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Counterpoint: Is Dengfu the next big bike brand?

A week ago when Dave leaked his intention to write a blog series on why he thinks Dengfu could be the next bike bike brand I told him it would have to be an exceptionally cogent argument, because I just don't see it happening. And not only for the reasons Dave points out here and then some more here, nor for any reasons having to do with product quality that were inaccurately ascribed to us here. My argument for why Dengfu et al will remain marginal players has more to do with brand and business strategy. Here's why.

1. Dengfu fails as a brand. Brands exist to do one thing for consumers - relieve them of the burden of decision-making. It's why Specialized and Trek and Cannondale sponsor pro teams and buy extensive ad campaigns - so you evaluate their products outside of purely logical and practical analyses of price, weight, stiffness and other measurable and comparable metrics, and instead fall in love with the idea of owning them. Look at the practice in another industry. If you had to read the ingredients of every bottle of shampoo before buying to make sure you were getting something you could trust would meet your expectations, you'd be paralyzed. In the bike business, where purchases are more considered, analysis paralysis is very real. The perceived fear of failure of buying a bike that won't make you more enviable or wheels that won't make you 4 seconds faster in a 40K TT is a powerful force. Go online to any forum site and you'll see this in action: "Vittoria Open Pave 24mm vs Conti 4000s 25mm" (4272 views on Weight Weenies), "Power meter brand reliability" (3391 views), "Help me pick a new bike? Dogma F8?" (2274 views). Want evidence that the Chinese options are contributing to analysis paralysis instead of alleviating it? "Open mold wide profile carbon wheels" thread - 125,293 views. Any company whose products promote such compulsive should-I-or-shouldn't-I is failing as a brand. For our part, we're happy to show up in the forums under these circumstances ("November Rail 52 vs Zipp 404 FC?" - 1198 views) because it means our brand is being exposed to new users. But I know also that every time someone asks if we're a good choice is an instance of the brand not doing its job. 

2. A willful resistance to differentiate. When we launched, our point of differentiation had nothing to do with product (which was open mold and under-adorned graphically) and everything to do with distribution (selling direct) and operations (organized around reducing internal expenses and therefore customer costs). That works great with customers who place price before product, and who do not value product differentiation. We had a realization at some point though that the only thing worse than winning the race to the bottom is coming in second. Now Dengfu is economically better equipped than we are to win a race to the bottom and still survive. Doing so however may grow revenue but does not create brand value. That's not to say that all strong brands are for premium products. Many value-based brands command raving fan followings - Trader Joe's, Southwest Airlines, Pabst Blue Ribbon. But it's not solely because they're less expensive - they're less expensive AND provide a differentiated product and/or industry leading experience. So far, the product strategy of Dengfu et al is to wilfully avoid differentiating and instead to try to resemble recognizable products. Part of the reason is that by all informed accounts, Dengfu et al are not manufacturers at all, but trading companies that simply distribute the products provided by other even lesser known companies. It's impossible to have a consistent product strategy or philosophy built on products other companies give you to sell, so the only product strategy left to them is to suggest that whatever you're getting is just about as good as what you might get from a brand you've heard of.

3. They are not the ones to break through the distribution morass. Currently in the bike industry, a greater percentage of your purchase price goes towards distribution channel expense than product expense. The rise of direct-to-consumer sales (through companies like ours, Williams, Canyon and, yes, Dengfu) is starting to shift that, but only by fractions of a percent. You could argue that the strongest brands are in the best bike shops, but I'd posit also that brands rely largely on the shops as a tacit endorsement of the quality and trustworthiness of the brands. It's not just some company you found online, but one with the infrastructure and scale (perceived at least) to be anointed with shelf space at the shop closest to your home. For Dengfu to become a truly significant brand, it has to give consumers reasons to trust it over the endorsement of their local shop. Trustworthiness is not high on their list of brand attributes, not because of any lack in integrity but because of a lack of transparency. Customers just don't know who they are, who their people are, what they actually do, what their company values are, or why - besides low price - they should consider products. Believe me, it's not an easy thing to compete with products available at shops. You'd think selling for less is an asset, but when it comes down to trust and perceived quality, selling for less is actually a liability. Zipps cost $3K and Novembers are $1.5K? I guess Zipps are twice as good. So they must be 4x as good as Dengfus. If Dengfu does break through it would theoretically pay huge dividends for the brand, but the brand is a pre-requisite to actually turn the tide. 

