Discuss.

Inspired by repeated comments on margins, selling obligations, warranty etc.

Is the bike industry full of people that are out to fleece you of your money?

Every industry wants your money.

That’s why they exist.

I’m always impressed by the impressive, expensive vehicles that bike shop owners run around in. 😆

When I worked in the trade the typical margin for the shop was around 30-35% on most things. When you put this next to say something like coffee that has a 90% margin, you’ll see that its by no means great and you’d question which is truely effected by the marketing hype.

I’m always impressed by the impressive, expensive vehicles that bike shop owners run around in.

So you’ve seen the Aston Martin that’s parked up outside Merlin then…

Using the business week site, look up the reported margins (profit) for Giant Manufacturing, and compare them with some brand names you are familiar with (I used Verizon as an example). Not a perfect comparison, but bike manufacturing is much less profitable than running a phone network.(9% ebitda margin vs 34% ebitda margin if you’re interested)

Giant is the only publicly quoted bike company, so they release figures for investors. I picked Verizon as they also have a spread of products from low end low margin up to high end high margin.

If you do shed loads of volume, then those margins are ok. But you’ve got to take lots of capital risk to get that volume.

I’ve bored myself now, back to the olympics.

The bike industry huh.. Yup, it’s coke ‘n’ hookers all the way these days, laughing at those suckers that thought rock’n’roll was the road to fast living.. hah

To the OP – why not start up your own bike shop offering stuff much cheaper than anyone else? If the margins are so great, you’ll be a millionaire overnight.

Yep, if you want to make loads of cash, don’t go into the cycle trade

as above – not much money in bike retail

Isn’t the age old joke something along “How do you make a small fortune in the bike industry??. Start with a large one.” 😐

The saying goes in the bike trade, ‘if you want to make a million selling bikes, start with 5 million’. Let’s says you run an lbs that turns over 1 million per annum (and plenty don’t) and you see 30% margin on trade prices so you have 350k. Then you pay the VAT bill, wages, rent, rates, staff benefits and the various sundry costs and what are you left with? The notion of LBSs being rip-off merchants is a joke.

staff benefits?

Tea and coffee?

Tea and coffee? I think the OP has a point. The LBS owner I worked for was obviously “mugging me off” as I had to buy my own. 😈

C’mon Ray… don’t mack me off like a two bob…

I really really really like nice bikes, without the bike industry making money, I wouldn’t be able to buy nice bikes…….

Think of the bike trade like the movies. Your local cinema doesn’t make it’s money from bums on seats, it makes it by charging £6 for a watered down coke and some stale popcorn .

Your lbs doesn’t make much money from selling bikes, it might be lucky to scrape 10% off a bike after ordering, building, storing, selling, discounting, pdi’ing etc. They make it by getting 65% on tubes, workshop labour, yada yada.

Basically, Michael Bay is SRAM, Steven Spielberg is Shimano, and Tom Cruise is Mark Cavendish.

Yes, we’re all out to get all your money – we’re just spectacularly bad at it 🙂

Very few people go into the bike industry to make money. In fact I’m struggling to think of any that I know – most tend to take a big pay cut to do something they love.

druidh – Member

I’m always impressed by the impressive, expensive vehicles that bike shop owners run around in.

druidh, I am assuming from this that you have a rather modest motor vehicle?

I have a close friend in the local motor trade who has made just that observation (but without his tounge in his cheek) about a few of our local cycling dealers/distributors, and personally supplied a few of those rather nice vehicles to them too. A few of our local bike businesses are run very ‘close to the wire’ so to speak, but there are a few more who are doing fabulously well financially and have done for 3+ years now…

What I find curious I suppose is why the owner of shop A sems to do so spectacularly well compared to shop B, likewise for distributors C and D. 😕 (none of our local shops are particularly competitive on price or get the amazing bulk deals that the merlins/crc/ribbles get and all have pretty great staff and service really)…

What I find curious I suppose is why the owner of shop A sems to do so spectacularly well compared to shop B, likewise for distributors C and D

Successful ones are run buy good business people. Less successful ones tend to be run by cyclists.

Successful ones are run buy good business people. Less successful ones tend to be run by cyclists.

Agreed, and to add to that, successful ones have the right mix of both – business people who employ cyclists with relavent skills and then listen to them in some areas and politely ignore them in others )
The good thing about the bike trade is that if a company is in it purely for £ and have no idea about bikes, they’ll not do well. It’s an enthusiast-led industry and that means there’s a level of customer empathy not found in all trades.

Yep can’t get to the work bench for Ducatis and cases on Kristal 😉

aston by Loco Tuning, on Flickr

company car (not)

Dear OP,

Please see my meltdown on a similar topic yesterday. This should provide you with the information you so clearly need:
http://singletrackworld.com/forum/topic/6250-for-a-mountain-bike/page/3

You still lighting your cigars with burning £50 notes Jameso?

I don’t know about the industry as a whole but I definitely feel like a lot of mtb stuff is over priced and not even that good quality. Mostly the clothing and other accessories.

Well, if it’s overpriced and badly made then no-one will buy it and they’ll go out of business, surely?