Same spec bikes more expensive in the UK?

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  • Same spec bikes more expensive in the UK?
  • Premier Icon njee20
    Subscriber

    It won’t be the UK distributors making the extra cash, lots of people having their slice – shipping companies, HMRC, the manufacturer.

    But yes, it’s shit.

    Premier Icon matt_outandabout
    Subscriber

    Book a flight to US, having reserved bike beforehand.
    Ride, ensure it is covered in mud, pack in new bike box, apply some stickers.
    Fly home.
    Pocket £1k.

    Simples.

    There’s £700+ of VAT for starters, plus shipping, plus duty, plus exchange rate losses / risk management.

    Premier Icon nickdavies
    Subscriber

    Don’t forget that price will be nett of sales taxes, whereas UK pricing includes them. You’ll also have arse covering if it’s a USA firm to avoid currency fluctuations & the additional cost of overseas services like warranties – if they have to price a bike for a model year and the pound goes up by 10 cents it would make a big difference to margins.

    aP
    Member

    In 2004 the ASR-SL was $1800 and £1300. We never worked that out particularly as every other US made bike followed the $=£ route.

    keng38
    Member

    It’s because the UK ones are to be ridden on the left of the road.
    Most countries ride on the right so more of these are made, hence cheaper.

    Yes I’m joking!

    Premier Icon mikewsmith
    Subscriber

    Don’t forget import duty

    xcracer1
    Member

    I was looking, or admiring, the new Yeti ASRc 29 review on a competitors website – the price stated was $5800. If you convert this to £ it comes out at around £3500. Yet the same bike in the UK has been priced at £5200. Is it the importers are making £1700 or am I missing something?

    Yet the US pricing for the Giant Anthem 29 is very similar to the Uk!

    wilburt
    Member

    They will charge whatever a market will pay, wouldn’t you?

    Premier Icon mikewsmith
    Subscriber

    Or the likes of Giant and Specialized are importing 1000’s of bikes and can therefore take advantage of that scale where as the number of Yeti’s imported must be a fraction of that.

    As pointed out above most people miss the 20% VAT on Uk stuff vs the fact that nowhere in the US tells you what the sales tax is until you get to the till.

    you want to buy your new bike in Delaware, New Hampshire, Montana or Oregon….

    http://www.salestaxinstitute.com/resources/rates

    khani
    Member

    I was shocked at the price of Santa Cruz frames in the US, considerately cheaper in $’s than £’s,
    In fact when I looked you could get a complete SC bike over there for less than the frame price here..

    bencooper
    Member

    £3500 + 15% import duty + 20% VAT = £4830

    wilburt
    Member

    Burgernomics suggests the Ukraine is the place to buy stuff.

    Premier Icon Stoner
    Subscriber

    £3500 + 15% import duty + 20% VAT = £4830

    BUT….. £3500 is not the cost price for the retailer. £3500 is the US retail price.

    Obviously the number of wholesalers/importers involved effects things but IF a UK retailer were simply buying product at US retail prices and importing them then it would be a particularly daft business plan.

    You would expect at least a 30-50% margin in the factory gate price to US retail which would also be there for the importer.

    I dont believe there’s any one link in the supply chain that is “profiteering” I just expect that the supply chain is so convoluted from manufacturers, wholesalers, importers, retailers, the tax and duty and certification and warranty and SOG obligations so onerous that UK retail is not alwyas the best method of acquiring a US bike.

    If it suits you (and by no means will it always do so) to arrange your own importing, tax and duty if necessary, latent defect risk, PDI checking etc etc then there’s a lot of savings to be made bypassing the UK retail route.

    bencooper
    Member

    Obviously the number of wholesalers/importers involved effects things but IF a UK retailer were simply buying product at US retail prices and importing them then it would be a particularly daft business plan.

    I’m not suggesting that’s what’s happening – that’d be silly. All I’m pointing out is that to bring a bike from the States you have to add on duty and VAT, and that’s before you get to extra shipping costs and other things.