So those are my high-level thoughts on the topic - basically that Dengfu can't be the next big bike brand until it first starts acting like a brand. And I don't see that happening in the forseeable future.


Is Dengfu The next huge bike brand? pt 3

What a nice weekend we had in the northeast, perfect for getting a bit of rock practice in on the mountain bike and then playing the role of floor mop in Sunday's cx race, despite riding in all respects at a level that made me quite happy - but for the front of the race sneaking inexorably away. 

So, with all of the obstacles I've identified working against Dengfu, why do I think they'll become a brand on the world stage?


Asset 1: Confirmation Bias - You might be surprised to know that the above picture (removed) was posted by a guy who's happy with his purchase. He's using them with disc brakes, so this particular thing isn't a direct immediate problem for him. The point of this is that people will accept a lot to justify that they made the right purchase, once the purchase is made. This is a well-proven psychological concept. So, whether the preponderance of opinion is pro or con, some amount of the pro is going to be in support of product that looks like this. "They've given me no problems..." In order for us to sell product, we feel like it has to be perfect. If they can sell product like this and satisfy customers, wow.  

Asset 2: Sell It Like It's Hot - As mentioned before, Mike and I get a lot of emails from Chinese vendors, and, let me tell you, if coffee is for closers, these guys are as well caffeinated as you could imagine. "You buy now" is the last sentiment of every one of these things. You read it the FAQs on their sites and in the forums as well - we've got whatever you want, you buy now. They close. 

Asset 3: Internal Market - The most embarrassingly bad book I've ever read is "The End of Cheap China" by Shaun Rein, but he makes one point worth considering: in any category, if a Chinese supplier manages to become the big supplier to the domestic market (not a layup - the history thus far has been that you start buying foreign alternatives the second you can afford to), they are de facto a player in global volume. If recreational cycling takes off in China, any brand supplying that market in a meaningful way becomes huge. 

Asset 4: Major Threat - This supply channel is potentially too big for anyone to ignore. I've seen a bunch of instances where shops will build wheels on Chinese rims - this is actually kind of a big thing in cross with tubulars. So, call cross tubulars a trojan horse for the whole thing; with cross tubulars, people figure they're sort of disposable, so you might as well buy the cheapest thing that might possibly work. Shops start working with them in that venue, then if those don't just plain suck people have developed a taste for buying stuff from their shops at new price points.  And the shops have to win back the people who've said screw it the shops are too expensive/don't stock enough/don't know as much about this stuff as I do. The interesting thing will be how the big three and the secondary and tertiary brands deal with this as well. But no brand can afford to totally ignore this supply channel.

Asset 5: Audience - Previously I said these trading companies are anonymous and confusable and interchangeable, but that winds up being an asset, too - collectively, China Carbon, Inc makes a story that's far bigger than any individual component of it. 

Asset 6: Bombast - A huge part of what Mike and I are doing with all of the testing that we do is to find out what's actually a "sellable benefit." By that I mean that we're informed and discreet about the claims we make, we don't make claims that we can't support. In our minds, this puts us at odds with a lot of the industry, but we're prepared for a whole new level of bombastic claims coming out of this supply channel. That "beefy frame" pictured in the last episode proves they know about hitting the hot button lingo. If they get a bit more elegant about it, look out. My unfortunate belief on this is that you gain more in bombast than you lose - more people sort of believe it and respond to it positively than are turned off by it. A lot depends on the credibility of the claimant, of course, but I think that BIG claims generally work. November is structured to pursue meaningful relationships with the people who are turned off by empty claims, which is precisely what we want to do, but I take it for granted that this ultimately limits our growth. That limit, fortunately, is well beyond the level at which November is a good business.  

