Mountain Cog

114 - Why Direct-to-Consumer Bike Companies Are Failing (And What's Next)

• Josh Anderson & Dane Higgins • Episode 114

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What killed the direct-to-consumer bike boom? This episode combines financial data, industry research, and insider knowledge to explain the DTC mountain bike industry's spectacular rise and dramatic fall. Josh presents findings indicating that many of the DTC bike brands are financially struggling or insolvent. The podcast reveals how customer acquisition costs skyrocketed 200%+ over ~10 years as Meta and Google replaced traditional retailers as profit-extracting middlemen, while increased competition, privacy changes, and expensive venture capital made the DTC model financially unviable for most DTC companies.

Listeners get unprecedented insight into the financial health and product quality of brands like Ari/Fezzari (healthy), Canyon (distressed), YT (bankrupt), Commencal (stable), Guerilla Gravity (closed), Revel (restructured), Propain (healthy), and Polygon (strong). Bike shop owner Dane Higgins explains the tangible value independent bicycle dealers provide—from expert bike fitting and assembly to warranty support, community events, and local trail expertise that DTC brands cannot replicate. The episode concludes with Josh's five predictions about the future of bike retail, including a shift to omnichannel models with clear boundaries between what's sold direct versus through dealers.

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Host: Josh Anderson:

There's no dad joke today. Okay.

Host: Dane Higgins:

And uh I don't think anybody will be disappointed.

Host: Josh Anderson:

No, you don't think so? There might be one or two, but I do have an interesting story, and I'm I'm it's a question for you to see if you figure this out. Every time I come into your bike shop, I do something. Go to the bathroom. Yep, and while when I'm in there, what do I do? Poop. No.

Host: Dane Higgins:

I mean, I had a 50-50 on there, didn't I?

Host: Josh Anderson:

No, no, no, not even close. Oh, really? I take your toilet paper and flip it around. Flip it around.

Host: Dane Higgins:

God damn it, I didn't even notice that. Somebody else must flip it, because if I don't notice it, because I I will. Like if I do it, if I'm in a restaurant and I can flip it, because sometimes they have those little dispensers. Yeah. And they have locks and you can't do it. Plus, it doesn't matter because you can't see it. So um, but uh, but yeah, if they if I can flip it, I will uh to do it the right way.

Host: Josh Anderson:

The right way is the paper folds over the top. And every time I come, I swap. Like I've probably done it 40 times. Somebody else here is probably switching it back. There's a secret uh toilet paper elf in the case.

Host: Dane Higgins:

You know, I think there was one day I came out and like gave them all crap. I'm like, who's putting it? And it was you, you know? Like, because they know, you know, the right way.

Host: Josh Anderson:

One day I'm gonna go in there and put like a padlock on it or something so you can't find it. I'm gonna do that. Shit.

Host: Dane Higgins:

Oh my god. All right, all right. So I'm really bummed that I haven't noticed that sooner. You got you you you got so frustrated doing it and not getting a response that you had to tell me.

Host: Josh Anderson:

I'm like, I'm gonna see how many times I because you told me it was your pet peeve, and then I was like, oh god, I'm gonna fuck with him from now on. All right, so on today's topic. No guests today. Uh I was listening to one of the financial podcasts I listened to. This one's called The Motley Fool. Yeah, I've been listening to it lately. Um, great podcast. And uh they had an episode where they were talking about, not specific to the bike industry, but kind of all U.S. industry. They were talking about direct to consumer, like how direct to you have a bleep button?

Host: Dane Higgins:

Is there a bleep? Should I what should I believe? Well, the direct, whenever you say direct to consumer, we have to go beep beep, yeah, because it's a bad word.

Host: Josh Anderson:

Oh god, it's not a bad word. Anyways, they were talking about the business model, how it blew up in the 2010s, and how it's like significantly struggling now. And given the past conversations that we've had, you obviously, as a as a retail bicycle shop owner, are very passionate about this topic. But this was unique, and so I thought it would be cool to like kind of take what I heard in that podcast episode. So kudos to Motley Fool, do a little bit more research, a couple hours of research, and kind of pull together the story of like what happened, why it blew up, like in a positive way, then why it's struggling today, like kind of not from a bicycle perspective, but just from like a business model and business uh financials perspective. And then we can um kind of dive a little bit into the current state of the direct-to-consumer brands, and I've got like an assessment of like the status of each of the DTC brands in the bike industry, and then I've got some predictions of like what I think is gonna happen in the future with with the bike industry and direct to consumer. And I thought maybe we could debate my predictions. I'm down. I'm down. Do you think that's right enough? Okay, that was a lot.

Host: Dane Higgins:

I know.

Host: Josh Anderson:

That's okay.

Host: Dane Higgins:

I'll get started here. Okay. So so uh first I think did you you said direct to consumer. So if anyone doesn't know what that is, yeah, you okay, yeah. Fair enough.

Host: Josh Anderson:

That's that's good.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

So direct to consumer is you have a business model where you're a product uh company, and instead of using a wholesaler, distributor, and retailer type model, a brick and mortar.

Host: Dane Higgins:

Brick and mortar, like like going to a store.

Host: Josh Anderson:

Going to a store, you sell directly from your business and your factory to the consumer.

Host: Dane Higgins:

Now, if I was just listening to this and I wasn't, you know, in the business I am, is that Amazon? Is Amazon a direct-to-consumer brand?

Host: Josh Anderson:

So I think for the brands that Amazon manufactures themselves, like the Amazon Essentials or Amazon Basics, it would be. Okay. But they're also a third-party seller. Okay. So they can be an online distribution uh company for anybody. Okay. That you know, frankly, you could sell guru wheels through them if you wanted to, right?

Host: Dane Higgins:

Yeah. Yeah. Okay. So um so it doesn't mean that you bought it online. It means that the company is selling directly to them. Directly to you.

Host: Josh Anderson:

I guess in theory, you could call them up and order it and they could send it to you.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

Mail order may have been the old school way. Yeah. Um, but now it's pretty much all online because that's how we communicate, right? Yeah. That's how we get our information.

Host: Dane Higgins:

Is it defined as like they don't have a store to go to or correct? Okay. Correct.

Host: Josh Anderson:

Um they yeah, so so we'll get into that. But yeah, yeah. It's just in theory, like you're ordering it directly from the company who who manufactured the product themselves, right?

Host: Dane Higgins:

Okay. Oh, okay. That's a good one. So it's not a reseller. Okay. Not a reseller. Okay.

Host: Josh Anderson:

All right. So um so so basically, like in the 2010s, this concept of direct-to-consumer business model kind of exploded. And there was a whole bunch of venture capital, so that's like private investment money, coming in uh into companies that were adopting and standing up and using this direct-to-consumer model. And part of the reason that there's like, I guess I kind of pulled the other seven reasons why like the model at the time appeared to be so attractive and kind of blew up.

Host: Dane Higgins:

Okay, and this isn't bike specific, this is just in general. Not bike specific. Okay, what do you got?

Host: Josh Anderson:

So the first one is what they call customer acquisition costs, CAC or CAC.

Host: Dane Higgins:

Is that like kidnapping?

Host: Josh Anderson:

No. But at the time, at that time, with the law with the rules and regulations and policies of like Google, Facebook, Instagram, it was really cheap and really easy to get a direct line to consumers that would like your product. Okay. So the cost of acquiring a new customer was super cheap for these direct to consumer brands, right? So you think about a retail shop like you. Yeah, I gotta have a building and lease and all that stuff, and pay for lights. Yep, and you and you and from from the producer's perspective, the margin that you take from them is part of their new customer acquisition cost. Okay. Right? Because you're bringing when you get a new customer and you sell one of their bikes to them, yeah, they've got a new customer. Yep. The margin they pay you, the margin they pay the distributor, the margin they pay the wholesaler, uh, and all the shipping and everything that goes along with that, all of that is part of the customer acquisition cost. So they can make more money because they're not paying me. Okay, so that's one that's one reason is because Instagram, Facebook, Google all offered a really cheap way and a really effective way to acquire for these companies to acquire new customers. That's reason number one. Okay. Second is data.

