It seems like I’ve been linking a lot lately to Chris Matthews’s blog. He’s been in the bike biz for a while and works for Specialized in Morgan Hill, California. In this post, Chris writes about the credit crunch and how it might impact the bike business.
- Banks are not lending to each other, let alone to individuals or businesses.
- Bike shops purchase their inventory on credit provided by the bike companies. The bike shops pay the bill in the spring.
- Many bike shops have to borrow cash so they can operate through the slow winter season. If banks aren’t lending, bike shops can’t pay the rent and might close up shop. Maybe the inventory is sent back to the bike company, or maybe it’s all sold in a fire sale. Either way, the bike company loses revenue.
Gigantic names in the financial industry have disappeared over the past few weeks because foreclosures went up from half a percent to one percent since 2007. What minuscule percentage of local bike shops need to go belly up before the big bike brands themselves become insolvent?