[Closed] What is "trade" vs "retail" price on a new bike?

I guess my point is why is a bike shop's pricing structure any relevance to whether you buy a bike from them?

You decide you want a new bike (or one winks at you slyly from a shop window), you see how much it costs, you check you've got enough money, you buy it. At least that's what I do when I buy stuff...

I get bikes at trade + VAT through a sponsorship deal direct from the distributor and trade is ~ 45% of the RRP.

I’ve been sponsored by a shop (in fishing not cycling but a similar industry in many ways - discount online retailers, local shops struggling etc.) and my deal was “trade” on large items of tackle and “cost” on consumables. What that meant was I paid ticket price less VAT on big things and about 50% of the ticket price on consumables. I would also get 50% off any old stock (discontinued poles or rods).

The lads I knew who ride for shops have roughly the same deal, a new bike would be ticket price less VAT, an inner-tube would be 50% off, last years bikes 50% off.

Personally I just want to make an informed decision for myself on whether the additional service the bike shop provides is worth the price premium to me. You won't find me coming round your shop complaining about your prices, i'll make a decision on whether I think its a good deal based on the information I have and go with it. A clearer understanding of why an LBS is more expensive has made me more understanding of their prices, openness fosters understanding.

I get bikes at trade + VAT through a sponsorship deal direct from the distributor and trade is ~ 45% of the RRP.

Personally I just want to make an informed decision for myself on whether the additional service the bike shop provides is worth the price premium to me.

Ah, you see, that's a different thing entirely 😉

The additional services a shop provides should be reasonably obvious - you get to see and try the bike first, you get it properly and professionally assembled, you get free services afterwards, and you always have a local point-of-contact if and when there is any servicing or warranty problems.

Whether that's worth the extra cost is entirely up to you.

(Of course I'm speaking for other shops here mostly - most of what I do isn't available from other shops, and I do a lot of mail order)

If any of you came into my little bikeshop, I would have a rack of bikes, all on display at RRP. (if it wasn't for that we would all be zombies trying to outdo each other and making a skinned living for it)

I would be relaxed, friendly, ask a ton of questions, look yer up&down, get a bike out, set it up, & let you test ride it outside. We do a little deal on P&A, and two free services. Works pretty well for us.

Some peeps like to look at pics on a computer, and get a box of stuff in the post, some like to walk into shops and chat 🙂

Either way, I have customers that do both. Hell, one of my regs. wanted to build himself some wheels (I already did a set for him last year) so I helped him decide on rims, which he bought from us, he asked about hubs, i chatted about that for about 20mins with him. Two days later I called to tell him his rims were in, turns out he bought XT hubs online (I didn't blink an eyelid) then I sold him the exact spokes, gave him some advice on building them, (whilst I was fixing a bike) wished him luck & off he went.

Sometimes it happens both ways 🙂 as a shop, in brick and mortar, we (hopefully!) will always be here. Doing it for the love, not so much for the fast buck!

I ordered a rear shock from my one of my LBS, they left the receipt in the box...cost them £240, they passed it on to me for £380... Not bad profit for one phone call!!

You decide you want a new bike (or one winks at you slyly from a shop window), you see how much it costs, you check you've got enough money, you buy it. At least that's what I do when I buy stuff...

So you dont shop around and see if you can find that exact same thing at a lower price? Must be nice to be in that position. That to me is the "see how much it costs" bit that is the substance of this thread. Do you buy the Easton Haven stem winking at you from your LBS for £70 or do you spend 30 seconds on your smart phone to discover Merlin are doing em for £37?.....I wouldnt want to be in Xeo etcs position in this sort of market, and I think we've concluded shops survive on custom and loyalty through quality of service.

I think you misunderstood my point - sure, sometimes looking around for the best price makes sense and that's completely normal - but you don't need to know the exact way the price is worked out by your LBS, do you?

How does knowing the trade price of something help you?

Thank you crashtestmonkey, I have just purchased an Easton EA70 Monkeybar and was looking to buy a stem. That is not a bad price!

One of the mechanics at my local Evans was telling me about the Trek Remedy he purchased recently using his employee discount and a Ride2Work voucher. It was a third of RRP.