Host: Dane Higgins:

So he was on Star Trek. Next generation. Not that kind of data. Oh, I know a lot about that one. Data. Yeah, data. Data, data.

Host: Josh Anderson:

So um if you're selling directly to your customer, uh-huh, then you have first person or or first order data.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

You know exactly what they're buying, what size they bought, how much they paid, what price they were willing to pay, what color they bought, you know what model they bought, you know where they were in the country. You might have some demographic information on them. Are they women, are they male, are they older, are they young, whatever. You you have a lot of like first person, first order data, and that is super valuable for a company when they're trying to figure out how to do their marketing, how to do their product development, and which products should they market in which ways to what part of the country, what part of the world.

Host: Dane Higgins:

Okay, so they're getting it immediately and they're not paying for it. Yep. And like, whereas if I'm selling a widget, you know, I may not share that info with them. Yeah. I just bought six green ones and then I sold three and didn't sell, and they think six is popular, but three isn't.

Host: Josh Anderson:

So they don't have the real or maybe like maybe like you know, purple's popular in Arizona and blue is popular in Colorado. Okay. And if they if they know that they ship that bike directly to Colorado, directly, whatever whatever. Yeah. So so they have better like direct line of sight to the data. Okay. And that's so that's very valuable for them. Okay. Third thing is brand identity.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

Because they're communicating directly with the customers themselves versus through you, yep, or and also through you, right? Because they because because the brands that you sell, they communicate on their own, and then you I come in my shop, I'm like, uh come in your shop, I'm like, I want to pivot, and I get Dane's opinion. Yes. So you all you are helping or hurting pivot's brand identity.

Host: Dane Higgins:

And it's filtered.

Host: Josh Anderson:

So it's filtered through your opinion.

Host: Dane Higgins:

Yeah, and and and you know, it's the telephone game. You know, their message is diluted every time it gets uh retold. Yeah.

Host: Josh Anderson:

So so they're able to shape and control their own brand identity a lot easier because they're not having to control you know a thousand Dane Higgins of the world, all adding their little vibe and flavor and feeling into the message that makes up the identity of Pivot. Or wrong info.

Host: Dane Higgins:

Correct, right? Okay, all right. Computing power. Okay, that's weird.

Host: Josh Anderson:

Right? Okay, so at that time, cloud services were starting to come online in a bigger way. And so computing power, the ability to move data, lots of data, store, move, uh, assess, analyze, lots of data, became really cheap.

Host: Dane Higgins:

Did it become cheap, or there wasn't many people doing it, so it wasn't expensive?

Host: Josh Anderson:

So so as we move from like see, the but I'm not an expert in this, but let me see if I can just give you my best explanation. As we move from doing processing on a piece of like hardware that's on your desk or in a warehouse to a cloud service where you don't have to you you're buying like the processing power, you don't have to buy the computer.

Host: Dane Higgins:

Yeah, right?

Host: Josh Anderson:

It's cheaper for companies to buy for processing powder from a data farm than it is for them to buy the computer and do the processing themselves.

Host: Dane Higgins:

So the the one guy buys the really kick-ass computer and everybody shares the space on it. That's the one guy builds a million square foot data farm with a million of the best computers, and we all buy a piece of that.

Host: Josh Anderson:

That's basically how the world works today, is through cloud services. Yeah. God, that sounds like socialism. I don't know about that, but maybe. All right, so we're on so so we've we've had low customer acquisition costs, we had direct, you know, direct first-order data, we've had brand identity, computing power. The fifth thing is venture capital. Okay. At that time, the interest rates were like zero. They were low, super low. So investment dollars were super cheap. Okay. They were easy to get and um and and plentiful, right? So investment money was was cheap. They could they could go get it. Okay. Sixth thing is cons is consumer desire. If you think back to the 2010s, you got the millennial generation just growing up, getting big boy pants. That's the internet generation, right?

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

They're all like screw the world. We're not going to your stupid mall. We're not doing we're not going to Sears, we're not going to JCPenney, we're doing everything online. That's we're we're better than everyone else. So the millennial generation, they had a desire to kind of buck the old retail model and do everything fast and sexy online.

Host: Dane Higgins:

Okay. Right? Now, I I gotta say, I I keep bringing this up, but I don't know if because I grew up in that and I was on both sides of it. I don't know if they were bucking a trend, is more like they weren't stuck in their old way. So they were like, look at I I can see three different products and not leave my couch. Yeah. Okay, so that's instead of going to three driving to three stores.

Host: Josh Anderson:

So that comes to the rest of us.

Host: Dane Higgins:

Okay. Yeah.

Host: Josh Anderson:

Part of it was the millennial generation just just bucking the trend, is my my hypothesis. The other part of it is what you just said. Okay. Which is just like, hey, dude, it's like if I'm gonna buy like some degreaser, it's way cheaper and way easier for me to go on Amazon in 13 seconds and say, here's the six different degreers, and that one's two bucks cheaper, and it's just as good. Click, buy, it's at my house tomorrow. Yeah, okay. Right? Like that's the rest of us, right? Yeah. And then the final thing is what everyone in the bike industry talks about.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

And is the most obvious one. You've cut out the wholesaler, you've cut out the distributor, you've cut out the retailer.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

Each one of those entities is taking a cut of the margin.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

So now you can sell and cut all those guys, all that middlemen out.

Host: Dane Higgins:

So you could either try and sell cheaper and to beat your competition, or you could sell it at the same and just make more money. Correct. Okay. Right. Gotcha. Okay. Right. I mean, you know, either way, like whatever works.

Host: Josh Anderson:

Supply and demand says you can only charge what the market will pay.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

Right. So you your profit margin is going to be set by demand of the market and availability of the products, right? That's kind of supply and demand how it works. But yes, and and it's not quite that simple, but basically. Okay. All right. Sounds all that all sounds great, right? Cheaper customer acquisition costs. Yeah. I get better data, more like faster, better first order data. I can I can control my brand entity and keep Dane from saying shit about my brand that I don't want them to say out of the equation. I've got cheap and available computing power. I got I got venture capital coming in that's super cheap and plentiful. My customers want this anyways. They all want to buy stuff online, and I can get more margin because I can cut out all these middlemen. Yeah. That was the vibe and the perspective at that time. Okay. It didn't work.

Host: Dane Higgins:

Okay, so can I argue a little bit on that? Like, I think it did work. Like, I mean, it it's we're different now because of that. Like, right?

Host: Josh Anderson:

I mean Yes. Okay, fair enough. Okay. It changed the market.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

But there was a belief at that time It was gonna be the only way. That retail was dead. Yes. Every mall's going out of business, your shop is gonna die. Every shop in the country is gonna die, right? It was going out of business.

Host: Dane Higgins:

It was the idea, it was the new way, and everything would change to that, and then the old way would go away.

Host: Josh Anderson:

Yes, that's not how it worked out.

Host: Dane Higgins:

No, I totally agree with that. That it did it did hit a wall. Right. Yeah. So why did it hit a wall? I know.

Host: Josh Anderson:

And you yeah, okay.

Host: Dane Higgins:

Well let me go through my reasons. Okay, all right, all right. And then you can tell me. Okay, wait. Uh so cut out the middleman, you put that quality, okay. I that's the things I wanted to bring up. Uh you missed it. Uh no, I was just trying to make sure because I made my little notes on your stuff, but you actually hit everything. Cool. So uh there's some things that I'm gonna bring up that are from the bike side, and then you see. We're gonna get to the different on the second.

