IBD FOCUS Approach with caution
Founder and director of Criterium Cycles bike shop in Edinburgh, Richard Bowker CBE, outlines what bike shops could look forward to as we kick off the new year
Criterium Cycles in Edinburgh
In October 2021, the total value of the market was +20% compared to 2019 but -23% compared to 2020, suggesting that the market in 2020 was up some 40% compared to the previous year. The ‘boom’ appears to have flattened since (no surprise), but what can we look forward to in 2022?
future, it’s prudent to remember that whatever we think will happen generally doesn’t happen at a precise level of detail. Forecasting trends is a
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broad-brush exercise as any decent economist will admit. Having said that, if markets believe something will happen, that can often be the stimulus for something broadly along those lines to come to pass. Since there are several widely held economic predictions as we head into 2022, it helps to see what guidance they offer.
What happened last year? We all witnessed a demand-led bike boom during the various lockdowns coupled with supply side disruption across the sector. The Bicycle Association’s excellent analysis provides some clues as to the level of the demand.
hen considering any economic forecast for the
Economy and Covid The general view appears to be that we will see growth in UK GDP in 2022 of around 4-5%, falling back in 2023 to 2% or thereabouts. So, at a macro level, 2022 at least looks okay for the nation. Nevertheless, inflation is something to be wary of. The vast sums of money pumped into the economy during the pandemic coupled with serious global supply issues led the Bank of England’s (BoE) Monetary Policy Report to forecast a Consumer Price Index (CPI) of around 4.1% in November 2021 rising to a peak of 5% in April 2022. The BoE then expects the upward pressure on CPI inflation to relax over time due to supply disruption easing, global demand rebalancing and energy prices stabilising. CPI inflation is then projected to fall back materially
from the second half of next year. That’s good news for consumers and hopefully means that the purchase of discretionary goods such as bicycles remains affordable. 5% CPI is not necessarily bad news either for retailers holding significant inventory coming into 2022. Since that stock was purchased in 2021, there should be capacity to discount against rising 2022 prices and still deliver decent net margin. So, in H1 2022, we may see retailers with large inventory discounting to turn it into cash and also a fair number of ‘almost new’ bikes, bought during lockdown but now the subject of buyer remorse, hitting the auction sites. Both factors could put pressure on smaller, traditional single store cycle retailers. One thing that will continue to generate material volatility is Covid. Goldman Sachs has already cut its US GDP forecast by nearly 0.5% in 2022 thanks to the Omicron variant, despite the fact that there are limited data points at the moment to say what the impact is likely to be.
www.bikebiz.com
January 2022 | 47
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