The most talked-about cycling brand in the world right now is Canyon Bicycles, which opened for business in the US on August 15. The German company manufacturers high-end road, mountain, triathlon, and commuter bikes and sells in more than 100 countries. And though its origins date from 1984, Canyon is only now making its American debut.
Canyon says it differs from its rivals by offering technologically advanced performance bikes at comparatively low prices. And though price comparisons are not easy to make, because similar bikes are often specced differently, Canyon says its bikes sell for 20% to 30% less than comparable bikes from major rivals like Specialised, Trek, Cannondale, and Giant, but some observers suggest those figures are overstated.
Canyon sells only online, at canyon.com, direct to consumers. There is no bike shop or middleman. By comparison, if you want to buy a bike from Specialised, you must do it through a brick-and-mortar retailer. You can order a Trek online, but you still have to complete the transaction at a physical shop. Some lesser-known companies also sell bikes online directly, and there are successful third-party sellers, but Canyon is looking to be among the first brands to sell high-end performance bikes directly at a discount on a larger scale. Bike shops make money by assembling, marking up and selling, and servicing bikes, in addition to selling gear and accessories. Because Canyon sells direct and skips the shop, it says, it can afford to sell bikes cheaper. Canyon calls it “democratizing performance.”
Canyons are highly desired, award-winning bikes, but US consumers haven’t been able to purchase them until now. Riders in the States who own a Canyon most likely had the bike shipped from Europe through a friend or found other means. But their cachet also comes from a German-engineering heritage, which emphasises a technology-driven approach and matters of detail drawn from a unique industrial-design language that appeals to discerning consumers. Canyon’s chief brand officer, Frank Aldorf, who worked at the brand’s chief rival, Specialised, comes from the advertising industry, where he did creative for BMW, Mercedes, Adobe, and other top brands. Canyon recently won the prestigious international Red Dot design award.
Canyon says customers will receive nearly fully assembled bikes on their doorstep (direct signature required), with US orders taking no more than a day to process. Customers choose from three shipping options: ground, three- to seven-day, depending on destination, $US89; two-day, $US150; and overnight, $US175. Customers also pay tax.
Canyon’s arrival in the US has many cyclists excited, but it’s also brought about a sense of anxiety for some in the industry, and there is debate, on sites such as Bicycle Retailer and Industry News, over what effects, positive or negative, a successful consumer-direct sales model like Canyon’s could have on brick-and-mortar retailers. In addition, though Canyon has been selling in more than 100 countries, its entry into the US won’t be easy, several insiders who spoke with Business Insider said, pointing to a soft bicycle market and a lack of new riders buying bikes.
Business Insider spoke with Aldorf by phone from Canyon’s headquarters, in Koblenz, Germany, and industry insiders about the company‘s bikes and business model. We also tried out one of the company’s most popular bikes, the Aeroad (photos below), which Canyon shipped from its new Chino, California, warehouse by UPS to our doorstep. We had it assembled inside a half-hour and have already ridden it 500 miles.
In the mid-1980s, Roman Arnold was an amateur bike racer in Koblenz. In his teens he travelled to races with his father, a sales rep, who came up with the idea of selling imported bicycle parts from Italy. At first they sold the parts out of a trailer, which they towed around with their family car. When Arnold was 18, two days after he graduated from high school and was set to be conscripted into the army, his father died, Arnold told Pinbike in an interview. He suddenly didn't have to enter the service, so he and his brother, Franc, decided to grow the fledgling side business, which is when they started selling out of the family garage.
That eventually led to the opening of a bike shop, in 1985, and Arnold's shop became a dealer for other brands, including the American companies Specialised, Trek, and Cannondale. (Arnold has said he was for a long time the largest Trek dealer in Germany.) But Arnold dreamed of having his own bike brand, so he started off with a small mail-order catalogue before eventually moving onto the web and becoming one of the first online cycling brands. At the time, positioning the business as an internet-based bicycle company was something of a bet, but, according to Aldorf, Arnold believed that selling online direct to consumers was the future.
In developing his own bikes, Arnold said he looked at the best people in the industry and asked them to work for him. In 1985, he eventually put a team together, and 'that is when the Canyon you know today was kind of born,' Aldorf said.
The business grew, first in Germanic markets but then in France, Italy, and Spain and eventually in the UK and beyond. Canyon now sells bikes directly to consumers in more than 100 countries, and it has sold more bikes outside Germany than in its home country in every year since 2008, Aldorf told Business Insider.
Today, Canyon is one of Europe's largest bike makers, with a global staff of 850 and north of $US180 million in annual revenue, according to Cross Border magazine, with revenue growing 30% year-over-year for the past seven years.
'We always knew the path was outside of Germany because that's where the biggest growth would come from,' Aldorf said. 'In European markets, it was an easier transition, closer to home, and in terms of legal, tax, and regulations. But for the past seven years, there's been a huge number of people overseas asking, 'When are you opening in the US?'
'So for a long time there was a huge demand there already. But it was something we couldn't get our heads around, and Roman was always just a little bit hesitant to go into this market and just didn't know the market well as he did those here in Europe. But at some point it was, like, 'Will we ever go to the US market?' 'When is the best time?''
While Canyon says a good deal of its success stems from its consumer-direct model -- part of what it likes to refer to as 'democratizing performance' -- Aldorf said that, for him, it wasn't the business model that defined the company.
