John Neugent Interview:
When It Comes to Bicycles,
He's Been Everywhere
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I honestly believe no one knows more about bicycles and the bicycle trade than John Neugent. Throughout my own career in the bicycle business, our paths kept crossing. More than once he pulled my bacon out of the fire by giving me crucial advice and help when I needed it most.
He has done it all: retail, sales rep, wholesale management, import and mail order. While researching my current book project on the bicycle industry, I turned to him (as usual) to see what he knew. He kindly let me transcribe and post our talk. As you read it, you'll see how the bicycle business has changed over the last forty years.
John now owns Neugent Cycling, a firm devoted to delivering world-class equipment at the lowest possible price. If you are in the market for a set of wheels, please, check out John's site. He really knows his stuff. — Chairman Bill
Here's the interview from February, 2017:
Bill McGann: You are work at your computer now, receiving orders over the internet for product made 8,000 miles away. Could you, even in your wildest imagination, when you started working in bike shops in the early 1970s, have thought this could even be a remotely possible outcome?
John Neugent: Of course not! It still astounds me today. And now, in the past couple of days I have received items I've ordered, both costing less than fifteen dollars, shipped directly to me from offshore. I don't really think people are aware of the implications of this.
BM: You just rang a bell for me. My father wanted to get some World War Two veteran license plate frames. He ordered them on the internet and they came quickly, with a Chinese return address. They had been mailed from China, and yet the price, including shipping, was quite modest.
JN: From China, really?
BM: Not Taiwan, China.
JN: I badly needed some specific skewers to take care of a customer. I found them on Amazon Prime, ordered them for ten bucks a set and they came, right from China.
BM: And the shipping wasn't horrendous, was it?
JN: Heck, five bucks. UPS, US Mail, FedEx and EMS, the Chinese equivalent, now makes that a non-issue. International transport costs for small shipments used to be a big deal. It's a non-issue now. Bicycle Retailer just told about the retirement of Giant Bicycle Company's original bosses King Liu and Tony Lo's retirement and new people coming in, with the company's premise being the necessity of the company having an on-line presence.
And there's nothing preventing Giant, the world's largest manufacturer of prime, top-end bicycles going consumer direct. There's nothing preventing that, whatsoever.
BM: What you are saying is that the American market needs only one major player, such as the pre-announced intentions of European bike seller Canyon, to go consumer-direct, and then bike shops get pushed back to 1925 when they were primarily service shops.
JN: What I see is Giant not changing its distribution channel. They can buy a popular, well-known brand, and use that to sell bikes they make consumer direct. They can add to their existing bike-shop sales. Of course, I don't know, this is all speculation. But we can see where things are heading….
BM: Before we head off somewhere else, here's what I'd like to do. Let's just look at your career chronologically. When did you first become a bicycle professional? Was it like most of us, in a bike shop?
JN: Yes, I started in 1973. Long story short, I had a leather business and then a childhood friend opened up a bike shop because he wanted to buy a bike and ten of his friends wanted to do the same. So they decided to buy them wholesale from Fuji. So they did and he opened up a bike shop. He shared the retail space with me. I closed the leather store and we became partners.
BM: Where was this?
JN: Willimantic, Connecticut. Not a high-end area, middle-class really. And that's how it all got going. And then after the crash of the bike boom in 1974 I said, "This business is good enough for one of us, but not both of us." And so I left and became a sales representative for Service Cycle, a wholesale distributor.
BM: It's funny, we both entered the bicycle business just as the boom was ending, perfect timing. I opened my bike shop in June, 1974. Six months later one of the two other shops in town had a bankruptcy sale. We were somewhat parallel, but you moved on to wholesale with Service Cycle.
What did you do when you joined Service Cycle in what sounds like 1975 and 1976?
JN: Yes, '75 or '76. I covered Eastern New England as a sales rep. It was a job I loved because I didn't have to work on Saturdays. To me, it was easy. A bike shop is work. And then In 1982 Service Cycle was looking for a product manager. They realized that they didn't really know what they were doing in terms of product. At the time there were two divisions. One was the bike division and was one for mass-market. They first entered the mass-market with Cycle Products and that was the big money-maker for them. And yet they felt they had to keep their specialty bike store business alive.
