Masiguy does an excellent job explaining what's going on in the bike industry with price increases. The falling dollar, dramatically higher costs from labor, raw materials, energy and so forth is resulting in significantly higher costs for bike companies while the US and global economy is slowing.
Small player Masi is concerned about consolidation, as well they should be since that's what happens when the economy slows. There's some indication that bike sales may go up as people try to save gas money by biking to work and errands, though the more profitable high end of the market will probably suffer.
It might interest you to know that one of the cyclists who was killed by the Sheriff's deputy in Cupertino the other week, Matt Peterson, was a bike buyer for Wal-Mart. Most of the bikes I see on my commute are still things like Dave's $100 road bike shown here, available from Target.
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It's a strange time for the industry. Thankfully, many of us have been moving to embrace and address the more utilitarian side of the market. As you mention, this may hurt high-end sales, but there is still plenty of business to be had (and money to be made- in all frankness) at the lower end of the price spectrum.
It's not all bad news, for sure, but the uneasiness is palpable.
It's odd that the cheap bike in the photo is ugly (it wouldn't be if it weren't for the bottom part of the frame), but the guy behind it is hot. Go figure!
I've been looking into a bike for a few months now and I think I'm ready to get one. It will be a mid-priced ($500-ish) bike. It's beyond me why anyone serious about biking would get a Wal-Mart/Target special. Personally, I'd go to a specialty bike shop for a bicycle if that wouldn't mean a round trip lasting hours to get to a bike shop.