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I have worked in a chain shop previously. Margin on bikes would average at 30% (a touch more for spesh and trek etc a touch less for boutique).
Closer to 50% if you are also the importer (Evans and Norco for example) but the extra overhead (storing massive orders) and min order levels etc pretty much swallows up the "extra" margin.
I would guess halfords are making a load more on Boardman etc.
Seeing a cheap invoice from Trek does not mean much - they certainly did good staff deals so perhaps that was it?
Nope. Wrong again. Unless it was an extra special deal, where Trek had bought too many bikes and were selling them to their dealers at a deal.
Maybe so, Joe. I saw it with my own eyes. Don't know if that included VAT or not but happy to believe it does. That gets close to…
Margin on bikes would average at 30% (a touch more for spesh and trek etc a touch less for boutique).
I really don't have a problem with that amount of mark-up. A good shop deserves it. People need to make a living, right?
Margin on bikes would average at 30% (a touch more for spesh and trek etc a touch less for boutique).
many thanks, I think my question has now been answered !
Maybe so, Joe. I saw it with my own eyes. Don't know if that included VAT or not but happy to believe it does.
It would have said on the invoice... that you saw with your own eyes 😉
iainc - Member
Margin on bikes would average at 30% (a touch more for spesh and trek etc a touch less for boutique).
many thanks, I think my question has now been answered !
That's gross remember - the VAT will take 20% of that - knocking your 30% down to 24%, then if there's any discount or C2W/finance that comes off your hgeadline figure, so in the 30% case above its 20%, reduced to 16% after the vat in the blink of an eye. And that's without any other overheads!
We closed half the bike shop down and turned it into a coffee shop as the mark up on food was about 90%
Overall ratio in a coffee shop / cafe is about 1:3 to 1:4 minus VAT at selling price. Wages, overheads, rent, power etc take Net profit to between 10% to 20% if you have enough covers.
It's all relative really to people making a living having worked in the meat industry as employee and shop owner where the average mark up was 30% then deduct costs of running shop,wages etc there's not much left.
If people think there's so much profit there ,go do it themselves.
Working as an employee is far less stress than being a business owner ,speaking from both sides.
Actual figures:
£2000 rrp bike. Cost £1067. VAT £333. Therefore 'margin' is £600
Interesting PeterPoddy, is that now a norm across a wide selection of bikes in the shop you work, a £2000 bike would still be a high ticket sale so how do the figures look on the bread and butter of a normal bike shop; say £300-£800 bikes? Is your shop still buying those lower end bikes in and then doubling up?)
@Richwithsilver. Come on chap, you know what proof means.. show some pics of paperwork on those posh Yetis you have 8) What does a stockist pay YOU for a SB5C?
@Richwithsilver. Come on chap, you know what proof means.. show some pics of paperwork on those posh Yetis you have What does a stockist pay YOU for a SB5C?
Come on. You don't seriously expect that this is going to happen do you?
(Apologies if my humour detector needs recalibrating today.)
EDIT This isn't meant to imply that the industry types on here have something to hide. Just that it won't be surprising if they don't feel like posting their paperwork on the internetz, because really who would do that?
Doubling up doesn't happen at the lower end either.
When I worked in the trade (about 15 years ago), the best profit margins were around 35% on bikes and 40% on accessories and parts.
+ another. And this was before the days of CRC and Wiggle. At the time the worst competitor was Ribble who grey imported Campag and sold it at what we (shop I worked in) would pay for it at trade. They also sold frames that claimed to be a certain tube-spec, but would only have one tube of that particular line in the frame (and not always a main frame tube either). Actually I can think of someone else that does that, but that's another story.
The problem now is that there are online retailers with large, cheaper-rent non-high street properties and the finances to negotiate extra-special discounts with distributors for mass orders. Needless to say these discounts are passed onto the consumer as very discounted prices and there's no way a high street retailer can get near them. Add this to online shops over on the continent who can often cut out a distribution middle-man (for example, they can deal with Shimano or SRAM Europe direct) and LBSs really have to think about their business model to remain competitive.