Service Cycle was the first bike distributor to enter the mass market. My boss at the time was the first to go to mass-market businesses and pitch them bike parts.
BM: Who was that?
JN: The guy's name was Morty Gold. Nice guy. Most of the mass-market bike business started on the East Coast about that time, mid-1970s.
BM: You are talking about parts and accessories for these giant retailers? Because Firestone and department stores had been selling bikes all along. In fact Firestone sold Schwinn for decades.
JN: Yes, it was Service Cycle that added accessories to their existing bike sales.
BM: So in 1982 you became the product manager for the specialty shop side of Service Cycle?
JN: Yes, I had to move to Long Island to do the job. And the first trip I took to Asia was in 1982, to Taiwan, Japan, Korea, Hong Kong. And then I went to Germany for the IFMA Cologne international bike show.
BM: That was before Eurobike had forced all the show organizer's show go yearly. Back then the Cologne show for the big companies was in even-numbered years in September and the Milan show was held in November in odd-numbered years. We would have run into each other if we had any idea that either of us even existed.
JN: Yes, I went to all of the Cologne and Milan shows. And that was back when, as you know, Europe was still a major supplier. Outside of Japan, Asia, as far as the specialty business was concerned, was a non-entity.
BM: At that time Shimano was already a muscular, capable company.
JN: Some time during my second or third trip to Japan was right after the 1985 dollar devaluation. That was the big thing. The exchange rate went from 250 yen to 150 yen to the Dollar in almost a single day.
BM: Which pulled the rug out from under SunTour?
JN: It pulled the rug out from Nishiki…Everyone went for Japan to Taiwan in the period of just a year. Shimano at that point was introducing SARA, Shimano Automated Robotic Assembly. I visited their factory in Japan then, which they wouldn't let me film.
At that point SunTour was still pretty strong…
BM: But at that point, when you first started going to Asia, Shimano was just two years away from SIS [indexed shifting]. Shimano introduced indexed shifting in late 1984.
JN: And Shimano jumped into mountain bikes and made a wide range of parts for them.
BM: And the Euros didn't make mountain-specific components. The only Euro parts early mountain bikes used were French T.A. Cyclotouriste triple cranksets and the Asians figured out rather quickly how to make triples for mountain bikes. And they could make a better one for a lot less money than that foldable T.A. crankset.
JN: I remember about that time, mid 1980s, Chris Chance, of Fat Chance Bikes, was a friend of mine. He was a customer of mine, at the bike shop, before he ever started building bikes.
Around the late-'80s Campagnolo came to him with their first mountain bike group [the Euclid MTB group was introduced for sale in 1988], which was a total disaster, by the way. They asked him to put them on his bikes for the Milan show. Campagnolo never did well in this area and they failed miserably with those 1980s MTB groups.
BM: It seems that whenever Campagnolo went away from its core racing product, it did poorly. And that seemed to be true whether it was that Gran Turismo hunk of Detroit iron rear derailleur or the later Rally, a decent enough wide-range derailleur, which they worked very hard to get makers to put on their mountain bikes. But Shimano had better and less expensive equipment to compete against it. Whenever they departed from their core competency, they got their heads handed to them. Whereas Shimano was spreading in every direction, and doing almost all of it well.
The Gran Turismo rear derailleur
After the war, the Japanese ministry of trade and industry wanted Japanese manufacturers to have ten percent of their employees be engineers. And Shimano was at ten-twelve percent engineers. And the result was their stuff worked.
So, you're going over to Asia in the mid-1980s, but despite the Dollar devaluation, Japan is producing bikes and equipment that simply works and works well.
JN: In 1982, I think Japan was still at about 250 Yen to the Dollar. And their product was "it". We were buying bikes there, as were Nishiki and Centurion and a host of others.
BM: So you were going over to Taiwan as well in '82. I think that at that point KHS was the only truly competent bike maker?
