new bikes sold at MSRP?
05-13-11, 11:10 AM
#126
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The wealthy don't get wealthy and stay wealthy by throwing money away. If it's possible to negotiate a better price, then you should. The store provides the service...the customer owes the store nothing. If you are looking to spend $3000 on a bike and the shop won't budge at all on the price...find another shop. Sometimes, in business, a small concession to a customer to make him feel better will seal the deal and earn a customer for life. Remember, the customer is the guy with the money to spend.
Of course I'd be a lot better off if it wasn't for this slight addiction problem my wife and I have
05-13-11, 12:19 PM
#127
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I assume this then makes me an enabler?
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05-13-11, 12:31 PM
#128
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05-14-11, 03:55 AM
#129
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Certainly a contributor, but I think the online market is what has killed the LBS. I cannot think of any other regularly consumed product that is 'price-protected'. When you say companies like Apple want to protect their retailers from bottom feeders, I would wager that the Wal-Marts and Targets of the world would love to compete by lowering prices. It's what they do. In the world of cycling, I would love to walk into a bike shop and see a bike that I could buy that was worth what they were asking. Part of why I know how to build and maintain a bike is because I started by picking up used what I could afford and fixing it up - new bikes were out of my budget. Now I can shop parts wherever, local, online, and build a better bike for less than any LBS can sell it.
We had a sale earlier in the spring. We set a sales record for a sale that's been an annual event for nearly 30 years. Three quarter of a million dollars in three days.
If you know what you are doing, people will seek you out. You can do your taxes and a execute a will on line too...
Last edited by roadwarrior; 05-14-11 at 04:34 AM.
05-14-11, 04:00 AM
#130
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05-14-11, 04:02 AM
#131
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I really didn't get this from this thread...MSRP is the Manufacturer's Suggested Retail Price. In our case we never charge what, say Trek lists in their public site. MSRP is not what the shop charges. I see a few posts here where it seems the two are being confused.
Last edited by roadwarrior; 05-14-11 at 04:33 AM.
05-14-11, 04:28 AM
#132
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Yup - we've gone over this many times before and it doesn't change. Yes some bike shops can thrive and grow by providing good service while charging at or above MSRP in markets that reward that behavior. This is because the bicycle itself - the OEM's are doing everything they can to try to maintain product differentiation - albeit even in cases where that differentiation doesn't really exist or is simply creative marketing. As such that approach along with aggressive MAP (not mutaly agreed price - rather "Minimum Acceptable Price" as noted in the direct pricing literature I have from at least 2 large OEMs) policing they can help preserve those margins.
Where this differentiates - never fail - is when customers of the type that are my market in particular walk into a shop and see a price on a commodity item like a tire that is at or above full list. The customer may actually take the time to ask for a price match or a discount but is usually met with the typical bigger shop, "That's our price. We have to eat too." mentality. Those shops - similar to the one you work in I would assume, are in the end fine with that customer walking out and going to the "bottom feeder" who is selling at a lower margin. They then spend thousands of hours convincing themselves and their similar dealers like them throughout the industry that they don't need those customers to build their business and that they need to divorce themselves from those customers.
That's great. As a result they tend to capture lucrative markets - family, recreational, enthusiast, tri-athlete....but these are not long term customer in all but a few cases.
What these larger shops have missed is that the niche avid rider who knows his stuff and knows his prices are the guys and gal that spend upwards of 10%-20% of their income annually on cycling. These are the people who routinely buy items week in and week out. Not the 1 time I bought 3 bikes for my family you won't see me ever again, customers.
Again - it's just a different market. To ignore it completely as an industry is a huge mistake. The industry needs to embrace dealers who can tend to this market. Because right now that market moves further and further away - now sending money overseas to places like Chain Reaction and PBK and Ribble. The OEM's will never control the issues with international markets. This is because they are set up in a completely traditional manner. The European business units have completely different sales goals, incentives, dealer structures, etc so when Joe's bike shop of Fraiser's Bottom West Virginia complains to the area Shimano Rep about not being able to compete with Ribble...it falls on deaf ears. That won't change and it doesn't need to....
These shops just need to stop complaining and move on. Everyone should be able to take care of their own business. Those shops need to focus on what makes them their sales - as you mention - which are strictly moving bikes and service on those bikes. Period. Sales, sales, sales. The avid cyclists buying commodity consumables is simply not their market. They should not try to service them. If they do they shouldn't be in the business of lecturing them about why they have to charge list on an item. Lose the sale and walk away - there's a Trek 1200 that someone is eying.
The Walmart Nordstroms comparison is interesting but it ignores the Target's, Kohl's, etc. of the world. Step up from Walmart, well chosen product, not at bargain basement but not at Nordstrom prices either.