I still weep gently into my pillow thinking about it.

From a bike shop worker perspective i think Xeo hit it on the head with his post up there ^ , sure there are folk who are comfortable enough with their mechanical knowledge to shop online and fit the component themselves - that's great - go ahead and do that but if Xeo's customers are anything like our loyal customers they are a different breed entirely, we don't sell anything under the £400 or so price mark as the amount of time it takes to correctly set-up a cheap bike is not worth it and we know it's going to wear out too quickly and go out of tune/be heavy and cause dissatisfaction with the purchase'e so we spend time advising them and finding out exactly what they need in a bike, sometimes we advise against the all-singing-all dancing superbike and show them a lesser model which would be better for their needs.

Other customers come in and we'll spend time giving them advice on components/bikes/clothing etc...etc and then find out they bought them online for a bit cheaper than we can do, while that can be a bit annoying, in the grand scheme of things it doesn't matter as we gave them the advice to begin with and they may tell their friends of the good service and advice we gave them or they may (and do) bring their bought online bikes in for servicing or to fit their bought online parts - we don't turn anyone away as we cannot afford to, unless they bring in a cheap bike that is seriously not worth spending workshop time on to repair then we'll be honest and to the point rather than waste our time and their time and money.

Most of our customers (as we're in a small rural town) pop in on a daily/weekly basis just for a chat, bring us coffee, occasional beer if they pass the shop and see us working late at night or sometimes if we are on our own (there's only two of us) they'll pop down the town and buy us lunch etc.

Juast as Xeo says i do it for the love of working on bikes and i get a kick out of repairing someones bike to a standard that i'd be happy to ride, for 20odd years i've done jobs that i've hated, that sunday night feeling of dread as i realised i had another 5 days of drudgery doing a job just so i could pay bills that i ran up to help me forget i had a shit job in the first place finally came to a head 7weeks ago, i quit a very stable job that i had grown to detest and went to work for a mate who started up his own bike shop two years previously, i earn a pittance for someone of my age, i have to be very careful with what wage i do earn, very careful how much i use my car etc as petrol is so ****in expensive, very careful how much i spend on shopping etc, as for holidays?....ha ha!....not had one of those for 7 years and can't see myself having one for another 7 years but i don't care as for once in my life i look forward to going to work, i look forward to the challenge of whatever comes through the door, i look forward to talking bout bikes n' stuff wi customers everyday. I hope we can make a real go of the business, i know i'm willing to put the effort and time into it and i don't want to earn a shedload of cash out it either, as long as i can pay the bills and go home satisfied at the end of the day knowing i've made a difference that'll do it for me.

Perhaps some of the larger bike chains are making shedloads of cash but every small bike shop owner i know (and i know a fair few) are just making a living out of it and no more.

This is true.

The other point I'll make before bed is this: quite a few people aren't price-conscious. For them, the effort required to chase about and find the lowest price isn't worth the saving. Fr example if you're paid £30/hr and you spend an hour to save £10, you've just lost £20. Others know that bikes are pretty cheap (even expensive ones) compared to cars, houses or yachts, so can't be bothered worrying about price. And others know that good kit, knowledge and skills cost money, and don't mind paying for them. My parents just spent £2500 on a new chair for reading books in, for example, and waited 3 months for delivery. And I got the cast-off for the shop 😉

So, odd as it might sound, for lots of people the price isn't the most important feature of a bike.

Me i bought a 500 quid giant talon
Whether it cost 300 I doent care
I liked the man that sold it to me deal done
What's it worth ? Who cares it makes me feel like a kid when I'm out on it .the cost priceless

stuarty - Member

Me i bought a 500 quid giant talon
Whether it cost 300 I doent care
I liked the man that sold it to me deal done
What's it worth ? Who cares it makes me feel like a kid when I'm out on it .the cost priceless

Good point. The truth is (depending on the level that the shop is on with Giant) the bike would of cost him say between 290 and 325. So let's say for arguments sake it was 300. He has to give the tax man 83 of that. So the profit is down to 117. He has to pay someone to build it up, say 5? if he/she is quick. He might of had to pay shipping, if he bought in less than freight free, 10ish? He has to pay to dispose of the box, plastic etc. The list go's on. He might make 90 pounds? That's before he's paid the rent, electric, business rates - then given the tax man another wedge of corporation tax. If he give you 10% discount you are down to peanuts.

