at cost (not considering the opportunity cost of that model sitting in the floor, freight, assembly, etc.).
Bicycle shops are not making fistfuls of cash on new mtbs.
Add in that most shops give a 15% discount on any additional purchases when you get a new bike and.... Well I'm glad I don't own a bike shop.
Maybe parts are better than that though? I got a non boost set of wheels 2 years ago where msrp was 1200 and I got them for I think 650 because they had a scratch on them. I doubt this sales associate was selling me anything below cost.
Auto dealerships also make good money selling you things like extended warranties and add-ons like undercarriage protection...
I remember my first job offer outside of cycling being 2x what I was making. That gets you a lot further than 45% off on a bike.
Plus Santa Cruz and yeti are pretty damn close to ep price almost the whole year on competitive cyclist or Jenson.
@ironmonsoon602
Check your inbox mate, I’ve sent you a phone number.
Margin erosion is a major factor in the cycling industry. Once that bike is pulled from the box and assembled, margin declines. Sell a bike and give away free water bottles, margin declines. Flip the lights on in the shop and that bike is still sitting on the floor, margin declines. Entry and exit margin is a tough metric for a shop to track, but makes a massive difference when a shop is trying to unload inventory.
Cheers!
Hyperbole aside, not a single mountain bike maker/site is shaming anyone for riding what they have. The comment section and maybe your local a*sholes are. That said, companies that sell products are in the market to ....sell products. Yes, marketing is involved, but that is true with ALL consumer products. I have been through the early-mid 1990's bikes. Bikes today are vastly better in every way to bikes not that long ago and that is because if big and sometimes incremental changes. Ride your current bike into the ground, and kudos if you do, no one is forcing anyone to buy anything. There are even new tires, forks, rims, etc. out there in 26" if you want.
So, when did you become a millionaire? Which fortune 500 company is your business?
You're taking it way too literally. How bout instead of pumping out new products, perfect the ones that already exist...
The one challenge I see is if you release a new bike when no ones interested will people lose interest in it by the spring?
Mostly helping themselves at having a more efficient business model. The side effect is helping LSBs.
As long as LSBs need to keep huge stocks from January, they will still lose money.
What would really help the LBSs, and also the dealers, would be to set-up some sort of BSMs or BRs, like in other retail industries. Basically, dealers would support LBSs in destocking/selling larger unsold volumes and the manufacturers would support the dealers in giving these BSMs and/or BRs. That way, the profit margin for the LSBs would be higher(as the destocking would not be soley on their backs) and it would be more easy for a shop owner to take larger stocks, knowing that dealers will help them if that's the case.
In the end, it would be beneficial for all parts involved, as the volumes would increase. It works in retail, why wouldn't work in bike industry. Like someone said above, to a degree, this is fashion.
Back system money and back rebate.
Basically, I agree with a distributer to take 1000 pcs of whatever, which I need to sell in 60 days maximum to be profitable. If, for instance, after 50 days, I have sold only 200 pcs, the distributer will be emitting a correction invoice, thus changing(lowering) my aquisition price or negative invoice directly or I will simply invoicing him and use the money for financing sales campaigns. All of these(+similar) go into those BSMs and BRs.
It’s typical Cannondale shit to come charging through the front door claiming they thought of it first when in fact they should have just moved to this model without making any sort of mention.
Like that scene in dumb and dumber where Lloyd says “we landed on the moon!” This isn’t news and it isn’t new
Again a product is only worth what someone is willing to pay for it
Actually makes sense from every point of view. The business makes more money, the customers doesn't feel SO let down when the new model year outspecs a newly purchased bike and it's good for the planet, less planned obsolescence.
Releasing info on new models during late Q3 or early Q4 of the year makes sense.
but great idea to fix the stupidity of "model year" vs calendar year.
Also, while their discounting season will be traditional off-season in the northern hemisphere, how much more of a discount do you need to convince someone to buy a road/XC bike in the winter?
Obviously they've run the numbers and they're taking the gamble. I agree with their strategy, but am not anticipating that they will stick with this model for long once they have 1-2 consecutive years of it not "working" as they originally envisaged and retailers start complaining that they still have to discount in summer peak season AND off-season now.
What would really support this strategy is an overall lower pricing strategy that remains relatively flat throughout the year. This would be far more disruptive in the industry than changing the model-year lifecycle changeover. Imagine bike and part pricing that was so "fair" that we all paid full retail at our LBS instead of hunting for 50% off deals online?
Like car brands do it or at least used to do...
I assume if you really want to help LBS the brands should not transfer additional risk to the LBS but increase their stock levels (or the distributors) and allocate quotas to LBS. So LBS can place multiple orders a year.
they stopped making bikes way before April this year for top-selling bikes to ship in Feb and be sold out by April with no new bikes until December or later.
Icing on the cake is GT never told our shop about the yearly booking order until the night before it was due so we had slim pickings for the bikes we did end up with.
All of this on top of most of the bikes we wanted not making it out of the catalog and into our store.
Top 2 hardtail specs were eu only and not for sale in Canada and the same goes for their Ebikes this year.
The worst by far had to be when someone bought a used gt only 1 year old and gt had 1 swingarm to replace the broken one but they would not sell it to us because he bought the bike 2nd hand.
I am waiting to see if they do the same thing for a used bike that was $10 000 new. I need a chainstay and I have asked 3 times and still no answer. The big S sold me a rocker link for my status when it was 5 years old and I bought it used.
Scott will sell me parts for a bike from 2009 still but gt won't support a bike that's only a year old.
Dave from CSG: Nah, instead of fixing the most common problem in manufacturing, lets just release the product when there is no demand. Its supply demand economics 101 dude! (Attempts to fist bump Bob.)
Bob from CSG: shakes head, cries at the cost of his MBA, resigns and goes back to consulting