    I import some things from the States – the supply chain is the same (manufacturer > retailer > customer) but I find once you add on the taxes, shipping, transaction charges etc then the effective exchange rate is pretty much $1=£1.

    Premier Icon Stoner
    Subscriber

    If

    the supply chain is the same (manufacturer > retailer > customer)

    were the case, then you have to ask why

    the effective exchange rate is pretty much $1=£1.

    as there is a 66% margin there.

    Duty (4.5% x 120% VAT = 5.4%)
    VAT (20%)
    Shipping (let’s say $50 a bike in bulk, so 2% ish)

    only gets you to c.30% of that difference. The other 30% is getting lost somewhere and it’s not clear where.

    butterbean
    Member

    The other 30% is getting lost somewhere and it’s not clear where.

    30% gross margin then for a distributor?

    Out of which they have to pay all of their normal business operating costs, run a demo fleet, UK marketing, PR, sponsored riders, carry a lot of warranty stock (well, we are using Yeti as an example), goodwill, etc etc.

    bencooper
    Member

    For the things I import, it’s mostly down to shipping, but that’s because I import one-off things which means expensive air freight.

    As butterbean says, for more mainstream* things then there’s the extra costs of supporting the brand in the UK.

    *Not that a £5000 bike is mainstream 😉

    irelanst
    Member

    It’s not just isolated to the UK, in fact it’s worse in some other European countries. A Dutch colleague found it cheaper to get the ferry over to the UK to buy a Bronson recently than buy it locally; the same bike from a Dutch shop was €600ish more expensive.

    Premier Icon Stoner
    Subscriber

    30% gross margin then for a distributor?

    for

    un a demo fleet, UK marketing, PR, sponsored riders, carry a lot of warranty stock

    exactly!

    The supply chain is extended for UK retail purchasers and the extension carries a cost. However, there are “arbitrage” opportunities for canny UK buyers who are willing to take a risk on warranty/latent defects/after sales support etc if they can make a US Retail price to UK delivered beat a UK retail price sufficiently to compensate for not having UK support.

    I think most people feel that that extra 30% is sometimes a bit too much, hence why private import can work.

    xcracer1
    Member

    Wouldn’t the US branch of Yeti also do marketing, PR, sponsored rides as well though in that £3500? I would expect that the cost to the importer is less than £3500 otherwise we would be paying for US and UK marketing!

    Premier Icon mikewsmith
    Subscriber

    I would suggest that those who feel there is profiteering going on get themselves into the game and import some bikes for sale…..

    Premier Icon tonyg2003
    Subscriber

    I was looking at a US cycling mag and a Boardman road bike £3199 in the UK was £2870 (pre sales tax) over there. I guess that they have to compete in what is effectively a larger and more competitive market and take a margin hit compared to the UK.

    30% gross margin then for a distributor?

    Out of which they have to pay all of their normal business operating costs, run a demo fleet, UK marketing, PR, sponsored riders, carry a lot of warranty stock (well, we are using Yeti as an example), goodwill, etc etc.
    -1

    Wouldn’t the US branch of Yeti also do marketing, PR, sponsored rides as well though in that £3500? I would expect that the cost to the importer is less than £3500 otherwise we would be paying for US and UK marketing!

    +1

    I’m not in the market for a £5k bike so it’s no skin of Yeti’s nose if I don’t agree with their pricing, but when you can fly to the USA, buy the bike, DECLARE IT TO HMRC AND PAY TAX, and still be better off, you’ve got to question what is the importer actualy doing that makes them so much less efficient than their US counterparts.

    I’m not saying they’re profiteering and driving arround in a new McLaren, but they do appear to be hugely inefficient if that’s their margin!

    I was looking at a US cycling mag and a Boardman road bike £3199 in the UK was £2870 (pre sales tax) over there. I guess that they have to compete in what is effectively a larger and more competitive market and take a margin hit compared to the UK.

    In your example the UK bike is only £2665 before tax, so actualy its cheaper here.

    butterbean
    Member

    Simply put, you’re displaying a lack of understanding of how the distribution model works in the bike trade (whether that be right or wrong).

