Terrie's Take 957 (Tourism Edition) - Why Taiwanese Bicycle Maker Giant is Cleaning Up in the Japanese Market

Terrie's Take terrie at mailman.japaninc.com
Sun Aug 12 23:26:24 JST 2018

* * * * * * * * TERRIE'S (TOURISM) TAKE - BY TERRIE LLOYD * * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie 
Lloyd, a long-term technology and media entrepreneur living in Japan.

Tourism Sector Edition Sunday, Aug 12, 2018, Issue No. 957

SUBSCRIBE to, UNSUBSCRIBE from Terrie's Take at: 

+++ Why Taiwanese Bicycle Maker Giant is Cleaning Up in the Japanese Market

I've always found it strange that in a country which has fought for 
global market share in almost every manufactured product segment, Japan 
has happily ceded its market presence in the bicycle business to other 
Asian economies, most notably Taiwan and China. This is not to say that 
Japan has no bicycle manufacturers, but those that have survived are 
either trying to become "two-wheeled electric car" makers or are simply 
focusing on bike parts (e.g, Shimano and their bicycle groupsets).

In 2017, the top three exporters of bicycles in the world were: China, 
with sales of US$3.1bn (35.2% market share), Taiwan with US$1.3bn 
(15.1%), and the Netherlands with US$807.6m (9%). Japan was number 22, 
with sales of just US$45.4m, giving it a meager 0.5% global market 
share. Compared to the completed-bicycle manufacturing sector, though, 
Shimano is a noteworthy exception. Their 2017 net sales of gear shifting 
and other bicycle mechanisms, most of which were exports, was US$2.4bn - 
not a bad effort for a parts company.

The completed-bicycle sector's puny standing wasn't always so and in 
fact in the late 1800's, Japan was already proving its manufacturing 
prowess overseas. A Chicago Tribune 1895 article stated, "Japan seems to 
be the ideal land in which to purchase bicycles - good wheels are sold 
over there, and at wholesale at $12 each." This at a time when U.S. 
bicycles cost around $50.

Unfortunately those early Japanese manufacturers never made it to the 
USA or other markets, mainly because at the turn of the 19th century the 
domestic market was rapidly industrializing and families could afford to 
buy durable products. Bicycle usage thus boomed in the domestic market, 
and of course they were made to fit the population. The first few 
attempts at export found very few takers other than children, because 
the bike frames were simply too small. Later, after the War and 
automobile manufacturing had caught on, bicycles became considered a 
poor person's vehicle - meaning that most of the local manufacturers 
lost interest in making them. Today only Panasonic, Yamaha, and 
Bridgestone have any real presence in the market, and most of their 
output revolves around high-end electric bikes.

So you'd think that the bicycle business is dead in Japan, but not so. 
Instead of the local players making good here, it has taken a Taiwanese 
firm, the world's largest bicycle manufacturer, Giant, to show the 
locals how to revitalize the market. And the way they are doing it is 
really interesting.

[Continued below...]

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[...Article continues]

Whereas over the 50 years since WWII the bicycle sector has been driven 
by children and teens (and the families buying for them), in the last 20 
years, the growth has come from adult health and fitness, and more 
recently from adventure seekers. The health and fitness aspect has been 
the engine for the exponential growth of road bikes, and can be easily 
traced to baby boomers who have become commercially successful and who 
have wanted to recapture some of the experiences of their youth. This 
has been a fortuitous trend for Shimano, the parts maker, which 
specializes in supplying high-end road bike manufacturers. It has also 
been the main growth engine for Giant in Taiwan.

With the advent of carbon bikes and lightweight aluminum frames, 
technology and performance as consumer considerations have also come to 
the fore, and this has stimulated an even newer segment in the market, 
which comprises young (mostly guy) riders looking for mountain and trail 
bikes to use on rugged, risky downhill courses. In between these two 
extremes (of road and trail), you have several other categories of 
bicycles known as cross bikes and gravel bikes. And then of course there 
are electrics for those baby boomers who "boomed" a bit too much.

These segments have created hundreds of thousands of financially 
well-off adult consumers wanting not only high-end bicycles but also 
high-end experiences to go with them. Giant has intelligently plugged 
into this segment's psyche, introducing new hybrid bikes every year (to 
get the upgrade cycle going) and creating tours and support in iconic 
locations around the world where their customers can enjoy their own 
personal adventures. As you would expect, Giant has placed its first 
bets locally in Taiwan, but thereafter it has focused on Japan, where it 
now has 33 stores - more than Y's Road, the largest Japanese road bike 
specialty chain.

And not just stores. If you review where the company is placing their 
outlets, they are mostly focused outside the major urban centers (with 
the exception of Tokyo) and instead are situated along popular riding 
courses around the country. For example, there are two stores at either 
end of Japan's No. 1 cycling route, the Shimanami Kaido, and another 
store in the middle of nowhere to service riders circumnavigating Lake 
Biwa in Shiga (just northeast of Kyoto). Actually, I've been to that 
store to help a friend fix a broken shifter cable during a 550km tour we 
did in March this year - it's very well stocked and with a knowledgeable 
mechanic. There is even a Giant store in Nogata, Kyushu, a 
"least-famous" mining town in Fukuoka-ken that has one redeeming factor 
- it connects riders to Fukuoka.

[Continued below...]

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[...Article continues]

There are of course no official numbers as to how many people take 
Giant's Japan tours or do their own trips on Giant bicycles, but I was 
told several months ago that the company was responsible directly and 
indirectly for more than 10,000 foreign tourist-cyclists riding in 
Japan, in particular the Shimanami Kaido route between Shikoku and 
Honshu. If this number is true, it makes Giant the LARGEST cycling tours 
operator in Japan by a factor of 10, which is pretty impressive.

When I think about Giant's ability to read and develop Japan as an 
adventure destination, I feel both excitement and frustration. 
Excitement because with its amazing network of paved roads and an aging 
society reducing the number of drivers, Japan has huge potential to 
become an international cycling mecca (with convenience stores every 
10~20km for water and snacks). Frustration because this is a sector that 
Japanese firms should be leading the way in - if only they could get 
their noses out of their manufacturing boxes and think about what makes 
consumers buy their products.

Indeed, tourists are the ideal target for these manufacturers to 
lend/hire their products out to, as Giant does with its national bicycle 
rental business, because if a customer uses your product and falls in 
love with it, chances are they'll to on to buy one to take home with 
them. Duh...?!!! I tried several years ago to point out this logic to 
the nation's top camera manufacturers, visiting them one by one. To a 
company they told me to "get lost". They make products not running an 
activities business, so why should they be interested in renting them out?

Yeah, and so foreign companies like Giant have excellent prospects in 
Japan, both because of the huge number of tourists looking for new 
adventures, and because their competitors are too blinkered to make the 
marketing-sales connection. Also, because of the historical factors in 
any case there is no domestic cycling industry to protect, so there are 
very few rules to hobble creativity.


Lastly, we are taking off next week for the annual Obon Holiday (which 
starts tomorrow). We will be back with our next Take on August 26th.

...The information janitors/


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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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