In retail, the general rule is -VAT (20%) and halve it. Bikes are a commodity like everything else. Expect no different.
In retail, the general rule is -VAT (20%) and halve it. Bikes are a commodity like everything else. Expect no different
Are you serious?
djaustin & others earlier:
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In retail, the general rule is -VAT (20%) and halve it. Bikes are a commodity like everything else. Expect no different.
So trade price on a car is 40% of retail?
No wonder Arnold Clark is so rich.
In retail, the general rule is -VAT (20%) and halve it. Bikes are a commodity like everything else. Expect no different.
He's not wrong sadly!
For general retail. The "Expect no different" quote is TOTALLY off though... The Bike Industry is definitely not in the same league though when it comes to margins, not by a long chalk...
So trade price on a car is 40% of retail?No wonder Arnold Clark is so rich.
New car industry is even worse than the Bike trade for margins... Where they make all their money is in optional extras, and the dreaded finance. But typically if a dealer sells a car for £10k, it's cost them £8k or more to get it in...
think some of the trade are too defensive/possessive for reasons already stated (complexity of market, other costs), anyone hoping to use the information as a negotiating tool is on a hiding to nothing. Shops are free to
but not sure how they actively look? My issue with LBSs was never having stock and being told "oh we can order that in for you", yes and I can order it myself and get it quicker for less. Usually when someone visits an LBS they want the item there and then. Judging what stock to hold is obviously a killer decision for LBS owners.look for other customers
A recent 'impulse purchases in LBS' suggests there is real value in holding high-end kit, loads of respondents who'd spent £££ on a whim after going in to buy something else.
Direct selling is killing the old multi-tier business model. CRC, Wiggle, On One etc all regularly sell kit for less than LBS can get them from the respective distributor/importer. Recent thread about the ICE V8 dropper post with the guys from R53 getting very defensive. Still cant figure why a post made in the far east, marketed by a French company, imported by to the UK by R53 and then sold by an LBS is a viable model in 2012, or why I should pay more for a "UK sourced" item when I can buy it from a euro retailer for substantially less and have an EU warranty. Consumers resent the fact that most stuff we read about in magazines or on the web cost the same in £ as it does in $ or Euros, and this alone drives bargain hunting and the feeling [i]someone[/i] is ripping us off.
Years ago the motorbike market was hit by grey importers bringing bikes in from the continent cheap. Dealers were up in arms and refused to service them in a bid to deter customers, but the official importers eventually responded by dropping bike prices by £2K overnight, matching and killing the grey market (I think Honda even bought all the grey stock up).
Some high ticket items have large mark-ups, which are undermined (along with the brand image) by discounting. Take this for instance
which is similar to discounts the likes of Turner (those £900 5-Spots from CRC) and Ibis (£1100 Mojos from TBC) have been sold at in the last 12 months or so.
My experience is that high end kit does NOT have any higher margin.
That's a 2011 bike - they are clearing old stock at a loss.
That's a 2011 frame - they're desperate to shift it at any cost, even if they take a hit on it. That doesn't mean the margin is that big.
In fact premium stuff usually has smaller margins - the logic being that they're more desirable so the retailer will have customers beating a path to their door.
Edit - yeah, what he said 😉
I cannot believe they will sell old stock [i]at a loss[/i], that makes no sense it would be cheaper to skip them, or just stack em up outside and let people help themselves to them.
The fact it is an old model doesnt change what the importer/distributer sold it to them for, or what the RRP was set at. Are you saying Pauls Cycles, whos entire business model is selling old-stock-at-half-price is actually a charity giving stuff away at a loss?!
edit: having thunk about it are Pauls benefiting from a mixture of high volume buying (compared to LBS) and selling and/or grey importing meaning they get the stuff cheap and sell at low margin per item?
Fair play if people are really making a loss selling old stock, I am picking at the business model and the market LBS have to compete in I'm not anti LBS. My point is consumers will be deterred from spending full RRP on an item when theyve seen an older model of the same thing go for so much less, it immediately devalues the brand (or model, the ASR7 was obviously a non-seller as Evolution were selling em off when they ditched Yeti) and makes it harder for them to justify RRP on the new model. Some manufacturers try and control/limit this by not supporting mail order - I think Trek can only be collected in-store so the only reduced stuff you see on the web is from places with a real store presence like Evans, J E James etc?