The long and short of it is that there is not a great amount to be made. If you are a small LBS with limited buying power and discount a high end brand by 15% off RRP you will not make a very much at all, that's how tight the margins are.

You pay your money and you make your choice, if there is a specific value proposition in purchasing from a LBS at a price that suits both you and the shop (that's the market) then do it, if not shop else where, but whining and moaning about LBS's ripping you off is not very likely to be true, how much do you spend on food every year? How much could you buy it for if you shopped around, yet are you on consumer forums demanding to know how much Tesco's pay for a loaf of bread?

I know that no one likes to pay more than they have to for anything, but as has been said previously, it's nor just about what you are walking out the shop with, it's about the service, the advice and the after sales care. If you don't give a hoot about that then shop online, but there really is no conspiracy.

I ordered a rear shock from my one of my LBS, they left the receipt in the box...cost them £240, they passed it on to me for £380... Not bad profit for one phone call!!

Then they pay the vat man £75. Assuming it was a special order they will also have paid postage. Then rent, rates and wages. Suddenly the net profit on your purchase becomes less impressive.

Corporation tax? What ? You mean as a buisness you have to actually pay this, sounds pretty proposterous in this day and age.

How does knowing the trade price of something help you?

in which case I did miss your point, I dont think trade price is relevant, esp when the big mail orders are paying and selling for less than trade prices by grey importing.

curiousyellow, theyre £66 now @ merlin but earlier this year they were doing bars and stems at close to half price.

The other point I'll make before bed is this: quite a few people aren't price-conscious.

thats the point I thought you were making first time around 😀

I ordered a rear shock from my one of my LBS, they left the receipt in the box...cost them £240, they passed it on to me for £380... Not bad profit for one phone call!!
Then they pay the vat man £75. Assuming it was a special order they will also have paid postage. Then rent, rates and wages. Suddenly the net profit on your purchase becomes less impressive.

Do they?

They paid 240 plus VAT so incurred an ITC (input tax credit) of 48 quid.
They sell for 380 incl vat so collect vat of 63 quid.
Ultimately on this particular transaction they owe the tax man 15 quid. right?

From that 15 quid they owe the tax man, there may have been vat on the shipping. They may have vat they can write off against other expenses

Corporaton tax?.. aren't we all lead to believe there no money to be made in running a bike shop.. in which case the corporation tax liability is zero.

if theres no money to be had running a high street coffee chain or even a mobile telecomunications supplier ,theres definitely no money to be had in running a bike shop...

They paid 240 plus VAT so incurred an ITC (input tax credit) of 48 quid.
They sell for 380 incl vat so collect vat of 63 quid.
Ultimately on this particular transaction they owe the tax man 15 quid. right?

Sale price is £380. Of that, £63 goes to the VAT man, £10 goes on shipping (approx, for a one-off order), leaving a profit of £67.

And that's exactly the sort of misunderstanding that occurs when folk find out what the Trade Price is!

And that's a profit margin of 17%. Doesn't sound all that impressive any more, does it?

Corporaton tax?.. aren't we all lead to believe there no money to be made in running a bike shop.. in which case the corporation tax liability is zero.

Well i'm not sure if the UK tax laws have changed, but when i had a bike shop we paid ours. If you are not a Ltd Company thou you wouldn't have this. If you are not paying this tax then you are not going to be able to live much of a life on your pay alone, income is derived from dividend payouts. They might of closed that loophole thou?

A shop will be doing well to make between 25% net on all sales repair and service over the year. So say a shop takes 200k a year (prob about average for a small well positioned shop). It has 50k to split between all the staff and other costs. No there is not much money in the bike trade.

Jewelery and high end watches, now that's a different fish of kettles.

I think there are a lot of other industries making more out of their customers than the bike industry.

To produce bumpers for a car it costs around £7 - front and rear and that's painted. How much does the dealer charge?.............

An engine is around the £50 mark.