JN: I was not aware of KHS in 1982. We were buying from Merida, and at that time they were producing rather low-end stuff. They tried to make it look Japanese, but it was nowhere near Japanese quality. KHS really came on a few years later as a truly strong bike maker. They were the first in Taiwan at the high end. And then over the next few years lost their primacy to Merida and Giant.
BM: So when you went there in 1982 Merida's factory was far from being modern, immaculate and robotized?
JN: No, they were still really small and very basic. And most of what we bought from them was for the mass-market. Back then I would buy things in Taiwan like derailleur cables and locks. Really simple, core stuff. You couldn't buy anything above that in Taiwan for the dealer market. That was still a ways away.
It didn't take long. After the Dollar devalued against the Yen, everyone went to Taiwan and the money poured in. And the buyers said, "We want to buy high-end stuff."
BM: You once told me that Giant almost went bankrupt. Interestingly, there is absolutely no mention of this on the internet. I am sure no one writing today was aware of it. What is your gut feeling of when Giant was on the ropes?
JN: When I started working for Sachs, we hired a technical specialist, Ted Yang, who went on to found his own the factory. I've bought wheels, from him, in fact. His factory was very close to Giant. He told me many times that Giant was just about ready to go bankrupt when Schwinn came in and started buying Airdyne exercycles. And that really saved their butt.
And at that point, Giant was off the map. No one knew about Giant. No one cared about Giant.
BM: Schwinn had already been sourcing bikes from Giant. So when Schwinn added 70,000 Airdynes in about 1986, that must have been a huge hit of cash for Giant.
JN: And Airdynes were expensive, 550 or 600 1986 Dollars. I have one, in fact.
A current Schwinn Airdyne
BM: So how long did you work for Service Cycle as a product manager?
JN: 1982 to about 1989. And then I got fired. Service Cycle was really classy about it. They let me stay with them until I found another job. And that job was as the head of Sachs USA, which was nothing at the time.
BM: Did Sachs USA even exist when you came on board?
JN: Yes and no. Neal Todrys' father Fred, who owned Todson [Neal is currently bicycle component distributor Todson's principal] was running Sachs in the US. The Sachs people in Germany wanted Sachs to be a separate company from Todson, which Fred did not want to do.
BM: So Sachs was a part of Todson then?
JN: Not really. Fred was running it as a separate company. I ended up talking to Neal, asking him if he wanted to hire me, since we were just twenty miles away. He said you should run Sachs.
I said Sachs is nothing. Why would I want to do that? Neal said it will pay a lot of money. I said, OK! It was about $90,000 in 1986!
BM: Double that to get your pay in 2017 Dollars.
JN: So I interviewed with Gerard Huret. Who was the boss in Europe at that point, and I got the job. They told me I had to move to California. And I said, "OK".
BM: For the equivalent of $200,000 you could find a way to live in California?
JN: I made the move and got to know all the French component executives, Philippe Maillard (his daughter stayed at my house for six months), Gerard Huret and his brother Alain. And also the Modolos. It was a pleasure, back then there was still some real European production. In the late 1980s, the Euros had still not really found out about Asia. They were late to the game.
Although, interestingly enough, in the late 1990s, I was buying from Ted Yang, who made a lot of the cassette bodies for Mavic. And European internet retailer Canyon was there, buying from Yang at that point. Canyon was buying in Taiwan twenty years ago. They preceded many of the European merchants and manufacturers in Taiwan.
BM: Canyon was one step ahead of everyone else in Europe?
JN: They were. Whoever was leading Canyon's buying department was pretty sharp.BM: So you moved out to California and set up the warehouse and office. I think we [Torelli] signed up with you almost immediately. I think we had already been doing some Sachs stuff.
JN: You know, the first meeting we had was a little contentious.
BM: Was it? Me? Contentious?!?
JN: You had a number of concerns, all of which were legitimate. And I'm pretty sure you were already dealing with the Todrys' Sachs company. You brought up a number of important and reasonable concerns and I, being the representative of Sachs, said we will deal with them. Which is fair.
