When Black Friday Comes...

Hat tip to Steely Dan for today's title, even if Black Friday is now much more known for people leaving Thanksgiving dinner early to go play Fight Club with their neighbors in orders to save $8 on the latest TV.  Not for me, and I suspect if you are reading this, it's not much for you, either. I had a better time stealing a friend's Beetle Cat, getting out on the water with some friends, and escaping the gathering hordes that way, even if it was somewhat colder than ideal for a day on the water. 

I also suspect that a lot of you have been getting emails from various cycling vendors announcing their Black Friday/Cyber Monday/Crazy Eddie's Christmas In August sales.  Nothing wrong with a sale, but some of the discounts do give me pause.  A set of lobster gloves whose selling season is somewhat rapidly expiring (we are a fore-thinking lot, after all) that's normally $69 going for $59 is one thing (and I need some new lobster gloves...), but frames from big brand names, which originally sported the latest innovations and $3,500+ retail prices, going for $1,999 is one of those things that makes me go hmmm...  Why?

That's a pretty big discount, right?  Does it make you wonder how they can discount that deeply?  How much margin is there in the frame in order to sell the aging inventory for roughly half the original price?  How much padding is there in the original retail price to guard against such radical markdowns?  These last two are rhetorical questions, and the answers are "a lot" and "a lot," respectively. 

One of the business risks that we most fear is inventory risk on frames.  The cycle from when we release the order to when we start selling frames is long, as we've discussed before, and it's a cash flow challenge of a fairly high order to finance 6 to 8 months of your sales cycle.  You can't get a lot of inventory turns out of frames because of the long lead time, and adding to all of that there's your exposure to having guessed incorrectly on size mix.  You don't want to wind up with a warehouse full of size 52 frames when the world wants size 58s. 

In order to mitigate this inventory risk, we invert the process: we call our Black Friday "pre-order." By doing the pre-order, we're able to avoid locking up all of our working capital into slow-turning inventory, and sell as many frames and bikes as possible with pre-determined sizing.  This takes A LOT of risk off of our shoulders, for which we pay you rather well.  The pre-order price is on the order of a 15% savings, in return for you paying between 3 and 4 months before you'll have the bike.  For those astute finance students out there, this equates to and APR somewhere between 45% and 60%.  Sure, for us, almost any other financing would be cheaper, but no other financing would mitigate risk in the way this does.  Frames sold from in-stock after the pre-order need to be priced to reflect the risk we retain in holding inventory.

We'll be launching this pre-order/Black Friday bonanza soon, and you won't even need to leave dinner early and stomp a fool to take advantage.


Handbuilt Soul

Inspiration for the title comes from Nightmares on Wax, whose "Carboot Soul" certainly does have a lot of soul.  Give it a listen.  It's one of my favorite records to build wheels by.

A couple of weeks ago, I was beffuddled to read on some forum that our wheels aren't "true handbuilts." The only thing I can guess is that a wheel only qualifies as a "true handbuilt" if it's built to order for a specific person, out of parts specified either by or for that specific person.  We were also once accused of having no soul.  I can fluidly rhyme the entirety of Paul's Boutique, which I'd think would qualify me as having at least some small modicum of soul, but again I mostly plead ignorance as to what goalpost exactly we're kicing at there. 

This handbuilt thing popped into my head yesterday as I was building two sets of Rails, one putatively destined to become Mike's, the other mine.  I say putatively because it's a fancy word that I know and I do like to use fancy words, but also because the wheels in question are the first we're doing with the new White Industries colored T-11 hubs.  "Mine" are blue, "Mike's" are red.  The simple fact is that we are going to get decals on these, put them on Facebook, get orders for them within a half hour, and send them off without them over having had a tire mounted.  **EDIT - It already happened, without them getting on FB - Mike got screwed, his wheels are sold.  Sorry Mike**  And as I was building them, that knowledge was firmly in my head - that here I was building two sets of wheels, and whether they were going to actually wind up as ours or yours was totally immaterial to the process.  The simple reality is that they got built the way I build wheels, which through iteration, testing, and refinement has become what I'll modestly call a quite good way to build wheels. 