'We make higher-end performance bikes in road and mountain but also in our urban line and other performance-oriented bikes,' he said. 'We can offer them to a lot more people because of our business model. But 'democratizing performance' means first looking at the product, and no matter how you received our product, our bikes on a performance level can compete with all the bikes from Specialised, Trek, or our other competitors that go through the usual dealer network,' Aldorf said.
'The bike itself is convincing -- the design, performance, and quality. So it's part business model, part quality, but it's also the German part that plays into this, because our engineers and the department that takes care of our quality control is really top-notch. So that for us is the opportunity: a product that has won awards, is tested, and gets great reviews, without even taking consideration of how we distribute our product. Then, on top of that, we have our distribution, and it has a really nice price point. You get great value for the money. Combining these two things is the specialty of Canyon.'
Not everything has gone so wonderfully for Canyon, and in 2015 it experienced serious growing pains. The company had built a new factory and switched to a new computer system, but once the new system went live, Canyon encountered setbacks that prevented it from getting bikes assembled and out to customers. Exacerbating the problem, the company lacked proper customer support, which left customers even more upset. Disgruntled customers fumed on social media, with some saying they'd been waiting weeks and even months to get their bikes. Eventually the company righted its wrongs, it says, and Arnold wrote an open letter apologizing. But its image had been smudged, at least for a time. Aldorf described the debacle to Business Insider like this:
'We wanted to have a state-of-the-art factory, and that's something we built starting in 2014, and it took about two years. At end of 2015 it went live and we made a switch to the new facility. We had the whole logistics going and most of the bikes going on the belt, like in the car industry. This was a highly complicated system for planning the different batches. With the new factory we said, 'Let's have a new IT system as well,' and those systems had to work in concert. We thought we could just flip the switch and within two weeks things would be running smoothly. Well, this was just not a very mature way of looking at it.
'It was a huge change in processes inside the company. You had to have all the systems working in concert. The factory workers had been used to working in a certain way and had to change. So with all this happening it caused some trouble at the end of 2015, and it took us instead of two weeks six months. Still, some companies struggle after two years with a big change like this, but for us six months felt like a long time, a surprise we were not prepared for.
'The dry runs were OK, but when the systems went online, things happened. That hiccup costs us trouble for six months. Coupled with that was we were heading into spring and people were ordering and wanted new products. Some payments got lost, people waited way too long, we overpromised, because we wanted the new system to work so badly. We'd say, 'You'll receive your item in two weeks,' and then something else would pop up and it became six weeks.
'I totally understood why people were freaking out. If you already paid your money -- and it's not just a few bucks -- to somebody far away, online, well, that was a hiccup for six months. But we solved everything. But still, it takes a long time before this washes out of all the comments, before more people are talking about how quickly they received something from us than others who still have some issues. Sometimes it's on our end, and there are sometimes payment issues that are actually on their end. But overall it's now much better.
'We just had a record year in the company's history. So it's not just that we received money but that we shipped product and there should be more people happy that they got their bikes. This July we were way over plan, and the plan was already very ambitious. A record month of selling bikes and happy customers. Everyone got ice cream in the office last Wednesday.'
This time, a slower rollout
Because of the debacle in 2015-2016, Aldorf said, Canyon is taking a much more cautious approach as it enters the large and competitive US market. At first, that means it's offering a limited number of models for sale. The company has also opened a new warehouse, in Chino, California, from where it plans to ship bikes after giving them a 'final touch' to ensure they're ready for customers.
'We already feel that our customer service in Europe is pretty good,' Aldorf said, 'and the US will lead the way in terms of what we have to do going forward and what people are used to from Amazon and other online retailers. They just offer a certain level of service that we need to offer. So to offer all of this, we start with a slightly scaled-back portfolio, but then add to it later.
'It's not so easy to just go into an online business. We tried it at Specialised, to say, like, 'OK, now we become consumer-direct,' but I know that after seeing it from the other side, it's not that easy. So over time you add a lot of knowledge, and we want to be the best, so there are things where we want to improve our business. We definitely want to improve our assembly line.'
Generally, the Canyon bikes sold in the US market will be the same as those sold in Germany and around the world, Aldorf said.
'We're keeping the Canyon aesthetic in the US, which is what people there have wanted for six, seven years. We already know what they want, so it's just a matter of how easy we make it for them to purchase those bikes.
'There might some models where we feel this spec is not as needed, or the spec needs to be different. Certain parts need to be specced differently for US consumers. This could happen, but overall ride quality and geometry and concept will be same for all platforms.
'We're going to have a slow build, so there will not be the entire full line that we offer in the Germanic markets available from day one in the US, but we will be adding models to the US portfolio. First we're going with the ones that we feel are going to be the most successful and most wanted. Then later we'll spread out a bit more over time. That way we can deliver the service quality we want that is top notch.'
Arnold told Pinbike that he eventually chose the name 'Canyon' for his company because he wanted a unique-sounding name that would leave an impression on people. 'A canyon is very wide, it is something very big. It does not mean that we wanted to be a big company, it was more about the feeling of being in the canyon and the wide open space,' he said.
Years later, the German design firm KMS Team created the Canyon branding used today, explaining: 'The type leans to the left, inspiring athletic associations such as »climbing«, »speed« and »braking«. It clearly sets Canyon apart from its competitors. The slant of the wordmark corresponds to the angle of the down tube of the bike frame. Here, the label and product merge into a single unit.'
