I accept the risk, as well as the enjoyment of presenting some of the most exciting developments in bicycle product design, marketing and distribution that I have seen in my 43 years in the bicycle business.

The global bicycle market is breaking up into niches and particles - or into smaller and more focused consumer segments by country, and by regions and demographic groups within countries or large geographic markets like the EU.

New players are emerging, primarily from the automobile, scooter and motorcycle industries. They are driven by a common interest in two-wheel transportation, short-distance mobility needs and very real environmental, air-quality and quality of life concerns.

Mountain Bikes - or MTBs - have been king for just about a decade, but overall are declining in popularity in all the markets of the world. While still accounting for approximately 45 percent of Specialty Bicycle Retailer (SBR) units in the U.S., this is a long way from the dominant 52 percent of units just three years ago. The decline of the Mountain Bike is being felt in all of the world's bike markets, and the global industry is looking for the next "big" product segment that will replace king MTB. From the current global trends, it doesn't look like any one "big" new product type or segment will replace the Mountain Bike. Instead, a group of re-cycled configurations and new concept bicycles are emerging as a collective replacement in world markets.

Among the strong niches in the U.S. is Mountain Full Suspension, with just 4 percent of SBR units. At an average retail price of US$1,200, this product segment represents 12 percent of retail dollars and has increased in volume by almost 45 percent over the past year.

Road 700c - or road bikes - have been growing steadily in the U.S. SBR channel. In fact, this product segment and the extreme and aggressive athletic niches it serves are exclusive to bicycle dealers - plus mail order and online retailers. In the U.S. dealer channel this segment has achieved 4 percent of unit sales, averaging US$1,100 per unit at retail and representing 11 percent of retail dollars. Road 700c has increased in volume by 41 percent over the past year.

Demographic Significance:
Mountain Full Suspension and Road 700c segments are growing because they both serve the Gen-X and extreme athletic and aggressive athletic market niches. These groups are above average in income and overall household income and they spend heavily on their lifestyles.

Supply Chain Significance:
Mountain Full Suspension and Road 700c are "traditional" product segments supplied by the current manufacturers and brands, and both segments sell at above US$1,000 average retail price. However, these are small volume islands on which only so many suppliers can live. Only the fast, just-in-time innovators will survive to enjoy these high value product segments. Both segments are almost exclusive to the SBR channel, but mail order and on-line retailers live here too, and will have opportunities to grow in share if traditional bike shops don't figure out how to capture these enthusiast cyclists for life!

Comfort - is still not clearly defined, but "comfort" has become the rallying cry of the world's largest component manufacturers. Shimano is projecting that sales of "comfort" component sets will increase from 8 percent in Europe last year to 22 percent in 2000! SRAM has "fine-tuned its focus on comfort," according to Bike Europe, and the company recently introduced an expanded line of components for comfort bikes. In the U.S. SBR channel the comfort segment has reached just under 12 percent of dealer units and 10 percent of retail dollars. The volume of Comfort Bikes sold by bicycle dealers in the U.S. over the past year has increased more than 40 percent. Both Shimano and SRAM are positioning Comfort to move up-market, and SRAM is quoted by Bike Europe as believing that innovative comfort components "could decrease or entirely bring to a halt the ruthless price competition among bike and component makers seen in today's industry."

Recumbents - are coming on slowly but steadily. The problem is that the industry does not even acknowledge this emerging product segment, so it makes no attempt to collect statistics. More and more Specialty Bicycle Retailers in North America and the EU are taking on recumbent lines and the average selling price at retail is estimated to be US$900 and above. Unit volume is estimated at 50,000 units in North America and an equal number in the EU. Recumbent and semi-recumbent models are being introduced or shown as concept models by a growing number of manufacturers and brands in the U.S. and Europe.