As the builds pile up and pile up, I know that my general skill at building is way beyond what it once was.  At this point there are two guys who help me with wheel production, and they are also very very good wheelbuilders.  I would gladly ride wheels that they built (part of the process of their builds is my post-build QC), and if Fabian Cancellara urgently needed a set of wheels and we had a pile of wheels sitting there I'd happily (eagerly, even) grab any set out of the pile, give it to him, and have it represent our wheel builds.  The corollary to that is that we could be building a set of wheels intended for either Mike or me, or Fabian Cancellara, and ship them to you instead.  There would be no difference.  I don't necessarily know why I use Cancellara as my example other than that when I've talked about this concept I've always used him for some reason.  That and that he's won big things and worn special jerseys while riding wheels from companies where that's not the case - wheels for pros are built off line, not for public consumption. 

So despite their being built by hand, they aren't handbuilts, and despite my obvious possession of mountains of soul, we are a soulless company, and that's fine.  I don't care about that, I just care that whatever you get from us is as good as it can be. 



It seems like all we do is talk about wheels lately, huh?  Well, there's a lot to talk about about wheels, and we have some really really nice wheels.  If you're on the mailing list, you'll know that we've just announced a Rail trade-in program, where you can trade in your older November carbon clinchers for new Rails.  It's a great program, but talking about wheels is not my purpose here today. 

Have you noticed that there are relatively fewer carbon frames going around these days?  I don't mean from Trek, Giant, or Specialized.  I mean like Blue (the company was shuttered a couple of weeks ago), and Van Dessel (their primary cx bike is the very cool new aluminum "Aloominator"), and companies sort of that size and smaller.  There are a bunch of different market forces at play creating that.

One is what I call the forest syndrome at the bike dealer.  The big companies are the tall trees and they soak up the sunlight and the moisture from the ground and the big get bigger and the small fight over what's left.  This is decidedly not me wearing some punk hat right now, it's a simple fact of the way things go.  In order to thrive in that environment you really have to be well adapted and do something unique.  We've chosen to go a different route entirely, and that's been pretty good for us so far.

Another thing is floor plan financing.  This is really part of the forest syndrome, but it bears talking about quickly.  The bikes that you see on the shop floor are being financed.  The bigger brands can finance more stuff at better terms than smaller ones can.  They have more access to capital, and their draw as brands puts people through dealer doors, so the dealers generally need them to thrive.  It drives a lot of shop floor homogeneity, but until it becomes a bad thing (dealer sales don't meet expectations, dealer gets behind financing) it's a good thing in terms of keeping inventory available to buy.  As the bike buyer, you pay for it, but that's part of the stew. 

A big and growing challenge for a lot of brands on the undercard is lead time and carrying cost.  If you want to buy frames from someone worth buying them from a) they're not cheap, b) you have to buy a ton of them, and c) there's a long lead time after you pay for them and before you get them.  So, say you are a company like us, and you are aware of and have access to the companies that you want to be buying frames from.  In order to have bikes to sell, you need to buy what we politely refer to as a metric f**kton of them, and pay for them at time of order.  Anywhere between 90 and 120 days from that time (from the quality suppliers, lead times have been growing, and prices have been rising), they'll be ready to ship to you, so you're out the use of that money for that entire time, and you're paying the vig on whatever of it you had to borrow. 

Call it 100 days later, you get the nice notice that the frames are ready to ship to you and you get to pay the shipping cost then, and soon enough customs duty and broker fees as well.  If you do it like we did our last pre-order, when the frames were a bit at risk of arriving behind our promised delivery window, you air freight them.  That costs a ton.  If schedule allows, you sea ship them.  That takes a ton of time.  Say you've shipped them by sea, which takes on average about 30 days from Taiwan.  Now you are looking at a clean 4 months from when you've paid for the frames to when you even have them.  Then you start selling them, but because of the nature of this whole morass you are taking any where between 6 months and a year of inventory in the shipment. 

