Tuesday
Feb042014

Frame Dies, Framework Thrives

As some of you will have heard, we canceled the dojo pre-order.  We'd achieved the level of sales we needed both financially and to convince ourselves that the market was, indeed, hot for dojo enough for us to move forward with it.  Unfortunately, a series of progressively more impactful announcements from the manufacturer compromised our ability to deliver the product as we'd tested and sold it, so we had to bail. 

All the money's been returned, and while people are understandably bummed, all the ones who've written back to us in response to the news have been supportive and offered some version of "I'm sure you made the right call." And like a huge percentage of people who ordered wrote.  Obviously we appreciate the support, but we didn't expect the concern, with nearly all also offering some version of "I hope you guys can pull through this and keep selling wheels."  So we also appreciate the concern.  Fortunately, it's superfluous.

We're pretty darn conservative with how we run things.  The pre-order money was sitting all by itself in an account, sufficient to cover any eventuality around the dojo order.  Needing to do what we did is an eventuality that's very much within the realm of eventualities we plan around. 

With wheels, we've minimized supplier risk.  We've got a strong relationship with the supplier, we buy a ton of stuff from them, we have our own molds there - we're not just some schmucks off the street, and they in turn provide us with awesome rims.  This isn't to say we're complacent in the relationship, you have to stay alert in this world, but it's a good relationship. We have a standing order with them. 

With the frames, we had a situation that's happened to a lot of people, some combination/variation on a bait and switch and a soft kiss-off.  Our strong suspicion is that someone acted more quickly than we did (not that hard to do), placed an order big enough to make us an afterthought at best and a hindrance at worst, and when we placed an order that didn't bowl them over, they wanted rid of us.

So, yeah, it sucked to have to cancel the frame order, but far more from the perspective that we'd told the people who got into the pre-order that it was on, and then had to go back and tell them it wasn't.  From a cash flow perspective for us, we would only really have made money as frames sold from stock. It's a punch that's super easy for us to roll with, we just focus on other things (like the 34, which now that I've got them on my bike I've actually caught myself just sort of staring at them, which if you know me like few do you'll know isn't something I'm at all prone to doing; they're just that dead sexy) and play judo. 

The 34 is a going concern, the pre-order is nearly 0% about finance and nearly 100% about managing the order.  If we opened the 34s for sale outright, we'd never be able to get them and build them fast enough.  Only so many can come out of the mold, and we can only build so many per day.  More or less, we're handing out numbers like at the deli counter, only we're paying people a discount for their patience.   

So what's the story on frames going forward?  We don't know.  We're trying to figure it out.  This game with being able to buy only at the manufacturer's whim is BS and we're done with it.  We're only interested in products that we can control, like Rails, where we're in control of our ability to deliver to you what we say we will.  And, of course, we have to be able to offer a unique value to the market.  Without those two factors, we're not doing anything.  It's a slightly pressing concern for me, as after 4 winters of sweating my caustic mank on the thing while riding rollers, and about 25,000 miles on the road, my bike is starting to get that "not so fresh" look.  Runs great, looks a little rough.  Oh well, same with my car.  It's long since paid for. 

Oh yeah, the picture.  That's Mt Lemmon, taken from the front door of the house where I stayed in Tucson. It was an unbelievable experience and I could not possibly recommend The Cycling House enough.  It was far more than just one of the best weeks of riding that I've ever had.  Go.  

Sunday
Jan192014

Why is a wheel company selling bikes without wheels?

Before I answer the question in the title here's some relevant data on the dojo pre order (which remains open through today so is subject to change a bit):

 

  • Framesets by themselves were less popular than frames plus a gruppo, build kit, and/or wheels - only 26% of dojo buyers bought just a frame.
  • Of those who did buy more than a frame, only 20% included wheels.
  • Of those who did include wheels, 100% opted for Rails with 0% choosing our alloy FSWs.

 

Let's unpack these a bit and see what's going on here.

The first one - on the preference for frames+ instead of frames only - was the only one that surprised us. Our pre orders are normally pretty heavy with frame only buyers - always over 50% and as high as 70% in the past. My guess is that the wholesale conversion of gruppos to 11 speed this year lured more people to start fresh with their builds - exactly as most brands and retailers in the industry like it. Planned obsolescence is alive and well.

Are you surprised that so few people add wheels to their dojo? If you saw the number of dojo customers in the pre-order list who know about us after having bought a set of our wheels you wouldn't be. That is the heart of our decision to make bikes without wheels available, even though we have as much leverage as other brands when selling a bike to force the inclusion of wheels, and the incremental profit they yield.

