Dumb question for LBS owners:
 

For any LBS owners out there -

I order parts through my LBS all the time. They never charge back shipping to me and the prices are always within +/-$1 of Amazon, Jensen USA, Nashbar, all of which I believe have very fair pricing for online retailers.

I shop with my LBS for a lot of reasons which you can probably guess at, but my question is are they making money on these transactions and if so how? I would hate for them to take a loss on my piddly little orders. How can they price parts with the online retailers who have a fraction of the overhead? I don't think this is unique to my LBS, there's a few shops I have noticed who price parts this way.

I'm sure they are. The thing I have noticed is that online prices are very close to the price I get from my lbs unless it's something the online place got surplus somehow. Since I get a fairly large discount from my lbs, I always save money going through them. If they can't make money with my normal discount, they let me know and charge me more.

A well managed shop with decent volume gets free shipping on a lot of stuff, so that's not a concern.

The traditional smartass answer is, "They lose money on every sale but they make up for it on volume."

I do not know the actual answer to your question, but congratulate your shop if they've figured it out. The internet did not exist when I was in shops but catalogs from places like Nashbar, Performance and REI did and they were a challenge even then.

Usually shop owners are still making money a couple of ways (not a huge margin, mind you, but it's there). There is a 'fixed' price in shipping because they are constantly getting large shipments of parts from their vendors, so throwing more parts in doesn't add to the shipping cost, it's already factored into their pricing for all the stuff they sell. Many LBS will get wholesale pricing which is slightly lower than retail (again, not huge margins, but should be enough for a good store to stay in business and turn a profit).

So that bar tape (to take a very simple example) they sell to you for retail, which is more or less the same as retail you'll get from a lot of online vendors like Amazon, sells for $10. They paid their vendor $8.50 for it, and bought 20 of them with that order, plus all the other parts they get in that shipment. That's just how retail works.

I figured the margins, if existent, were not huge. Lucky for me the shop in question always seems to be busy so hopefully there's some volume behind it. Thanks by the way!

For sure! It's a wild world out there!

I forgot to add they offer free installation on most purchases so makes me feel almost guilty buying stuff from them, having them slap it on at the same price Amazon charges me!

They did say they'd charge $10 to install hydro brakes because of the labor involved in cable shortening.....

buy it on-line exception...
 

I do try and keep up with what my LBS stocks and avoid ordering through them anything costing less than $20 if they don't normally stock it. Not to save me anything, but I figure they can't be making anything on that once the labor/handling time if accounted for.

I suppose it matters the time of year? If it's January and they're slow then there's no real pain inflicted if they're not busy.

If they're slammed and they have to pause a repair to wait on you then yeah, time is money.

I am an accountant - starting to remember all my cost accounting coursework now....

Overall, I like your approach.

Good point, surplus sellers like Random Bike Parts will get some smokin' deals sometimes if it just so happens they have the one thingy you need but yeah, the full catalog sites like Nashbar and Jensen USA, usually within a trivial margin.

Forgot to mention also, I make every effort to pay in cash (actual currency) at my LBS since the owner has expressed to me the hardship created by processing fees. It's no additional trouble to me and helps him with his bottom line. He will also offer cash discounts sometimes but I don't come to expect.

Simple answer: MSRP agreements require all retailers to advertise the covered products within the MSRP range. If any covered product is advertised for less than the MSRP the retailer loses access to all covered products. Retailers don't want to lose access to products so they abide by the agreements. Hence all retailers advertise the same price for the same product.

If they are matching prices on parts and not charging labor, I'd advise you to enjoy shopping there while they last. I can't believe the guy is making a living unless he's blowing through his trust fund or laundering money. Or something.

Hahaha will do! I don't get it either, especially as a CPA (hence the post). I also know for a FACT his mechanic eats time (when I can see my bike is on the stand for 45 mins and they charge me 10 mins of labor)

They do a lot to create a positive cycling culture (group rides every Thurs on gravel, participation in trail building, MTB groups, etc). I want to see them around for a long long time.

They are super down to earth guys but they also sell some REALLY high end stuff (only Evil, BMC, Norco, and Open dealer in a 275 mi radius, also they sell bread and butter brands like Kona and Rocky Mountain) ... maybe they make their $ off of servicing their high end customer's stuff??

10 bucks to install hydro brakes? Includes the whole set up, ready to ride? Holy smokes that is giving it away! Gotta wonder how they do it.

The shop that built my custom ti frame and built it up gave me a discount for paying by check. The discount was greater than the money I would have received if I had used my REI credit card. Didn’t expect it, but I brought my checkbook with me and figured I would ask.

If the agreement requires adhering to MSRP prices in advertising, I would think they'd afoul of federal law in the US pretty quick. Mail order record sellers in NYC beat the MSRP on LPs in the 1950s, IIRC (but I can't find the info via google or duckduckgo search). Or have the MSRP thieves bought enough congressmen to get the law changed?

I think most bike shops get most or all of their merchandise through QBP, so when you order some small item, your order gets added to a bunch of others and the shipping charges get distributed among those orders. The truck doesn't have to visit their store just for something like a set of brake levers, so I'd think they save on shipping costs.

Just a guess.

$10 per axle but still.....

Two weeks ago I went to my LBS for a pair of rim tapes and the shop wanted to charge me 2.5x the online price, and that did not include installation. I told the owner about the online offering and he seemed to say that such thin profit margin was impossible. I walked away. Am I being a bad customer?

Not an owner, but...

As mentioned earler, not abiding to MSRP will get your account pulled. Shops going out of business do this, as they don't care anymore.

Wholesalers have tiers; the more you buy, the lower your price is. Different shops may not pay the same price for the same part.

I worked a brand theme bike shop for a time. Everything we got that was themed was at a substantial lower cost than MSRP and made good money on those items when and if they sold.
Otherwise, ALL of the rest of the off brand items we purchased were through a distributor that any/all bike shops use. I know there to be a couple (can't recall the name) that would be well recognized among shop owners and such...anyway...the pricing for those wasn't significantly better than what could readily be found online, yourself. IMO the coolest aspect was the big color catalog with all the parts in it, no web searching. But, anyway, the money being made on those parts wasn't specifically keeping the door open. It was value added and the opportunity to charge some shop time installing, etc.

I personally try to support privately owned bike shops when and where I can, in spite of price. Unfortunately for this area there are none that I am currently aware of to spend with.

I once mentions to the owner of a LBS that I'd like to buy my tires from him but his price was considerably higher than what I could get if for a Mountain Equipment Co-op (before they went crazy with their prices LOL) and he said he'd match their price. He told me he'd match any of their prices. I told him that he couldn't make much money doing that. he told me that if I bought the tires or other stuff elsewhere that he'd make nothing. I don't know what his markup was but he was a really decent guy who loved bikes, riding them, and encouraging others too. He was a licensed coach and offered coaching sessions as well as wind-trainers for winter use in a back room of the shop.

Cheers

Not a shop owner but ..

I'm doing the same thing as the OP. And I flat out told the shop they don't have to match Amazon's price, just tell me what the price is and it'll probably be fine. I've turned them down a couple times but it was because they simply couldn't get a close enough replacement part, not over price.

I can't imagine they make enough on these one-off transactions to cover labor, but they're not turning me down. Sometimes it takes a few days, which if it means they're waiting until the shop person has idle time is fine with me. I just don't want to give any more to Bezos.

Handling cash also cost money for counting, transport, insurance and so on.
There usually is one reason to prefer cash, the IRS.

Remember that price is shipping is built in to Amazon orders at some level.

Shops will often order multiple things from suppliers at once which also cuts down on shipping for them.