If you've taken 6 months worth of inventory, you're going to sell approximately half of that inventory in the first three months and half of it in the back end.  Say your sales go well and you sell half of the inventory in the first two months (which, incidentally, has now given birth to your resupply problem).  So now you are starting to get recoup some of your investment that you made 6 months ago, and if sales continue to go well, you will get out of the red and into the black before much longer. Hopefully you've gotten the size mix right so a bunch of your inventory doesn't become a white elephant. 

Most small businesses simply don't have the capital to finance COGS (cost of goods sold - one of the acronyms I do use, and often) for half of their year's sales for 6 months.  The various responses to that are going out of business (a la Blue), or shifting to a different supply (Van Dessel), or realizing that their original plan of doing pre-orders is actually really smart (us). 

As with every blog post about complicated topics, I've had to leave out a lot in order to keep it to a length you might actually read.  If the world slows down just a little bit hopefully I will be able to fill in some of that shading. 


My Opinion On Disc Brakes

I woke up one day recently, surprised to read that I’d become one of the world’s leading opponents of disc brakes.   Apparently we’re adamantly opposed to them for cyclocross.  Sort of strange that we’d offer a disc brake option on every wheel we build, then, but who knows? The world makes some strange connections sometimes. 

This characterization must come from a blog I wrote nearly two years ago, toward the end of the cx season that I spent using discs.  I’m actually not going to revisit that blog while writing this, since it will be much more fun to have someone call me out on how I re-characterize what I wrote then. 

My issues, as I recall, were:

1.       The power and modulation weren’t substantively more than the best cantilevers, which in my mind are Avid Shorty Ultimates (BB7s were, at the time, the best mechanical option, so comparing best to best was valid).

2.       The dilemma of either having brake rub or loosely adjusted brakes was frustrating to me.  No mechanical brake at the time offered dual-sided engagement, and pad clearance when using road brake calipers was a known issue, so this wasn’t really a rogue impression that I had.

3.       Having a 135-spaced disc wheel in a world of 130-spaced rim brake wheels was inconvenient.

4.       I’d had one instance where my rear brake pad didn’t last through a race.  This was the issue that so many disc-brake users experienced at CX Nationals in Madison last year. 

We were extensively testing discs in 2011.  Many had gone hog wild about how discs were incomparably superior, and would be taking over the world within minutes, yet I was one of maybe 2% of cx racers who were actually using them at the time.  The cocktail of authority and ignorance displayed there has always particularly rankled me, and there was definitely some flavor of “dude, until you’ve actually really tested it, you know nothing, so shut the f up” going on for me.  There was a generally complete dismissal of the real and present shortcomings that I was experiencing. 

I also thought that there were challenges to frame design, not as much with cx frames but with road frames, where the narrow q factors, 400-ish mm chainstays, and 135 spacing wouldn’t play nice together.  At the time, I believe I foresaw 11 speed complicating things, and said that 130mm spacing, plus discs, plus 11 speed, would cause challenges.  At the time, there was no standard over hub spacing, nor disc diameter.  None of these is sorted out, as yet.  People fail to consider disc diameter as an element of frame design.  It’s a big deal. 

So, am I the world’s leading opponent of discs?  I use them exclusively on my mountain bike.  A few weeks ago I had maybe the most fun day on a bike I’ve ever had, at Bryce Resort’s bike park.  Six hours of downhill runs later, my hands had zero fatigue thanks to hydro discs and 180mm rotors.  I’ve said many times that I probably wouldn’t even ride a mountain bike that didn’t have discs.  Hydraulic road brifters have proliferated, (although those brifters are some freaky looking hardware!), and I’d guess they work way way better than the mechanicals I used.  As electronic shifting keeps marching on, the re-decoupling of shifting and braking that I’ve talked about a lot (at least in conversations, if not necessarily in blogs to which I can link), that will offer more latitude for hydraulic lever engineering. 