A few years ago, Canyon started looking for someone who understood the US market and could help it take the next big step, and it finally found one last year. 'That's when we planned to work with the financial partner TSG Capital Partners in San Francisco,' Aldorf told Business Insider. 'For Roman, this was key because if they were taking a little bit of the risk, then he felt more comfortable going into the US. These guys aren't just providing financial input but knowledge and insight and helping us to set it up in a more successful way.'
TSG, the US private-equity firm -- whose $US5 billion portfolio includes investments in consumer brands such as the online sporting-goods retailer Backcountry, Stumptown Coffee Roasters, Vitamin Water, and Pabst Blue Ribbon -- said a minority equity-investment partnership with Canyon was completed in June 2016.
Canyon frames are produced in Asia, where the company says it has a team that carries out a 'quality-management test.' Once the frames are shipped to Koblenz, Canyon carries out a second quality test. Each bike has three barcodes, with two on the frame and one on the fork. Canyon says it scans the codes through a CT scanner to track production and ensure everything is up to standards. The company says every one of its bikes is test-ridden at its assembly plant before being packed and shipped.
Both Arnold and Aldorf like to emphasise that at the heart of the Canyon's success is not its consumer-direct model but really its bikes -- the design, the performance aspects, and even the look and feel.
'Maybe this comes from our German background, but we are also much more defined by our industrial design than I feel like any of our competitors throughout the line,' Aldorf said. 'Maybe there are some other brands that have one or two bikes that are defined by industrial design, but, in our case, you will see more of a theme, say, through our mountain-bike line, where it all becomes like one language. So it's the same as a BMW or a Mercedes, where you see it's one of their product and not that of another brand.
'So we don't add too many layers of any stickers or lines or decals or other details, so you can recognise it as a certain bike. That's also part of our success -- finding this industrial-design language that is defining for us. I think if you look around, everybody else tries to put yet another layer on top. But we don't need this. That further differentiates us from others.
'You can see a bike and see it's a Canyon without even seeing a name on it. When we make a change to a bike or colour, it's a long discussion, and we don't go with a broad colour palette. We are very reduced in terms of the changes we make to our line. We're very precise that way.'
It can be challenging to make fair price comparisons among different manufacturers' bikes, in part because they're often specced differently. Two similarly quality framesets could sell with very different builds. One bike might have a much higher-end wheelset, for example, or a flat-out superior component group. Still, Aldorf told Business Insider that, generally, Canyons will sell for up to 30% less than rival companies' bikes, such as those from Trek, Specialised, Cannondale, and Giant.
'Overall, it's easily about 20 to 30% less expensive,' he said. 'And then sometimes you have to go into the spec level, too. If you see how we spec some bikes, it really speaks to our German engineering. It's how our engineers would like to see the perfect spec for a bike, and we can offer that for a great deal. It might not be something that everyone needs, but for some bikes, we spec them believing it's the perfect spec for that bike. And if you look at the specific spec level on some bikes and see that we are 20 to 30% less, then you have a really good package.
'Certain Canyon bikes are so awesomely specced -- the wheels and all the parts -- that if you took them apart and sold all the parts and bike, you'd actually make money,' Aldorf said.
Canyon bikes debuted at the world's biggest bike race in 2009 under the Silence-Lotto team and Australian star Cadel Evans. 'For Roman Arnold this represented the fulfillment of a childhood dream -- a dream that had begun 20 years before when he first discovered his love of cycling and in the early days selling bike accessories from a trailer,' the company wrote on Facebook.
In 2014, Nairo Quintana (Movistar Team), one of the world's top stage racers, became the first Colombian to win the Giro d'Italia, and he did it aboard a Canyon, giving the German company its first overall victory in a grand tour, or three-week race.
In 2015, Alexander Kristoff (Katusha) became the first Norwegian to win the Tour of Flanders one-day classic. He also gave Canyon its first victory in one of cycling's five monuments.
Canyon's chief brand officer, Frank Aldorf, says he wants people to know that though Canyon has been successful, it's still small compared with the giants of the industry. That's why he says the company is entering the American market carefully. (As the Canyon USA website went live on August 15, it featured a limited number of models compared with availability in other countries.)
'We're always compared, on the bike level, to Specialised or Trek, but we're probably an eighth of the size of them,' Aldorf said. 'It's a good thing that people think the product is on the same level and competes with those guys, but they sometimes forget we're small, and that's why we have to be careful going into the market and not overpromise.
'I don't want people to get the impression, like, 'Oh, that's the next Specialised coming in.' We're really just a portion of those guys. I know because I've worked at Specialised. But it also means we have room to grow. I don't know if it was SRAM or who said it: 'We're not the biggest, but we are the most important at this time, or perhaps the most interesting.''
Aldorf said Canyon was 'definitely a threat' to brands like Trek and Specialised but also to Giant and Cannondale and the rest. 'Customers who usually buy a Trek or a Specialised will be interested in checking out a Canyon,' he said.
Aldorf continued: 'If they are used to that level of quality or performance level, then Canyon is definitely an option. That's our advantage there. With our model we are probably more appealing to discerning riders who Trek and Specialised go after.
