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

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  • What is "trade" vs "retail" price on a new bike?
  • Not having a pop at shops or anything, I’m just curious to know what % difference there is typically between what a shop/industry rider pays, and what customers pay?

    why would a retailer tell you their cost? its not only that of the bike it has to account for utilities premesis staff costs etc too, do you want to know these figures too?

    PS ‘trade price’ can also cvary by business depending on ‘through put’ of stock, more sales more purchases from supplier can mean larger dicounts

    thepodge
    Member

    Huge variations between shops & suppliers but on a full bike I’ve been told it’s roughly a 15% mark up

    Premier Icon bruneep
    Subscriber

    To make a living?

    Why is profit such a dirty word?

    account for utilities premesis staff costs etc too, do you want to know these figures too?

    Er, no. Read the thread title again. And if you don’t know, why bother posting?

    A good friend of mine used to run a bike part import business. Used to pay ~£80 for frames he’d then sell for £300. And he sold quite a lot of them!

    Then CRC got in on the act started dealing with said frame/part business so I dread to think how little they pay considering the much higher amount of stock etc they must buy.

    Premier Icon akira
    Subscriber

    Not really one answer, varies on brand and shop. And quite rightly I doubt anyone will tell you actual figures, the profit most shops make on bikes is pretty small, especially when you add in things like 0% finance and price matching.

    perthmtb
    Member

    Huge variations between shops & suppliers but on a full bike I’ve been told it’s roughly a 15% mark up

    Gotta be more than that. I just bought a 2013 bike from my LBS at a 20% discount. Now, I have bought three bikes from them in the last 18 months so they look after me, but I know they’re not going to sell at a loss!

    tarquin
    Member

    I would expect it to be quite a lot for bike shops to even stay in business.

    Can’t imagine that they would sell many bikes a week, especially above the 1000 mark so a large profit would be required for the business to be profitable. Repairs and such may just cover wage costs of staff and tooling etc.

    bencooper
    Member

    Shop riders don’t usually get things at trade price, they get a discount – with some companies that discount is quite large as its subsidised by the manufacturers who like having enthusiastic shop staff riding about on their kit.

    mechmonkey
    Member

    guess based on other similar industries would suggest that trade price is ~ 40-50% of retail.

    Premier Icon mos
    Subscriber

    A friend of mine that used to work at an mtb manufacturer in west yorks told me a rough guide was that they cost 1/3 of the rrp to make & they then sold them to the shops for 2/3 of rrp.

    bencooper
    Member

    Tarquin, largest profit is on the cheapest items – profit on an inner tube is much higher than on a bike, just as Tescos make a much higher percentage on potatoes than on TVs.

    Premier Icon mattjg
    Subscriber

    I doubt the gross margin on bikes is as low as 15% but I don’t know the facts.

    Don’t forget you’re paying 20% VAT too. So if a retailer buys a frame for £100 and sells it at a gross margin of 15%, that’s actually (100*1.15)*1.2 = £138 to you.

    Premier Icon njee20
    Subscriber

    A good friend of mine used to run a bike part import business. Used to pay ~£80 for frames he’d then sell for £300. And he sold quite a lot of them!

    That’s far from typical!

    On complete bikes (and as said it depends on level of dealer and value of bike (better margins on cheaper bikes usually), it’s more than this:

    roughly a 15% mark up

    And less than this:

    trade price is ~ 40-50% of retail

    Not a vast amount, and worse than many components.

    The margin will be higher to the SRP <edit than 15%>, but what the actual price is that’s on the bikes varies from shop to shop

    Finance stuff is usually a money maker – the finance companies are betting that you’ll mess up on the repayment and end up paying well over and above

    Trade price will be in the region of 50-60% of RRP, depending on quantities. Profit will be in the region of 10-20% of RRP for the shop to be healthy.

    Big shops like CRC/Wiggle will get cheaper trade prices due to the volume they sell, they will also have lower fixed overheads so can afford to take a smaller markup, and with such a large volume of sales, can probably afford to take a smaller %age profit per item as well.

    When I worked in a shop, trade + vat was about 30% off. Sometimes more sometimes a lot less.
    The old intense importer springs to mind, 200 quid profit on a 2.5k frame.