Following my experience two seasons ago, I went back to cantis for cross, and am still there.  In the fields I race in, I sure don’t see many disc bikes, so I’m not alone in that.  Over time, discs will inevitably dominate, because that’s the way things go.  For now, they’re still a small minority of the bikes I see at cx races.  Top-level US crossers use them, but the top echelon of crossers in the world don’t (van der Haar being a possible exception).  For road racing, it’s a moot point because they aren’t allowed.  For a dedicated gravel or adventure bike, I’d probably prefer discs, but I’d only go hydraulics (maybe those TRP ones with the integrated cable to hydro conversion?). 

For me, the charge of being anti-disc dies on the welcome mat because we offer disc option on every wheel we build.  When my current cross bike dies whatever death is in store for it, I may choose to have a disc bike for my A bike, and I may not.  Until then, if not being a raving evangelist for the undeniable necessity and categorical superiority of discs makes me the world’s leading opponent of them, well, guilty as charged. 




Why you have (hypothetically) not bought our wheels, Part 2

Last time I worked through the first half of a rather formidable list of why you (hypothetically) have not bought a set of our wheels yet. Here's the list again:

  1. Want ease of service provided by LBS
  2. Want to physically inspect wheels before purchase
  3. Want a lower price
  4. Want to feel line they are getting a special deal
  5. Are suspicious of our product quality
  6. Are suspicious of our product provenance 
  7. Doubt our longevity
  8. Believe we do not stand behind our product
  9. Do not have enough perceptible evidence that our product is high performance
  10. Do not see enough brand cache
  11. Do not like red hubs and/or silver spokes 
  12. Do not know our full product offerings
  13. Do not want to wait 2-3 weeks or 4-6 months
  14. Believe we are too inexpensive to be high quality
  15. Are not in the market currently
  16. Are pressured to buy team sponsor equipment
  17. Do not live within our geographic distribution
  18. Are waiting for an upcoming product from us
  19. Are in the process of saving enough money to buy from us or do not have enough money now
  20. Are giving credence to some industry misinformation they received

I'll see if I can shed some light on 11-20 this time using the same scoring scale: +1 if we've addressed this somehow, +.5 if we've done something to address but need to do more, 0 if we haven't made a dent here.

11. Do not like red hubs and/or silver spokes. So, the red hubs. Some people love them, some find them a complete non-starter. We understand that, but the ferver that some people have for black with black and black and black and black was wholly unexpected. We tried for a long time to resist it, but ultimately had to relent and now offer the Rail only with black spokes, and with your choice of either black November hubs, black White Industries T11s or a black PowerTap hub. (We still have some red November hubs left but are fully prepared to make them Christmas tree ornaments this year until the market returns to an appreciation of color in 2014.) For those of you who want something different than 98% of the market, there are custom builders happy to help you. Score: +1

12. Do not know our full product offerings. We're different from some other wheel companies in that we are also a bike company. For this reason, people see us through different lenses. Many people know us from the HOT BUNS cross bike, and may not realize we also sell handbuilt wheels. Others bought alloy wheels or carbon tubulars from us a few years ago and we haven't noticed we've progressed to a carbon clincher of our own design. So while we have a pretty sizable email list and about 6,000 Facebook fans, not everyone knows the same things about what we offer. We've tried to change that a bit by offering a lot less, simplifying our wheel offerings (on purpose) and running out of bikes to sell (sort of on purpose - we wanted to sell them but would like to have had more to sell). We're also close to a website redesign that better spotlights our streamlined offerings. Click the pic for a larger look. Score: +.5