Electric Bikes, or EBs, have been the focus of a great deal of attention over the past five years, perhaps more so than any other new bicycle product segment. Here again the industry in North America does not collect statistics, although most of the rest of the world does. Electric Bikes Worldwide 2000 by Frank E. Jamerson, Ph.D., the world's leading expert and author on EBs, reports estimated 1999 sales of 150,000 units in Japan, 10,000 units in Taiwan, 60,000 units in Europe and 50,000 units in the U.S. The big deal with EBs is the interest and involvement of the automobile industry and other companies from outside the traditional bicycle industry. Lee Iacocca is the CEO of a new company, EV Global, and TH!NK Mobility, a subsidiary of Ford Motor Co., entered the market this year. EBs are being marketed as accessories to automobiles in order to provide short-distance mobility.

Folding Bikes - were the big surprise at the Taipei International Cycle Show this year, and Bike Europe estimates the world market for folding bikes at between 600,000 and 1.5 million units. Like many of the emerging new product categories, statistics are hard to come by, but folding bike sales for 1999 in the EU are estimated at 185,000 to 200,000, and at 400,000 in Japan. U.S. sales estimates are much lower, at 12,000 to 15,000 units. Folding bikes have been around for decades and traditionally have been sold at mid- to low-price points. What has changed is the emergence of a high-end folding bike segment, above US$700, driven in part by the automobile industry and the short-distance mobility requirements of consumers. Titanium folding bikes were introduced at the Taipei Show as one example of this up-market migration of folding bike products.

Folding bikes were also displayed as accessories for cars at automobile shows around the world, including in Detroit where VW introduced the Tango from Urban Solutions. One additional variation of the trend was the introduction of folding electric bikes by a number of companies at the Taipei Show this year.

Demographic Significance:
Comfort, Recumbent, Electric and Folding segments all address in their own ways the aging of the world population. The bicycle industry needs to hurry if it is going to be in a position to reap the rewards from providing innovative, comfortable and easy-to-use bicycle products for the world's Baby Boomers and Seniors. All of these product segments are moving in the right direction. However, many of the innovations are being driven and introduced by non-traditional suppliers.

Supply Chain Significance:
Comfort is the one segment where the traditional suppliers still have the upper hand, but if they don't move quickly to bring more innovative, comfort and easy operation cycles to the aging population - someone else will! More and more non-traditional suppliers will start-up and enter the market if this huge opportunity goes largely unaddressed by the existing industry players.

Electric cycles have attracted strong attention from big traditional players like Giant, Merida, Bridgestone, National, Derby and Schwinn/GT, to name a few. This emerging product segment has also attracted people like Lee Iacocca and Ford's TH!NK Mobility with a new and innovative distribution model. Iacocca's Total EV, a subsidiary of Central and South West Corp., one of the biggest utilities in the U.S., is distributing electric bicycles to its own network of bicycle dealers. The auto industry in Europe and Japan is adopting and actively promoting bicycles and electric bicycles as accessories and short-disatance mobility vehicles. Look for major changes in supply and distribution models starting this year.

Recumbent and Folding product segments have been supplied primarily by smaller companies like BikeE, Lightspeed, Dahon and Montigue. However, this is changing as Giant and Merida have both entered these emerging product segments, fueled by new alliances inside and outside the traditional bicycle industry. Recumbent manufacturers will be seeking venture capital and investment to expand their businesses, and traditional companies and brands will be looking to acquire existing recumbent companies. Outside investors will be attracted to both recumbent and folding bike companies. Folding bike companies have already started to license their intellectual property and this will continue. There currently isn't enough economic power behind these product segments to develop new distribution models, but this may change, depending on the acquisition and investment activity.

Electronics - will define component development. Shimano is leading this charge, followed by SRAM and Campagnolo. Component integration with computerized electronics will be the driving force in component development in all categories of bicycles and components. This in turn fuels the appetites of all of the demographics served by the product segment trends we have covered here for comfort, ease of use and innovative computerized gadgets.

Look for all the major players in the industry to seek alliances in order to "integrate" their components to central, on-board bicycle computer systems. Also look for major bicycle manufacturers and brands to develop proprietary, on-board computer technology or to license the technology to control the component integration on their products.

That's all for now, I have to take a break to eat some ground glass! Next month we will take a look at Distribution Trends.

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