Advertisement

Why attitudes about cycling are shifting during COVID

As people continue to social distance, more people are moving towards cycling as an alternative to public transportation. Trek Bicycle CFO Chad Brown joins The Final Round panel to break down why attitudes about cycling have shifted during COVID-19.

Video Transcript

SEANA SMITH: One of those categories, bikes, have seen sales skyrocketing since the start of the pandemic. So for more on that, we want to bring in our next guest. We have Chad Brown. He's the CFO of Trek Bicycle.

And Chad, it's been quite a year for your business. We've seen a couple of the numbers, but just talk us through how you've been able, if you've been able, to keep up with demand and what the past six months have been like for your business.

ADVERTISEMENT

CHAD BROWN: Sure. Well, first, thanks for having me. You know, for the bike industry, it's been a couple of decent years for the overall industry. And coming into the year, it was a solid start to the year, I think, for the overall industry.

And you know, March 14 for the overall industry, it started to-- we started getting all the notifications of it closing down, and retail closing down, and the pandemic happening. And you know, for a couple of weeks, it was sort of touch and go as to what was going to happen. And then there was this inflection point, like, Easter weekend, the first week or so in April, where we just started seeing some signals from the field and from retail sales that something was happening.

People were buying bikes. They were looking to get outdoors. They needed to be socially distant. Kids were home from school. And you know, it just sort of took off like a rocket ship from there.

SEANA SMITH: How much have your sales increased, just in terms of what you're seeing this year versus back in 2019?

CHAD BROWN: Yeah. You know, I think, like, the overall-- the industry as a whole, I think if we look, the first three months of the year, 10%, 15% were up. In the boom, you know, I think you saw the industry grow somewhere between 50% and 100%, depending on the category and-- and the business. But it's been really strong since, like, that mid-April through-- through the current period. It's been a-- it's been a real boom so far.

AKIKO FUJITA: Chad, what does your manufacturing pipeline look like right now? I know you've got factories outside of the US in Europe, as well as China. We've heard a lot of companies who've said given what they experienced over the first several months of the pandemic and the closures, they're reconsidering moving things closer to home. What does that look like for you right now? And is that something you're thinking about?

CHAD BROWN: Well, so first of all, the factories look busy because we're making a lot more bikes and there are a lot more bikes on the way. You know, our supply chain reflects where our customers are. We have manufacturing in the US. We have it in Europe. We have it in Asia. And you know, it reflects where our customers are and where our sales are represented.

You know, we certainly saw the signs early in this boom, and we've been ramping production since then. You know, there-- there's just some really strong sales around the world. It's in Europe. It's in the US. And you know, our-- our factories and our supply chain have been rallying strongly since April, May time frame to make sure we can keep up with the demand right now.

RICK NEWMAN: Rick Newman here. I wonder if I could just press you a little bit more on China, in particular, because that's obviously been a focus for President Trump. Bicycles and bicycle parts did get hit with some tariffs. And now we're sort of-- we sort of have this uneasy truce known as the phase one trade deal. Are you comfortable sourcing everything from China that you were doing before all of this began? Or are you-- is that raising costs, and are you shifting some things away from China?

CHAD BROWN: You know, like I said, we have-- we have manufacturing around the world. We have it not just in China, but other parts of Asia, in Europe. And you know, really, mostly what we need is stability. We need predictability.

We can handle-- you know, we can handle increased costs. We can handle commodities fluctuation. We can handle tariffs. We just need stability and a level playing field and, we'll-- we'll take it from there.

RICK NEWMAN: How do you handle tariffs on just-- I mean, do you-- are you able to absorb the cost? Are you able to pass it along? Are you able to get it back from suppliers? I mean, there's been this big question all along is, who really ends up paying these tariffs in the end?

CHAD BROWN: Yeah, you know, I think, ultimately, the tariffs end up being a tax on the consumer. There's really no other way around it. There's only so much money in a supply chain and that businesses can make. And ultimately, we have to figure out a fair way to share the costs amongst our supply chain. And then ultimately, I think we've seen, and it's proven out, that these-- these tariffs that have been placed have ultimately been a tax on the US consumer.

SEANA SMITH: Chad, have you guys been able to address the supply shortages? Because I know you were saying that you're doing your best to keep up with demand. Because I've talked to a number of people who were looking for bikes for themselves or for their children, and they weren't able to find bikes.

They went to a number of shops. They were nowhere. They were sold out everywhere around this area, at least, outside of New York. So where was the hiccup in supply? And has that been addressed?

CHAD BROWN: Well, so first of all, anyone that wants to buy a bike now, there are plenty of bikes. I would encourage you-- you can go to trekbikes.com, we'll help with the concierge service to help you locate a bike. You can call any of the Trek bike retailers around the world. There are a lot of bikes in stores.

I think the days of empty bike shops should be past us, but there are plenty of bikes out there right now. There's also a lot more bikes coming in. Through even the boom time and the shortages, we've been shipping out tens of thousands of bikes per week, so there's a lot of bikes coming in. They're just going out of our warehouses immediately.

And in terms of, like, how we responded with our supply chain, as soon as we saw those inflection points happening in early April, we stepped on the gas and kept ordering. You know, earlier in the year in the late January, February time frame, there were definitely some stops in production from overseas. And I think those factories caught up over the summertime, and now they're just trying to keep up with the increased demand that we're seeing around the world.

SEANA SMITH: And Chad, real quick, just in terms of where you're seeing the most demand city versus more suburban or rural areas, do you have any data on that just in terms of whether or not people are using this more for recreation or if they're using it as a mode of transportation for getting around cities because they don't want to take Ubers or they don't want to use the subways?

CHAD BROWN: Yeah, I think the good news is is we're seeing really solid demand in both areas. In more urban areas and the cities, people are looking at the bicycle as a viable alternative. E-bikes in New York City continue to be a great option. And so people are using the bicycle for transportation, and it's a great green alternative to taxis, or buses, or automobiles.

And then around the world, too, we're seeing families, and kids, and a whole new generation of riders getting on bikes for the first time. They're getting off screens. You know, they're home from school. Their parents need them to do something during the day, and families are riding bikes together. It's awesome. We're seeing an entirely new generation of people fall in love with the bicycle.