My father was a Schwinn dealer from 1971 until 1990 or so. He had some great years with them in the early '70s but Schwinn completely went to hell in by the early '80s. I still remember my dad on the phone with their finance department, begging for a bigger line of credit so he could keep bikes on the showroom floor. They treated him and other loyal dealers like dogs. My father eventually became a Trek dealer and renamed his store from "Alamo Heights Schwinn" to "Bike World". Ed Schwinn wrote my father a letter, telling him that he had "some nerve" to change the name and that he "would never forget this". A few years later, Schwinn was bankrupt and we became one of Trek's top-ten dealers in the nation. My dad later heard that the credit manager who had treated him so poorly was now driving one of those trucks with the flashing yellow lights that escorts oversized trucks on the interstate highway.
So this link was sent to me by my father today and I posted it. He followed up with some historical documents from his relationship with Schwinn. I'm going to share them because I think it's a great testament to the hubris of Schwinn but also to the determination of a young entrepreneur.
They should have known better to give such a persistent business man as your father a franchise. His ambition was indicative of someone who would betray them in their time of weakness. And this is in no way an indictment of your fathers excellent business skill. A very well informed and aware shop owner indeed!
The next interesting chapter of the Schwinn story is about how it was bought out of bankruptcy by the same investor group that owned the Scott brand. They moved the headquarters to Boulder, Colorado and became a true quality manufacturer, at the same level as Trek and GT. They built most of their bikes overseas but also launched a US-built line called Schwinn Homegrown that competed well on quality. They also offered more downmarket lines. In the late 90's they were sold to another investor group, one that was more interested in the high-volume, low quality market and had also purchased the Huffy and Mongoose brands. So now all that most people know are the crap Schwinn bikes sold today. But there was a time in the 90's that the Schwinn Homegrown was a great bike to have (I still have mine). The fitness line has gone through some additional gyrations. So much of this is about buying a recognizable brand and squeezing value out without putting anything back into it.
But there was a time in the 90's that the Schwinn Homegrown was a great bike to have (I still have mine).
I appreciate their efforts, but who the hell was going to buy a Schwinn in the 90s? If you asked most people at the time, they probably would have said, "they're still in business?" After you convinced them that Schwinn is, indeed, still in business, you would have had but a tiny chance to convince them that not all of their bikes were crap. Because crap they were the twenty years prior. (Yes, there was the Paramount, which wasn't crap, but it was overpriced.)
I grew up with the Schwinn 10 speed. I didn't own one, but they were built like tanks. I didn't own one because of funds, and honestly--really never liked them, they were just too heavy.
That said, my friends all had Schwinns. I don't remember any of them failing. We would "ghost ride" the bikes--basically just rolling them down hills and watching them crash. We would retrieve the bike, and sometimes adjust the goose neck, and we were off. Those rims were military steel?
When I was around 10 years old, my friend Peter Stewart and I, did a Centurian for a local bike shop. We completed 100 miles. It was kind of a big deal for us back then. My mom's main concern was wearing a helmet. I wore the Bell skateboard helmet for about a mile--then just tied it to the handlebars. My mom would have gone biserk, if I didn't come home with that helmet.
What I think about to this day is Peter Stewart's determination to finish that race. We came in last, but we both finished. It wasen't that much of a feat for myself, as I was one year older than Peter. I was on my father's Raleigh. I didn't know it at the time, but the lighter weight bike really helped me.
Back to the race. About 5 miles into the race on a huge hill Peter just stopped. He got very emotional. I really didn't think we would finish the race. Back then buddies didn't leave the other behind for any reason. He was on a Schwinn with all the trimmings. He had the rack, and other stuff on his Schwinn. Don't remember all the details.
I talked him into getting rid of the rack. We hid it in the bushes. Peter drank out of his official Scout canteen. He was still emotional. Peter was smaller than myself, but he was much brighter. (I look back, and Peter was the only true genius I have known. That's another story, but he was smart.)
When Peter composed himself, we got back to finishing 95 miles.
Peter couldn't have been more than 60 lbs. All I remember is we both couldn't strattle the bikes comfortably. The bikes were too big for our frames. We would seesaw when riding. We ran out of water within a few hrs., and then it was garden hoses. When we told the homeowners our story--they were more than accommodating. One lady even gave us two Cokes. It was still the best Coke I have ever had.
Long story short-- we finished. The Owner of the bike store (who sponcered the race) made sure we crossed the line before he and his buddies went home. We didn't put him out because they had a barbecue ending, and they were just finishing their beers when we crossed the finish line at dusk. They even clapped.