Host: Josh Anderson:

We'll we'll we'll focus in on the bike, but I want to just talk about the the business model of this of direct to consumer first. Okay, because all we ever focus on are the bike specifics. And to me, I think we need to pay attention to also like the fundamental financials behind all this, right? Okay. Okay. So why didn't direct to consumer again, this is like a few hours of my research and with some with some catalyst help from the Molly Fool uh 20 minute podcast episode. Use Bob a little bit. Use chat or uh uh Claude. What? Claude Claude. What? Claude, huh? Anthropic, yes. What is it? Yes. Bob. Okay, so okay, so why isn't why it didn't disdirect a consumer by now, you know, 15 years later? Why didn't it take over the world? Why is it it's there, but it's not the only thing. It's it's actually not even the most prevalent thing. Why? Why is that? Um and so I've got some reasons why. Okay. This time I got eight reasons. Eight. Seven that made it sexy, eight that made it struggle. Okay, man, we're 20 minutes in. You better make this quick. This is the whole meat of the episode, bro. Okay, all right. Come on. I know, but we got two pages. Well, we can talk for as long as we want, right? Okay, all right. And I got like half a bottle of Jack left, so I'm good. Maybe maybe slurring. Maybe slurring more than all right. Uh it's a little bottle, just a record. Okay. Um, so the first thing that happened was Facebook. Well, not the first thing that happened, but one of the I think is the most important things that happened. Okay. Facebook, Instagram, Google, they changed their privacy, and that made it more difficult for these product companies to get that first order data.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

It also became much more expensive.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

So they cut out the retailer, the wholesaler, the distributor, and they replaced those middlemen with other middlemen that became Facebook, Instagram, and Google. And turns out that Facebook, Instagram, and Google are way more effective at pulling profit away from these companies as you are the distributor or the wholesaler is. Yeah, but they probably get to keep it. What do you mean?

Host: Dane Higgins:

I don't get to keep it. I don't feel like I do. All right, well, that's what's a different podcast. Okay.

Host: Josh Anderson:

That's a different podcast. But they they were more effective at pulling profit away from those producers than you were. Okay. Which is which is crazy.

Host: Dane Higgins:

Yeah. So like so what you're saying is like these guys were cutting out the middleman to get an advantage and make more money, and then the new cheaper way that they were doing it kind of caught on and was like, hey, we want a little more pie. And uh that's like the drug dealer, uh total drug dealer uh way of doing things. Like get them hooked and then start increasing your purchase. First, first bumps free, right?

Host: Josh Anderson:

First bumps free. So I'll um I'll jump down to number three, which is related to this conversation. Okay. Customer acquisition costs. Remember, we talked about what that is.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

Between 2013 and 2022 increased over 200%. Oh, geez. So their cost. Their cost to acquire a new company. Uh uh what years? 13 to 2023. 2013 to 2022.

Host: Dane Higgins:

So about 10 years, nine years. Yeah, nine years. Okay.

Host: Josh Anderson:

200% increase in cost. So that's that's Facebook, that's Google, that's Instagram, uh, and others, Meta basically, pulling that profit away from those companies because they have to use these tools. What else happened? Well, because it was so attractive for those seven reasons we talked about earlier, a lot of companies jumped in. Okay. Right? So what do you get? You get increased competition. So when you get increased competition, you got reduced market share. So each one of these companies is now competing with other companies, right? So yeah, we have to do it. Okay. You know, we can go on and on and on.

Host: Dane Higgins:

Yeah, if you're the first guy, you're doing great. But as soon as the second and third come on, then they start race. We call it race to the bottom.

Host: Josh Anderson:

Right.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

So then you get price wars.

Host: Dane Higgins:

Yep.

Host: Josh Anderson:

There's the race to the bottom. Yep. And they're all competing now, and this sounds weird, but they're all competing for a finite amount of ad space.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

Right? Even though it's online and it's in, you know, in in theory infinite. Like I only have so much time that I spend on Facebook.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

Right. There, you know, each one of those companies, Ari, Canyon, YT, uh, Common Sall, Propane, Polygon, whatever.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

There, and I know I'm jumping back and forth in the bike industry just to give examples that our our listeners will understand. All six or seven or eight or ten of those DTC bike companies are trying to get onto my Facebook feed.

Host: Dane Higgins:

Yeah. And even if you were there for 24 hours a day, right? I couldn't see it all. You you it's only 24 hours. There's only so many hours in the day, and the only so many so there is a capacity. Okay.

Host: Josh Anderson:

And as that competition went up, this brand differentiation, the the ability to so so like one of the key things when you talk about the strategy of a business or strategy of a product is how do you differentiate yourself from your competitors became like much harder to do. How do you differentiate? Like, why am why is Canyon different than Ari, different than YT, different than propane, different than common saw, whatever. They kind of felt all the same, yeah, right, in that vibe. You know, Canyon did their thing with the Kiss and like, you know, damper, you know, whatever. Yeah, yeah, yeah. Fail and you know, successes and failures are. Yeah. Uh then they realized holy shit, there's this like increased complexity to my operations. Like, I gotta do shipping, labeling, cybersecurity, customer services, more direct uh customer service, direct engagement on returns, warranties, all these things that you and and and your chain were paying for.

Host: Dane Higgins:

That's the customer service part. Every question you have to now answer. Like, you know, like at no point, you know, like can I put this chain ring on there? What can I what is size shock? Is it like everything? You have to answer every single question.

Host: Josh Anderson:

So we got more competition, customer acquisition costs going up, they're trying to figure out how to differentiate their product, they got all these new operational complexity issues they got to deal with, and then the rates go up. So that venture capital money becomes more expensive for them to get. It's not as plentiful. Okay, it's it's it's more expensive to get. So, like, you know, it's just interest rates. Like if you're borrowing borrowing a car when money's expensive, okay, you get a high interest rate.

Host: Dane Higgins:

When money's cheap, you get a low interest rate, right? So so from a business standpoint, they are making a product that costs them money.

Host: Josh Anderson:

Uh-huh.

Host: Dane Higgins:

They have the factory, that costs them money. Uh-huh. And they have to do a level of marketing before they do this DTC that they have to do to let people know that they make this product. Uh-huh. Before they would then sell that to a retailer and they're done. Maybe to a distributor, maybe to a wholesaler, maybe. But either way, they're done. Maybe directly to a retailer. They're done. They're done at that point. So they don't have to spend the money. Maybe they're not done, but 90% of it's done. Right. And and you pick up 90% of the work. And then I take over and I do all those things. And you get a little bit of a little tiny sliver of margin. I get a margin for that. Yep. And so now they're like, hey, why don't we cut Dane out? Because we can just do that ourselves because it's digital. We don't actually have to we don't have to ship it to Dane and then have him try and get it out to people. We'll just ship it direct. Yep. And they didn't think about the fact that they have to now do all the stuff Dane did.

Host: Josh Anderson:

Well, I mean, I'm sure they did, and the smart people did, but like their customer acquisition costs were so cheap. Money was so cheap. All the reasons that we talked about before, it was like, oh yeah, we can over those are headwinds. Yeah. We call them headwinds and tailwinds in the business.

Host: Dane Higgins:

They don't have to pay anyone to do the marketing if they have Dane doing it.

Host: Josh Anderson:

They just pay through the margin. I mean, they're paying you. Yeah, they're paying through the margin. That's one of the services you're offering. Yeah, exactly. Okay. All right. So money got more expensive. So then if they needed a capital infusion or they needed cash for whatever, it was more expensive for them to get that cash and less easy for them to get that cash because it wasn't as plentiful.

Host: Dane Higgins:

So now they can't pay for the marketing that Dane used to be doing.

Host: Josh Anderson:

Yeah, they can't go borrow money to like infuse capital to kind of like like supercharge parts of the business or or overcome things that are struggling.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

In some industries, you got some unique things. Okay. We definitely dealt with this, and we've talked about it at Nauseum, so we won't go into it, but it's it'd be it'd be uh not inclusive enough or not complete enough. I didn't at least mention it. So we know the consumer demand dropped. Uh-huh. Yep. So the customers are like, I can't afford it or I don't want that right now. But you're talking about right now in this general economic. Yeah, I'm saying in in the last five years, since the DTC model has started to fall. Yeah, yeah. Right? So the consumer demand dropped.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

Supply chain issues emerged. Yep. Right.