But the other driver of the decision to make wheels optional is a function more of our mission and philosophy than customer analytics. When you set out to deliver value in unique ways, you necessarily have to examine every product decision to see where there is consumer waste. That's a very different approach than looking at product launches as opportunities for incremental revenues and profits. Because we have sold both bikes and wheels since our outset, we know first hand that people buy wheels hella more frequently than bikes. And based on eBay and Craigslist and other secondary markets, we know that OEM wheels shoehorned into a new bike purchase get jettisoned pretty quickly. Instead of trying to capture a piece of that well-established waste for ourselves, we set out to reduce it. Don't waste money on shit you don't need. That philosophy drives me and Dave as people as well as November as a brand.

The data suggests that our customers like the flexibility that results from our philosophy, as it creates a custom buying experience at a less superficial level than choosing your paint and decal colors on the bike that includes wheels and a cockpit whether you need them or not. It is also borne out by the last data point - that 100% of dojo buyers who did opt for wheels went to the highest end and rolled in some Rails. If you don't waste money on shit you don't need, it's easier to afford more upmarket versions of the stuff you've decided you really want.

We're not yet sure how these data and insights will impact our frame and bike business in the future. But they're interesting to us in that they validate our philosophy (anything that tells us we did something right is interesting to us), and also speak towards the market opportunity for greater degrees of customization. As people pay more attention to how they spend their money, "precisely right" begins to win out over "good enough." I frankly have no idea yet what we'll do with that nugget, but we're hanging onto it regardless.

Friday
Jan172014

dojo is a go-jo.

We reached our pre-order goal for the dojo yesterday so the dojo pre-order is a go. Everyone who pre-ordered will have a shiny new dojo in the spring. Anyone lurking on the sidelines waiting to make sure they weren't wasting their time with the pre-order can now pile on with conviction. Hooray, new bikes for everyone!

When I say we reached our goal I don't mean that we pre-sold 100 dojos. We didn't. But we did sell enough frames with gruppos, build kits and wheels to generate enough cash to cover the frame order. This means we'll have frames in inventory in a few months. Good news for people who want to pay one day and receive a bike the next (though you'll be paying substantially more than the pre-order), but it's not the outcome we were hoping for. Selling out of inventory means raising our prices by quite a bit, moving us into a pretty competitive area with other direct to consumer brands (there are still quite a few out there, despite the dozen or more that have disappeared in the past 18 months), and shop-distributed brands at inevitable clearance prices. Our business model is never to do what everyone else is doing only better or less expensive; rather, it's to deliver something that adds unique value to our customers. I can't say we're not a little disappointed that the pre-order was not bigger, and it's causing us to take a hard look at the frame business moving forward. We're psyched to have new bikes on the way, but it's becoming clear that the market for value is substantially smaller than the market for immediate gratification. To compete, we may need to get all Warby Parker and FedEx customers 3 fully build dojos in different sizes to test ride, and have them just send back the ones that aren't quite right. Good luck doing that on the margins from $1045.

Thanks to everyone who did get in early and made this pre-order happen. You're going to love your new dojo. And I'm going to love mine!

Tuesday
Jan072014

dojo pre-order FAQs part 1

dojo pre-order sales are moving along at a pace I'd call predictable. We saw a spike when we launched and it has been pretty steady since. My prediction is that this week will be steady on the slow side, but we will see a rapid acceleration next week, particularly if we get past 50 out of our target of 100 pre-orders. Then the sideline perspective will shift from, "I wonder if this thing is really going to happen," to "Oh crap, what if they hit 100 before I get my order in?" Note however that my confidence level on any predictions is pretty low. We have zero visibility into how many people will pre-order a dojo, which is exactly why we are doing a pre-order instead of buying 100 frames and hoping they sell. We'd have no visibility in that scenario either, but would be sitting on a lot of very expensive inventory. When your inventory is high and your cash is low, you have an incentive to discount heavily to keep cash flow going. We'd rather discount heavily up front so that the people who buy early get the best deals, instead of discount heavily in a year so the people who wait on the sidelines score. Also, inventory gluts have ruined other industries (just as Dave to talk about wind surfing). It's happening to cycling too and we don't want to be a part of it.

We're getting a lot of questions about the dojo pre-order. I'll share the most common ones here.

1. How many frames have been pre-ordered so far?
The answer to that one of course varies by day. We've taken to publishing the running tally on our Facebook page. Our dojo daily yesterday was 39 pre-orders out of our target of 100. We're collecting some interesting factoids in the process as well, which we also share there.  