(I lost track of Peter out of middle school. I heard he was living with two women in the Sierras. I knew he would live life to the fullest. Peter if you happen to read this I have an inactive contractors licence in CA. Get in touch with me--if you want? I wouldn't be suprised if you are one of these big wig Silicon Valley types now, and maybe you remember this event?)
"Good customers make for good products". This is my explanation for why an ignorant customer base causes merchandise quality to decline, on account of unhealthy market dynamics, e.g., in retail computer hardware and software. In the mid-1970s, bicycles suddenly became very popular in the USA. The masses suddenly entered the market, few knowing anything about bicycles. Many could distinguish poorly if at all between good equipment and bad; good customer service and bad. Consequently, poorly made bicycles (which cost less to make) undercut well made ones (and poor customer service out-earned the good variety), because superior value ceased to be perceived. Over time, overall quality of available bicycles declined considerably, almost entirely because of this dynamic with customers, recovering only after the fad ended, years later.
Quality thrives only when people can tell the difference. When they haven't a clue about products and how they work, schlock merchandise prevails. One can see this process at work in retail computing gear and software: People who know least about computing always insist most on achieving bottom dollar. In a way, this is understandable: You want to exercise control over the process, and, if you're dirt-ignorant about computing, the only place to exercise control is over price. Gradually, this effect tends to drive good merchandise out of the market entirely, leaving a generous selection of cheap crud.
(Archive link to pity a creaky old server on a slow link.)
The argument that cheap but lesser quality alternatives drown out better quality but expensive merchandise seems to be much more involved than a lack of ignorance in the clientele. Why would a flood of cheap bicycles affect the business of higher-end bikes, when their customers were oh so knowledgeable?
Personally, I think its a very good thing that the market is so sensitive to the demands of consumers. AFAIK these kinds of fads come and go all the time. It seems a good thing that people who wanted to just try out bicycling could do so cheaply; they probably bought a really cheap bike, rode it a few times and then the fad was over and the bike was forgotten. And so it is for other merchandise as well.
It seems like the so called quality biking companies were not clear on what kind of company they wanted to be. Perhaps they tried competing on price and lost there. Perhaps they should not have reduced their prices but increased the quality of their bikes and advertised those qualities.
>Personally, I think its a very good thing that the market is so sensitive to the demands of consumers. AFAIK these kinds of fads come and go all the time. It seems a good thing that people who wanted to just try out bicycling could do so cheaply
It was ultimately self-destructive, because the poor quality of those products harmed the reputation of the whole industry. A generation of people came to believe that bicycles were inherently heavy, dangerous and unreliable.
Companies like Oculus and Tesla have wisely chosen the opposite strategy, producing a premium product that gives the best possible experience. They understand that you don't get a second chance at a first impression. They know that it's easier to start with a prestigious product and move downmarket than vice-versa.
In the bicycle industry, the most successful companies have doggedly stuck to producing high-quality products and refused to compete solely on price - the likes of Trek, Specialized and Cannondale. They refuse to tarnish their brand with cheap crap. They have built strong relationships with good retailers who can educate customers on the merits of a quality product.
Oculus attempted it, but quality issues have plagued them. Red haze in the panels mismatched between eyes causing headaches, variable quality on the lenses causing some units to have much worse god rays than others, IMU calibration issues affecting tracking, and more.
And DK2 had a strong chemical latex smell that, in combination with some first experiences causing nausea, ingrained a long term aversion in users.
Two of the free pack-in games cause motion sickness in many users, where Valve found a way to cause it almost no one (avoid artificial locomotion).
The Schwinns I rode as a boy were reliable, and they weren't particularly dangerous, but my goodness they were heavy.
I was never the bicyclist my brother became (long rides into the Colorado foothills, long commutes from one side of Denver to another), but in my junior high days, I regularly rode my bicycle to school, perhaps a three mile round trip. For that distance and the very level terrain, a heavy Schwinn was just fine.
It's not that cheap bad bikes drove out expensive good bikes, but tha bad bikes at all price levels drove out good bikes at all price levels.
There are hallmarks of bike appeal (say, fat tires, or suspension), which will attract buyers. If those features are poorly engineered and manufactured, they lower the overall value of the bike. It's a worse bike for having them.
It's much as embellishment of virtually any product occurs with time, but most especially functional systems, which negate the actual useful appeal. The functional parts are reduced to minimum viable cost (and quality).
Put another way, the situation is of a high-reward environment (lots of dumb money flowing), rewarding variation, but with a really bad selection criterion. It's essentially disevolution at work -- the goal is to suck up as much money as possible, regardless of technical quality, and it works because technical quality is hard to assess for.