'If you want to buy a bike online, I think you need to have a certain level of knowledge, and I think our product line represents this. It's not like someone who usually goes into Walmart to buy a bike there suddenly goes to a Canyon. That's not going to happen. So it's the one who is into performance -- maybe a racer or someone who likes to have a performance-oriented bike or has ridden a Specialised, Trek, or Giant. That type of rider is going to be interested in a different brand that has this offer that we have. That's going to be our main customer for sure.'
Industry observers told Business Insider they would be looking closely over the coming year at how well Canyon's consumer-direct model actually plays out in the US, at how well it can meet demand, maintain quality standards, and fulfil orders. There will be pressure, and Aldorf sounded well aware of that, especially given some of the company's past missteps.
'We have to make sure that when a bike leaves our factory that this bikes is dialed and that we don't have to ship it back and forth between the customer and us, because that then adds too much cost on our end and would ruin us,' he said.
Aldorf believes Canyon genuinely wants to bring better bikes to consumers at better prices, and he says Canyon as a brand is interested in starting a new conversation within the bike industry, a conversation he says should have taken place years ago.
'I really see in Canyon as the one who is kicking off this discussion that should have happened way earlier,' he said. 'With us coming into this market, it's really the time other bike companies rethink their model -- and there's still room for everyone in the market.
'I hope what we're doing kicks off a discussion in the industry about a different way to do business that's good for the consumer. For us, it's not so much about us against any of these brands, but I think the other side sees it that way, probably more than we do.
'We come in peace,' he said.
Aldorf said he's expecting 'way more business' going through the online channel from other companies as well (Trek already does that, but in a limited way). But he quickly added that Canyon actually had good relationships with brick-and-mortar shops.
'We've gotten positive feedback from shops, who feel like there's a new brand coming in and they can do service,' he said. 'And a lot of shops have already seen that. They're welcoming us as another brand, one that doesn't have its own shops. We're never against the bike retailers. Bike shops are great -- and they have their place.'
For Aldorf, Canyon is a game changer, or at least wants to be. When asked why the big US brands hadn't gone direct-to-consumer a long time ago, he said brands were reluctant to change their ways.
'There is a big margin on bikes if you go through the dealer network, and this is part of their model,' he said. 'You have to dramatically change your operation if you want to operate the way we operate. With an organisation the size of Specialised it's not that easy. To me, that's what's holding them up to change. Change is always scary, and change is not always easy.
'In the end they're not really businesspeople,' he added. 'In the bike industry, it's passionate bike riders, and they want to be around bikes, but they're not really thinking through the lens of a businessperson. I think, then, they would have changed already a long time ago.
'The change we hope to kick off in the bigger discussion is good for the riders and the entire industry. We hope it's not a battle against brands, but a big shift for the industry to move.'
'We have never had more opportunity in our core business, and that is what we are focused on,' Burke told Business Insider. 'Two key areas of focus for us are awesome products that we love and providing exceptional service to our customers. We do a pretty good job in both of these areas, but we have massive untapped potential in each.
'Canyon is not the first company to sell product online at a discount in the US market. Bikes have been offered online for a long time. Canyon will add to that assortment.'
'Love the bike,' Levchin said. 'It rides like a race bike, very stiff, and very good downhill. The aero frame, which is what I got, is fantastic on a slight uphill flat in a TT mode, not normally my favourite terrain.
'I am no cycling-industry wonk, but I can see why dealer-driven guys should be concerned -- the constant channel-conflict concerns one hears while talking to the traditionalists make sense, but LBS (local bike shops) are not exclusive to any brand when it comes to fit, service, and even parts ordering. So getting a bike that shows up basically fully built, with a few tweaks to be made by your local Trek or Specialised-dealer mechanic (oops!) before it's roadworthy, will probably work for a lot of chamois-sniffer types like me, who just want to ride whatever Quintana is riding. A US distribution center will probably make them that much more competitive -- faster arrival times, faster replacement parts.'
'Personally, I'm not a fan of consumer-direct bicycles,' Watson told Business Insider. 'I live behind a bike shop in LA and see how it affects their business. Most people aren't capable of assembling or adjusting a bike and they bring it into a shop, where they expect to pay $US20 for adjustments, but upon further assessment, the shop ends up having to do more work to it, leaving the consumer upset that they have to spend 'more money' on a bike that they purchased direct.
'Sure, the shop doesn't mind the business, but I think it ultimately sours the consumer's experience. Versus buying a bike from the shop, everything is dialed in. If the stem is too short or too long, they swap it out for free. They make sure the wheels are tensioned, ensure the bolts are greased, etc. Ultimately, doing consumer-direct bikes just adds another painful step to the process, makes the bike companies more money, while taking business away from bike shops, many of which are the reason for the bike company's success in the first place.'
Joe Gaspar, 30-year bike-industry veteran and owner of the shop 2 Bici in the Chicago suburbs.
'I welcome Canyon,' Gaspar said. 'I like disruption. Mail order has been something we've dealt with a long time, and shops have been stagnating. It's like shops are having a slow death, so I'm in favour of anything that causes them to hurry up and adjust.
'When it comes to the strategy, companies have been dipping their toes in online, but no one has taken the plunge. Canyon is going to teach people there's a new way to buy bikes, and it's going to eat up a chunk of the market. When you look at Fezzari bikes and Motobecane and others like that, some are already making a dent, albeit a small one. But half a per cent here, 1% there will be a chunk sooner or later.'