2. What happens if you don't hit 100 pre-ordered frames?
We really have zero interest in being in the year-round on-demand frame business. It's costly, risky, resource intensive and disruptive. So if the heart of that question is what will we do if the pre-order stalls out right now and we're not even halfway to our goal, the answer is that we're not going to finance the rest of the order ourselves and we will refund everyone's money. There is a grey area in there, for sure. If we get to 99, we'll bring the order up to 100 instead of refunding 99 customers' money. Same thing goes for 98. But not 49. So the mendoza line for where we would step in and finance the rest of the order is somewhere between 50% and 100%. That amount will depend on the total cash and profit we generate from the pre-orders that do come in. If someone pre-orders a frame, we don't generate a lot of additional cash to buy more frames. If someone buys a complete bike with a set of Rails, we have more cash to invest into the order. 70 complete bikes could finance the full order; 70 frames could not. 

The other reason people are asking this question though is that they don't want to pre-order and still want to buy a bike from us. If we do end up financing part of the order, it means we will have frames in inventory. But the purchase flexibility around these frame will be orders of magnitude less than what you see in the pre-order. If we have to take on frame inventory, we will order only the sizes and color we think will sell fastest. And because of the risk, one of the options we are considering is not to offer framesets by themselves, but only sell inventory frames as complete bikes where we can add more value and still recover our investment more quickly. The pre-order is organized to give our customers the greatest range of options and value; when we sell out of inventory we have to put the business' needs in front of some customer flexibility. It's the only way the economics work. And with another direct selling bike company announcing last week that they had shut their doors, we're more closely attuned to risk management than ever.

3. Can I pre-order a frame now and add a gruppo and/or build kit later?
Absolutely, though you give up $200 in value if you wait on the gruppo and/or kit. Frames alone are $1045. When you tack on a gruppo or kit, the frame price drops by $200 (which is why our gruppo prices look so low - they're being subsidized by your frame purchase). If you add the gruppo later you will have paid $1045 for the frame not $845.  So if the frame with gruppo and kit you're looking at is $2750 now and you only buy the frame, your total cost for the whole nut at delivery will be $2950. For complete bikes with Rails you will pay a little more more than the configurator indicates as Rails carry a pre-order discount if you buy them as part of a bike now. If you add wheels on later it will be at their current in-stock price. Even if you wait on the gruppo though, it's a pretty remarkable value. 

Interestingly, we have received very few questions about the bike itself. If you have some or have additional questions about the pre-order process, use the comments here or drop us a note.

Tuesday
Dec312013

Why I really hope we pre-sell 100 dojos

Last week I gave you Mike-the-bike-company-guy's perspective on the dojo - what it means to our business and how it fits into our brand and product portfolio. Last night I was talking to one of our customers - let's call him Bob (since that's his name) - who is himself itching to get a dojo and really wants the pre-order to succeed. In addition to Dave and myself, Bob also had the opportunity to ride the dojo and wrote an unsolicited review of it over on Weight Weenies (which was not met without some cynicism from people who thought he must be on the payroll to actually like the bike that much). He and I have talked about the bike a lot so he is very familiar with why I'm so fond of it. In fact, everyone I've talked to about the bike knows how much I dig it. It occurred to me while talking to Bob though that Dave and I haven't done a lot to share with everyone else why we as cyclists like the dojo. As the person with the most direct experience with the dojo, maybe I ought to publish my own review of it. So I will.

By way of relevant background, I stared racing road bikes as a kid in 1985. In addition to our own Wheelhouse and dojo, I've owned and raced bikes by Blue, Eddy Merckx, Cannondale, a handbuilt steel Brodie Rodie (whassup Vancouver), an OEM carbon of unknown origin, and Giant. My racing style is to rely pretty transparently on hard and tactless accelerations so I appreciate stiffness. My training style is to not to, so I focus a lot on efficiency as well, preferring a setup that lets my body get plenty aero. For this reason, I usually run a frame size smaller than Dave even though we're the same height and same inseam. I like a slightly lower head tube because I do more work on my hip flexibility than lung capacity. My event of choice is a crit, so cornering confidence is paramount. I also used to care not at all about compliance, but that was before I rode the dojo. More on that in a bit.

In my mind, the perfect next bike for us would combine the best characteristics from every bike I've owned, and then go further in ways I hadn't imagined. Just as Henry Ford realized that if he asked his customers what they wanted they would have told him they wanted a faster horse, I was hoping we'd come up with a bike that moved a needle I didn't know existed or mattered. 

Before we could even start riding a bike though, it had to check a number of boxes on paper. First and foremost, it needed to be produced by a supplier we could trust, had reasonable terms, and who was earnest about wanting to do business with us (we had gone down a road previously with a supplier who said yes to building out some demos to our spec, but then changed their mind about actually accepting an order from us). It also needed to be lighter than the Wheelhouse, which was about 1150g in a size Medium. We knew that to be competitive in 2014 we would need to have a frame around 900g or better. And the aesthetic is also important. Dave uses the word "bike-flavored bike," which essentially is gimmick-free geometry and features. We both vastly prefer the traditional double triangle of Cannondales and Colnagos to the swooping gallantry of Specialized and Pinarello. 