In the end the market I am talking about isn't buying a new bike every year but they are buying wheels, tires, chains, components, etc. These people shouldn't have to spend more for their wheels than they did for their bike.
Where this differentiates - never fail - is when customers of the type that are my market in particular walk into a shop and see a price on a commodity item like a tire that is at or above full list. The customer may actually take the time to ask for a price match or a discount but is usually met with the typical bigger shop, "That's our price. We have to eat too." mentality. Those shops - similar to the one you work in I would assume, are in the end fine with that customer walking out and going to the "bottom feeder" who is selling at a lower margin. They then spend thousands of hours convincing themselves and their similar dealers like them throughout the industry that they don't need those customers to build their business and that they need to divorce themselves from those customers.
That's great. As a result they tend to capture lucrative markets - family, recreational, enthusiast, tri-athlete....but these are not long term customer in all but a few cases.
What these larger shops have missed is that the niche avid rider who knows his stuff and knows his prices are the guys and gal that spend upwards of 10%-20% of their income annually on cycling. These are the people who routinely buy items week in and week out. Not the 1 time I bought 3 bikes for my family you won't see me ever again, customers.
Again - it's just a different market. To ignore it completely as an industry is a huge mistake. The industry needs to embrace dealers who can tend to this market. Because right now that market moves further and further away - now sending money overseas to places like Chain Reaction and PBK and Ribble. The OEM's will never control the issues with international markets. This is because they are set up in a completely traditional manner. The European business units have completely different sales goals, incentives, dealer structures, etc so when Joe's bike shop of Fraiser's Bottom West Virginia complains to the area Shimano Rep about not being able to compete with Ribble...it falls on deaf ears. That won't change and it doesn't need to....
These shops just need to stop complaining and move on. Everyone should be able to take care of their own business. Those shops need to focus on what makes them their sales - as you mention - which are strictly moving bikes and service on those bikes. Period. Sales, sales, sales. The avid cyclists buying commodity consumables is simply not their market. They should not try to service them. If they do they shouldn't be in the business of lecturing them about why they have to charge list on an item. Lose the sale and walk away - there's a Trek 1200 that someone is eying.
The Walmart Nordstroms comparison is interesting but it ignores the Target's, Kohl's, etc. of the world. Step up from Walmart, well chosen product, not at bargain basement but not at Nordstrom prices either.
In the end the market I am talking about isn't buying a new bike every year but they are buying wheels, tires, chains, components, etc. These people shouldn't have to spend more for their wheels than they did for their bike.
The bike market is pretty big. This forum tends to think it's all roadies and racers. Trust me, there are a lot of Grandmas looking for bikes and service and assistance...not many shops want to cater to them. Some end up at the big box store, but in our case word of mouth sends them to us....and there's 50 bikes out the door on the weekend and 50 happy people telling our story. Hard tail MTB's under $600...
In our case the vast majority of our road bike sales are under $1,500. Those people move up, they are back.
Ten million a year in sales....appeal to the fat part of the bell curve.
05-14-11, 04:47 AM
#133
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05-14-11, 05:38 AM
#134
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If I go to a specialized shop for the first time, then - unless I need the expert advice and service - I want to make sure I get a "good deal". That makes sense, cos this is my initial transaction with the shop. A good deal can be a good price (if I know exactly what I want), or really good service (if I dont).
Later, once I have a relationship established with the shop, then I just trust them to give me a good deal and dont bother bargaining anymore (or if I do, it is very gentle).
From a customer behavior point of view, sometimes it isnt so much about the money saved as the feeling of having gotten "a great deal". That is what LBSes need to focus on. That is the initial hook that leads to building a long term relationship. Sure, some percentage of customers will never have any shop loyalty. But enough will (if enough dont, you - the shop - are doing something wrong). OTOH, if you dont make the initial sale, 100% of those people will not have any loyalty to your shop.
There are many ways for an LBS to make people feel that they are getting a good deal. Initial discount is but one of them. A good businessman will know how to do so, and not rely on some kind of misplaced sense of entitlement to loyalty from new customers.
05-14-11, 05:51 AM
#135
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If you look at the NBDA studies they have done on shops int he industry the average earnings for shops in the US is in the 3%-5% range. This is obviously after taking into account the net effect of giving out discounts, but in general negotiating out a 10% on gross margin would theoretically put the shop under eventually (if they made a habit out of it and selling bikes was their only source of revenue)
Let's say you are selling 10 bikes at $100 margin a bike - $1000 net.
If you drop your prices by 10% flat, you might end up selling 12 bikes at a margin of $80/bike, or $960 net.