BM: Since this would have been 1989, we had hit our stride. Paulo Guerciotti was our Italian trading agent, we were importing Mondonico and Faggin frames. We were even bringing in some Zeus components. That shows you how completely devoid of sense I am when it comes to these shiny, pretty bike parts.
JN: Zeus was definitely out there…But before I met you I knew about you and thought I would have liked to do something like you were doing.
BM: Before we got to that point, we had wandered in the wilderness for several years. When we started Torelli, I stocked more of what I liked than what my customers wanted. Because of the bike shop, I had the luxury of being dumb.
Examples: I imported Galli components and Everest chains. It took me years to sober up and learn how to run a proper import company.
After our meeting, I think we went whole-hog for Sachs. I even equipped my personal bikes with Sachs groups. In fact, my mountain bike still has Sachs Neos and New Success parts on it.
JN: Yes, and you were, by far, our best customer for derailleurs. And you got behind it and pitched it. No one else did.
I remember talking Felix Magowan [of VeloNews] into visiting the factories in France such as the one that made Huret derailleurs, actually Sachs at that point. He came back and said those guys don't know what they are doing. And he was absolutely right.
That was an inspiration for me, to hear Felix tell me that. It really put a fire under me to try to change Europe. But good luck with that one.
BM: But it seems the major problem confronting Sachs was that Shimano was a single company with a completely integrated system of components, designed from the ground up to work with each other. All the components came from one factory, one set of engineers.
You had Maillard, Huret and the others and you had to try to get them to work together as well as the single-sourced Shimano products.
Sach New Success rear derailleur
JN: The issue really wasn't so much that. It was a European political issue. Sachs had been hugely successful with its internal gear hubs. Sachs in Germany was comparable to Schwinn in the United States at its high point. That's how strong they were.
And so at this point they were looking at this derailleur division, remember they were an internal hub gear company. And now they had bought out Huret, Modolo and Maillard.
Sachs brake calipers made in the Modolo factory
BM: Did they buy Serena and Domenico Modolo's brake company?
JN: Yes. And when Sachs bought Modolo there was a huge problem. They had defective stems.
BM: I remember. They were light and beautiful and they were breaking.
JN: It was huge. Rick Canter at Security Bicycles called me up and said, "If you are going to do Modolo, you have to get rid of these defective stems." I found out that, indeed, they were breaking and we did a recall.
BM: I remember, an official CPSC recall.
JN: We did it, and it cost us a huge amount of money, something like $200,000. Modolo said they knew there was a problem, but they were not going to do anything about it. It was a huge internal company problem because at that time, we owned Modolo.
I remember back then going to Taiwan and seeing them X-ray every stem. But in Italy, I saw nothing of that sort of quality control. I asked, "Don't you check these out after they are forged?"
They said they didn't need to do that.
BM: So, Sachs bought these diverse companies in the late '80s and early '90s and tried to integrate them?
JN: Yes they did. But they went through four bosses in five years. The man who was responsible for buying Modolo was canned fairly quickly. Modolo offered Italian style. Their products looked great and were, simply, cool.
BM: And there was some serious thought going on at Modolo. They invented the anatomic bar [flat section on the drops for better hand-fit].
So, how long were you at Sachs?
JN: 1989 to '97. What happened is rather interesting. Sachs, on the whole, was profitable. But the derailleur division was always losing a ton of money. In the mid-'90s Scott Montgomery from Cannondale called me up and said, "You've got to sponsor the Cannondale team." Meaning their mountain bike team. Cannondale had a big mountain bike team.
I said, "Scott, I don't have money to do that." But I contacted Germany. At that time Cannondale was really big in Germany and in a lot of Europe. And I was told, "OK, we'll pay for that."
And as a result, Cannondale used some of our components on their bikes; derailleurs and shifters on their pro team bikes. And that got Sachs off the ground. That was it. That should be about 1995.