    Biscuits anyone? 😀

    IIRC this topic is banned on the southerndownhill/ride io forum. 😆

    Premier Icon jambalaya
    Subscriber

    Supply chain …

    It’s not unusual in retail (generally not just bikes) for something like the following – assuming unit sold at 100

    Sourcing 20 (ie manufacturing)
    Importer 30
    Retailer 30
    Tax 20

    For bike this is why brands like cube which effectively don’t have an importer have an advantage. Remember you have the transport costs (which are generally very low if you have scale) and costs like insurance and actual losses if stuff is damaged or turns out not to be manufactured properly. I would be surprised in the UK if VAT we pay is actually more than the manufacturing cost of the items.

    My Mrs works in interiors – the mark up on furniture etc is bigger than above – by the time costs like rates etc are paid the shop breaks even

    jackthedog
    Member

    Why is profit such a dirty word?

    Because life is a competition. Nobody likes anyone else to profit.

    tarquin
    Member

    Tarquin, largest profit is on the cheapest items – profit on an inner tube is much higher than on a bike, just as Tescos make a much higher percentage on potatoes than on TVs.

    Largest percentage profit, but not largest profit 😉

    You would need to sell a lot of inner tubes making a couple of pounds on each!

    Need to run a jewellers, 400% profit on stuff!

    Premier Icon DezB
    Subscriber

    From bruneep’s link…

    Thought it said ARSE when I saw the thumbnail. Lovely “new design uniqueness”

    Sorry, carry on with the bickering

    Completely off topic, but there’s nothing immoral about profit IMO, only profiteering. No-one is suggesting that businesses in the “food chain” are profiteering to the detriment of others. Are they?

    andyrm
    Member

    I’m actually very against these kind of figures being published. They oversimplify the economics of business operation and give fuel to idiots to try and leverage price down, putting the squeeze on independent businesses.

    I’ve seen first hand customers in a mate’s shop saying “yeah but I know how much you can buy it in for, so why do you need to make that much on it?” Errrr because you fool, it’s got to pay the rent on the shop, the wages, the electric, the advertising costs, VAT bill and turn a profit end of year so we’re here in 12 months.

    bencooper
    Member

    I just bought a 2013 bike from my LBS at a 20% discount.

    You see, that’s insane. Sadly it’s not an uncommon story on the bike trade forums – people want a shop to price-match an online price, but want to spend an hour talking to the shop about the bike first, then have the bike assembled, then get their free first service.

    They want all the benefits of a LBS but don’t want to pay for it.

    bencooper
    Member

    I’m actually very against these kind of figures being published.

    Which is why I don’t think anyone in the know has actually named figures 😉

    Premier Icon mattjg
    Subscriber

    I’m actually very against these kind of figures being published. They oversimplify the economics of business operation and give fuel to idiots to try and leverage price down, putting the squeeze on independent businesses.

    That’s daft, it doesn’t give them any leverage at all.

    Customer is well entitled to ask for a discount. Shop is equally entitled to say no. Customer may well go and ask somewhere else and get the same answer.

    It’s a free market in operation.

    xeo
    Member

    hhmm, A lot of opinions here, but no one with a certain answer .. I know full well the average margin made on bike sales in IBD’s, but after reading the above, not sure I should say!

    Its such a long, dragged to death subject on forums..

    I guess, the danger is in those whom (as its states on Privateer magazine, “for those who know the obvious”) spend time on forums, & spend most of their money online, wanting to justify why they do so. The other group being IBD customers, whom, in real life, walk into good bikeshops, make friends, buy stuff, get free advice, & get their bikes fixed, & are happy with that. We have plenty of the latter as our regular customers, & also some of the former, which is cool.
    What a bike shop makes on bike sales is their business, it varies, (not massively) but if we didn’t, we wouldn’t exist.

    Premier Icon edsbike
    Subscriber

    It’s usually less than you think. The more obscure the brand, generally, the less it is.

    When we bought accessories in bulk from our biggest brand, there was 40% margin after the VAT was paid. Which was the best I ever saw. Although that’s a lot of gloves and bottle cages that you need to sell to make a living.

    Margins are bikes are typically less. I’m not sure what percentage of the margin then went on rates, wages etc., but basically, giving someone 10% off pretty much halved the profit.

    I just bought a 2013 bike from my LBS at a 20% discount.

    They will have made almost zero profit on this, but, it’s cash back in the bank that can then go on new, more saleable stock. Running a good shop is about stocking the right stuff at the right time, and there is a lot of risk trying to second guess how many (e.g.) £900 19″ hardtails you might sell in the next 6 months.