Its not business I'd want to be in, and all the successful ones I can think of survive on level of service generating repeat custom (I've mail ordered from TBC and raved about their level of service on here, if they look after lowish value mail order customers so well they must have a legion of happy bike buyers).
crashtestmonkey - MemberI cannot believe they will sell old stock at a loss, that makes no sense it would be cheaper to skip them, or just stack em up outside and let people help themselves to them.
That would be correct only for stock you are ordering in.
Once you have a £1.8K bike and have paid say £1.2K for it, you are making a loss selling it at <£1.2K (my definition of loss), but you're still getting something for it rather than paying someone to take it away (your definition).
Pauls' will be buying stuff cheaper than half price in order to make profit.
I cannot believe they will sell old stock at a loss, that makes no sense it would be cheaper to skip them, or just stack em up outside and let people help themselves to them.
Um, no. Selling at a loss means you're still getting something, even if it's not what you paid for them. Skipping them means you get nothing.
Are you saying Pauls Cycles, whos entire business model is selling old-stock-at-half-price is actually a charity giving stuff away at a loss?!
I don't know how they work, but I'd guess they buy up old stock at a big discount, and therefore still make a profit. A bit like how TKMaxx do it for clothes.
[i]I cannot believe they will sell old stock at a loss, that makes no sense it would be cheaper to skip them, or just stack em up outside and let people help themselves to them.[/i]
Which is better in your pocket on a frame you paid £1000 for? £500 to buy new stock which you can make a profit on OR nothing?
Some bikeshops/businesses have 14, 30 etc day credit accounts as well. I imagine Credit control at some Distributors have a few choice words to say about accounts paying late, accounts on hold and cash upfront accounts..
Same as every industry. 'Poor ol LBS' - I say some bikeshops are great, however customers are also feeling the pinch and are not ungrateful, saps to take money off etc etc etc.
Its a business.
Many, many years ago I use to put the IT systems in for a white/brown goods retailer; gross margin was usually in the order of 50% with net/profit at 5-10%.
But, the overall price of something often has no bearing on its cost of sale. For example, at a later supermarket I worked for we calculated that bananas' were our most profitable (as in percentage) item as their cost to sell were so low. The importer basically delivers a crate which is then put on a shelf and the lid taken off.
[i]old model doesnt change what the importer/distributer sold it to them for, or what the RRP was set at. Are you saying Pauls Cycles, whos entire business model is selling old-stock-at-half-price is actually a charity giving stuff away at a loss?! [/i]
Distributors will have old stock they need to shift and they will be playing the same game, get rid at any price to raise funds to buy new stock and to clear space in the warehouse to put that stock into. Pauls are simply taking advantage of that situation.
Mister P has it. On occassion you have to drop something at a loss to release cash for new stuff. Fact of business. Unpleasant and actually horrible to do but cash is all.
But, the overall price of something often has no bearing on its cost of sale.
Yes - one problem with the bike industry is it often is based on "cost plus" pricing - you work out how much it costs you to make something, add on margins for distributors and retailers, and that gets you the retail price. Fine, until part of that chain changes, and it takes no account of customer demand.
Another way is to work out what price people will pay for something first, then work back from there.
The mark up on bikes is **** all.
If you want to make money in retail, sell poncey t shirts or something similar.
INRAT
I've seen trade prices in my previous job. Orange and Santa Cruz I remember particularly as I was surprised at how high the trade price was! I was especially surprised at the cost of the upgrades on Orange bikes were (hope bits, forks etc)
Needless to say some of the figures quoted on here are ridiculous and some folk are living in cuckoo land
Too many mouths to feed in the chain though isn't there? Thats why the end-sellers margins can be soo tight.
Edit- Houns, which can mean Orange are raking it in on home/UK sales?
Once you have a £1.8K bike and have paid say £1.2K for it, you are making a loss selling it at <£1.2K (my definition of loss), but you're still getting something for it rather than paying someone to take it away (your definition).
Al (and MrP) you are of course correct, my fuzzy logic blamed on coming off a night shift... See also edit about Pauls Cycles.
Mister P has it. On occassion you have to drop something at a loss to release cash for new stuff. Fact of business. Unpleasant and actually horrible to do but cash is all.