Asset 7: War of Attrition - I speculate that these guys are set up to wind a war of attrition. That is to say that they can afford to price at unsustainably low prices for an indefinite period of time, starve out a bunch of companies who can't compete on that footing, and create a bunch of room for themselves in the marketplace.

Asset 8: Promotion Works - It's only a matter of time before a major pro team is sponsored by one of these guys. Major pro team sponsorship sells product. Minor pro team sponsorship doesn't sell product. Sponsoring a WorldTour (is that what we call it now?) team is an instant path to legitimacy (whether deserved or not) and audience.

I'll have a few cleanup things to follow, but that's the substance of my thoughts.   


Is Dengfu the next huge bike brand? pt 2

Mike told me yesterday that I'd have to kill it today to convince him of my thesis.  All I did yesterday was advance his side of the argument, and that that's probably all I've got space to do again today. Once more into the breach...

Obstacle #4: The Ick Factor - Ick factor is the opposite of brand pride. A big part of me thinks that the stealth look came into vgoue because people didn't know what they wanted their brand selections to say about them. Ick factor can be "I don't want to advertise that I spent $2800 on these wheels" or it can mean "I don't want to advertise that this is an anonymous frame I got from China" or it can mean "I want to feel people into thinking that this is something other than an anonymous frame I got from China." The last two are at play here - few seem eager to shout about their awesome new Dengfu. Some are, though.  

They seem to have picked up on my least favorite of the bike market's favorite words. Taken at a shop in Xingyuan

Obstacle #5: Rising Prices - This is related to the race to the bottom, but deserves a few sentences on its own. If you read internet forums, people are already talking about carbon wheels that cost $600 a pair as "getting kind of pricey" and looking for cheaper alternatives. Brand power is usually hard-earned and implies a trust that in turn commands a fair trade at the very least. Their customers, on the other hand, seem stuck at a price point (that point often being "the cheapest thing which I think won't kill me") and won't move with the brand if/as it makes its way forward. 

Obstacle #6: Lack of Innovation - This is part and parcel of the trading company phenomenon. It's hard to create a compelling product portfolio when you're fronting for whatever it is the factory is making this week. Not that many people realize how easy it is to copy a mold shape. Looking at rims for a second, every day I see evidence that people buy Chinese carbon wheels knowing nothing other than how deep they think they are. Yes you read that right. The phrase "oh, I hope I get that shape" crowds the forums. If you don't really even know what it is you're buying, who you buy it from can matter everything, or it can matter not at all. I propose that the latter dominates here. Without principled innovation, as in "we set out to provide a product with these traits and benefits, and we did it, here it is," brand doesn't work very well. And if your only innovation as such is the lowest price, go back to the race to the bottom.

Obstacle #7: Jingoism/Xenophobia - When did the quality and benefits of Japanese cars start beating the crap out of American cars, versus when Japan to shed its status as a producer of trinkets and trash? Same thing with South Korea more recently - Hyundai might make awesome cars but a lot of people remember their early cars and have the lingering snobbery/ick factor/"they can't make good stuff" prejudice that at some point is just xenophobia. Long after it became evident that Japanese cars were the smart play, people hesistated to buy them because it meant you weren't a "team player," buying 'murican. You also have to remember that WWII was a LOT more recent then than it is now. Please don't think for an instant that I think Chinese bikes in 2014 represent the market equivalent of Japanes cars in 1978 or 1983, they don't. But if (big if) they ever do, memories fade somewhat slower than quality improves.