13. Do not want to wait 2-3 weeks or 4-6 months. For most of our existence we have essentially been a custom wheel company, offering a choice of hubs and spokes across a number of different rims and drillings. At one point we had 11 rims to choose from, most in multiple drillings. That meant we would build everything to spec, since there was no way to guess what the next customer would want. We tried to communicate that custom wheels require some time, but the delay was causing prospective customers to look elsewhere. We know some people are perfectly willing to wait for a dream wheelset, but since all we offered was custom we weren't able to get wheelsets out to customers right away for an upcoming event. The Rail afforded us the opportunity to change that. We still offer it with 4 different hubs (red November, black November, Black WI and PowerTap) but the selection is manageable enough that we can build all the wheelsets for stock (except PT hubs, which sell less frequently and require a lot more expense to stock). Over the past few weeks we've reduced our average order-to-ship time on wheels to about a week. As for the 4-6 months wait, that refers more to frame pre-orders, which is a horse if a different color. We'll talk more about frames soon. Score: +1

14. Believe we are too inexpensive to be high quality. We could solve this by jacking up the price of Rails to $1800 and then giving everyone who asked a Bro Deal for $500 off, but we didn't and we won't. What we are doing is moving up the value curve. The Rail is more expensive than our open mold carbon clinchers. It costs us more to develop so it costs you more to buy. But we think that the extra expense is justified by an increase in performance, which is very different than having to pay twice as much because of added layers of distribution. Ultimately, we will never be as expensive as the brands available through shops, so the perception that our quality must necessarily be inferior may persist. We're OK with that, and expect many of you are too. Score: +.5

15. Are not in the market currently. How many of the 6000 people who follow us on Facebook are actually looking for new wheels? According to my math, less than 6000. The sales cycle is something all brands must deal with. How many of them try to bring people in market is through discounts and promotions that turn a considered purchase into an impulse. The only discounting we do is on clearance items we no longer offer, so don't expect a discount on the Rail anytime in the next couple years. You ought to be in the market for new wheels before then, yes? Score: 0

16. Are pressured to buy team sponsor equipment. We've heard this a lot - that people are interested in our wheels but are supposed to ride this brand or that because of sponsor obligations (which aren't obligations at all at the amateur level, so these usually mean that the racer doesn't want to hurt the feelings of the sponsorship coordinator who lined up a pro deal on some brand that's not as appealing to the rest of the squad). We don't sponsor teams but we do the next best thing - we put our logos above the clear coat so you can remove them and not piss off your sponsorship guy (as much). Score: +.5

17. Do not live within our geographic distribution. Before the Rail, we ceased shipping internationally and limited our sales to the US and Canada. But once the Rail launched we have lined up custom builders who service all of Europe, New Zealand, Australia, Singapore and Malaysia. It's not the whole world, but it's very near 100% of the world where we actually have demand. Score: +1

18. Are waiting for an upcoming product from us. Before we even launched the Rail 52 we started talking about possible plans for a shallower Rail. Once we begain testing the 52 though, we shelved those plans. The wheel is so rudely indifferent to crosswinds that we couldn't come up with many scenarios where the Rail 52 would not be the best choice. Sure there are some, but they do not render the Rail 52 inappropriate, only slightly less than ideal. So we've stopped talking about a Rail 3x (though we haven't stopped thinking about where one might fit into the market one day). Score: +.5

19. Are in the process of saving enough money to buy from us or do not have enough money now. This is one of those scenarios where we can't do much other than wish you well in your pursuit. So get out there and make more and/or spend less money. Score: 0

20. Are giving credence to some industry misinformation they received. A lot of misinformation exists on forum sites, and we've redoubled our efforts there to correct any statements about us that are somewhat undertruthed. The reason we do that is because we've found the forums can have a pretty profound impact on awareness and brand desire, and we would much rather people learn about us through word of mouth than a splashy ad campaign. We're a very candid brand so don't feel much need to control the conversations about us, or limit the information that gets disseminated. But we realize also that visibility in more popular media kicks off more of those word of mouth conversations, and lends more credence to people with a first hand experience with us. So look for us to expose ourselves in many more places this year. Score: +.5

Out of the possible 10 points available here, I have us scored at 5.5, for a total of 12 out of 20. Technically that's an F, but we grade ourselves on a bell curve and we're squarely in the middle - a solid C.