We looked at many many bikes before finally deciding to bring one in for testing. When it arrived, I was unprepared for how elegant the tubes were. Where the Wheelhouse was muscular, this bike was lithe and sinewy. I told Dave that the Wheelhouse looks like it hangs out in the free weights room, but this bike takes yoga. He immediately dubbed it the dojo and I knew it was a keeper. Like a stray cat, once it has a name it's part of the family.

Our demo frame was a size M (54) and finished with UD carbon fiber and a gloss clearcoat. (Production versions will all be matte.) The frame with bottle cage bolts, r/d hanger and BB cable guide was 850g. We expect grapics for the production version will add about 30-40g to the frame. The fork was 390g uncut, making the frameset about 300g lighter than the Wheelhouse. We built it up with SRAM Force, a Deda cockpit and a Quarq crankset. We tested it with FSWs and Rails. Dave went first, training on it in February and racing on it in March and April. I took it from there and trained and raced on it into August. 

When I first rode it, my very first impression was to ignore my very first impression. The first time you get on a bike, you are more aware of the thickness of the bar tape, the position of the shift levers and the precise height of the saddle than you are to any meaningful reflection of the bike. So I spent a few days getting used to the inconsequential differences before trying to focus on the frame itself. This is why we're not big believers in test rides, by the way. Unless a test bike is set up exactly like the bike you've been on, with the same wheels, tires, bar tape, gruppo and measurements, it's really hard to filter out all the noise and feel the differences that matter. 

Once I was able to do so, one thing about the dojo became abundantly clear to me. This was the best cornering bike I'd ever owned. Dave corroborated this observation, finding that the bike - particularly when paired with Rails - was able to find and hold lines in fast turns with facility. I'd describe the steering in technical situations as almost intuitive - the lines you want are the ones the bike naturally finds itself in. It's really a hoot in the curves.

The next thing that became clear was the increase in compliance, which I wasn't even looking for. On one of my regular training routes there is a stretch of recently repaved road riddled with tiny undulations. (For those local to DC, it's the downhill section on Tuckerman Lane headed towards Falls Road, passing Herbert Hoover Middle School.) I call this section the "invisible cobbles," and I get bounced around it pretty mercilessly. The first time through on the dojo though, I didn't even realize I was in the invisible cobbles until I was almost out. I started paying attention to other places where I'd experienced road chatter and found the bike ate them up too. It was particularly apparent in rough corners. The more rigid Wheelhouse bounces a bit through rough turns but the dojo keeps the rear wheel on the ground, providing more speed, traction and confidence. 

Using the Quarq, I tested the frame's stiffness under measured hard accelerations. Comparing the stiffness and acceleration of different bikes is always subjective, even when using a power meter. You can look for evidence of flex like chain rub, but it's very difficult to tell if you're giving away power on one bike or another. Purely subjectively then, I can say that I found the power transfer on the dojo every bit as good as the Wheelhouse (and better than any other bike I've owned). My testing protocol, such as it is, was to remain seated and punch hard for 10-15 seconds, seeing how high watts would spike and how much speed would increase. I was pretty consistenly getting 100-150 watts more out of the same perceived effort on the dojo. This is likely attributable to the lower head tube, which changed the angle of my arms and upper body and allowed them to achieve greater purchase in generating torque. But whatever the exact reason, the same perceived effort had me going harder and faster, and I like that. I suspect you would too.

The 300g weight difference was most noticeable when lifting the bike onto and off of my car's roof rack. Long, steep, grinding climbs remained long, steep and grinding. As is their nature.

So does the dojo succeed in delivering the best of all of my previous experiences, and then something more? It has the power transfer of the Wheelhouse, the compliance of the Blue, the race-eager geometry and classic good looks of the Cannondale, and the road feel to rival the steel Brodie. All at a price that is not far from the OEM and otherwise unremarkable carbon. It lacks the pedigree of the Merckx and always will, as neither Dave nor I are threats to win multiple grand tours and classics and hold the 1 hour record. But somewhat unexpectedly, it corners like it's on, um, a train track. Combined with all its other attributes, it really is a remarkable bike - more so than I would have expected. It's delightful to ride - either balls to the wall for 45 minutes of productive pain, or on a multi-day memory maker. I really think our customers will be as happy with it as I am.

On the one hand, I want us to pre-sell 100 dojos so November continues in the frame and bike business and we can meet a need we perceive in the market. But I mostly want to sell 100 dojos so I get one to ride and race myself. In my mind, it has long been "my next bike." This is my pitch to you to go ahead and pre-order one. I'm a selfish bastard with a discerning palette, and I this is the bike I want to ride every damn day.