Host: Dane Higgins:

The the COVID issues, like the the aftermath.

Host: Josh Anderson:

And the other thing, these VC firms, these venture capital firms that that funded a bunch of these entities, they demand hyper growth.

Host: Dane Higgins:

Uh-huh. Yep.

Host: Josh Anderson:

It's either top line. So when we say top line growth, we talk about revenue. So that's just like you know, how big are you? Or bottom line, we talk about bottom line growth, we're talking about profit. Okay. So you either need to grow exponentially, and typically it's top line, I think, from my perspective. I could be wrong about that. And there's probably a bunch of strategists out there, they're going to call me and tell me I'm an idiot. But like top line growth. They want hyper growth. If you're a billion dollar company, we think you should have a $10 billion valuation or a $100 billion valuation, right? Okay. We invest in all these companies with the goal of like we invest in a hundred companies with the goal of four of them, making a thousand times the money we went in, and 96 of them are going to fail. That's like the VC, that's the exaggeration, but that's kind of pretty much their perspective. Gotcha. They're demanding hypergrowth. They're like, hey, like, come on, let's go. Gave you the money. Gave you the money. Where's our money? Give me the money back. Give me the growth back. And you're like, well, wait a minute. What about the privacy changes and the increased competition? And my customer costs increased and this operational complexity.

Host: Dane Higgins:

And what about this competition? All that shit. Yeah.

Host: Josh Anderson:

So this is the perfect storm. Okay, so I believe that's why it blew up. And those those are the reasons why it blew up, the seven that we talked about, and the eight at least are a good portion of why the why the business model is struggling today. Let's transition to the bike industry specifically. First, let me give you some data. Okay. So bicycle research LC, you can get there by research.bike, www.research.bike. Okay. They've had some metrics I thought would be cool to share.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

900 bike product brands.

Host: Dane Higgins:

And that's that's important. Bike product. Yeah, bike-related product brands. Yeah, yeah. So tire lever or a bike or whatever. Yep.

Host: Josh Anderson:

That sell in the US market. Okay. 80% of those have some type of direct-to-consumer market channel.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

Forty-one percent of them sell through independent bicycle dealers.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

21% of them what they call rest of market, which things like Amazon, okay. You know, mail order, whatever. Uh you know, that kind of stuff.

Host: Dane Higgins:

So if you can go buy a Pedro's tire lever at Pedros.com and you can get it on Amazon, and you can come into my shop.

Host: Josh Anderson:

They would be in all three of these. They're in all three.

Host: Dane Higgins:

Okay. All right. All right.

Host: Josh Anderson:

So just an interesting thing.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

So I thought it would be cool if we talked for a minute, and and I apologize you don't have this on your printout, but we look at what is the financial health of each of the major direct-to-consumer brands for bicycles right now.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

So first one. Uh and and I think as we go through this, I think it would be interesting if you could comment on do you agree if you heard something different?

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

And then like what what's your what's Dane's impression of the quality of their products?

Host: Dane Higgins:

Okay. Okay. I'm gonna be biased. I always am, but I'll tell you.

Host: Josh Anderson:

But I I mean I would imagine you could probably rank the direct to consumer brands one to N and say, this is the one that I think is the best, this is the one I think is worse. None of them can come close to pivot.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

But the if if if I if I had a gun to my head and said you had to buy one, this is the one I would buy.

Host: Dane Higgins:

And there's a little fuzzy area because when we say direct to consumer, like pivot now, you can go on their website and buy a pivot.

Host: Josh Anderson:

So so we'll get to that. That's omnichannel.

Host: Dane Higgins:

Yes, but different. That's the thing, is like, you know, if listeners thinking and and playing along with our game.

Host: Josh Anderson:

We're gonna talk about this. We're gonna get to omnichannel.

Host: Dane Higgins:

Yeah, but but they they need to know that when we say things we may not be considering.

Host: Josh Anderson:

So what I'm talking about is just the companies that sell that only sell direct to consumers.

Host: Dane Higgins:

So we call that uh we call that DTC only. Yep. Which means they won't even sell to me. Yep. You know, as as far as a as a business goes. Okay.

Host: Josh Anderson:

So first one's Ari, used to be called Fazari. Okay. In 2024, they changed their name from Fazari to Ari. Um they are and appear to be extremely healthy, strong, and growing.

Host: Dane Higgins:

Okay. I uh you and I talked about this. Is your data, when you say that, solely based on the fact that they have a team?

Host: Josh Anderson:

No.

Host: Dane Higgins:

Okay. You have numbers and and and stuff that they're they're doing. So this assessment on the health I had the AI tool does recheck and triple check. Okay.

Host: Josh Anderson:

And it's got probably each one of these has four or five sources.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

So there's a healthy amount of I I don't know that this is a hundred percent accurate.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

This is what the AI tool could find online.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

Uh and from multiple different sources. I also had it double and triple check its answers. There still could be what we call quote hallucinations in there.

Host: Dane Higgins:

Yep.

Host: Josh Anderson:

But uh I feel relatively confident that it's it's fairly accurate.

Host: Dane Higgins:

My first experience with Fazari is I rode their bikes. I all of a sudden saw them when they popped up on the radar. And the bikes This is this is dated now. Yeah, this is dated. This is dated. Um but the bike dated like what year?

Host: Josh Anderson:

Circa what? Just as a rough estimate. You're talking five years ago, ten years ago?

Host: Dane Higgins:

Five to seven. Okay, so it's pretty dated. Yeah, it's it's not super old, um, but it's five to seven, you know. That's not really that old.

Host: Josh Anderson:

I mean, it is but it does it is pre settling on geometry. Oh, yeah. Because 2018, 2019, we were still all over the place with geometry.

Host: Dane Higgins:

Wasn't the geometry. I got on these bikes, and um uh there's two factors. One, this demo uh fleet that they had was just so clapped out, so creaky, awful feeling. And but the bike itself was just inefficient, didn't ride very well, and it had a similar design to other bikes that we carried. And so I learned really quick just because two bikes are an FSR design, doesn't it?

Host: Josh Anderson:

Does that mean two bikes the FSR implementation is effective? Yeah.

Host: Dane Higgins:

Exactly. And so the the quality of the bike, there's a lot of things that make a quality bike. So I my first experience was bad. Um now I've fast forward to a few years ago, just two or three years. Yep. They've changed a lot. When they were Fazari, they started into eating into our business because people they were their fit and finish was better, their quality was better.

Host: Josh Anderson:

They were learning, getting it.

Host: Dane Higgins:

Yeah, they were they were learning. And um, but we still had problems where when you when you saw one up close from somebody who's who's dealing with a lot of bikes, you could find out why that bike was cheaper. Uh it was like a definitely a different layup of carbon, heavier carbon, uh not as refined of uh fit and finish, is what we call it. Like they you can tell that they're quality control standards aren't the s exactly the same. Yeah, and it's not not that they weren't working properly, but they weren't attention to detail was low. Okay. And from the design level, they weren't there, there was things you're gonna do.

Host: Josh Anderson:

Was it design level or manufacturing level? Yeah.

Host: Dane Higgins:

Or both. Probably both. Okay. You know, some of the design features wouldn't, you know, if you design a link that has too much flex in it, the bike has flex, you know. But then when you look at the bike, if the pivot points have different size gaps on different parts of the bike that don't match, you know, so basically, you know, like the symmetry's gone, not because of you know the bike's designed that way, but because it literally has got a bunch of crooked parts put together to make it work. And that that does happen, you know, and so so we would see things like that. And so, yeah, it was a good value. It was a good starter bike, it was good, it was kind of heavy. Uh suspension design wasn't as bad as it used to be, it was a little more efficient. But honestly, you could easily justify most people were purchasing it because of the price.

Host: Josh Anderson:

If on paper, when you can't see it and you're looking on a website, and you think it's got FSR, this one else this this also other one's got FSR. This one's a thousand dollars. It's the same part spec you're reading. Carbon, yeah, you know, all the same. Yeah, why would I pay a thousand more different bikes? I mean, this is why I bought a Vitus.

