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May 26, 2020

The Bicycle is Back in Black!

MHT Partners  | Consumer Investment Bank

A simple mechanical contraption has surged in popularity over the past couple of months as people struggle with restlessness at home, public transportation unavailability, shuttered gyms, the temptation of all day work-from-home snacking and bulging waist lines – the bicycle is back in black!

Whether it be road bikes, mountain bikes, e-bikes and the latest, gravel bikes, all have seen a surge in demand from “state of the art” versions to beginner varietals. While some of this mechanical mania will surely subside as “normalcy” returns to recreation, work and commuting – we believe a significant percentage of this change to consumer behavior will stick.

The National Association of City Transport Officials (NACTO) reports an “explosion in cycling” in numerous U.S. cities. While much of this is recreational, usage by essential workers commuting is up significantly and may portent the behavior of non-essential workers who return to the office in the coming months.

Domestically, an increasing number of cities have closed city streets to vehicles both in response to less cars on the road and increased demand from cyclists. Among notable cities:

  • Oakland has closed 74 miles of streets.
  • San Francisco just this week pledged to close another 20 miles of streets which brings the total to 34 miles.
  • NYC plans to close 100 miles (starting with 40 in May).
  • Seattle plans to permanently close 20 miles of streets.
  • Elsewhere in North America, Minneapolis, Philadelphia, Burlington, Denver, Boston, Charlotte, Calgary and Mexico City have all had street closures.
  • International cities ranging from Auckland to London, Berlin to Bogota, are doing the same.

Admittedly, not all road closings will be permanent, but it’s not a stretch to envision some permanency will continue.

Several considerations and factors contribute to cycling popularity:

  • Biking is fantastic exercise, and with public transportation in high density urban areas down 50% or more across the nation, biking is a logical alternative.
  • One can partake in this activity with the whole family.
  • It is lower impact versus some physical activities, and one can cycle late into their life.
  • Biking is an activity that can be both social and social distancing at the same time (unless you’re banging bike pedals, it’s difficult to be within 6 feet or so).
  • Importantly as well, biking is fantastic for the environment as it reduces reliance on cars.

More specifically with respect to some of the points above, according to the World Resources Institute, studies have shown regular cyclists can have a 50% less likely chance of heart disease among other ailments (the same can presumably be said for other acts of regular exercise). As relates to the environment, it’s estimated that each kilometer cycled avoids 250 grams of CO2 emissions. Cyclists in Copenhagen, one of the world’s most prodigious biking cities, by virtue of avoiding cars, keeps 20,000 tons of carbon emissions from entering the atmosphere.

All of this points to significant growth in the estimated $6B + bike market.

Anecdotal checks with numerous bike participants (vendors and independent shops) paint a picture of massive demand juxtaposed against limited supply. At the local bike shop I frequent just north of San Francisco, a simple mountain bike tune-up is taking 10 days (because of overwhelming demand), and the availability of a bike to demo in advance of a new purchase was exactly one (in contrast to probably 10 X that in less active times).

But a word of caution – America witnessed a significant bike boom in the 1970s, and at the time it appeared to be spurred on by high oil prices, a concern for the environment and a number of other “wellness“ dynamics also at play (sound familiar?). Bike sales boomed for a number of years and then they deflated just as quickly and alas, America didn’t become the Netherlands. That said, in hindsight, the 70s’ boom appears to have been fueled simply by baby boomers coming of age and buying “big people“ bikes. While bikes in the 70s were still viewed as somewhat of an odd accoutrement for an adult (rather than something shed with finality in one’s teenage years), bikes (and the quality and spectrum of them) have come a long way in the interim, and there is nothing “childish“ about them anymore.

In addition to the aforementioned dynamics, it remains to be seen how much consumer behavior will stick versus the alternative of bikes becoming glorified drying racks in one’s garage.

Additionally, with respect to worker commutes, the interplay of more people working from home (less need to commute) and convenience (dedicated bike lanes – perhaps less needed with more people working from home) remains to be seen.

As an avid mountain biker and believer in “a sound body makes for a sound mind,” I hope that this two-wheeled revolution continues!

MHT Partners, a leading consumer investment bank, welcomes further discussion. If you would like to learn more about MHT’s consumer advisory practice, please e-mail Craig Lawson, clawson@mhtpartners.com; Patrick Crocker, pcrocker@mhtpartners.com; Gavin Daniels, gdaniels@mhtpartners.com; Tara Smith, tsmith@mhtpartners.com or Tom Gotsch, tgotsch@mhtpartners.com.

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