To be clear, Gaspar says, he's talking about high-end bikes purchased online.
'I don't mean the everyman bikes, the hybrids, bikes that cost between $US300 and $US1,000. I'm talking about expensive bikes, where consumers are spending $US5,000. Today, the buyer often knows the bike better than the retailer -- they do all the research, they know all the specs. So no one is stumbling into a shop to buy a $US5,000 bike. That is the business we're in now. Test-riding a $US5,000 in a parking lot makes no sense. That is a kind of marketing ploy. Comfort and sport hybrids, yeah. But roadies at the higher level know exactly what they want and can buy online.'
Gaspar added that his own small shop had become something of 'a convenience store with service.'
'There is no loyalty among 25-year-olds now,' he added. 'They buy everything off their phones. They used to at least pretend to be interested in buying in the shop -- 'showrooming' -- but now they don't even pretend. So the old model is broken, the 35% markup is broken.'
Edwin Bull, owner of Van Dessel Cycles, a New Jersey-based bike maker.
'Canyon is making big news, and I wish them well. I imagine they will be a big deal, more to the bigger players than to us. Canyon is awesome and they put out really nice stuff -- their bikes are A-plus -- their operation is A-plus. They have what it takes to attempt a shake-up.
'The retail environment is totally different now than any time in the past. They have everything going for them. Consumer-direct has never gone well for other brands in the past, though, in US, so we'll see ... I keep to my tunnel focus of putting out the best product I can.'
Business Insider also spoke with Pat Hus, the vice president of Interbike, North America's largest bicycle trade event. Here's what he had to say about Canyon:
Daniel McMahon: How do you think Canyon will fare in the US, given your perception of the marketplace?
Pat Hus: It will be interesting to see what's going to happen here. I don't think anybody really knows. Each market they have gone into, they're unique unto themselves. What worked in Europe, and what may work for them in Australia, is very different from what they're going to be encountering here in the US. There's been pretty dramatic consolidation here with the major brands, and the top two dogs -- Trek and Specialised -- have really separated themselves from the rest. But Cannondale and Giant are doing a phenomenal job. There's pretty strong brand positioning for the big four, whereas in Europe there are a lot more brands and greater opportunity.
Canyon's got some beautiful bikes -- they have some amazing product. Their promotion and visibility on the global scale has been excellent. They have hired great leadership and appear to be well funded. They are positioned very, very well to make an impact. I just don't think it's going to be a steep ramp-up to all of a sudden carve out a huge share. I think it's going to take time, longer than other places they have gone into. But I could be wrong.
McMahon: What are going to be some of Canyon's specific challenges in the US, and do you think it can overcome them?
Hus: The whole assembly and delivery is going to be a bit challenging, and their focus, to my understanding, is still very much to the high end of the market, which sounds great, but we all know the softness of the high-end market, which has taken a beating over the last few years. So that's going to be a tough one. It's a small, shrinking market, and they're positioning their brand very much on the high end. I know Blair Clark, who's running (Canyon USA), and he's a smart guy. He's probably managing expectations with leadership there.
I think in mountain (bikes) they have more opportunity, but that's crowded over here too. We have strong players in the boutique mountain business, with Santa Cruz, Pivot, Intense, and other brands. That's not going to be a walk in the park either.
McMahon: There's been a lot of hype around Canyon, and some commenters and brands seem anxious at its arrival in the States.
Hus: I think they will make a splash -- I think they will make an impact. But I don't think it will be a 'sky is falling' or 'Oh, my God -- Canyon's here' thing. It's going to take more time than that.
McMahon: What's it going to mean for bike shops? Some say Canyon will disrupt the industry, with its consumer-direct model and claimed 30% discount.
Hus: We've got a very strong independent dealer network that is very active in the communities and are getting strong every year, and the survivors -- the bike shops that are doing it right -- are figuring out that they have to change and evolve their businesses. I think there are a bunch of them out there that are doing a great job. So that's going to make it more challenging.
And you know, when you really drill down into the cost savings on a bike from Canyon versus a bike from, say, Specialised, the disparity is not as dramatic as everybody wants to paint the picture. By the time you shipped it, get it assembled, and get it ready to go -- we've done some analysis, and it's a 10 to 15% save versus what you can get from a local bike shop on a Specialised. Now, there are going to be a lot of savvy consumers who will do the maths on the high-end product and say, 'Well geez -- is the juice really worth the squeeze?' I mean, it's a high-end carbon bike with Ultegra or Dura-Ace, and both are amazing products. I want to be able to go back to a bike shop that's going to take care of this Specialised I've invested in and know that I'm going to get service. I don't know that with Canyon yet.
That said, I think the mobile guys -- Velofix, Beeline Bikes -- are going to be able to support a bike line like Canyon, and consumers can definitely get with these mobile guys in certain communities. That's an avenue, and I think there will be bike shops that will embrace and take in Canyons and work on them. They need to establish a beachhead here first and be patient.
$12,000 Tour de France bikes are impressive, but Canyon will need to sell lots of 'meat of the market,' sub-$1,000 bicycles if it's really going to succeed in the US, one industry observer says.
Finally, Business Insider spoke with Todd Grant, the executive director of the National Bicycle Dealers Association, a nonprofit that promotes the interests of bicycle retailers in the US.