It'd give me a break-down. If it's any consolation I am still bitter about not buying a reduced Mojo frame when I had the chance...
Orange .. I was especially surprised at the cost of the upgrades on Orange bikes were (hope bits, forks etc)
I was always amazed that upgrading a part on an Orange seemed to involve paying full RRP of the new part (eg. CCDB, Hope headset) but not deducting the cost of the part being upgraded and replaced. Seemed close to theft to me, or business genius as people were prepared to go along with it...
Are you serious?
In retail, that's the mark up on the high street. There will be a distribution dependent on commodity, and I can accept that bikes may be below the median. But be under no allusions about what things cost and what we pay.
Why do you think Specsavers offer 2 for 1? And I know a lot about the mark up on glasses 😉
And yes, I perused the Giant trade catalogue, and 50% may be off, but not by too much.
I went in to my LBS the other week to get some gear cable outer thingy, and was surprised how cheap it was. i was expecting to pay double the online price but it was actually sligtly cheaper. I think the guy just rounded it up/down cos he was being nice, which means he'll get my custom again.
I know the bike shops don't make a massive profit on stuff generally but the seems to be to many that aren't willing to help themselves by helping the 'potential' customer. I know some of these customers will just go away and buy from the internet but if you just ignore them or shrug them off they won't come back when they brake the thing they bought of the internet fitting it!!
I rarely use a LBS but i do lots of research and if i still end up with the wrong thing i understand it's my fault, and i have to take the hit.
I've worked in both the trade and retail side of bikeland. Mark-up varies massively, depending on all sorts of stuff such as the tier the shop is on (depending on how much stuff they order from that particular supplier) and costs of raw materials/fuel (at one point the distributor I worked for was publishing pricelists weekly with RRPs due to the dollar/pound/yen having a bit of a spat).
As a rule of thumb, bikes and frames (and most 'high-end' parts, come to that) are not massive percentage mark-ups - if a shop selling good kit can make 30% it's doing very well. Consider that wages, overheads and a profit have to come out of this, it's not a lot.
Want to make good money in bikeland? Sell cheap bikes, low-end tyres and inner tubes, and keep a warehouse of them. Most LBSs are run by enthusiasts that love the sport, so deserve your support.
On the flipside, look at someone like Next, where the model is very different and 80% profit on the shop floor at full price (pre-VAT) is not uncommon. Why did companies such as Eisenegger (remember them?) manage to have 80% sales all the time? Because, as long as their clothes were marked at the RRP for a period of time (the exact amount I forget, but not long) they could then legally slash it, thus selling 'expensive' kit at a massive discount.
If you want to make money in retail, sell poncey t shirts or something similar.
Exactly.
And if you want to have to justify your existence to people who think you're charging too much for a frame because steel costs have gone through the roof, then open a bike shop.
Most LBSs are run by enthusiasts that love the sport, so deserve your support.
But the kit in these sort of shops is still VERY expensive. How can an entusiast who is a customer afford those prices? Everyone seems to go on about 'poor LBS' - however we all aren't Audi driving/expense account-types awash in money. We, the customer also have running costs; bills, lighting, fuel, heating and children.
What about us? Why is it 'evil' to want the maximum bang for your own buck? Why do some folk think its evil to shop online?
[i]however we all aren't Audi driving/expense account-types awash in money[/i]
That is why there are options like Acera 😉
hora - Member
But the kit in these sort of shops is still VERY expensive. How can an entusiast who is a customer afford those prices?
Does that consumer NEED xtr etc?
It is your choice of course, but the price you pay for a cheap deal online is that your choice of LBS becomes limited.
I can't even contemplating affording XTR. I NEED a new chainset at the moment. Currently I am running my 6yr old Saint driveside with a 3yr old non-driveside arm.
Shortlist is XT max and even the price (£130?) is too much I feel. I wonder how many people drop out of the sport/hobby due to the constant price increases? Its a bicycle, we aint talking that they are all carbon/ti beasts- alu mainly.
How much does it cost for a new starter motor for a car? Factor in economies of scale (lots more starter motors are made than XT chainsets), and £130 doesn't sound all that bad.
And of course there's Deore which is perfectly decent stuff.
Ill copy n paste my last response to this question.
