How bike shops kept up with America's 121% spike in demand

• As bikes became a means of recreation, exercise, and commuting during coronavirus shutdowns, bike companies were facing growing demand.
• In March, leisure-bike sales jumped 121% in the US.
• But when Lunar New Year and COVID-19 outbreaks shut down bike-manufacturing factories in China, bike companies also had to contend with a shortage of the now super-popular bikes.
• Business Insider stopped by the Linus Bike warehouse in Los Angeles and State Bicycle's shop in Tempe, Arizona, to see how the companies pivoted to keep up with demand.
• Visit Business Insider's homepage for more stories.

Following is a transcription of the video.

- When the coronavirus shut down public transportation and gyms, Americans returned to a trusted classic: the bicycle. In March, leisure-bike sales increased by 121% in the US. By April, bike shops across the country were cleared out of inventory.

Adam McDermott: At no point did we ever satisfy demand.

Narrator: And that demand is still holding strong. But bike companies are facing a problem: a shortage of bikes.

Adam: This whole shelf right here all the way back to that side of the warehouse is usually stacked with bikes, and now there's nothing.

Narrator: We visited two bike shops, one in LA and one in Arizona, to see how they're keeping up with this unprecedented surge in demand.

Mehdi Farsi: During typical times, we have bikes in stock, and we can ship them the bike that same day.

Narrator: That's Mehdi, the founder of State Bicycle in Tempe, Arizona. Usually, he sells 30 to 40 bikes a day. But now, he's more than tripled his daily orders, to 150. Mehdi's bikes are made in Taiwan and China.

Mehdi: In January and February, right around the Lunar New Year, all bike suppliers really were shut down for at least four weeks.

Narrator: Then COVID-19 shut down the factories for an additional month through February. That happened just before demand for bikes started to surge stateside, in mid-March.

Mehdi: Only a couple weeks later, we were completely sold out of bikes.

Narrator: Even though bike shops were deemed essential businesses, Mehdi still had trouble bringing new bikes in.

Mehdi: Production times are getting longer and longer, and that's why we're seeing such a shortage of bicycles still.

Narrator: Over in Los Angeles, Adam McDermott had a similar story. His company, Linus Bike, was wiped clean of its bikes.

Adam: We immediately sold through all our inventory, and it was just like, waiting for the next container. And by the time that next container arrived, it was already completely sold out.

Narrator: Adam and his business partner, Chad Kushner, started Linus Bikes back in 2007. Customers can buy their '50s French-inspired city bikes starting at $400 online.

Adam: Our web traffic increased by, like, 150%. Like, every sector that we sell through, we're seeing, you know, 100% increase in revenue.

Narrator: Built in Taiwan, the bikes are sold all around the world. But we stopped by the Simi Valley warehouse in LA.

Adam: We're down to kind of just the bare minimum here. If we could just get more product, that's really what we're facing right now.

Narrator: From his Venice Beach shop not too far away, Adam's team would normally sell wheels to walk-in customers, meaning they could buy a bike and take it home that day. But since the pandemic, this isn't an option.

Adam: Inventory that was supposed to last us the entire year, we were selling just in a matter of months. So, at, like, peak, in July, we were back-ordering for some models all the way to February, which is insane for us.

Narrator: Linus went from selling 1,200 units a month to about 4,000. Now it's taking the company nearly double the time to produce a single bike. To keep up with demand, both companies had to get creative.

Mehdi: We quickly went to a preorder method and started ramping up our production overseas.

Narrator: Mehdi also put a cap on the number of bikes each of his 300 dealers could sell.

Mehdi: In order to prevent larger shops from eating up all the inventory and kind of taking away availability from some other shops.

Narrator: Over at Linus Bikes...

Adam: When COVID broke out, New Jersey, where our other warehouse is, the picture looked much worse there for New Jersey and New York, so we diverted all inventory to the West Coast, just 'cause it seemed like this warehouse will keep operating. So, we're doing all our shipping from the West Coast. It's a much bigger expense, but at least we knew this warehouse would be functioning.

Narrator: Adam's also working on a new kind of inventory.

Adam: We just introduced e-bikes. They're just landing now, so they're not even available. We're still preselling them. And those range from about $2,000 to $3,000. It's a really massive kind of change. It became a business of managing inventory and trying to allocate inventory. Where we can get the bike to the customer, how we can, like, keep one customer happy and not lose another customer.

Mehdi: If we had bikes in stock that we could send to someone same day, I could only imagine sales might be up 10X or more.

Narrator: Linus doesn't anticipate getting many of its popular bikes back until 2021.

Adam: I think it's really key not to rest on this crazy demand that is temporary. I know it's temporary in some form. I think if a business expects it or assumes it, like, you'll pay for it later.

Mehdi: My advice for any other small-business owner out there, try to be as agile and flexible as you can in order to adapt and survive.

Narrator: For both companies, the biggest surges happened in cities, where residents traded in crowded trains for bikes.

Adam: It's Portland, New York, Brooklyn, Chicago. Los Angeles is a big market.

Mehdi: People just feel a lot more comfortable commuting by bike versus subway trains or buses now.

Narrator: And the demand for two wheels isn't expected to let up.

Adam: We think demand will hold into 2021.

Mehdi: With so many more riders experiencing their cities on bikes, the future of American cities might actually transform as well. More and more people are going to look to commute via bike, which is obviously awesome for the environment. We love to see that. And, who knows, maybe the next Lance Armstrong or the next Tour de France winner has gotten on a bike during this pandemic, and in several years' time, we're gonna kind of see the next great American road cyclist come out of this.