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Welcome to 2009
By Tom Demerly.

From Left to Right, Jim Felt of Felt Bicycles, Dan Empfield of Slowtwitch and Tom Demerly of Bikesport.

As a consumer, the more you know about the “inertia” in the bike industry the more informed you can be about when to get the best selection and pricing on a new bike. The shifts that happen in the cycling industry are interesting to watch and this is one of the most interesting eras in two decades- and a strong opportunity for consumers.

There are three prominent factors affecting how we’ll buy bicycles over the next year, what we’ll pay for them and how easy they will be to get. These factors will also influence what we’re comparing and ultimately buying when we do go shopping.

First, the economy. The effect of fuel prices on shipping and freight costs combined with the shrinking power of the U.S. dollar against foreign currencies will accelerate bike prices throughout 2009. Add to this the concept that bicycles are a commuter alternative to gas powered vehicles and the value of a new bicycle is rising faster than home values are falling. In the last “recession” Forbes magazine listed bicycle retail as one of 500 “recession proof” industries. When discretionary income shrinks across all income ranges a bicycle becomes a viable alternative to other recreational vehicles such as boats, motorcycles, sports cars, personal watercraft, etc. These factors make the bicycle more valuable than ever across a broad range of categories. Bikes, as vehicles or as luxuries, reside at the bottom end of any vehicle purchase: Millionaires buy a $10K bicycle instead of a $200K car or boat. D.I.N.Ks buy new road and triathlon bikes instead of jetskis, a time share or a new SUV. People who just got a lay off notice, have little or no savings and scrape to make the bills may park the car and buy an inexpensive commuter bike. Rich or poor, bicycles still sell.

Second, rising costs in the middle of the model year during 2008 tightened bicycle supply in niche categories including road and the fast growing triathlon category. Add this to an increase in demand and values of bicycles stayed high throughout 2008. Bike companies that calculated retail prices based on what they were paying for materials, freight and manufacturing before the first quarter of 2008 got an unpleasant surprise as costs increased steadily throughout the following two quarters. Costs on 2008’s went up at the supplier level, but retails had already been established. The result was manufacturers couldn’t afford to bring in more 2008’s at 2008 prices. The solution: 2009 model year bicycles are on the floor of some bike shops now- at prices adjusted upward based on costs and demand. In addition to this, manufacturers and retailers are trying to de-condition the consumer from buying “year-end” models at a discount by drying up the supply of current year bikes before the end of the year and introducing new models earlier.

Third- the good news: Consumers have more choices, all of them better. Component variety in the bike industry is at a twenty year high with new and established component companies fighting for market share. The component wars are competitive and it is driving quality up.

At ground zero are the new guys on the block, SRAM, with their SRAM Red component group. The news about SRAM Red is good when compared to other established and even future component kits. In short, SRAM Red works very well, is the lightest full component groups available as of this writing. SRAM Red incorporates features and benefits consumers want like carbon fiber parts and ceramic bearings. SRAM may have timed the introduction and compatibility of SRAM Red superbly as Shimano gets ready to introduce their new 2009 Dura-Ace 7900. Bicycle company product managers have suggested that Dura-Ace 7900 has limited backwards compatibility with previous model year 7800 series Dura-Ace components. SRAM Red is largely compatible with 2008 and before Shimano Dura-Ace components such as cogsets and hub bodies. This cross-brand compatibility between “old” 2008 Dura-Ace 7800 and SRAM Red will be an attractive option for people who already own Dura-Ace 7800 components and want to buy a 2009 bike that can use previous Dura-Ace 7800 across the board. Going forward in 2009 Shimano’s new version 7900 series Dura-Ace appears to have complex, limited backward compatibility with 2008 Dura-Ace 7800. This may have been a bad move for Shimano regardless of how good the new 2009 Dura-Ace 7900 series component kit is. People may have a tough time de-coding the (in?)compatibility chart. Shimano has been criticized before for leaving previous technology owners “stranded” when they introduce new components not unlike the introduction of a new Microsoft operating system- to make anything work you have to have the new stuff: But SRAM Red will work with the old stuff too. Big advantage for SRAM.

Shimano has published a cross compatibility chart that suggests more compatibility between 7800 and 7900 (pre-2009 and new 2009 Dura-Ace) than was initially represented by industry product managers of several major bike manufacturers. The chart does include at least one mention of compromise performance though. This asterik leaves the end result in question until the groups are in widespread use among consumers.

In a very significant way, SRAM is to Shimano What Apple is to Microsoft. The SRAM user interface is more adaptable, compatible and versatile and easier to use- although the later is subject to opinion. The new Shimano high-end component kit, Dura-Ace 7900, may effectively force them to upgrade to Shimano’s bicycle version of Vista with questionable backward compatibility. Additionally, the Shimano development team seems less connected to consumer desires such as the allure of carbon fiber (there is very little on the Dura-Ace 7900 compared to SRAM Red) and ceramic bearings. SRAM Red features this component-candy out of the box giving consumers what they’ve been upgrading to over the past two years without the upgrade cost- or at least charging them for the upgrade up-front.