Having seen some grey import pricing a few years back there's definitely good money to be made.
Not having a go - genuinely interested. I've worked on both sides of the bike part distribution coin. Please go on.
The current model is slightly broken and it's why the direct sales brands have flourished.
To a degree this is true but could also be applied to plenty of other retail models. A lot of shops have to supply something more than bits now, especially with the likes of Amazon offering same-day delivery.
Having worked in the IT distro side of things for a few years markup there can be literally pennies and single finger pounds on a lot of items.
I had one manufacturer who wanted me to be a dealer offer me 10% margin once. Plus I had to buy a demo bike and two bikes for stock.
They were surprised when I said no 😀
The problem isn't so much the tight margins - they're quite tight but they also are in other industries. The problem is that people quite often expect a discount which they don't expect when buying a similarly-priced iPhone (for example).
Another problem is that, for silly reasons, the value of old stock drops off a cliff. Making 20% on everything you sell is okay if you sell in sufficient numbers. Making 35% on some, 20% on others, 0% on some, and -25% on what's left over gets very messy, and it's very easy to miscalculate whether you're an importer or a retailer.
I also think people get hung up on % margin. That's fine when all items are roughly the same price, but that's rarely the case.
If you sell a £4K bike at 25% margin you make £1000 profit. That covers a chunk of fixed costs, labour, etc. in one sale.
Alternatively, you sell a £400 bike at 40% margin, you make £160. Probably won't cover the mechanic's wages for the day.
Yet one shows at 40% margin and the other at 25% - which bit of business would you rather do?
I suspect that's why parts and inner tubes have such high mark ups on them - because doing an inner tube for pennies of actual profit doesn't pay many bills.
£160. Probably won't cover the mechanic's wages for the day.
£160 for a day's fixing bikes?! Sign me up!
I suspect that's why parts and inner tubes have such high mark ups on them - because doing an inner tube for pennies of actual profit doesn't pay many bills.
It's bread and butter. The largest mark-ups we made (that I remember) were on consumables such as cheap tyres (bizarrely expensive high-end tyres had very little mark-up), inner tubes and cables. At the end of the day you couldn't guarantee you'd sell a £2k bike every week, but you could be pretty certain that you'd repair a few punctures.
I work for a large German tyre manufacturer, and we can get the tyres at "trade + VAT" and it's only 1-2 pounds less per tyre than the german sites like bike-discount, rose etc..
Sure, i see that, but when people say there's a 100% markup on inner tubes as if it's an outrage - at the end of the day it's only a quid or two. That's what i was after..... everyone quotes % margin but only £'s pay the bills.
Alternatively, you sell a £400 bike at 40% margin, you make £160. Probably won't cover the mechanic's wages for the day.
Hahahahahaha that would pretty much cover my wages for 3 days. (Bike mechanic) But I doubt our total sales today have been £160. Whatever else is going on in the bike industry, the bike shops are not ripping you off and the owners are not getting rich.
Sure, i see that, but when people say there's a 100% markup on inner tubes as if it's an outrage - at the end of the day it's only a quid or two. That's what i was after..... everyone quotes % margin but only £'s pay the bills.
when I worked in a bike shop 30+ years ago, some of the margins were astronomical 😯 We'd buy a box of cable ferrules, unit price 0.5p and sell them for 3p. The owner was a millionaire 😉
You LBS's deserve to go under, shamelessly ripping off the punter like that 😉
@Richwithsilver. Come on chap, you know what proof means.. show some pics of paperwork on those posh Yetis you have What does a stockist pay YOU for a SB5C?
Even if I did put this info up, which I'm not going to, your expectations are so high that wouldn't believe me anyway!
You have a heap of experienced people here telling you that your 'fact' is incorrect. What is it that makes you think they're all in conspiracy together?