Daniel McMahon: You have a close-up look at the US bike industry. What's your take on Canyon's coming to America?
Todd Grant: Canyon's model is no longer unique. Two or three years ago, when conversations were out there about whether Canyon was going to come to the United States, the model of selling direct to consumer of a brand such as theirs -- a brand that is as wide and deep, where you can get very inexpensive to very expensive, and you can get quite an assortment. There were really no brands out there that were doing it at the time. So the conversation was, 'What would it look like for a big brand like that to get involved?'
Then, awareness of this brand was extremely low. You'd have to be a European cycling enthusiast to know what the brand was. So fast-forward to today, there are a slew of brands that are using a similar direct-to-consumer model as well as using mobile service as a point of sale to get directly in front of the consumer, at their home or business -- wherever it is that they connect.
So the model, in some way, has become more complex, rather than less complex. An example of a brand that was selling direct before was Motobecane. They have a long name in cycling, and there's awareness about their name. They sold direct to the consumer, and the consumer would bring the bike into the bike shop to get the work done -- really no different from Canyon, only a smaller brand. The points of distribution have changed because of mobile service entering the market. That's allowed more brands to get into this, 'Well, we're not going to use the bike shop' to reach the consumer.
McMahon: So is Canyon a threat?
Grant: Canyon today it's definitely a threat. I say that not because the brand has enough awareness in the United States today to make an instant impact -- where the volume of bicycle sales really is -- but the brand, from a logistics and investment perspective, may be in that place where it will take a few years from them to tough it out, to establish that business model and assure the consumer that the expectations are being backed on the quality of the build and the follow-up service they're going to be expecting.
Canyon does not have a lot of room for hiccups there because, I believe, their earliest customers, their earliest adopters, are going to be folks at the higher end who already have a certain expectation of what's going to be delivered to them. A bike with a discount is not going to be enough if it isn't what the customer had as an expectation in the bicycle.
Their threat, I think, is that it's so linked to so many other brands, their ability to market over those other brands, and to show something that is a unique proposition to their brand in the marketplace, and selling direct. So other than Canyon making more money off it, they really have to convince the consumer that it's the way to go. And they're not just competing against brands, like, say, Fuji, which has a pretty complete brand that you can buy through Performance or buy through a mobile service. Brands like Raleigh you can definitely buy online. But Canyon has to get into that space and create the value proposition against them, not just the existing bike stores, and that's going to be difficult to do because it's not just brands: They have to get in there against major online competitors, like Competitive Cyclist, Backcountry.com, and Performance as an online provider.
When you start going down this list of people who are capable of presenting more brands at discount, they have to figure out how to compete against them, or setting up with them. But those discounters are not usually interested in competing with a brand at the exact same price.
Take a Competitive Cyclist. They can make custom all the time. They can go buy 300 frames from somebody on a frame close-out and buy 300 sets of wheels on close-out and buy 300 groupos on a close-out, and they build their own special bikes that are unique to them. They're always value-built kits, at any price point. That's what Canyon's going to have to compete with, and they're going to have to compete with nimble companies, like Niner, which is a high-end, smaller brand. They don't work on model years (as Canyon does). They change their bikes as technology and consumers demand. It's a different world than just competing with the IBDs (independent bicycle dealers).
Now don't get me wrong, as an IBD representative, we have our concerns about this type of a model because we wonder what it's going to do to the other brands already dipping their toes in this water. The impact of Canyon, at least in the beginning, may be harder on the online service providers than actually on brick-and-mortar. It really goes down to companies like, say, Excel Sports, who sell online. You're going to find so much in that space that they're going to have to compete with. To me, that's the first space that they're in. If they're going to show value to the consumer who's already open to the idea of shopping online rather than the consumer who's really more predisposed to going into the brick-and-mortar store.
McMahon: How do you think this will ultimately affect retailers' bottom line?
Grant: Retailers are getting cut out and squeezed at both ends in these types of propositions. Canyon goes online and sells the bike cheap. What happens is, big brand X lowers their retail price of a bike on the floor, to be more competitive, but they don't lower the cost of the bike to the retailer, so the retailer gets a small margin on a business that in general puts very small margins to the bottom line.
So you take a business that is extremely margin-challenged, and you push the margin down because the other brands react to this, and it's the retailer, really, in the end where all the collateral damage is done -- at the retail level. More store fronts may be at risk because of the margins maybe getting squeezed out. It's a real concern. That's the group that gets squeezed, the dealer itself. The dealer is part of the community. They do a lot more than just sell bikes. They part of the community fabric. And that's a loss.
McMahon: Canyon sponsors two teams well represented at the Tour de France, by far cycling's biggest event. How will big sponsorships play into its US strategy?
Grant: The problem is, the enthusiast market in the category of road bikes is the smallest market. The bikes at the high end are the fastest-declining category. It's seeing huge declines and inventory gluts and lower margins. And there is no strong feeling right now that that category is going to turn around.
So some of the great marketing that Canyon does is going right at the greatest shrinking part of the marketplace, against very established brands that people have ridden are already familiar with. The challenge for Canyon -- and I know they're going to have the 'If you don't like it, send it back' guarantee -- but people wanting to get a Canyon really have to figure out, 'Do I really want to roll the dice?' So not only is that a challenge for them, but it's also not where the money is made.