Host: Dane Higgins:

Yeah, yes, exactly. But ultimately, when you get to that, you start to realize That was my son calling me. Oh, was that yours? Yes, sir. Uh so uh so ultimately what I'm saying is that when you get up close and personal, you start to see the little chinks in the armor, and sometimes they are important and sometimes they aren't. You know, so for instance, lower cost bikes sometimes really it doesn't matter, a little heavier bike, but it rides great, who cares? You know, I saved a thousand bucks, you know, that's not a big issue. Um, and then we also are looking at like, did the company take care of you? How hard is it? That's the big thing that comes in the bike shop all the time is when they ship you a bike and something's wrong with it, what do you do? I mean, do you do you send it back to get it checked out? You don't. You usually go to a bike shop, you know, and at that point, what do you do then? You know, you at that point you have to pay the bike shop. The bike shop did not sell you the bike, they're not supporting the bike, but they may fix it. And so that created a lot of inconvenience that a lot of people at first didn't look at. Didn't realize.

Host: Josh Anderson:

Now here's so so let's stick with let's stick on R because I want to get to the general thing. Well, and then I want to just but one nuance. When I talk about the state, yeah, what is it? When I say healthy, yeah, and I say strong and growing, yeah, I'm talking about the financial health, financial solvency, how's the company doing, irrespective of the products and like are the products good or bad?

Host: Dane Higgins:

So what you saying that was surprising to me because no, it was surprised me too. Yeah, because but wait, there's more. When they changed their name, that signaled uh a big thing. Like we need to change something.

Host: Josh Anderson:

Yeah.

Host: Dane Higgins:

That usually does not come from we're kicking ass.

Host: Josh Anderson:

No, they wanted to rebrand.

Host: Dane Higgins:

Yeah, but that that action is not necessarily something you do when you're super healthy.

Host: Josh Anderson:

Well, we're yeah, but we're 18 months after that happened.

Host: Dane Higgins:

Yeah, yeah. So you could argue that it was successful. Well, yeah, that's successful, but that may not be necessarily a long-term thing. We'll see. So, yeah.

Host: Josh Anderson:

Okay, so so that's already.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

And and what I took away was okay, so so my analysis says they're strong and growing as a business.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

You're saying, hey, when they started their products with garbage, a few years ago they were a little better.

Host: Dane Higgins:

Yeah, but not awesome. But you could tell why they were cheaper.

Host: Josh Anderson:

Yep.

Host: Dane Higgins:

So um And that's that's something that um I feel like we still get to see. Yep. Uh but I will tell you something about their success uh that that I have noticed. Because remember, I'm specifically Ari now. Yep. Remember, I'm deep diving on YouTube. And what I have noticed is how much presence they have now with the influencers or YouTubers. That's good. And so it's good marketing? It is good marketing, but that doesn't always mean that their success comes from a sustainable place. Uh like if if you uh are getting the bikes out and they don't live up to the promises.

Host: Josh Anderson:

Ah, that's that's return customers, brand loyalty. So so yeah. So the influencers might get the people in the door, but are they gonna stay at the 18 months is not really? Yeah, so we'll so we'll see.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

But they're but compared to their peers in the market, they're doing good, and I'll get into that. Okay, all right. Canyon, struggling. Um this is their business model. Yeah, yeah. Mightily struggling, financially stressed, but still operational. Yes. So I can go into all the data, and I've got a bunch of numbers here, but like they're hurting in a big way. Yep. It's struggling year over year.

Host: Dane Higgins:

Now we're not confusing YT for Canyon. Okay.

Host: Josh Anderson:

Canyon, what's your perspective on Canyon?

Host: Dane Higgins:

So Canyons are one of those bikes that we definitely don't we get frustrated with when we see them come in the shop.

Host: Josh Anderson:

They are uh Well, you get frustrated with every DTC. So can't like if you just isolate Canyon specifically.

Host: Dane Higgins:

And I'm trying not to be biased. Um You are biased. And and I am, you know, when you're a bike shop and you see a lot But we're trying to rate and rank the different DTC offerings. How does Canyon compare to Ari? Well, uh it's more prevalent. We see way more of them. Better product? No. Uh and I don't say it's worse. Similar quality. Similar, low quality. Um, and we're always kind of like, oh, this is why they're cheaper. Like that that that kind of feeling when you see and work on a bike comes out. Like when you're taking a bike apart, you see it way more than you see the quality.

Host: Josh Anderson:

You see the fit and finish, you see the unique.

Host: Dane Higgins:

And and so like the ride quality, you know, there's a lot of people that will ride a canyon and absolutely love it. Um, but I know a lot of people that will, you know, ride a one particular bike and you switch them to a definitely a nicer bike with nothing for nicer parts, and they can't tell the difference.

Host: Josh Anderson:

Well, it's conf, I mean, there's also like a a buyer's um uh thing that happens when you buy a product, it's like confirmation bias. Like you're gonna be like I you heard me say this earlier. Yeah, I love my gorilla gravity, it's the best bike in the world. Yep, yeah. I'm supposed to be unbiased as a strategist, but like I love that fucking bike. I just love it. Yeah, they went out of business. We're gonna talk about gorilla in a minute, but they just went out of business. I love that fucking bike. I don't know how much of my love for it is confirmation bias to justify my purchasing that bike. It's hard. It's Ari and Canyon. I got a similar vibe from you. Yeah. Okay, so getting better, but not awesome.

Host: Dane Higgins:

I would buy, I don't know if I'd buy an Arian.

Host: Josh Anderson:

If you if you had to pick from Ari and Canyon, what would you buy right now?

Host: Dane Higgins:

If I have a gun to your head, what would you buy? Probably an Ari because the suspension design's a little better. Okay. But it's not that great. So Canyon and Ari.

Host: Josh Anderson:

Next one's YT. Okay. We know they are insolvent.

Host: Dane Higgins:

Yep, yeah, yeah.

Host: Josh Anderson:

They are um I'm a little insolvent because they're they're attempting to try to relaunch.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

It's regardless of what you've heard on the Lone Wolf and all that.

Host: Dane Higgins:

Yeah, I'm I'm I'm confused because they they said Germany and then the US. And I don't know if they're separate or I would be very skeptical. Yeah.

Host: Josh Anderson:

Based on their financial status right now, of YT.

Host: Dane Higgins:

You know the big deal with them, right? The big thing that that of course bike shops are like feel a little vindication for is that they took a ton of orders and then now they're not giving the money back. They didn't ship the bikes and they're not giving the money.

Host: Josh Anderson:

So I did research on that and I haven't been able to conclude the act. I haven't been able to um like confirm the accuracy of what I've heard. I've heard those stories.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

Not sure how accurate the stories are. Um, they might be 100% accurate, they might be completely bullshit or completely conflated. I don't know.

Host: Dane Higgins:

Yeah, it's not like I have a memo from them that says that.

Host: Josh Anderson:

I don't want to propagate that story on the podcast because I don't know. But I I have also heard I'll propagate it. But you're part of the Mountain Cock podcast, motherfucker.

Host: Dane Higgins:

But I'll tell you that I have heard it from various Have you heard it from someone that's dealing with it personally? Yes.

Host: Josh Anderson:

Okay. Yeah. Well then that's that's a first hand.

Host: Dane Higgins:

Yeah, and so and so that's the the tricky part is like I don't know if it's like a thousand people or ten people, or if this one guy I talked to, you know. So Okay, so uh next one's Common Sall. Okay. Common Sall I never see stable operating normally. Okay. They're one of the first I I would say what they're one of the first brands that I think was D2C, and they do a lot of gravity focus, so I saw them in the World Cup uh downhill stuff, but we hardly ever see their buses.

Host: Josh Anderson:

I thought they were a Canadian brand. And I just learned that they're not, and they just relocated their headquarters from California to Colorado.