> Why would a flood of cheap bicycles affect the business of higher-end bikes, when their customers were oh so knowledgeable?
One possible scenario: suppose retail display space for bikes could not expand proportionally to fad-driven demand, and stores started featuring cheap bikes more prominently in that limited space to meet the changing customer demographics. As a result, high-quality, expensive bikes would have a smaller total number of eyeballs looking at them, bringing about an absolute decrease in sales (not just in market share).
Why would a flood of cheap bicycles affect the business of higher-end bikes, when their customers were oh so knowledgeable?
Because they weren't knowledgeable, that's the whole point. They were "bad" customers, not the "good customers who make for good products". Pretty sure you misread what is some admittedly hard-to-parse writing.
Maybe there were masses of unknowledgeable customers and too few knowledgeable and wealthy customers for a higher end market to be sustainable.
High end bikes are a huge leap in price from casual bikes, at least today. A $300 bike is perfectly adequate for normal transportation. An entry level mountain bike actually suited for trails is about $800. If you want full suspension, that's $2,000 at a minimum.
It's hard to think of other markets where the premium is as large as it is in the high end bike industry.
A $300 laptop is perfectly fine for normal computing. An entry-level MacBook Air actually not irritating to use is about $900. If you want a full-sized 15″ MacBook Pro, that’s $2,000 at a minimum. The range is higher if you consider desktops.
But there are plenty of products where the top-end is a couple orders of magnitude more expensive than the entry-level. For example, the car market, from used junkers to brand-new custom luxury vehicles. Or the meal market, from McDonald’s to Michelin restaurants.
> Over time, overall quality of available bicycles declined considerably, almost entirely because of this dynamic with customers, recovering only after the fad ended, years later.
It seems like that quality improvement correlated rather suspiciously with increased automation in manufacturing and increased overseas competition. Am I off base about that?
There are still lots of completely awful bicycles on the market. The industry uses the term "Bicycle Shaped Object" - the cheapest possible machine that resembles a bicycle to a naive consumer. Every possible corner is cut to bring the price down. You'll see plenty of BSOs at general retailers like Walmart and Target, often carrying the Schwinn brand.
There are really two kinds of cyclists; enthusiasts who ride regularly and dilettantes who ride two or three times a year. The latter choose a bicycle almost entirely on price, because they don't know any other criteria on which to judge bicycles. These customers don't care that the bike will start disintegrating after a couple of hundred miles, because they'll never use it that much.
The bike boom of the 1970s meant that lousy bicycles almost completely dominated the market, but the more recent bike boom has created a generation of much more savvy customers. The market has split into lousy department-store bikes and real bikes sold through specialist retailers.
I rode an $80 bike-shaped object from Target in grad school daily. I cannot say it was a reliable or well-built machine; over time, I had to replace almost all parts of it other than the frame with used parts from local bike stores and ebay. Nevertheless - the total lifetime cost of that bike and parts was far less than a "real" bike from a real dealer.
An $80 bike can be a completely reasonable choice for someone who is not a racer, not a courier, and just needs to get from point A to point B every day.
$80 will also buy a good-quality used bicycle with plenty of life left. Many of those bike boom era 10 speeds are still in circulation and some of them are truly wonderful bicycles.
Cost is an important part of the equation, but it's not the only part. Naive bike buyers gravitate towards features that make a bicycle worse for everyday use. Knobbly tires provide more grip in mud, but less grip and higher rolling resistance on tarmac. Suspension is worse than useless if you're not barreling across a bumpy trail, which is why quality suspension systems have a lock-out to temporarily disable it.
If you ask a serious cyclist to name the best all-round utility bike, most of them will name a classic tourer like the Dawes Galaxy. Here's what that looks like:
You'll find many similar bikes being sold for pocket change on Craigslist, because they don't look the part. Novices literally don't know what a decent bicycle looks like and the big box retailers are happy to pander to their misconceptions.
I consider the bicycle market to be totally a lemon market, so why not get the cheapest lemon, sometimes.
The most irritating part is the lack of standardization. Every bike needs its own cassette remover and its own bottom bracket and its own brake pads. I’ve had 3 different road bike wheel diameters, 5 different crank standards, and 10 different axle standards.
And then the big brands like Shimano are all too happy to have their name and parts associated with everything from crappy BSOs to luxury bicycles. Rarely do these details appear in the Craigslist ad, nor the bike store ad, even if I had the inclination to memorize the Shimano part list. Many ads don’t even list the length of the bicycle.
I’m not sure about the “plenty of life” thing, either. Usually, I ride a bike for a couple years, and then some part of the frame cracks. Disappointingly, this almost never happens to the cheap department store “mountain” bikes. Usually, for those, the bottom bracket breaks.
