Originally Posted by
Sy Reene
I just scratch my head as to why these pricing structures make sense to the bike manufacturers.
They make more money this way.
Is there really a way that (for this example), Cervelo is really making more money (on absolute basis vs. percentage) on the complete than they are on the frameset?
The product of net profit and number of complete bikes customers are willing to buy at typical discounts from $3700 exceeds that at other price points.
Similarly, the product of net profit and number of frames customers are willing to buy at typical discounts from $3000 exceeds that at other price points.
The two markets are different, Lots of people want a complete bike they can ride out of the show room.
A few people desire exactly what they want and are willing to pay a significant premium.
If you don't like that you can buy a stock bike and ride it as is or go through the trouble of disassembling it, selling the components, and rebuilding it.
Aside from the component and wheelset/tire add-ons.. you have the shipping of the components to wherever the complete is assembled, plus the labor to assemble, and then the additional bulk for shipping of the complete thru the distribution network and on to the dealers, etc.
Aside from those costs, the dealer must pay interest on their inventory which is likely to be around longer. If the product is left over after this model year, they must sell it at a 40% discount that may be a loss which will be a more significant fraction of their bottom line for niche products with few units sold. As of July 29th 2019, Excel Sports Boulder sells complete 2018 Di2 Ultegra R8050 rim brake R3s for $2302 less than 2019 and $2860 substituting R8070 discs.
While Cost Of Goods Sold, marketing budget, sales overhead, and other expenses set a lower bound on price, smart companies charge what the market will bear.