    The Global Brand is responsible for global marketing, sponsorship, PR, brand awareness etc, the regional distribution point is responsible for all of that in their domestic market, and thus the associated costs.

    Premier Icon AlexSimon
    Subscriber

    A lot of these US bike companies deal direct with US retailers.
    So abroad there is an extra company in the chain (the distributor).

    Put the margin in for the distributor and then multiply that by the shop margin and it’s not surprising that it works out dearer.
    It’s hard to see how they could effectively do it differently.

    Some companies try harder on the price, but the result is reduced presence at retail as margins are tighter.

    Premier Icon tonyg2003
    Subscriber

    I was looking at a US cycling mag and a Boardman road bike £3199 in the UK was £2870 (pre sales tax) over there. I guess that they have to compete in what is effectively a larger and more competitive market and take a margin hit compared to the UK.

    In your example the UK bike is only £2665 before tax, so actualy its cheaper here.

    OK at the till around £3050 in the US and £2870 in the UK (sales tax isn’t shown on prices in the US). Given that the Boardman has to be imported to the US and our high value (ish) pound the bike is cheaper in the US and Boardman is on a reduced margin.

    Premier Icon dangeourbrain
    Subscriber

    Late to the party but I’ll throw in my tuppence (3cents) worth any how…

    I’m in fmcg so not bikes but assuming a similar level of margin etc…

    A bike retails for say $2000 plus tax. The retailer deals direct with the manufacturer and works to a minimum margin of 100% so trade price is sub $1000.

    A UK distributor buys from the manufacturer for the same price, assume a $50 per bike shipping charge, duty payable at 4.5% for example.

    ($1000 + 50) * 1.045 = 1100 ish.

    Margin for wholesale price list 200%,
    1100 * 3 = $3300 wholesale list price.

    Exchange rate, pre buy my dollars, 1.55

    $3300/1.55 = £2130

    Retailer discount 50 to 60% dependent on volume from this price.

    £2130 * 0.5 = £1065 ($550 or £355 profit at wholesale)

    Mark up to retail 100%

    1065 * 2 = £2130

    Vat @20%

    2130*1.2 = £2555 advertised price

    Us sales $2000 + tax, UK £2555 Inc

    OK at the till around £3050 in the US and £2870 in the UK (sales tax isn’t shown on prices in the US). Given that the Boardman has to be imported to the US and our high value (ish) pound the bike is cheaper in the US and Boardman is on a reduced margin.

    You missed a comma then, you meant to say
    “I was looking at a US cycling mag and a Boardman road bike £3199, in the UK was £2870 “
    , otherwise it reads the other way round to me.

    The Global Brand is responsible for global marketing, sponsorship, PR, brand awareness etc, the regional distribution point is responsible for all of that in their domestic market, and thus the associated costs.

    I think that’s kinda the point, the US marketing costs are (I guess) covered in the US price of £3500(pre tax), the UK marketing costs per bike sold are I guess about the same (every buyer will see a print ad, just the USA print ad will cost a lot more but have a much bigger circulation, and the USA will have a bigger demo fleet to cover the geographical area, but spread over more buyers etc).

    So if Yeti’s USA price is pre-tax (guestimates for illustration only, bike may actualy be 50p and distributor costs may be £1999.50)
    £1500 – Design, build and import bike from China
    £500 – Yeti USA overheads and profit
    £500 – Global Marketing by Yeti USA
    £500 – Domestic USA Marketing by Yeti USA
    £500 – Shops margin
    £TAX
    =about £4000

    So Yeti’s UK price is (pre tax):
    £1500 – Design, build and import bike from China
    £250 – Yeti USA overhead and profit (because they’re not doing much for this, they probably never see the bike)
    £250 – UK distributor overheads and profit (because they’ve got less to do than yeti USA, no dealing with factories)
    £500 – Global Marketing by Yeti USA
    £500 – Domestic UK Marketing by Importer
    £500 – Shops margin
    =about£4.3k because theres more tax in the UK
    £900 black hole

    My point is, between them the UK distributor and yeti USA do no more work than yeti USA manages on its own in the USA.