The lack of standardisation is frustrating, but it's certainly no worse than the car or motorcycle industry. The good news is that replacement parts never really go out of production, even for completely obsolete standards. Parts tend to get much cheaper with time - you can buy a perfectly usable 7-speed freewheel for $9 or a square taper bottom bracket for $12.
>I’m not sure about the “plenty of life” thing, either.
As long as it isn't left out to rust, a lugged steel frame will outlive its owner. Aluminium frames might be corrosion resistant, but they'll inevitably fail due to fatigue cracking. A properly maintained set of quality wheels will last ~30,000 miles before the rims wear out. Quality tyres and chains are usually good for at least 3,000 miles, cassettes are good for 10-12,000 miles if the chain is replaced before it stretches.
Indeed. My first law of bicycles is: "Good bikes aren't cheap." Unfortunately, BSOs do a big disservice to cycling in general - bad experiences discourage potential riders.
I'm a long time recumbent rider, and people accustomed to BSOs tend to blanch at the price of a recumbent, even when it isn't out of line with what a good bike generally costs, and even when they'd happily spend that much or more on a bag of golf clubs.
This is all correct. Walmart by me has row after row of BSOs for $79 to $99.
The local bike dealer starts road bikes at around $999 and goes up to maybe $10,000, with most sales in the $1,400 to $3,000 range.
Really no comparison in the products. I pedal hard enough I suspect I could break the crank off a BSO in a week. Keep meaning to buy one and write a blog about it or something..
You might be surprised. In the aftermath of Hurricane Katrina I didn't have access to a car and instead rode my dad's ridiculous full-suspension Schwinn (from Walmart) to and from work. This was a 3 mile round trip on flat asphalt. After two weeks, the weld joining the downtube to the bottom bracket actually split open entirely, leaving the bike held together by the suspension and chain tension.
This bike was only a year old at that point; clearly it wasn't designed to be ridden beyond an initial burst of post-purchase enthusiasm. It's the only time I've ever seen the failure of a bike frame.
First, no, that's not what Moen's Law is describing.
Second: the quality bikes that were appearing during at least subsequent bike booms were often very heavy on hand-fabrication. Ritchy, Fischer, and other Marin Country mountain bike manufacturers were hand-building frames in small lots, and often used components from manufacturers with a heavy hand-made element to their manufacture (though not exclusively). The improvements came for giving a shit, riding what you built, and rapid innovation cycles (something heavily automated manufacture didn't offer). The punishing environment of trail-riding also meant that bikes built virtually entirely for styling and aesthetic appeal (the Sting Ray, beach cruisers, etc.) simply didn't stand up to use. Put in evolutionary terms, the selection process was quite exacting.
As mountain biking evolved to more general street use, mountain bikes also became highly subject to the same dynamic which had affected earlier classes of bikes.
The phenomenon is known as a 'market for lemons' - freakonomics did a story about it and how it applies to the used car market, but the same principles apply: free markets go bad if one side is low-information.
Simply labeling this as "market for lemons", a case in which different parties of a transaction have differential knowledge, a/k/a, an information asymmetry, misses a larger and more general dynamic at play.
I've commented on longer length here: "Is Gresham's Law a special instance of a more general phenomenon?"
The thing that Moen's Law, Gresham's Law, the Market for Lemons, and other elements hings on is the inherent frictions and costs of information. Not only in acquiring information, but in assimilating it.
Actually, the Dunning-Kruger effect also counts. There are people who are so bad at recognising the truth (or quality) that they don't even know they're bad at it.
There are a tremendous number of other factors baked in as well. Why signalling works and/or is used (it is more effective at communicating than the quality being signalled), why false signalling is used (because a cheap signal substitutes for expensive quality).
A more pernicious case falls under the law of unintended consequences. Here the issue is implications of use or manufacture of a good or service which aren't available to anyone when initially transacted or provided. The use of fossil fuels (global warming, acid rain, particulates) comes to mind. Thomas Midgley, the most dangerous inventor in history, is another example. Two of his creations, freon (chlorofluorocarbons) and leaded gasoline both threatened or harmed more people than any other single person in history.
I've been exploring the question of extractive materials pricing, and in particular oil and gas, in light of information that's come to light since their first large-scale appropriation. How doctrines such as the Rule of Capture came to be accepted and commonplace (less so now, but still the foundation of much mineral law, and still extant in Texas), or understanding just how long it takes for fossil fuel reserves to be restored, and how true economic cost might be reconsidered, come to mind. The information is present, but it's not being assimilated.