And as a result, all of a sudden the derailleur division started breaking even and even making money, which it had never done before. And now Mannesmann, which owned Sachs and had always wanted to get rid of Sachs because it was a small company. It was only a 200 million dollar company and they didn't want anything that small.
And as soon as the bike and derailleur division were breaking even, Mannesmann said, let's get rid of it. And they sold it to SRAM.
BM: Finally free of this little irritation?
JN: To show you how badly Mannesmann wanted out, they sold this 200-million dollar company for ten million dollars.
BM: They just wanted it gone.
JN: They did want it gone. There are a lot of social costs in Germany, with the unions and all. And they knew the SRAM principals were capitalized well enough to take on this burden. I think highly of the SRAM people, even though they cost me my job.
BM: SRAM shut down Sachs USA because it was redundant, they had SRAM?
JN: They didn't need me. They did a good job integrating Sachs into their company and I still look up to them as a high-class outfit. This was in 1997.
BM: And so again, you are out on the street with a tin cup?
JN: Exactly. After that I went to work for Lee Iacocca for a year and his electric bike project. And then after that I spent a year with saddle maker Trico. And then I started my own company.
When I started, I wanted to develop parts for other companies. In that spirit I went out to see Schwinn to pitch my services. This was after the bankruptcy and it was now being run by the son of the Mongoose BMX bike company founder Skip Hess. But it was John Bradley I talked to there. He had worked for Trek before coming to Schwinn. He realized the Bontrager Wheel business was a big deal, and he said to me, "You should start up high-end wheel production in Taiwan."
So I said, "That's a good idea." So the factory I had known in Taiwan was making hubs. So all I had to do was go over there and start assembling wheels. Well, it was more than that. Before the Taipei bike show I talked to John Bradley was working for Schwinn/GT, which was a big deal. He said we're working with Velomax, Brad Hunter, to do OEM wheels for Schwinn.
So it was John, Brad and me along with wheel guru Ric Hjertberg that traveled to the Taiwan. The four of us started teaching the Taiwanese how to build wheels.
BM: So you are in Taiwan setting up your wheel business in what year?
JN: 2000. I spent a year and a half setting up the Schwinn wheel program when they went bankrupt. The company was sold to Pacific. So all the work just went up in smoke.
BM: But you ended up with all that knowledge and all those contacts?
JN: Exactly. So I'm on the street.
JN: Yes. But at this point there was a guy with an internet business in Florida who contacted me and he bought a half-container of wheels from me. And he sold them all in just two months. I had just a very basic web site, but I realized that there was something going on here, a big shift in business. So that when I started my Neuvation company. For the first time I imported wheels for my own stock. Up until then I had set things up for other companies to bring in stock for their own use.
I ran a little ad in VeloNews, a little tiny bar on the right-hand side for about a thousand bucks in December of 2004. And Bam! It took off. And from there it was straight up until it went straight down again.
BM: So you folded Neuvation and started your current business, Neugent Cycling?
JN: I was doing something like two million dollars in 2011, then just a million in 2012. The internet was changing again. Not only with the increase in players, but also a change in the marketing. It went from the space ads that were stationary to the ones that follow you around. And it happened overnight. I was spending almost $100,000 a year with VeloNews and it took me a while to figure out what was happening. And I still don't really know how to market a line.
BM: I got shingles in late in 2005 and couldn't work for more than a year. When I came back in 2007 I could see our European-sourced products were not selling. In fact, it was you who set me up with a first-class Taiwanese trading company. That firm had a man passionate about high-performance product and attacked the problem of finding the components with a fiery passion. Both you and he saved us. In a year we were almost entirely Asian-sourced, wheels, carbon frames, pedals. When we sold the firm in 2007, It was a high-performance component company selling Asian goods with a few hand-made steel frames still coming in from Italy.
It was all from Taiwan suppliers, but I don't know if any of it was really made in China.
JN: Ten years ago, your high-end product would have been made in Taiwan. Even now, most of the good stuff is made in Taiwan. But I have seen good carbon frames made in China, but finished in Taiwan.
Things have really changed and in ways no one could have foreseen.