Sure, i see that, but when people say there's a 100% markup on inner tubes as if it's an outrage - at the end of the day it's only a quid or two. That's what i was after..... everyone quotes % margin but only £'s pay the bills.
I'm agreeing with you. 🙂
when I worked in a bike shop 30+ years ago, some of the margins were astronomical We'd buy a box of cable ferrules, unit price 0.5p and sell them for 3p. The owner was a millionaire
Disgusting behaviour! 😆
Remember when looking at staff costs that the employer has to cover tax, pension contributions etc too.
I'm sure the owner of the shop I used to work in would love to get some of these markups being quoted, some comments here have certainly made me chuckle 😉
Between peoples ideas on pricing like that and the "customer" but I've found this 2k bike on the Internet for 50p match it! Jokers it's suprising anyone sticks with running an lbs
. I'm struggling to see how you're working out the VAT there .You'd need to start off at least 100% I reckon.£1000 delivered into shop
£2000 selling priceVAT already takes £333 of the £1000.
. I'm struggling to see how you're working out the VAT there .
The bike is £1666.67 plus 20% VAT but the VAT goes to the tax man
£2000 selling price includes £333 of VAT. That goes straight to the taxman. So the bike before VAT is £1666 - £1000 = £666 margin.
Take off building, power, business rates, staff wages, including the employers tax, NI, pension contributions, plus other sundry bits and bobs, = not a lot.
And an LBS doesn't sell many £2000 bikes.
Beaten to it. Damn slow fingers.
Remember when looking at staff costs that the employer has to cover tax, pension contributions etc too.
Remember mark-up has to cover all overheads, including the staff costs and wages, all the tax bobbins, rent, utilities (so that's water, heat, electricity, phone, broadband) and any other stuff the shop needs to pay (does it have a website? Does it run a van? Does it support a team? Does it help out with local events or trails?). It doesn't go into the pocket of the owner.
Take off building, power, business rates, staff wages, including the employers tax, NI, pension contributions, plus other sundry bits and bobs, = not a lot.
Beaten to it too. 🙂
having owned a bike shop for 15 years
i can tell the OP that it has never been 100% margin
its 20-40% depending on volume. (when we were the biggest yeti dealer in the Uk we got 40%)
but you are typically offering 10% discount to compete with everyone else
c2W take 15%
VAT works against you if you buy at £100 add the vat at £20, selling at £200 the vat is £33
so there you are, that's the facts.
If only the Bike trade had the kind of margins some of you wrongly think we make, If that were the case I would almost be able to take the constant IBD bashing but however its not, don't use the likes of Evans/CRC/Wiggle to base your prices on, thats whats killing the bike industry, Its been said before and I'll say it again, THEY DON'T PAY WHAT WE PAY, they deal on a massive scale, buying from abroad from bike companies overbuying on parts to sell onto mail order companies and buying from whatever country is weakest to the pound, it goes on...
I could rant on and on but I think I've ranted enough.
Forget VAT it's not shops property its passed from the customer, handled by the shop and handed over to the taxman. Its a tax on the customer. The customer pays it ONTOP of ALL prices regardless of who with.
A 1k cost bike makes a shop £600? Wow, we can only dream of such %.
'Overheads'- all businesses have overheads.
hora in "rip off Britain" dream land SHOCKER!
Wow, we can only dream of such %
It does seem like a decent amount, but you have to bear in mind that £2k sales don't come along every day. Shops certainly aren't selling them all day long.
When I ran a shop, the average value of the bikes we sold day to day were between £300 and £600. That same percentage doesn't equate to quite so much moola...
A 1k cost bike makes a shop £600? Wow, we can only dream of such %.
But the % margin is only part of it, as discussed above. How many £2k bikes do you think your LBS actually sells, and also sells without giving a discount on either the bike or other products sold with it?
You're a bargain hunter Hora - when was the last time you paid RRP?
It does seem like a decent amount, but you have to bear in mind that £2k sales don't come along every day. Shops certainly aren't selling them all day long.
Beaten to it. Again. 😆
.