To produce bumpers for a car it costs around £7 - front and rear and that's painted.

Is that the material cost? Does it include tooling, distribution, R&D, marketing, supply chain, QA, rejects etc? Is it the cost per unit of a massive production run?

Carbon fiber is pretty cheap by the kilo, as is epoxy. Much less than the 2000 pounds per kilo of cervelo's RRP!

😉

As said there's so many variables,

However (as an example) if something has an rrp of £100, and a trade pride of £50 (which isn't very common) the shop buys it at trade plus vat, (so £60 not £50) and then loses £20 to the taxman as vat at final sale, leaving £20.

Not a lot really!

Richpenny - that's everything in.

However thats on a constantly running production line making around 1 million per year. Still cost you a lot more at a dealer!

However (as an example) if something has an rrp of £100, and a trade pride of £50 (which isn't very common) the shop buys it at trade plus vat, (so £60 not £50) and then loses £20 to the taxman as vat at final sale, leaving £20.

Um, no. In that example I buy it at £50+VAT=£60, but I reclaim the VAT. I sell it at £100 inc. VAT, but £17 of that goes to the VAT man. So my profit is £100-17-50=£33.

Yes I know I left out the reclaimed lower vat price. However you do have to pay it, and then claim it back but its another step and delay in finances for a small shop (assuming you reclaim monthly)

But more importantly, Why are you paying 17% vat and not 20%? 🙂

He isn't........

VAT is normally reclaimed quarterly, but it's also paid quarterly so that evens out.

And I am paying 20%. I think you're confusing inc and ex VAT 🙂

I think that you'll find that on the whole, provided that stock levels remain constant then you are holding the money for the tax office, not the other way around, provided that you are actually paying your VAT, not reclaiming VAT each month/quarter. The only time i did that was before I opened and was stocking up.

We buy stuff at trade. We sell stuff, (generally, but often with discount) at RRP. Lots of stuff happens inbetween. My wife deals with that, at home, late at night (her brain kicks in at around 11pm) whilst I dream about our next promo, idea, brand, & even more so at the moment, shop move. We got two weeks to get it open, without closing the current one. Its been a long 3 months of toil, and I sit here right now typing "long legal words" in google to get accurate definition from our 50+page contract.

Yes, hopefully we will oneeeeeeeeeeee day, turn a profit. But it will be bloody well earned.

I haven't written the above to justify our existence or garner sympathy,or to make anyone think that IBD dealers are either to expensive, or to valuable, but for a millennia man has made a living from another.

But if you actually walked into your local bikeshop, hung about a bit, got to know the worker ants in there, you might like em' (although you might not!) but you might learn a few things (after all, fixing bikes all day, every day, along with the immense amount of knowledge is pretty priceless) so you might learn a few things. Even if you have been riding for 20years! 🙂 x

"I know that no one likes to pay more than they have to for anything, but as has been said previously, it's nor just about what you are walking out the shop with, it's about the service, the advice and the after sales care. If you don't give a hoot about that then shop online, but there really is no conspiracy" - alexathome - I like this. Especially the last bit 🙂

(Sorry, cant do that clever "quote" thing !

Yes, especially as anyone who knows the bike trade knows we never, ever agree on anything - organising a conspiracy is just never going to happen 🙂

Many are also too ****less...

More well meaning BS?
You don't state the brand so at least you're not biting the hand that feeds you. Different brands have different pricing structures. Different retailers get different prices.

Ha another 'I know it all keyboard warrior', you don't know me yet assume it's BS!! I just answered the original question, straight to the point, no B.S!! i.e. What is the actual 'Trade' price that the distributors have to pay to my bike manufacturer v the RRP.

Yes there are then different retail 'trade' prices based on volume, a lot of us shop at Costco, Macro etc, we understand the concept 😉

I don't have to state the manufacturer, and TBH it doesn't make any difference if I did as all Manu's are going to be a similar figure, if not less, as my bikes come from a European manufacturer that doesn't turn out a fraction of the bikes that Giant, Specialized et al do. I just know for a fact that they supply both the UK and the Nth American distributors at that 'trade' price ratio as I've had my bikes from both of them since 2008.