    Premier Icon mattjg
    Subscriber

    I don’t think you “trade” folks have any reason to feel so defensive really. Are your businesses really so threatened by discussing the business model a little? (Answer: no, because starting and running a bike shop is, I’m sure, bloody difficult and a lot more complex than buying a box for A and selling it for B!).

    clubber
    Member

    I worked in bike retail about 15 years ago. As a typical figure, the markup on bikes (trade to RRP) was about 30-35% as I recall. That was with Giant, Cannondale, Scott as the main brands.

    Selling bikes off at 20% off is just to cover costs and keep stock current. Makes more sense than hanging onto a rapidly depreciating asset in the hope that you’ll sell it closer to RRP.

    Premier Icon mboy
    Subscriber

    They want all the benefits of a LBS but don’t want to pay for it.

    There is a lot of that as you know, I see it too, ultimately as you know it’s about educating the customer as much as anything without making them feel stupid for making the wrong choice. I’d far rather someone bought a bike online (at a price we could realistically not match, or if we did we’d make very little on) but then came to our shop for servicing than be had over a barrel on a new bike price and feel resentful about it.

    We’ve got several customers like this, and to be fair, I’d guess more than 50% of those who’ve bought online or elsewhere will actually buy their next bike from us at RRP (or close to it) because these are the people that go away and rave about our service to their friends and colleagues and have helped our shop grow so significantly in the last few months that we’re actually looking to move to a bigger premises!

    Which is why I don’t think anyone in the know has actually named figures

    Hehe. It’s no secret a shop exists to make a profit, without making profit everyone would have to work there for free! But I can tell you, having worked in several other industries in the past, the Bike Trade is not run on huge margins for sure. Even things like inner tubes aren’t that cheap to buy in any more, things like tyres and mechs I can often buy from CRC/Merlin/Planet X etc for cheaper than I can get them from our suppliers (once you’ve added the VAT) which DOES NOT HELP I can tell you… But then if you offer a good service, you’ve got nothing to be worried about as people will come back, and will buy from you in the future, and recommend you to their friends too!

    The same is true in the car industry when it comes to parts and servicing too. If you’re savvy, you can always shop online and find parts for your car for cheaper, and if you spend days looking you can always find a mechanic who’s willing to work for peanuts (or is a friend of a friend etc.). But often people are short of time, and willing to pay more money for the level of service they receive from a main dealer, or the convenient garage just round the corner, as the level of knowledge and service is (hopefully) worth it. Of course there are garages (and bike shops!) out there with very poor service and still charge way too much though, but then these will lose customers in the long run and won’t stay in business.

    A good friend of mine used to run a bike part import business. Used to pay ~£80 for frames he’d then sell for £300. And he sold quite a lot of them!

    About as untypical as you could get. Normally, if I sold a £300 frame to someone, once you take the VAT off it the shop is getting £240 for it. At the price it would normally cost us, we’re lucky if once I’ve thrown the free bike build in on it (as you often might if your customer had bought a new frame at RRP) with my labour normally being costed out at £35 per hour, by the time I’ve finished building the bike we’ve essentially not really made a penny on it (certainly if I could have been doing other jobs instead it would have been far more profitable)… BUT… We now have one happy customer, who will go and tell his friends and colleagues about our shop, and come back and spend more money with us, get his bike serviced with us etc. So it has been worthwhile of course.

    Too many bike shops are too scared of the online businesses out there. All I can say is that yes, they will often beat us on price, but they certainly can’t come anywhere close to the service, and at the end of the day, people buy from people… Good service will always keep you in business!

    druidh
    Member

    This thread isn’t complete until Hora comes on to tell us how bike shops are all ripping folk off and how he could easily become millionaire bike shop owner if only he had the guts to put his money where his mouth is.

    cynic-al
    Member

    I know, but I’m keeping schtum for now. pleaderwilliams is wrong and optimistic is all I’ll say, njee is closest.

    I don’t know all the financials of bike shops but I do know that in my workplace the 3 employees earn a whole £1-£2 above minimum wage per hour, don’t get any sick-pay nor non-stautory holiday allowance etc (not talking 17 year olds here either, 30s-50s, some with dependants).

