Not for any reason other than I’m interested but does anyone know the breakdown of who gets what on the sale of a new bike, starting with the cost price, so: – Manufacturer to distributor ?%, distributor to bike shop ?%, bike shop to customer ?% appreciate it varies depending on brand but keen to know in general terms.

Taxman, 16.66% (VAT).

Taxman, (business rates)
Taxman, (staff income tax)
Taxman, (staff NI)
Taxman, (employers NI)

I don’t think you’d ever get an ‘average’ breakdown. Because some companies have marketing budgets, others don’t. You could be a shop selling a lot of ABC brand bikes, with a 15% margin because the distributor/manufactuer spend a lot on advertising, or you could be selling fewer XYZ brand bikes for a 25% margin, but selling fewer because no one’s heard of them. Some companies have distributors, some sell direct to shops, some sell directly to the customer.

fair point so does anyone work in a bike shop and know what the cost is to them compared to sale price for a Specialized for example?

It’ll vary according to how much stock the shop gets through in a year.

I’ve been into independent shops before and generally they’ll give you 10% off the rrp without asking, which got me pondering this one. So they must generally be making more than 10%… appreciate it’s probably based on projeceted sales and so on but does anyone work in a typical independent bike shop and know the answer to this one or should I just give up and accept it’s a trade secret?

It’s not a “trade secret”, it just varies according to the deal struck by each shop according to their sales. It’s pretty well known that shops doing C2W schemes end up paying 10-15% to the scheme organiser and that they then end up with little/no profit (some retailers actually add a surcharge for C2W).

On at least one bike brand, the basic price list mark-up for a bike is about 1.6 (ie bike with srp of 1600 will cost 1000 trade). Vat comes off that, so shop makes about 333 before any discounts, extras etc.

Ok thanks. I figured they can’t be making much especially when they discount the likes of 10% on current models, so perhaps I should have just accepted the fact that the taxman is the only real winner! So when they are offering 30% on sales bikes, you must be getting that for cost price effectively.

does anyone work in a typical independent bike shop and know the answer to this one

Yes

or should I just give up and accept it’s a trade secret?

Not exactly a trade secret but would you be happy to discuss in public the exact breakdown of your business finances, or would your employer be happy for you to discuss their business finances? Suffice to say that margin on bikes is better than e.g. a corner shop gets on baked beans or magazines, but much worse than a clothing retailer gets on its stock.

Bottom line – shops can give 10% off and still make a gross margin. Whether it leaves them with any net margin after overheads etc are taken out, depends on a number of factors including how big a shop they are (and therefore how good a deal they are on with their supplier), how efficient the business is, and the £ value of the bike. On anything sub-£1000, most shops won’t be making much net margin if they discount by 10%.

So when they are offering 30% on sales bikes, you must be getting that for cost price effectively.

30% off will mean that they’re making a substantial net loss when you take all of the above into consideration, but yes, in £ figures they’ll be recouping something close +/- to what the bike cost.

Going back to your original question, the distributor will generally be making a smaller percentage than the retailer (but shifting much more inventory and with lower overheads %-wise) and the bike brand itself (and this is getting into guesswork territory) will also be making less gross margin on each bike than the shop but obviously shiting even more.

These two stages are of course sometimes merged into one (either because a bike brand sells direct to shops rather than through a distributor, or because a distributor has developed their own-brand product) which means that either the retail price can be more competitive or the combined distributor/manufacturer can make a bit more gross margin, which is then often used to increase marketing spend.

Where it gets really juicy is when all three become one e.g. Halfords or CRC own brand bikes, Canyon, YT etc. They can make their bikes a bit cheaper but still make a really healthy gross margin. Whether they can make a sustainable business doing it depends on how well they control the other costs.

BIkes sold at discount are quite often bought at discount too. The supplier will send out a spreadsheet or similar with all outstanding stock and a new price. Bikes say 30% off would still be making a margin for the retailer as likely they bought it for that kind of discount. Sometimes of course the shop just wants shot of something the actually bought, but often shops run mainly (in terms of bikes) off supplier stock not their own. Hence why getting a 10% discount can be relatively easy as it’s just a flip for the store. You give them 900 instead of £1000, they pay the supplier 700 and pocket the 200. (Ignoring VAT for a moment). Of course that’s not the exclusive way things work, just sometimes, and the store needs to make a stock commitment to have that option too, which hits margin.

Appreciate all the answers guys and apologies if this came across too direct, I certainly wasn’t after specifics. Just interesting when you know that these bikes are expensive to start with, there are several people in the process and everyone needs to put food on the table. Sounds like a tough business especially for the smaller traders and something to bear in mind next time I’m effectively negotiating the food off the salespersons table!

and pocket the 200

… briefly, before using it to pay the staff who put the bike together, the landlord they rent the shop from, the electricity bill, the business rates, the postage when they need to send something back which failed under warranty, etc etc.

But then you know all this Ben as you also run a business and sell things for more than you buy them for 😉

Don’t know many proper bike shops that run “mainly” off supplier stock either – yes, most won’t have everything in stock in every size/colour, but even a small shop has tens of thousands of pounds of stock they’ve had to pay for.

OP, no need to apologise, and don’t feel too sorry for us in the bike trade. We get to play with bikes for a living so it’s not all bad.