The money is in the meat of the market, so they need to get in that place where people really buy bikes, and that's getting into the Raleighs of the world, where casual riders who don't know a lot about bikes and who had a Raleigh when they were young could look up a Raleigh and find one for $US600 online and already have a sense of confidence in the brand. That's where they're going to buy.
McMahon: How can Canyon succeed in this big market against the Big Two -- Trek and Specialised -- but also against all the other brands?
Grant: Canyon has to really end up competing across all the different price points and value propositions. That narrow (Tour de France) marketing will get them across to some people but won't reach the broad audience that I think they need to be really successful.
Now, one of the greatest strengths they have, in my opinion, is really in Blair Clark, the person they put in charge. I have a ton of respect for Blair, who's been successful everywhere he's ever been. I think he's a champion of the industry overall and truly believes that getting more people on bikes is sort of his mission -- not just selling more bikes to more people. I think that Canyon made a very, very smart move by bringing in a guy like that and paying attention to Canyon on his level and really paying attention to what it is that Blair Clark is thinking about doing with the brand and looking for the hints about where we might be 12 months from now.
It will be interesting what they do as they try to figure out how to get into that other (lower) price point and reach a much broad set of consumers. The margins are huge there, and that's where the money is really made, in those mid-tier categories. We're talking well under $US1,000. That's where the huge volume of the bikes is -- the five-, six-, seven-hundred dollars. And that's where the dealers used to get their hugest margins at those price points and still get good margins or better margins there.
Canyon shipped us one of its high-end road bikes for some test riding: an Aeroad CF SLX Disc 8.0. To be clear, because we got our Canyon as a test bike, we didn't go through the regular online-ordering process that consumers normally would. Still, after emailing Canyon our frame size (58 cm), the company shipped us the bike the way any customer would get it: to our doorstep and nearly fully assembled.
Canyon ships its bikes in a specially designed box called a BikeGuard. It's got a lot of feel-good aspirational branding written all over it.
We wondered how much assembly would actually be required. Could we handle it without having to go to a bike shop? In the owner's manual, under the section titled 'Assembly from the BikeGuard,' it says:
'Assembling the bike from the BikeGuard is no witchcraft, but you should proceed with care and deliberation. Unprofessional assembly can render the bike unsafe.' That's important, so we were careful to read the manual before doing any assembly.
Upon taking our Canyon out of the box, we inspected the bike for defects and to see whether the bike or wheels were damaged during shipping. Everything looked good. The bike arrived nearly fully assembled, as pictured, with the rear wheel mounted and the drivetrain dialed and ready to ride. All we had to do was attach the seat post and saddle, the handlebar-stem combination, and the front wheel (and of course our own pedals and water-bottle cages).
In addition to the bike, our shipment included an owner's manual (a book with a CD/PDFs), a torque wrench, a battery charger for the electronic-shifting system, and a thru-axle for the front wheel.
Around the bike were pads secured with Velcro straps to keep everything in place and protected during shipping. These remove easily and should be saved for future shipping.
Canyons have Allen bolts that need to be tightened to a specific torque value, known as a Newton meter, or Nm. This helps ensure that the parts are fixed securely to the bicycle. Canyon includes its own torque wrench (pictured) for doing this, with five different-size bits.
We started assembly by coating the bolts and clamping areas with a thin layer of the assembly paste, a packet of which comes in the welcome kit. Here, we applied paste to the fork steerer tube before sliding on the handlebar-stem combination.
After sliding the handlebar-stem combination (a one-piece design) onto the fork steerer tube, we made sure it was aligned with the front wheel before tightening the bolts to the marked tightening torque as instructed in the manual. We used the torque wrench without issue.
Our bike was equipped with disc brakes. Once we lined up the front disc-brake rotor, we slid it into the brake caliper. Then we made sure the wheel was sitting secure in the fork and inserted the thru-axle, tightened it, and locked it closed.
After applying assembly paste to the bottom of the seat post, we slid it into the frame to our desired height. Then we inserted the seat-post clamp, a small tightening mechanism (pictured).
Using the torque wrench, we inserted the matching bit into the Allen bolt and turned the wrench until the pointer lined up with the marked tightening torque on the orange gauge. In this case it was 'Max 5 Nm.'
Less than 30 minutes after opening up the box we had our Canyon assembled. All we had to do was put on our pedals and bottle cages.
The Canyon Aeroad CF SLX Disc 8.0 came well specced with excellent Shimano's 11-speed electronic Ultegra Di2 component group, hydraulic disc brakes, deep-section carbon Reynolds Strike wheels, and Continental Grand Prix 4000 tires.
Canyon claims the Aeroad CF SLX Disc 8.0 in size 'medium' weighs 7.8 kilograms (17.2 pounds); we rode a bigger bike, 58 cm, a tad heavier.
We found the assembly on our end to be simple and quick, but we did take the time to read the manual first, to be sure we were thorough and not missing important specifics about this (partial) bike build.
Our Aeroad came with the tires inflated -- we just pumped them up more to our desired PSI (110 front, 120 rear). The Di2 battery was nearly fully charged upon arrival, which was nice as it meant we could get the door for a ride right away. The drivetrain was already fully adjusted, and we ran through the 22 gears smoothly.
This bike is not yet available in the US, so pricing is TBD, but we expect it to sell for about $US4,200. (On the UK site, for instance, the same bike with a slightly different build sells for 3,400 euros, or $US4,000.)