    I tend to find that people who ask for discounts on bikes, citing web prices or discounts they can get (sometimes after 1-2 hour’s advice/discussion) rarely becoem customers, as they are presumably buying everything on price (which I can understand).

    bencooper
    Member

    I’m happy to discuss the model, but I don’t think giving specific figures means much – for one thing they’re so variable. Okay, gross profit on bikes I sell varies between 10% and 50%, how’s that?

    buying a box for A and selling it for B!

    Trouble is, some people do make that comparison. If you buy online it often is as simple as shifting a box from “incoming” to “outgoing”, but if you buy in a shop you also have the time taken by the salesperson, the time taken to assemble the bike, and usually the time taken to do first and possibly ongoing services. So it’s not a simple like-for-like comparison at all, really.

    Sodajim
    Member

    Smallish independant LBS will be about a 30% average across the brands on bikes. Thats based on distributor RRP NOT what you knock them down too, so basicly the best part of sod all considering the amount they have to buy in each season just to be able to hold a brand. You can see why so many fail and why they have to charge a “fair” fee for repairs to survive.

    Premier Icon mboy
    Subscriber

    I don’t think you “trade” folks have any reason to feel so defensive really. Are your businesses really so threatened by discussing the business model a little? (Answer: no, because starting and running a bike shop is, I’m sure, bloody difficult and a lot more complex than buying a box for A and selling it for B!).

    The problem is, whilst you’re absolutely correct, you have WAY too many internet warriors shouting from the rooftops about how easy it is just to buy a box for £1000 and then sell it for £1500 lets say… Then they come into your store, to tell you this, and how you should feel guilty for trying to rip them off!

    The flipside is as you’ve quite rightly pointed out, it’s a lot more complex… But build your reputation around the service you offer, rather than just heavy discounting, and you will slowly but surely maintain a profitable business.

    Selling bikes off at 20% off is just to cover costs and keep stock current. Makes more sense than hanging onto a rapidly depreciating asset in the hope that you’ll sell it closer to RRP.

    What he said. Can tell you that selling some bikes for 20% discount means they’d literally be being given to customers at cost price. Not all granted, and discounting is a good way to get rid of old stock to make way for new current models, but discounting so heavily a brand new model is rare.

    mr_mills
    Member

    perthmtb – Member

    Huge variations between shops & suppliers but on a full bike I’ve been told it’s roughly a 15% mark up

    Gotta be more than that. I just bought a 2013 bike from my LBS at a 20% discount. Now, I have bought three bikes from them in the last 18 months so they look after me, but I know they’re not going to sell at a loss!

    Same here. I actually got 27% off a 2013 bike. I didn’t haggle or owt, just asked what sort of deal he could do me.

    Premier Icon mattjg
    Subscriber

    The problem is, whilst you’re absolutely correct, you have WAY too many internet warriors shouting from the rooftops about how easy it is just to buy a box for £1000 and then sell it for £1500 lets say… Then they come into your store, to tell you this, and how you should feel guilty for trying to rip them off!

    You just have to say “sorry sir/madam, I can’t help you any more with that” and move on.

    As I said, it’s a market, and it works in both directions. Customer can go elsewhere, but shop is equally entitled to look for other customers.

    rootes1
    Member

    also now may purchases from shops are made where the shop does nto hold the stock directly, you purchase and the item is delivered from the distrubutor or manufacture eiether direct to you door or for a bike to the shop to be setup – this lessens the risk to the shop in holding dead stock

    As for discounts, when i was a saturday boy…was told ‘When the customer asks for a cash discount, offer goods instead of money off’

    This is better for the shop as they can offer the value of the goods and the customer sees the value but the shop has paid less for it so does nto loose as much.

    clubber
    Member

    also now may purchases from shops are made where the shop does nto hold the stock directly, you purchase and the item is delivered from the distrubutor or manufacture eiether direct to you door or for a bike to the shop to be setup – this lessens the risk to the shop in holding dead stock

    That works better for higher value items – at the lower end (which, unglamourous as it is, is where most shops make the money that keeps them in business) customers expect stock and will often go elsewhere if it’s not in the shop when they want it.

    ojom
    Member

    also now may purchases from shops are made where the shop does nto hold the stock directly, you purchase and the item is delivered from the distrubutor or manufacture eiether direct to you door or for a bike to the shop to be setup – this lessens the risk to the shop in holding dead stock

    That only works for bikes really. plus i would say it’s a bit misleading to customers marking something in stock that is actually not but is at the supplier.
    People visiting a shop for day to day small items tend to want them when they visit and that model falls down.

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