What I find fascinating is how failing to understand why people are buying your product can sometimes be more disastrous for the competition. Look at SUVs, almost nobody bought them to use as Sport and/or Utility vehicles, they were generally used for hauling stuff and people around town. Precisely the same things that minivans, station wagons, and extended cab pickups were always designed for. But minivans and station wagons had by the '90s picked up a massive uncoolness factor, and pickups had their own unique social connotations.
Similarly, most people who were buying mountain bikes were not using them on mountain trails, they were just biking around the city on roads. But a mountain bike is a bit easier and more comfortable to ride than a road bike for most folks who don't ride long distances a lot. Also, by the '90s the "10 speed" had lost its coolness factor and mountain bikes were definitely acquiring a strong coolness factor (just as BMX bikes had during the '80s).
Schwinn's failures remind me a lot of Radio Shack's. At one time a hugely iconic and market dominant brand, and then a few years later struggling to stay in business before tipping all the way into the abyss of history. All because they didn't understand what people wanted and how the market was changing around them and were disdainful of the competition until it was way too late.
A similar fate befell Raleigh in the UK. They were the stalwart of the British cycle industry, the fond childhood memory of several generations. Like Schwinn, it was a combination of poor industrial relations, overseas competition and management complacency that brought them down.
On a slight tangent, Richard Schwinn, mentioned in Part 2 of the article, has a great interview hosted by Georgena Terry of Terry Bicycles. They discuss the move of bike manufacturing from the States to Asia, largely due to the aluminum subsidies in China which allowed them to produce a frame for $4 in 1998 (~7 mins in).
However, there's a lot of knowledge not mentioned in the blog post and I recommend listening to it if you're into bicycles and the change of materials from steel to aluminum to carbon. Richard Schwinn is a bit biased since he runs Waterford, but he does know a lot about steel.
I have a fantastic steel Schwinn from the early 90s, with grey splatter paint and all. A Schwinn Paramount road bike. Actually the whole story behind the Schwinn Paramount Group is worthy of its own post. The Paramount Group now makes custom bicycles under their current moniker, Waterford.
Owner is Michael Spratt. He's pretty savvy for buying up old brands like Motobecane and Mercier and branding them on bikes. The quality of them aren't great, but they're stll a step up from Wal-Mart, and other department store bikes. Back around ~2008 during the fixed-gear craze, new riders had Kilo TT frames because they were $300 fixed-gear bikes and the next level up was around $700.
I used to read BikeForums.net back in the day and BikesDirect would post on there occasionally, so he had a community and also answered questions. Here's a notable post by him on RoadBikeReview:
> Kinesis is the largest frame maker in the orient. Their frames are used by just about everyone. They manufacture in a large plant in China and a smaller specialty plant in Taiwan. Le Champion frames are from Taiwan. We have never seen a defect on a le Champion frame. If your frame is the first, it will be replaced for free just like any other customer. I will not sell a bike without free lifetime warranty frame defect protection for the customer.
> Bicycle Frames are one of the marketing successes of the specialty bike business. Manufacturers have marketed the frame as the most expensive and technical item on the bike. However, most frames are very inexpensive compared to cranks, wheels, shifters, etc. This is not to say the frames are not valuable; but the way they are produced brings the cost way down. {Frames are the highest markup item sold by any manufacturer; many are sold at over 10 times their cost}
[...]
> Bottom line on frames and other components for me is clear. If I can save $100 a bike by not running an 800 line and put it in better equipment, I will. If I can spec a carbon frame from Taiwan instead of China and pay for it by savings on operating expenses, I will. And this attitude has always been the same; even before the internet. In the ‘old days’ I used to sell full Campy Record bikes with Colnago, Mercian, Viner, etc frames for $995. I was about $1000 under other shops; all of the discount was due to high volume, excellent buying, and low overhead. {This may also sound like a sales pitch; but it is just true. Even if you dislike Wal-Mart as I do; they are lower priced on CanadaDry GingerAle than other retailers; Why? high volume, excellent buying, low overhead}
Interesting AMA, even for those who don't know much about the bike brands is from Crank Brothers. It's a big name in MTB scene, and from what I can tell the company made some really bad products, went to shit, got sold and is now trying to build itself up again, still as a standalone brand, so they didn't get bought by a huge "monopoly". At least that's what I gathered from the discussion there.
A long but a fascinating read. I'm old enough to remember dreaming of owning a Schwinn 10-speed as a kid. The dream never materialized as by the time I had the means it was a whole new world. A plethora of options and bike types ruled the roost and I had completely forgotten about Schwinn as a brand. Perhaps the best TL;DR for the article is the line credited to the Specialized founder(s): "Innovate or die".