Obstacle #8: Trust - Some of it is undoubtedly due to cultural differences, and a lot of it is, let's just call it imperfect communications, but there is a big trust gap. When I was in mainland China, I saw about a million pairs of Oakleys for sale, but didn't see a single pair of Oakleys. And this was in seemingly established bike shops (bike shops are EVERYWHERE), not on street corners. And they were terrible fakes - the kind you'd buy just to show your friends "hey look at this terrible fake!" Then you see the Specialized Epic on the wall of that shop. Yes? No? Mike and I have always been super super diligent about not only being honest to the letter of what we've represented but honest to the spirit of what we've represented. If they're willing to lie in one venue, why wouldn't they then lie to you in all venues?

This guy was incredibly nice - made us tea while we waited for a rainstorm to pass. But I wouldn't buy any Oakleys from his shop!

Obstacle #9: Anonymity - I pay more attention to all of this stuff than the average bear, but I can't really tell you the difference between Hongfu and Dengfu. They both seem to sell a lot of frames that have "FM-" prefixes. Other companies sell these "FM-" bikes, you can seemingly get them anywhere. So what role does Dengfu have in the whole thing? Who and what are they? That's a question that you maybe don't mind asking so much about the vendor of a $300 frame, or a $500 frame, but there's no room for that in a $1000 or $1500 or $2000 frame, and that's simply what stuff really costs at the low to mid range. 

That's my take on their obstacles. Admittedly, there's a ton I don't know, which is also kind of the point. Is the Chinese government subisidizing these places, and we're seeing more "dumping" at play here? Labor is essentially free in the mainland, so the economics of what things cost get skewed, but knowing what I do know, even if you take labor out of it completely, a lot of these part costs don't come close to passing the sniff test. 

Next time I will stop making Mike's arguments for him and start making my actual argument, which is that it won't be long before Dengfu is a big brand on the world stage.


Is Dengfu the next huge bike brand?

A few times a week, we get sales emails from various Chinese vendors of carbon bike things, which go straight to the trash file never to be considered. These all contravene our number one iron-clad rule of sourcing: we don't want to buy from the companies that want to sell to us. Yesterday, however, we got one from Dengfu. It also went straight to the trash, but Mike commented that this obviously meant that we've now made the big time. In just a few moments, I became convinced that Dengfu will become the next major bike brand.  

For those unaware, Dengfu is a Chinese outfit that sells on eBay, Alibaba, and direct. With stunningly imperfect information, I'd say that they're the most visible brand coming out of that cohort, with FarSports perhaps being close. My technique for writing these is best described as stream of consciousness (more a Richard Brautigan than a James Joyce fan), so at the outset I will say a few things 1) this topic will likely have to be broken down into several posts 2) I will try to stay value neutral in all of my wording, despite a generally very negative view of Chinese carbon supply as a whole and 3) yes, there is still a chasmic difference between a Taiwanese company and a Chinese company even though people think I'm being pedantic when I militantly correct and clarify. The lines can get obscure - for example Reynolds manufactures the vast majority of their rims in China, few in the US, and none in Taiwan. Same with Cervelo at the point of my last awareness, and same with many others.  Most understandably want to obfuscate their Chinese production, as the sublety of the distinction there is lost on most. The difference between a Chinese company and a US company producing in China is pronounced, and in our experience the Taiwanese companies (especially those producing in Taiwan) are run much more like US businesses. 

You also have to be aware that almost none of the Chinese brands that show up are actually producers, despite their claims. They are trading companies, but claiming to be the producer is incredibly common practice. If you really want to dive into this, read "Poorly Made in China" by Paul Midler. It's getting a bit dated, but I was in mainland China last spring on a non-November consulting deal and everything that Midler talks about is still in plain view.  

Okay, so, why did I come to the conclusion that Dengfu is going to be the next big brand? First, let's look at the obstacles that they face. I'll finish out this post with the first parts of that side of the equation, and then move to why I think they will ultimately win a spot in the "really big brand" pantheon (which, for those keeping score, Mike and I have reverse interest in joining - our aim is to be as small as we can possibly be yet still swim in the big pond - read "Raising the Bar" by Gary Erickson if you want our perspective there).