Theres only 1 distributor I can think of that works on a pre VAT markup of 50% with a few of its lines. Factor in VAT and youre looking at 30% markup surely? Highest top rate buying 100k of bikes a year would probably get you a 36% markup, but to shift 100k of bikes youve gotta pack um high and sell um cheap.
In an ideal world where everyone sold at RRP youd make a gross profit of maybe average 30%, but everyone price shags, so in reality on bits 15% on a bike, 20%, but then factor in the time building it, selling it and the first free service which comes out of the price originally..
Put it this way, if you opened a 100k account with Madison tomorrow with one massive order of Shimano, on most lines youd still pay more that buying it from Rose Bikes AFTER paying your VAT at Shimanos top rate.
Basically if youre a shop owner theres more markup in buying from a german retailer than the UK distributor.
Basically if youre a shop owner theres more markup in buying from a german retailer than the UK distributor.
Why don't they do that then?
('s funny, I dinged a rim the other day and asked the LBS for the cost of replacing and fitting it. They looked it up on CRC).
Some do. But warranty would be a concern.
('s funny, I dinged a rim the other day and asked the LBS for the cost of replacing and fitting it. They looked it up on CRC).
Why not, its quicker to search crc for mavic 729 than get the mavic book out and work out vat and markup. CRC will list the RRP
Ah OK, that makes sense. I assumed they subsequently ordered it from CRC too but that could well be wrong.
http://www.rosebikes.co.uk/article/shimano-slx-crankset-hollowtech-ii-fc-m670/aid:591873
Why is it sooo much cheaper?
When I was doing my first bike build I bought a SRAM cassette from the LBS, I wanted it straight away and paid RRP which was in the order of 70 quid. Fair dos that was my choice. I looked it up on CRC or Wiggle later and their price was about 45 quid, I knew it would be less but was staggered at the difference. So that's how I buy them now. I don't get how I can be expected to chuck away 25 quid every time I want a cassette, to pay some sort of LBS tax.
I've no beef with the LBS at all (that's not my point here), in fact I can see a case that it's them getting stiffed.
Why aren't they getting angry on the blower to the distrbutor saying "how come CRC can sell this for 45 quid when our price to the customer is 70? That's costing us footfall and margin every day!" ?
Is there not a 19% tax on bike parts in Germany which gets removed for export?
Cos CRC dont get them from the distributor, or if they do they buy in such bulk they get can DEMAND a greater margin, if they dont get it they take their business to another EU importer etc..
Economics of scale. Stack it high and sell.it cheap.
Also, a warehouse in the middle of knowhere is cheap compared to a lot of prime hogh street locations.
Is there not a 19% tax on bike parts in Germany which gets removed for export?
No for EU - its tax at source. You can only apply for tax removed (as a customer outside the EU can apply in some circumstances from a UK store)
So its a 1% saving of tax, I see.
Of course the Euro / Pound rate makes a difference.
I want a Saint chainset again 🙁
hora - MemberI can't even contemplating affording XTR. I NEED a new chainset at the moment. Currently I am running my 6yr old Saint driveside with a 3yr old non-driveside arm.
Shortlist is XT max and even the price (£130?) is too much I feel. I wonder how many people drop out of the sport/hobby due to the constant price increases? Its a bicycle, we aint talking that they are all carbon/ti beasts- alu mainly.
You've proved my point. What's wrong with a 6-year old crank? Why replace it? 2 of my bikes have 21 year old cranks. What's wrong with something less than XT?
You feel you NEED XT when the only difference Deore would make is to vanity.
So trade price on a car is 40% of retail? No wonder Arnold Clark is so rich.
Last year I was looking at a new car with a RRP of £22k and the bloke at Arnold Clark let it slip that trade price was around £9k which accounted for the fact they could sell a 6-month old model for £10.5k and still make a profit.
cynic-al I'm running crank arms from two different bikes together. The Saint has been brilliant- I bought it when Saint was first released. The thing is I only run one bike, whereas alot of people spread wear and tear across at least two bikes over time. One bike/one build tends to accelerate wear.
I guess if I went Saint again the thinking is it'd last me again.
I briefly had old SLX- I could really feel it flex.
Are you sure about trade cost on new car(s)? I don't believe that there is THAT much margin afforded to the dealer.