SRAM also enjoys the advantageous position of being about last out of the gate with a high end road component introduction. As a result their offering is the most modern and relevant to current consumer needs. SRAM Red was introduced with purpose built aero brake levers for the triathlon cyclist along with already available bar-end shifters. These items were not an afterthought. Shimano took fully a decade to introduce a purpose built aero brake lever.

Over the previous decade SRAM has quietly been on the acquisition trail buying up companies like Avid, Rockshox, and Zipp. These technologies come under the SRAM umbrella and improve their leverage to compete against Shimano and Campagnolo with a broad range of purpose-built previously aftermarket technologies. The challenge for SRAM is to integrate these disparate technology groups into one cohesive bicycle component story where everything is related, everything works together. If there is one area where Shimano excels- and there are several- integration of components is one of them. Shimano invented the integrated shifter/brake lever and the concept of a component ensemble intended to work seamlessly together and controlled by rider intuition. SRAM has taken the learned counsel of Shimano when it comes to integration. The practical question is can they execute it as well?

Another business advantage for SRAM is lead time for deliveries to bike companies. Product Managers for bikes companies- the guys and girls who order the components that bike manufacturer use during the year- have learned that delivery times for Shimano components at the original equipment manufacturer (O.E.M.) level will be long in 2009, upwards of 100+ days for Shimano component kits to build bikes. SRAM is quoting lead times shorter than half that time giving them faster access with bicycle product managers. The result is 2009 bikes with SRAM components are already on bike shop floors while most bike shop guys haven’t even seen the 2009 Shimano components.

Shimano hasn’t earned the market share they have accidentally though, and the new Dura-Ace 7900 is already discussed among insiders in awestruck tones. It will have to raise the bar high as the previous 7800 series Dura-Ace was very good and SRAM Red is even better. The price of Shimano Dura-Ace 7900 hasn’t just gone up; it has increased nearly $1000 compared to the previous 7800 components. This firmly positions the new Shimano 7900 Dura-Ace as the most expensive high end super component group by over $500 above SRAM Red and Campagnolo Record Carbon.

On the marketing side it took Shimano years to win a major professional cycling tour with Lance Armstrong’s 7 consecutive Tours and then Alberto Contador’s eighth Shimano tour victory. SRAM scored a bit of a coup with a Giro de Italia win in its first year on the professional cycling circuit as Contador switched to SRAM components in 2008. Two teams go into the 2008 Tour de France with full SRAM Red sponsorships, Saunier Duval and Agritubel- although one is already out on drug scandal allegations. A Tour de France victory for SRAM will have to wait since Contador’s Astana team, lead by the controversial Johan Buyneel, has been banned from the Tour de France. Ironically the Saunier Duval Team has suffered a more severe fate by being ejected from the Tour when one of their star riders and double stage winners produced a positive drug test. On the positive side there has already been one yellow jersey using SRAM Red on the back of Agritubel’s Romain Feillu. For a first year component kit, this is a bloody coup over Shimano and Campagnolo’s dominance of Le Tour.

Perhaps the one uncertainty for SRAM is whether consumers will embrace the new Red equipped bikes with the same reverence they have for Shimano Dura-Ace. Shimano enjoys the massive significant of brand identity attached to years of loyalty. Even novice cyclists know Shimano Dura-Ace is regarded as the highest end component kit. This same level of recognition will take time for SRAM to earn, but their Tour de France successes will help quickly. Enough SRAM equipped high end bikes will have to get into the marketplace and under cyclists to create a “pull-through” effect. In the mean time SRAM represents a true “Red Menace” to Shimano with valid upgrades, features and benefits.

Another interesting phenomenon for 2009 are rumors surrounding the introduction of certain new bike models from the industry’s leading aerodynamic bike designer, Cervelo. A rumored successor to the state-of-the-art Cervelo P3C aerodynamic bike is said to be in the offing but Cervelo has been officially mute on the subject. So much anticipation surrounds the bike that spurious commercials have been produced and posted on YouTube for the new Cervelo and some shops have even distributed mailings saying they are taking deposits- on a bike that doesn’t even officially exist yet. Cervelo President Gerard Vroomen has been active on internet forums saying the news will come when the news comes and not before. The excitement that surrounds the introduction of Cervelo’s new aerodynamic bike- whenever it happens- will be likely to create pull-through and demand for the bike at unprecedented levels.

With all this wrangling happening in product development this year we’re bound to see some real change in bicycle spec and pricing for 2009. Some years are simply “paint and decal” years when little seems to change except for cosmetic treatments. This year some real technical changes are on the table for consumers to sample.

 

 

© Tom Demerly, Bikesport Inc.
Site Designed and Maintained by: Intuitive Business Solutions.

 
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