After installing our pedals and bottle cages, and doing a final safety check to make sure everything was bolted down securely, we headed out for our first ride. Impressively, the bike rode perfectly with no adjustments needed.
Red is not a colour we normally like for road bikes, but somehow it worked for us on this bike. We couldn't decide whether to call it the Ferrari of road bikes or the BMW of road bikes. Perhaps it's a bit of both. Either way, it's a beautiful bicycle that got a lot of oohs and aahs from cyclists and noncyclists alike.
The one-piece aero handlebar-stem combination is designed to help reduce drag at the most important place: the front of the bike. And note that the bar comes taped (as pictured), so the position of the brake hoods is set on arrival. If you prefer them lower or higher, you'll have to remove the tape, reposition the brake hoods, and then retape the bar (the default position worked for us just fine). If you use a bike computer, Canyon sells a mount for these bars.
Since you can't adjust the stem itself, the bike comes with several spacers. If you want to lower the handlebar-stem combination, remove the spacers until you find your desired height. If you desire a more aggressive, aero position, you can go as low as the top of the head tube and then cut off the extra steerer tube.
This is a UCI-approved frame, so it can be raced at the sport's highest level, in case you make it to the Tour.
People who prefer disc brakes over rim brakes say they brake more powerfully and brake more smoothly, especially in wet conditions. Those who prefer rim brakes say discs are too heavy (they do add about a pound to a bike) and are just not necessary on road bikes. We liked them, and they performed superbly, providing smooth, powerful braking, most notably on fast, technical descents. Eventually, all (or most) higher-end road bikes will come equipped with disc brakes, so say many in the industry.
The first thing we noticed about these wheels was how fast they felt. They Strikes have a 62 mm rim profile, are fairly light (727 grams up front, 888 in back), and are very aero. They're built for straight-ahead speed. As predicted, the deep-section hoops did not make for great wheels in strong crosswinds. On blustery days, handling became distracting, and on really windy rides the wheels will challenge even heavier riders. But in our experience that goes for most deep-section wheels.
As for the Continental Grand Prix 4000s, they're among the best tires on the market, and they're the best all-around tire we've ridden recently. They felt grippy but fast, with low rolling resistance, though we didn't get to try them in the wet. After about 500 miles, we did get two punctures, one pinch flat and one puncture from a tiny piece of glass. Our Canyon had a 23 mm tire up front and a 25 in back, making for a nice balance between aerodynamics and comfort and traction.
Sidenote: This wheel-tire combination challenged us when taking the tires off and putting them back on. Some tire brands and wheel-tire combinations are notoriously stubborn, and we've added this combo to the list. To get the tires on, we made sure the bead sat in the deepest section of the inner rim and used a tire iron as we worked to roll the tires on. In one instance we used dishwashing liquid to help seat the tire.
We've ridden the Aeroad CF SLX Disc 8.0 about 500 miles so far. It's a high-performance bike for serious and competitive cyclists. Triathletes might want to check it out too. Everything about the Aeroad made us want to pedal fast, from the sleek frame design and deep-section carbon wheels to the aero cockpit and disc brakes. It's thrilling to ride, as I imagine an F1 car would be to drive, and I felt as if I was going a mile or two an hour faster just because of the bike, and probably I was. The handling, aerodynamics, and power transfer are among the best we've experienced. The bike got more oohs and aahs than any other bike I've ridden.
We didn't have the opportunity to ride this bike in the mountains, but on smaller climbs we sprinted up the bike went fast. It always felt stiff, responsive, lively. This is, after all, a true performance bike. To many, it will feel like a rocket.
The longest ride we've managed on the Aeroad was four hours, and it still felt comfortable. We've ridden aero bikes we couldn't wait to get off of after two hours because they were so rigid; the Aeroad is not one of them. What it is, though, is a crit bike, a road-race bike, or a bike for any roadie who wants to go as fast as possible. For those not into racing or fast group rides, it would make easy work of a gran fondo or century.
It has a lot to do with all the fine engineering that's gone into the frame and fork. The frame starts off aero in front, and things stay slippery-shaped all the way through the compact rear triangle, which has small angles for increased stiffness. The engineering comes through as the bike tracks like a laser, most appreciated on fast, technical descents and in corners. As with any carbon aero road machine, it's not the most comfortable on bumpy roads. The bike, though relatively compliant, does thrive on the smooth roads.
The Aeroad has no flaws. And at $US4,200 it's more than attractive, especially with Ultegra Di2 and disc brakes.
It is hard to find a not-great bike at the high-end level today, no matter the brand. The Canyon Aeroad is one of the smoothest, nicest-handling, and fastest aero bikes we've ridden. And at just over $US4,000, it's one of the best deals in high-end bikes we know of.
As with others we've spoken with, we'll be interested to see how Canyon as a company fares over its first year of operation here in the US. Some say it will ultimately have to sell a lot more inexpensive bikes -- those under $US1,000 -- versus the higher-end race bikes if it's to succeed in the land of Trek and Specialised but also Giant and Cannondale and the dozens of other quality brands.
But if the 30% discount proves true -- or even 20% -- and consumers at home can get their bikes out of the box and onto the road without too much hassle, Canyon could challenge even the biggest bike makers and truly disrupt the market.
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