German Bicycle Maker Canyon Rides Into the U.S. Market

A new business model for the bicycling industry rode into the U.S. market this week as Canyon, a German bicycle maker, kicked off a new challenge to the U.S. bicycle market: Selling their high-end bicycles to the U.S. consumer online.

Specialized, Trek, Cannondale, Giant and others who sell high-end bicycles offer them through bricks-and-mortar bike shops. But Canyon, which was founded in Germany in 2002, has changed the rules of the road by offering prices around 25% less for comparable high-end bikes. Movistar and Katusha Alpecin, who ride on two major professional cycling teams, ride Canyon bikes.

In the U.S., wheeled sports -- largely cycling -- is a $97 billion in sales industry, according to a 2017 report from the Outdoor Industry Association. Many bicycle companies, including Specialized and Trek, are privately owned, but Giant and Cannondale, which is owned by Dorel, are public.

The direct-to-consumer business model makes more sense even without the modern shift online, says Blythe Jack, a managing director at TSG Consumer Partners, quoted on "Independent bike dealers are limited for space for offering whole lines [of bikes]," Jack said. "It's not feasible for a small floor plan as well as capital intensity required to floor plan a large inventory. It's the biggest bottleneck of the retail experience."

On Friday, shares of Toronto-based manufacturer Dorel were flat at $30, while Taiwan-based Giant Manufacturing's shares dipped 0.64 percent, to $155.

Canyon isn't the only cycling brand primed to capture the American consumer. 

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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