I currently get them through the Nth American distributor, so I get it at 45% of the $ RRP and seeing as tax over there is only 12%, it actually ends up cheaper than UK 'trade' price 😆

I don't have to state the manufacturer, and TBH it doesn't make any difference if I did as all Manu's are going to be a similar figure, if not less

It's so amusing/frustrating/ridiculous (delete as appropriate) when someone who "knows everything" shouts out a statement such as this. Because if you were in possession of any real facts, rather than just your own experience and some heresay and conjecture, then you'd realise what you've said is complete bollocks!

Some manufacturers trade prices are better than others, and some by quite some margin. But none that I know of are approaching what you seem to be paying (you're probably paying trade cost to the distributor, not to the retailer), and many/most are far more expensive. It's not uncommon for a £1000 bike to cost a retailer £700, then add the VAT to that £700, cost of building it, storing it, first free service and the fact it might be sat on the shop floor for some time so hence gets discounted in the end, and you'll see it's not quite so profitable as you're making out!

Buying bikes direct from the importer makes a big difference of course. The guys who win when it comes to prices are the guys who work for the big companies, and get their bikes at what they actually cost the importer to buy (not the retailer). These very few, and very lucky guys, are the ones that will end up with bikes for less than 50% of the RRP cost, but for the guys working in your LBS they're not saving an enormous margin buying their own bikes than you could get if you shopped around/online most probably.

i used to own a shop that sold marin and giant, and on a bike that i sold for about 2300, i got about 250-300 quid, that was on there rrp

Buying bikes direct from the importer makes a big difference of course. The guys who win when it comes to prices are the guys who work for the big companies, and get their bikes at what they actually cost the importer to buy (not the retailer). These very few, and very lucky guys, are the ones that will end up with bikes for less than 50% of the RRP cost, but for the guys working in your LBS they're not saving an enormous margin buying their own bikes than you could get if you shopped around/online most probably.

That's true! I have had a few frames at this level, and the difference is quite staggering. This is also how Pauls etc manage to discount so heavily. In my opinion it is damaging for brands to do this thou as it becomes their one of the only outlets. Look whats happened to RM and Tomac, I don't think any LBS's would be likely to take them on, reducing the desire for a consumer to own one, as warranty issues and servicing etc is problematic when there are few dealers.

Some manufacturers trade prices are better than others, and some by quite some margin. But none that I know of are approaching what you seem to be paying

Which ones do you know of? How many years 'in the industry' have you under your belt?

Some manufacturers trade prices are better than others, and some by quite some margin. But none that I know of are approaching what you seem to be paying

Which ones do you know of? How many years 'in the industry' have you under your belt?

This is also true. margins vary between 42% (very rare, on low end cheaper brands when they have too much stock etc) and as low as 23% on high end frame sets. These are the two ends of the spectrum, the usual for big distributors will be as stated earlier in the thread between 32% and 37% depending on quantities ordered etc.

That's not really disclosing any industry secrets regarding pricing structure, just an overview, which others have outlined earlier.

It's so amusing/frustrating/ridiculous (delete as appropriate) when someone who "knows everything" shouts out a statement such as this. Because if you were in possession of any real facts, rather than just your own experience and some heresay and conjecture, then you'd realise what you've said is complete bollocks!

Some manufacturers trade prices are better than others, and some by quite some margin. But none that I know of are approaching what you seem to be paying (you're probably paying trade cost to the distributor, not to the retailer), and many/most are far more expensive

'mboy' - So my own 4 years experience with one manufacturer isn't 'fact' then ❓ I have spreadsheets with distributor and RRP prices on it sent to me every year, so what part of this isn't a fact? There are 9 other riders in the team who have also had these deals in the past 4 years, so I know it's not a one off deal for me and that will be 9 other people with the same 'experience', is that still not a fact??

I meet and talk to the Engineers and Marketing men from the manufacturer every year too - another 'fact'!!

I also stated that I was getting my bikes off the distributor, but you dispute my figures and then just confirm what I stated!!

So who is talking bollox exactly???

TBH I'm not bothered what you think, I'll just smugly carry on riding my new bike every year that's cost less than 50% of the UK RRP 😆