Host: Dane Higgins:

I had no idea. And and uh they've been off the radar. I always thought they were a European brand. Yeah, you know, they're USB. Yeah. Um I know that their suspension designs are kind of crap, and and I hate to say that. I just saw one of their bikes at Sedona Bike Fest when we were there, and they were still using a single pivot walking bar linkage design uh when there is no four-bar um you know, horse link uh patent to deal with, and it's just not a good design, and I don't know why they're still doing it. And and I don't have any idea other than what okay.

Host: Josh Anderson:

Why don't we try to get Commonsall on the podcast? And we can ask them that question.

Host: Dane Higgins:

All right, yeah. What do you think?

Host: Josh Anderson:

Yeah. What do you think? Um okay. So a few more.

Host: Dane Higgins:

Uh-huh.

Host: Josh Anderson:

Not there's not many actually.

Host: Dane Higgins:

Yeah. Uh oh, by the way, I gotta say something really quick. When I say that I don't like suspension that Commonsol's doing, the one thing that they're doing that's changing the industry is their high pivot with uh idler pulley is killing it. And that's why their downhill bikes have been doing well.

Host: Josh Anderson:

So some of their bikes don't have a good suspension design. Well, some of them do.

Host: Dane Higgins:

Is that what you're saying? Yeah, if you're gravity oriented, it's a pretty solid bike. I love how you say oriented. But if if you are in Arizona and you're riding on trails and you have to climb, it's not a good bike. That's my opinion.

Host: Josh Anderson:

So Gorilla Gravity, we've talked about it before in September 2023, they closed uh out of business. They're sucking. Super sad. So sucky. You know, like suck so bad. Pioneering. So sucky. Pioneering. They're not. They're great fucking bikes. Uh Dane has no experience with them. I have experience with them.

Host: Dane Higgins:

Everybody that I know has them, loves them. So honestly.

Host: Josh Anderson:

Great. You should I I would love for you. I don't think I've had my gorilla in here for you guys to work on. I'd love you guys to like next time I need to get something done, I'll bring it and have you guys do it. Yeah. You guys can look at it from a fit and finish perspective and tell me if it's the same thing.

Host: Dane Higgins:

I've worked on them. So one of our um customers has one and I've worked on his. There's a c like their their channel for the cable and housing to go in with the cover is great. The cover is finicky. It's it's pain in the ass. Yeah. Um, when I did your bearings, the the fact that you could change the bike into different bikes, I love that. That was super cool. There's a lot of cool things about it.

Host: Josh Anderson:

Yeah, and it's and it's not really a DTC where they're buying like overseas frames. They actually manufacturing more of a boutique manufacturing company in the United States, right?

Host: Dane Higgins:

And and and genuinely, sometimes those companies start that way as a DTC as a way to get their bikes out there, and then they evolve into a brick and mortar uh you know style. So Okay.

Host: Josh Anderson:

So they're out of business, unfortunately. Revel uh closed, and then their uh previous owner who sold the company to Venture Capital.

Host: Dane Higgins:

Yep.

Host: Josh Anderson:

Venture Capital put a bunch of money in, yep. Realized that for all the reasons that we talked about before, it's not gonna work. Yep. He bought it back at a discount. Yep. Bro made a gazillion bucks on it.

Host: Dane Higgins:

I don't know about that. Uh I think he made a a good amount to where buying it and that taking that risk was worth it.

Host: Josh Anderson:

Sold high, bought low.

Host: Dane Higgins:

Yeah, but that's what I mean.

Host: Josh Anderson:

That's what you're supposed to do with an asset.

Host: Dane Higgins:

I know, but a gazillion is not a good amount.

Host: Josh Anderson:

Yeah, yeah, a gazillion, okay.

Host: Dane Higgins:

Maybe it was a couple million, but like, yeah. If if he spent if he spends that money and that that company fails, it would have been much better if he had stuck it in the bank.

Host: Josh Anderson:

Well, here's what I'm just saying is like that venture capital firm sunk a bunch of capital into building up that business.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

And he got it at a discount. He would have never been able himself to infuse that much capital into setting up the supply chains, manufacturing process, all that stuff. So he like not only did he get a did he set sell high buy low, but in the meantime, but between the time that he's that he sold it and bought it, the the venture capital firm put a bunch of capital into the company and like did a like hopefully, in theory, like got a bunch of stuff worked out for him.

Host: Dane Higgins:

I will say when it comes to Revel, I wasn't super impressed until I rode one. And then I was really surprised. And so I'm not gonna tell you not to buy that bike. What do you think pushed me over the edge, motherfucker?

Host: Josh Anderson:

It wasn't my spreadsheets or my analysis. Yeah, it was my great friend Dane saying, This thing's badass.

Host: Dane Higgins:

Yeah, it was way better than I expected.

Host: Josh Anderson:

And my buddy Chris has got one now, and he's you should see him. Yeah, he's just he he was already fast.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

I mean, we rode with him on two you rode with him on Tuesday night.

Host: Dane Higgins:

Yep.

Host: Josh Anderson:

And he was right behind us, and we were on e-bikes.

Host: Dane Higgins:

I was dropping your son who was on an e-bike, and I was on a revel that wasn't an e-bike. And I'm fat and slow and old. And so I was like really surprised. Uh I was very surprised. And so I, you know, I I I like that because that is a a clear, you know, Revel. What what I didn't like about Revel is they decided to go consumer direct um and focus as bikes.

Host: Josh Anderson:

And then I think they've shifted a little bit, and now they're they've got kind of this weird we're gonna talk about them in a minute, but they've we've got this like hybrid thing where you they're only selling frames to to dealers. But I think they're selling frames to people too, but they're also selling them to dealers, and you get a smaller margin as the dealer than you would through like one of your other companies that you work with.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

But then you you custom build that bike for someone, which I love because I want to pick every part. Yep, yeah, right. But you get all the margin on every part that you buy. Yes. So it would be interesting to run a little analysis and say, what kind of margin do you get off one of these bikes that are fully built on this on the floor? Yeah, versus what's the margin that you would get on a custom built revel.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

And I my hypothesis is you make more money on the custom built revel. So that's a great that's you should do the analysis. Yeah, let's do that. You need to include the cost for labor of you speculing the bike and building the bike. Okay. And in your margin analysis. Okay. Because that's that's work for you guys and cost for your business. Yes. All right. So just a couple, we won't go into detail here, but a couple more. Propane, German company. We don't see them a lot in the United States. Yeah. DTC, stable, healthy, no financial distress.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

Polygon, Indonesian company. You were talking about the the you know, polygons are getting better because the the they've probably taken advantage of some of the patent expirations, good, whatever, financially healthy.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

Um, there's a couple other GT, these aren't necessarily direct to consumer, but because they're in my analysis, you know, GT bicycles paused, winding down.

Host: Dane Higgins:

Uh-huh.

Host: Josh Anderson:

Okay. So to round out and and and bring this podcast home in the next 20 minutes or so.

Host: Dane Higgins:

Yeah. Yeah.

Host: Josh Anderson:

I want to talk about what I think the consumers and DTC brands are starting to realize. This is your platform to like talk about how great the retail shops are. And then I want to debate my hypotheses for where I think these DTC brands are going to go in the future and what's going to happen, and you can tell me what you think.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

Okay, so I think that consumers and brands are starting to realize like and accept that the IBDs, the independent bicycle dealers, like guru bikes, yeah, is offering something they can't. Okay. Many things that they can't. Yeah. And those things are local perspective and community.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

So you helped bring together the community in Tucson. You know what the Tucson ride conditions are and which products work best. The DTC brand has no fucking clue about that. Um so you know Tucson. Yes. You know what bikes, what products, what tires, what suspension, what everything.