Obstacle #1: The Race To The Bottom - The way that Dengfu gained awareness for themselves was through low prices. They played the "knock it off and sell it cheaper" game as hard as anyone, and they still do. Their current bike lineup flatters the bejeesus out of Scott's product team, with previous production having taken clear cues (I'm struggling with euphamisms here, clearly) from other notable brands. Knock it off and sell it cheaper is at best a transitional strategy, at best. They once had the lowest labor cost, now they don't. At some point, people will demand actual design innovation from them. The proposition of being a valued brand is almost opposite to one where your customers think "eh, if it turns out to be a pile of crap at least I won't be out a ton of money."

Obstacle #2: Inelegant Sales Process - Just now, I pointed by browser over to their site to see what their prices were, in order to make another point. You have to inquire to learn the price. That will turn a pile of people away right there. Pricing integrity and process transparency are cornerstones of November's philosophy. Everyone loves to a deal (we'd likely sell more if we created an inflated price and then gave everyone a deal - research shows that works), but not having any indication of what the price is goes really far to the other side of the line. People will do it, but most people won't.

Obstacle #3: Bad Info - "High-temperature fibre and resin for the brake surface , and with high braking temperature about 160~280 degree generated from high speed braking." Okay... where to start with this. This is actual copy from one of their wheel pages. Is this f or c? I'll give you a hint, it ain't c. 280c is 536f. I visited an awesome carbon shop last week that had made parts for this boat, and the guys who'd made some carbon parts for the engine mount (when you commercialize the internet, you make enough money to afford boats with carbon engine mounts) were working with 400f layups. Not that hard to do, as long as money is no object.  But as we showed this summer, the difference between 160f and 280f heat resistance is the difference between toasting your rims on pretty much any significant hill, or having a pretty good safety margin (for the record our rims test at roughly 350f, which we state as many places as possible).  So what is it? Prospective customers POUND on us for HIGH resolution information - 1w makes a difference. You can't get away with useless information in the mainstream.

Okay I've well exceeded my word limit so we'll have to pick this up in another installment.  


November in January at The Cycling House

In case you missed it, we're doing a trip to The Cycling House in Tucson from 1/27 to 2/1.  The photos mostly speak for themselves, but after a month or so either dressed up like the Michelin man or on the road to nowhere in the basement, riding in short sleeves and bright sunshine in stunning locations sure is nice.  

Each day starts with a great breakfast, followed by a light core or yoga session, and then a ride. Rides distances are generally around 60 miles and range from rolling to Mt. Lemmon.  Mt. Lemmon is a twenty-something mile fairly gradual uphill with shocking scenery and a few dozen microclimates, on which you are nearly guaranteed to see most of the domestic pro peloton out training.   

Rides are fully supported with food, water, clothing, and spares. A healthy host-to-guest rider ratio means you'll be able to go at the effort and speed that are right for you. You get supported like a pro without having to ride like one.

We'll bring a bunch of great gear for you to try. 

Post-rides feature chances to go explore, do a trail run, read a book, get a massage, take a nap, whatever - it's your vacation. TCH will take care of your bike, you just take care of yourself. 

Dinners are something else. If there wasn't so much riding and other awesome stuff going on, you might call it a foodie trip. Between Brendan, Zander, Mike, and me, you'll never want for a good beer selection. Or wine, if that's your thing.  

Traveling is easy, just fly into Tucson and TCH will pick you up from the airport. You can bring your bike, but TCH also has an outstanding rental fleet. 

Weather is generally awesome, but come prepared. If nothing else, the descent from Mt. Lemmon can be a bit chilly. 

Bring your sense of humor, your sense of adventure, your appetite, your liver, and your personal gear. Everything else is taken care of.  Riders of every ability level will have a great time.

Space is limited. If you have any questions, contact us or hit us up with a question in the comments.