Bloomberg Businessweek (North America)
Middle-of-the-road bike maker Giant joins the Tour de France club
▶ Taiwan’s Giant has squeezed its way into the Tour de France set ▶ For cognoscenti, “truly cutting edge design and technology”
Among professional riders and cycling magazine reviewers, the Propel isn’t just a high-performance racing bicycle—it’s an engineering marvel. The bike, which retails in the U. S. for $2,200 to $9,000 depending on the features selected, has a carbon-fiber frame so light you can lift it with one hand. It’s so fast it promises to shave 12 seconds to 36 seconds off a race time. German rider John Degenkolb used it for his final sprint in this year’s Tour de France.
But the Propel, named Cycling Plus magazine’s bike of the year this year and last, isn’t the handiwork of prestige Italian or North American brands such as Cannondale, Colnago, Pinarello, or Cervélo. It’s made by Taiwan’s Giant Manufacturing, the world’s biggest bike maker and one until recently better known as a contract manufacturer for Trek, Scott, and other popularly priced rides. “Giant may lack the cachet of historic Italian or American innovators like Cannondale, but for those in the know, the Giant brand represents truly cutting- edge design and technology,” says Warren Rossiter, senior technical editor for road at the U.K.based magazine group that publishes Cycling Plus and Bikeradar.
Giant is taking advantage of the mounting accolades for its newer, higher- end bikes to position itself among the prestige brands in the industry. During this year’s Tour de France, it ran 65 television commercials on NBC—A first for the brand. It’s also planning to expand the number of U.S. shops where its bikes are a majority of the inventory, from the current 125 partner shops to 155 by the end of 2016. That’s in addition to the almost 1,000 American stores that carry Giant bikes along with other models. Its U. S. unit in September began rolling out its bikefitting system, which allows riders to customize their bike just as they would a tailored suit. The company is initially putting the fitting system in 10 stores in bike- savvy locales, such as California’s Santa Monica beach, and plans to sell the system in as many as 250 stores within five years, according to John Thompson, Giant USA’S general manager.
Tony Lo Hsiang-an, Giant’s chief executive officer, says that while Giant is “not as sexy as some of the brands,” the company’s innovations will change that more than any marketing campaign can. Giant, for instance, has put brakes behind the wheel forks to decrease drag and strengthened the handlebar post to reduce wobbliness at high speeds. In addition to
five frame sizes to fit different riders’ heights, the bike maker is offering its fitting system to casual riders who buy aluminum-frame bikes that cost as little as $330.
While other brands offer customization systems, Thompson says, Giant’s $5,000 fitting system apparatus costs bike retailers considerably less than rivals’. “Strategywise, we have no intention to become just a very fancy brand,” Lo says. “Our root is still technology and quality. Everything we do, we must have very good reasons why we do that. I think some brands, they are more marketing, more talk, but I believe ours should be real.”
The message seems to be working: Sales in the U. S., where Giant is thirdlargest behind Trek and Specialized among specialty bike retailers, rose 13.8 percent in the first half of 2015 from a year earlier, according to Giant, while the industry’s growth was flat. They’re also up almost 7 percent in Europe for that period, despite the drop in the value of the euro. The company’s sales are falling only in China, its biggest market, where the slowing economy led to an 8.5 percent decline in the first half.
At its high-tech factory in Taichung, on Taiwan’s western coast, which can make more than 2,000 models and turn out 5,000 bikes a day, frames for Scott and Trek bikes can be seen coming off the same assembly line that produces Giant-branded cycles. Giant is an original equipment manufacturer, or OEM, that makes products for those brands and others such as Colnago. That doesn’t mean the bikes are the same. The individual brands provide designs, specs, and some parts; Giant provides the manufacturing and workers.
Manufacturing for others “helps us understand the overall market situation,” says Chairman “King” Liu Chinpiao, who founded Giant in 1972. “It helps our management do planning and not make silly mistakes.” A robust 81-year- old, he bikes to or from the office every day, a two-and-a-half-hour ride—though nowadays he’s followed by a car after having had an accident last year.
Women are a new market for Giant. It sells racing bikes, branded as Liv, designed for women’s bodies, rather than producing smaller frames painted pink or lowering the crossbar as some other brands have done. In the U. S., Giant has 80 Liv ambassadors—women who lead local bike tours and host events— and there are dedicated Liv stores in Dubai, Shanghai, and Taiwan. “You cannot take a men’s bike and make it smaller,” Lo says. “That’s wrong. So we are doing it from zero.”
“I think Giant is the best-positioned right now of any company in the global bicycle business, because of the combination of the OEM business and its brand positioning,” says Jay Townley, a partner at Gluskin Townley Group, a U.S. consulting firm that researches the bicycle market for clients such as the National Bicycle Dealers Association. “They are able to take a look at the market and think about the best mix, the best way in which they will be able to control the market.”
Now Giant needs its brand image among consumers to match its quality, Rossiter says. That could be a challenge, since “Made in Taiwan” is a phrase filled with echoes of a less technological past. “Perhaps the perception is that the brand doesn’t have the soul or heritage of the old European marques and that they don’t shout as loudly as American or German brands when it comes to technical innovation,” he says. “If anything, I believe it may be a cultural issue, that they don’t promote their strengths as well as other brands.” Lo, however, wants his bikes to do the talking. �Sheridan Prasso and Cindy Wang
An employee assembles spokes to a wheel frame at Giant's bike plant in Taichung, Taiwan “Everything we do, we must have very good reasons why we do that. I think some brands, they are more marketing, more talk, but I believe ours should be real.”
—— CEO Tony Lo The bottom line Taiwanese bike maker Giant's U.S. sales grew 13.8 percent in the first half of 2015, as it pushed higher-end products.