Paul Andrews

Bike Business “Recovery”?

In Bicycling on February 16, 2010 at 2:09 am

Shimano sales took a 21 percent hit in 2009, but the company continues to look on the bright side. Talking “slight” recovery, the company estimates sales will improve 8 percent the first half of 2010 over 2009’s dismal showing.

Business articles often speak of a rebound in terms of “recovery.” The word is used far too loosely. “Recovery” denotes getting back to full health, or at least where you were before. If someone breaks their arm, they’re not going to think they’re recovered till they can fully use their arm again. Being able to write their name but not, say, wave hello, is not going to be “recovery.”

So when Shimano talks about an improvement of 8 percent year-over-year, they’re a long way from anything resembling a recovery. When you drop 21 percent and gain back only 8, you’ve got a slog ahead of you. You could even gain back a full 21 percent and fall well short of a true recovery. Here’s an easy example, using nice round numbers for explication purposes:

Company X’s 2009 sales drop 21 percent from $100 million to $79 million.

In 2010, Company X’s sales increase by 8 percent. From a base of $79 million, that’s $6.3 million. Add the two figures together and you get $85.3 million.

That’s not terrible. You can write your name. But you’re a long way from giving anyone the “hi” sign.

To get back to full “recovery” — back to where you started ($100 million) — you’d need a sales spike not of 21 percent but of just under 27 percent. Nobody’s talking anywhere near those kinds of numbers for 2010. Even a cumulative 27 percent is nowhere in practical sight.

Keep those simple economics in mind the next time you read a story mentioning any bike business “recovery” — or general economic recovery, for that matter. There may be a bit of a “dead man’s bounce” effect going on in 2010. A slight rebound. An uptick.

An actual recovery, if it happens at all, is going to be a long haul.

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