Host: Dane Higgins:

You know works what works best in Tucson. This gets me to like remember I I would rant about YouTube, you know, and some guy would go there for advice on what tire to get, and that guy lives in the Pacific Northwest, and it's not the same tire that he should be riding in our area. And so, yeah, absolutely. Like, and then community, that's the thing that I've actually done a video to kind of remind people hey, you know, if you can buy um a product from me or get it direct, and it's the same product, which is your omnichannel you're talking about. Yeah, do it locally because if it doesn't hurt you at all, except to maybe drive to the shop and pick it up, you're supporting uh, you know, a bike shop. You could be supporting the trail builders, you could be supporting I mean, we support trail building, we support you know all of those, all of those things. Yes. And so like it's absolutely free way to support those things. Like, what did you do last weekend? I did well, last weekend we had two different events going on where we helped support riders. I was broken, so I did shuttle rides. So I drove people up and down to get them on trails, and both events needed a shuttle rider, and so I just So was Canyon there? No. Was YT there?

Host: Josh Anderson:

No. Was Ari there?

Host: Dane Higgins:

No. Okay.

Host: Josh Anderson:

And so this like this support, this local community.

Host: Dane Higgins:

And to be honest, to be fair, Pivot was not there. Rocky Mountain was uh not there. They the those companies.

Host: Josh Anderson:

But they were because they sell through you. Yes, yeah.

Host: Dane Higgins:

When you when you come in here and buy something from me, it gives me the opportunity to pay back. We'll get to your we'll get to your stuff here. Okay. Expert fitting and sizing. Which is so here's here's something crazy. I've been looking. There's a couple things where they're trying to make this so you can do it from your couch. Like you can get an app and it'll somehow tell you how to fit the bike. I I don't have any faith in that because fitting to me is like an art form.

Host: Josh Anderson:

It's not a it is a thousand percent an option.

Host: Dane Higgins:

Yeah, it's not something that you can just reduce down to like angles and and and stuff, and and then diagnostic fitting where you're trying to figure out a pain that somebody has is so specific. Yes. Um, so I don't think those will ever threaten fitting.

Host: Josh Anderson:

To get the right size, and it's not just small, medium, large. Yep. This is way more nuanced than that. And if you never had a bike fit, we've got two podcasts from both Tyler Vandruff, who's the bike fitter here locally at Guru, he's a co-owner of Guru Bikes, and also Frank the Fitter from a totally different shop. Yep. That we Ben's bikes, you can say their name. Yeah, Ben's bikes. You totally emphasize like the value of a bike fit. If you're a mountain biker, if you're a road biker, gravel biker, try whatever, yeah, go get a goddamn bike fit. Yeah.

Host: Dane Higgins:

It will change your world. It is do it. It is something that people it's scary how many people deprive themselves of a of like a hundred or two hundred dollar bike fit, whatever your fitter charges. But they'll spend twenty three hundred dollars on a new set of wheels to kind of ride, you know, to get my two hundred dollar bike fit would improve your ride by two hundred percent in the in the And trust me, I sell those wheels all day long and I have them on my bike.

Host: Josh Anderson:

But you will, but you will continue to sell them. All right. Assembly, like bike bicycle assembly, yeah, and mechanical expertise, service, fixing the bike, getting it set up. Yep. Not not specifically fit specific, but just so that it's functional.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

Right? Like you get a bike in a box, yep, good luck.

Host: Dane Higgins:

Hopefully everything works. Yep. Yeah, we've built some D to C's and they are never really ready. But let's say they are. Let's let's say that you've bought your direct-to-consumer bike, it shows up on your doorstep, it's got a toolkit in it, it's got everything, it's got instructions on how to put it together. It's awesome. You get it together and you go ride it, and you're just like, this is awesome. It shifts great, the brakes work, the tires work, everything works, suspension's good. Did you you know there's this thing that happens with bikes where they do break in? And and when I mean, yeah.

Host: Josh Anderson:

I walked in the shop today, your shop, 30 days ago I bought a bike for Lacey. I bought a pivot vault. Lacey's my wife, bought a pivot vault. Yep. I walked in your shop, your bike shop manager then walked up to me and said, Josh, is Lacey riding her vault? I said, Yes. She's riding the shit out of it. Yep. He said, Sweet. You got to get it in for the 30-day checkup.

Host: Dane Higgins:

Yep. Yeah. And that 30-day checkup is free. Yes. Yeah, we don't charge for that. And then uh, you know, one misconception is sometimes people think it's a tune-up and they save it for a year. Like, oh, it's been a year. I should get my free tune-up. And we're like, nope. It's a 30-day. It's it everything on the bike settles. Bearings will settle into place that weren't normally loose. They get loose. Cable stretch, tire, tires not so much. Tires are but the rims. I'm sorry, not tires, wheels. Wheels. Yeah, the spokes will settle and the spoke tension will be off. Like lots of stuff that we go through and just double check and make sure it's settled.

Host: Josh Anderson:

Yeah, little tweaks here and there.

Host: Dane Higgins:

Yeah, because even the best bikes, we're talking $10,000, $15,000 bikes. Doesn't matter. It doesn't matter. This stuff still happens, and the bike shops know this, and they almost almost every single one will do this service for free, you know, if you've bought from there. Yep. If not, it could cost you hundreds, a hundred or more dollars to have this done to your bike, and you still need to do it. So um one story, real quick, is we sold a brand that went direct to consumer, they would send you the bike, they'd send you the instructions, but they also sold through our shop. And people would buy the bike direct, have it shipped to their house, and then never get the the um the uh 30 day. We were like, Can you please give us their info so we can email them to at least have them come in, you know? And it was like pulling teeth to get that info to get them in. If that customer Consumer acquisition cost, they don't want to shift that consumer from them to you. Which is super selfish. It's not good for the customer because had they bought it through us, they would have paid the exact same amount, we would have done a free fitting sizing that we do, included with the bike, and a free 30 day, plus we would have handled all their warranty issues with no extra fees. Whereas now they've bought it somewhere else, they've paid the same amount, and they've gotten none of these features. And it's like I you know, I pull my hair out sometimes when that happens. So all right.

Host: Josh Anderson:

So next one ongoing service and so we talked about like the fit, assembly, mechanical expertise. I guess it's a little bit the same, but ongoing service and then warranty support. Yep, yeah. Like you come in and you are the face, you deal with the product uh producer. Yes, yeah. They the customer doesn't have to do that. You're the one that goes and works out the warranty for them. I am looking right now at Iraqi Mountain that had a cracked frame, and you guys manage the warranty, and I see the brand new frame that you are currently installing on that bike right now.

Host: Dane Higgins:

Yep, yeah. And and that customer, all they had to do was drop it off. The crazy part, here's something, the story on that bike. Yeah, you didn't even know it was he didn't know there was a crack in the frame. It came in for a chain ring issue, and as we're working on it, we noticed the crack. We immediately filed the warranty form. Called the customer said he's got a crack frame because he bought the bike from us, so we have all the stuff we need, sent it out, and already had the frame warranty started and on the way before we even told had to tell him what we were doing.

Host: Josh Anderson:

Like you got a crack frame, we already got a warranty work. The next thing is that first person experience, right? I have written down the chart here test ride opportunities, but it's you can touch, you can feel, you can taste, you can see, even if it's a just take it around the parking lot. I'm sure you guys let customers do that. Different shops have different policies on test rides, I'm sure. Yeah. Um, but you get a chance to actually like touch, feel, taste, experience the product that you're about to buy before you buy it. The final thing is I think it's not a hundred percent of the time this is the case because the shops can't have infinite, you know, like like inventory. Yeah, yeah. But more often than not, you can get an immediate gratification. Yes. I mean you can walk in the shop one day, and that same day, oftentimes, yeah, you can walk out with your product.

Host: Dane Higgins:

Yeah, it uh I would say that the bike shop usually will have something that helps you in most cases. But if you again in this case, like if if you were looking at a particular product, yeah, you may not be able to do that. Yeah, yeah.