    I’m not saying they’re profiteering, just appear to be bloomin ineficient and pricing themselves out of the market.

    Premier Icon AlexSimon
    Subscriber

    So you pluck a load of figures from nowhere, say they could be anything, but then use the result to support your argument :confused:

    Premier Icon mcnultycop
    Subscriber

    No one is pricing themselves out of the market; people buy Yetis because they are Yetis. People want them, in part, because they are expensive and “boutique”.

    Premier Icon mattjg
    Subscriber

    This subject has been done many times before – you’re right.

    But there is an upside: that price hike leaves space for our indigenous manufacturers to operate in. Think Cotic, On One, Singular, that new Stooge & Bird, (& probably a bunch I missed). Orange maybe.

    Would they ever get off the ground if US imports weren’t bonkers expensive?

    Isn’t it great to have so many indigenous brands making great bikes for the UK?

    butterbean
    Member

    I think some of your numbers are muddled, so it doesn’t make a great deal of sense, but using your examples of the UK margins, even with my limited knowledge of smaller brands/distribution models, there is no way a distributor or retail shop is going to be working to margins that small.

    If you work to 30% for the retailer, and not far off that for the distributor, you might start to be in the right ballpark. On the face of it, you may think that’s high, but you also need to factor in sales volumes too (or lack thereof).

    Premier Icon dangeourbrain
    Subscriber

    You make the mistake of assuming margin is related to work done, most “middle men” companies make just as much markup regardless of what they do.

    In your example:

    So Yeti’s UK price is (pre tax):
    £1500 – Design, build and import bike from China
    £250 £500- Yeti USA overhead and profit (because they’re not doing much for this, they probably never see the bike mark up is based on cost of item not cost of labour, that’s only accounted for once, in your £1500)
    £250 £666 – see above – cost to them is now £2000 so add a third UK distributor overheads and profit (because they’ve got less to do than yeti USA, no dealing with factories)
    £500 – Global Marketing by Yeti USA
    £500 – Domestic UK Marketing by Importer
    £500£611 mark up based on cost 1/6 as above – Shops margin

    =£4277 +vat
    =about £5132 because theres more tax in the UK
    £60 black hole

    By your example a BSO of cost £10 would retail for £2010 plus tax because the same work is involved

    Margins are higher at that end of the market but it’s still based on cost +% not cost + cost

    If you work to 30% for the retailer, and not far off that for the distributor, you might start to be in the right ballpark. On the face of it, you may think that’s high, but you also need to factor in sales volumes too (or lack thereof).

    I was just using them to illustrate the point.

    The cost of the global marketing is presumably distributed evenly accross all the bikes built, ditto the R&D budget, which gives the total cost of actualy getting a saleable bike into a shipping container somewhere in china. The cost of getting that to the Yeti-USA or to Silverfish-UK is then similar. Then the retailer at the end in the USA presumably takes a similar margin to any UK LBS.

    So the difference is inbetween, what do Silverfish do in the UK that’s so expensive, that Yeti-USA doesn’t do to justify a £900 margin?

    Premier Icon dangeourbrain
    Subscriber

    In practice of course the figures you separateout for marketing etc are part of the overheads and profit you mention. They’re not accounted individually.

    Premier Icon dangeourbrain
    Subscriber

    So the difference is inbetween, what do Silverfish do in the UK that’s so expensive, that Yeti-USA doesn’t do to justify a £900 margin?

    Buy from yeti USA, not China.

    wrecker
    Member

    Distributor direct sales model please.
    No retail mark up = better value for consumers. Still get demo days, warranty support, informed tech support etc etc. It’s a win-win.
    I hope that the likes of YT and Canyon continue to do very well so that companies hands are forced.

    xcracer1
    Member

    But

    £1500 design build and import
    £500 yeti usa overhead
    £500 yeti global marketing
    £2500 total = $4100 so the above figures cant be correct as they sell them for $3500 before tax?

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