Re VAT: A shop will pay VAT on the goods it buys and charge it on the goods it sells but it only hands HMRC the difference between the two. So a shop buys a bike at £1500 net but pays 20%VAT so actually pays £1800 to the supplier. Let's assume a markup of 50% which means the punter will pay £2700. HMRC want the VAT on the difference between the two net prices, i.e. 20% of £750 or £150. So even though there's a total of £450 VAT levied on a £2700 the shop has only paid £150 of that it's based on the amount it "value added".
The shop thus has £600 out of which to pay rates, rent, utilities, staff, etc.
The guy who was thinking of opening a bike shop needs to read this thread.
Probably best if 'bike' shops remodel themselves on service centres and coffee shops, focus more on paid/guided rides, stock some tubes, spokes etc....but for me the LBS is defunct, I can do most stuff on my bike apart from wheel building and I've bought my last several bikes online....i don't mean any ill will towards LBS owners or workers but if they can't compete with CRC, Wiggle etc then I'm not interested....you have to play to your strengths and going forward I think that'll be servicing and repairs for most LBSs.
Deviant you are not far off, but no benefit in organising rides, best do your own brand stuff and be a workshop and coffee shop.
But there are plenty of people buying bikes, just not from the LBS.
Its unfortunately the pull of big shiny shops that the average shopper feels more comfortable in. A big shop full of shiny things makes the average shopper feel confident in quality and service etc.
small shops are viewed with suspicion
Been lurking in this thread reading with interest. Here's another inside perspective.
Typical margin on your mainstream brand is 35-40% max. Generally high end bikes like the ones many of you here ride are around 30%. If you purchase it on 0% finance over 36 months the finance company takes around 17% of the gross. Your £3k bike is then down to about £200 profit left to go towards the bills. I can say not many people purchase high end bikes without finance. That's not a great reward for the amount of risk involved in stocking bikes that then get devalued at clearance time. If you've not sold them by this point you can bet the stock you are sitting on is worth less than what you paid for it.
For costs of running a shop, lets say 2 members of staff, rent, insurance, electricity, advertising, sundries for example might come to about £70k. Even at such a conservative example that's a lot of £3k bikes sold on 0% finance just to break even, let alone achieve net profit.
As for margin on parts, accessories, etc.... that depends on how much you are willing to discount the stock your customer is telling you they can by from xyz.com for much cheaper.
Even with repairs the odd customer for some reason expects you to do jobs for free, because "It'll only take a couple of minutes if I borrow your tools and you help me". Why bike shops get such a hard time I've no idea, but I can tell you it's a very challenging industry to be in right now. Your LBS is most definitely not ripping you off.
but no benefit in organising rides
Some shops become the founders of, or the centre of, a club. Cyclopedia in Cardiff for example is inextricably linked to the JIF club which is very active across disciplines. Bikezone in Oxford housed Zappi's cafe, which was the hub of Zappi's club.
For a bike shop doing reasonable levels of trade with the big brands, its typically 35%
But, when you look at the difference between gross profit margin and net profit margin, you suddenly realize there is not money in selling bike
[b]Gross profit margin[/b] = (revenue - cost of goods) / revenue
[b]Net profit margin[/b] = (revenue - cost of goods - operating expenses - other expenses - interest - taxes) / revenue
for tax-relief cycle to work schemes:
cyclescheme take 10%
Halfords scheme takes 15%
Why bike shops get such a hard time I've no idea,
partly because at the bottom of the market when people can buy a whole new bike for 99 quid they can't comprehend why it might cost 50 quid to do a little repair (their mentality, not mine, but I've overheard exactly that). And at the top we're all web-savvy bargain hunters who buy from mail order, or end-of-season and heavily discounted; my CX bike was discounted by 25%, my MTB and road bikes by 40% or more.
i think you made my point, CTM.
its better to be involved with clubs than organising your own thing.
You get more reach being involved with a club or even a few clubs, but as you pointed out its the coffee shop bit that people also like