Host: Josh Anderson:

That's why I say it's not an all. So let's transition to my hypothesis for the future of direct and consumer. Okay. I have five or six hypotheses. Okay, and I would like you to agree, disagree, counter debate. Okay. And then we'll we'll finish off the podcast with these six things. Okay. First thing, I think the number, so we said earlier, what was there, nine hundred uh uh nine hundred bike product brands sold in the US market. Okay. I believe that the number of bicycle product brands in the US will continue to dramatically decrease over the next decade. Um I don't know about the decade, and I don't know about Let me explain my rationale for the position. I think there's so much we talked about several the brands. Yeah. And again, this is not just DTC, this is the whole bicycle industry.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

So much insolvency, so much financial struggle. Yeah. I believe that many of those companies, you're talking about strategic changes to help keep them viable. Yeah. Some of those will work, some of those won't. Yeah. I believe that the financial struggles are so d dramatic that we will we will have significant bankruptcy, mergers, and acquisitions, and the industry will contract. And instead of 900, if we're doing this podcast five years from now, that number might be 500. Absolutely. Like you agree that the number of companies are going to decrease. Absolutely. Yeah. Second, okay, so we're we're putting these out there in the ether, and maybe in a couple years we'll come back if we're still doing this podcast. We'll come back and see how how did our predictions.

Host: Dane Higgins:

These are your predictions. So your first one is that there will be a huge decrease in available products for the bike industry.

Host: Josh Anderson:

Yeah, dramatically, dramatic decrease in the number of not products, but the number of companies. Okay. Specific companies.

Host: Dane Higgins:

Okay.

Host: Josh Anderson:

Okay. I believe that direct to consumer will remain strong into the future for low-end products.

Host: Dane Higgins:

That's a tricky one. It makes sense to me that that would be the case. That they're going to focus on that.

Host: Josh Anderson:

Okay, so the other side of the coin from my my my prediction that direct to consumer will remain strong for low-end products is that the independent bicycle retailer will be the go-to place for both e-bikes and all medium and premium products.

Host: Dane Higgins:

The e-bikes are tricky because we started carrying an e-bike that you could buy consumer direct or but they were omnichannel and it was a commuter level bike. And so we carried in the shop thinking, hey, eh, you know, you can get it direct, but they're harder to deal with, and we can do it. And and we saw uh an opportunity, it was a disaster. We stopped carrying that company because the quality was so low.

Host: Josh Anderson:

This is why I think the independent bicycle retailer is going to be the the place you go to get an e-bike. Yeah. They haven't here this is Josh's opinion.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

They haven't figured out the technology yet. Yeah. Exactly.

Host: Dane Higgins:

It's it's it's definitely evolving. It's storming. Yep, for sure.

Host: Josh Anderson:

Right? I mean, you replaced the motor on one of my bikes, I won't say the brand, but you replaced the motor on one of my bikes already, right? Yep. They're figuring it out. But it doesn't matter. The bike's so fucking awesome. I'll buy it again if I had to, right?

Host: Dane Higgins:

Like and and you're as a consumer realizing the value of having somebody having bought that local.

Host: Josh Anderson:

I would have been effed and I have not bought it from you.

Host: Dane Higgins:

Yeah, and we see that in the shop because those bikes that are consumer direct have to go somewhere. And so I I totally agree with that.

Host: Josh Anderson:

All right, so um so next one brands, and there's there's a clear difference here. Okay, most brands, and this is not just bike industry. I think this is kind of like what uh Motley Fool was saying. Yeah, most brands will ultimately end up in an omni channel business model where they're selling through retailers and through direct consumer consumer. The nuance I think that's not there today is that in the bike industry is that there will be clear boundaries between what they sell direct to consumer. And what they sell through bicycle dealers. And I honestly believe it's going to be low end versus medium and high end.

Host: Dane Higgins:

I do agree that what they'll do is they'll they'll start to see some of the advantages to the IBD are going to be way more glaring. I'm sorry, I don't believe that they're doing any great thing for the bike shops. They're just trying to survive. To survive. And a revel is on that. I think Revel, I don't know. Confirmation bias. I think it's a good product, and I think they do a good job. And I want to see them survive because they have done wonderful things. And I think you're going to make a lot of money selling revels. I don't think so. We're going to test it. Here's my theory on all of this that we've talked about.

Host: Josh Anderson:

Well, before you say your theory, do you agree with that hypothesis, the future or not?

Host: Dane Higgins:

The the partner?

Host: Josh Anderson:

Yeah.

Host: Dane Higgins:

Um yes. I think they will try. I so what that's the same thing.

Host: Josh Anderson:

That means that the brand means that the bike shops have to accept like a con and and I've talked to many shops owners in town, and there's a couple that have already accepted deals to be the service center for the DTC brands.

Host: Dane Higgins:

Yes. Yeah. I think that'll happen. Okay. I agree with my my prediction. I do. There there will be a point at which the if that brand is not uh a good partner and doesn't help the bike shop, the bike shops will just get frustrated and leave it. Um and I think that's a desperate act.

Host: Josh Anderson:

Well, I mean if if you make money So so if so take a brand, if Ari comes to you and you make you Dane Higgins for guru bikes, you make good profit servicing RE bikes, then it makes sense for your business model to do that. Yeah. And if you don't, if it's a pain in the ass, if the products suck, if it you're spending more you know, tack time on an Ari bike than you are on another bike, unless you charge a premium for Ari, then you won't do it. Yes. I mean you're just gonna assess does I make money this or not? And if I do, or is this is this hurting my my retail sales? Exactly. Right, you're gonna do all those analyses and figure out, okay, is this should this be part of my offering or not? For service-only shops, it's a I think it's like a no-brainer.

Host: Dane Higgins:

Yeah. Service only, they don't have a product that's competing with that brand. So it's so so more server bikes. Yeah, exactly. Yeah, they don't they don't have the same kind of we are going through a time right now where um when you because none of this shows uh forecasting.

Host: Josh Anderson:

So I believe consumer demand dropped. That's one of my reasons.

Host: Dane Higgins:

I know, but consumer demand dropped. That's forecasting. But manufacturing is still supply chain issues emerged.

Host: Josh Anderson:

That's another one of my issues.

Host: Dane Higgins:

I know, but those are not easy for people to digest. And so when you have a market that is reliant on the direct consumer, any shift to that consumer is immediate. So if we have a war that pops up out of nowhere and all of a sudden spending changes and attitudes change, that will affect their business in in instantly. Okay. Instant. They cannot they cannot adjust for that.

Host: Josh Anderson:

And so when you So this is a good perspective that you're bringing up.

Host: Dane Higgins:

Yeah.

Host: Josh Anderson:

When you don't when you are managing all your own inventory, you hold the liability of the demand on that inventory. When you've spread that inventory out across distributors, wholesalers, retailers, that the risk of that inventory is spread across to all those different entities.

Host: Dane Higgins:

So if there's a hurricane in one area, it doesn't affect you as much.

Host: Josh Anderson:

And then that's a great that's a great perspective.

Host: Dane Higgins:

The spreading of ri of inventory risk. And it's a time thing. When you make a an arrangement with a bike shop, you are asking them to buy a certain amount of bikes over time, and then you can forecast. You have a reasonable demand. Your your forecasting can be much more accurate because they are telling you what they're gonna buy. Yeah, you're and then the bike shop spreading that liability or risk of MT. Exactly. But that that time have shown the D2Cs how volatile direct consumers can be. That's a great point. And I would say the last thing that I would say is also you know, one thing that the bike shop does that the direct consumers don't is they give you a more objective opinion about something. So when you come in and talk to me about all these bikes, I rarely will tell you one is better than the other because I've got to sell them all, but I'll give you good opinions on them. Whereas a direct-to-consumer is only gonna tell you how good their product is, they're never gonna give you the bad. And so you don't get that perspective.

Host: Josh Anderson:

Dick. I agree with you. All right. Thank you so much, audience, for sticking in.

Host: Dane Higgins:

If you've still stayed for an hour and forty-eight minutes. I can't wait to see if people like this. Please, please mention if you like this.

Host: Josh Anderson:

This was a long one.

Host: Dane Higgins:

Yeah, if it was brutal, we'll stop it.

Host: Josh Anderson:

Um, maybe. Take care, guys.

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Dane "Suspension Guru" Higgins

Host
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Josh "Magellan" Anderson

Host