By offering various discounts depending on the customers, you might end up selling 5 bikes at a margin of $100, 2 bikes at a margin of $ 60 and 6 bikes at a margin of $80, or $1100 net.
The latter part of your post sums it up very nicely - most LBSes are not run by businesspeople and they tend to oversimplify their thinking when it comes to pricing/business strategy.
Heck Rob - from what I can tell half a world apart, even you are not running your business as profitably as you could. I reckon you are leaving atleast 10% additional money on the table. Not that I, as a consumer and possessor of a Psimet Gold Frequent Buyer card, am complaining
05-14-11, 06:10 AM
#136
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Maybe the small shop. Not a larger shop like us. We even had Performance move into the neighborhood, now our sales are up 12% and that's off a very aggressive 2010.
We had a sale earlier in the spring. We set a sales record for a sale that's been an annual event for nearly 30 years. Three quarter of a million dollars in three days.
If you know what you are doing, people will seek you out. You can do your taxes and a execute a will on line too...
We had a sale earlier in the spring. We set a sales record for a sale that's been an annual event for nearly 30 years. Three quarter of a million dollars in three days.
If you know what you are doing, people will seek you out. You can do your taxes and a execute a will on line too...
05-14-11, 06:55 AM
#137
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05-14-11, 09:04 AM
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05-14-11, 10:59 AM
#139
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Bought a 2007 Trek Fuel EX-8 MTB from my local LBS. Price on tag was $2400.00 walked out with it for $1890.00 with accessories 10% off. Gloves, pocket tool, fender (SKS), tubes.
Everybody was happy.
Everybody was happy.
05-14-11, 11:18 AM
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05-14-11, 01:46 PM
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Yeah, because your math is wrong... unless like I said I am completely misunderstanding you. If they are only profiting $100 on a $1500 bike and they discount it 10% that's $150 - which means they LOSE $50.
05-14-11, 11:49 PM
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The point is lower profit/sale can either lead to overall lower gross margins, or, depending on how a business is run, can lead to greater gross margins as well due to greater sales volume.
The numbers are just there to give an example. Forget the 10% number and pretend the numbers are in Imperial Martian Dinars, if that helps.
05-15-11, 01:27 AM
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I have been shopping for a bike the last month and yes some shops will come down on price and some won't -- but after going to about a dozen LBS I decided to go to the one who gave me the most attention, answered my questions and gave their honest opinion. Now it just so happens that the place I will buy my bike had the greatest service and price on the bike $100 off of MSRP and 10% off accessories ... As a newb in cycling I wanted an entry level/intermediate bike and was going for a Cannondale synapse 5 alloy with 105 comp. And the owner of the shop really explained the entire bike and didn't push me into anything i didn't need being a newbie - but even though he strongly recommended that bike I personally went above and will be getting a cannondale synapse carbon 6 apex and I can't wait!!!! Now a days it's all about customer service and you should go where you will feel comfortable and welcomed everytime not just a person who they look at that will spend money
05-15-11, 01:06 PM
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I have been shopping for a bike the last month and yes some shops will come down on price and some won't -- but after going to about a dozen LBS I decided to go to the one who gave me the most attention, answered my questions and gave their honest opinion. Now it just so happens that the place I will buy my bike had the greatest service and price on the bike $100 off of MSRP and 10% off accessories ... As a newb in cycling I wanted an entry level/intermediate bike and was going for a Cannondale synapse 5 alloy with 105 comp. And the owner of the shop really explained the entire bike and didn't push me into anything i didn't need being a newbie - but even though he strongly recommended that bike I personally went above and will be getting a cannondale synapse carbon 6 apex and I can't wait!!!! Now a days it's all about customer service and you should go where you will feel comfortable and welcomed everytime not just a person who they look at that will spend money
05-15-11, 01:58 PM
#146
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The numbers are not the point.
The point is lower profit/sale can either lead to overall lower gross margins, or, depending on how a business is run, can lead to greater gross margins as well due to greater sales volume.
The numbers are just there to give an example. Forget the 10% number and pretend the numbers are in Imperial Martian Dinars, if that helps.
The point is lower profit/sale can either lead to overall lower gross margins, or, depending on how a business is run, can lead to greater gross margins as well due to greater sales volume.
The numbers are just there to give an example. Forget the 10% number and pretend the numbers are in Imperial Martian Dinars, if that helps.
fair enough. You're saying that discounting bikes and grossing less, if it leads to more sales (and more importantly, more subscribed patrons), then it's worth a slight decreased profit margin? I would have to agree, because if someone buys the bike from your shop and not the other one in town, then they are more likely to come back and continue spending money on accessories and service (which is what keeps them in business).
05-16-11, 02:29 AM
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It's a small step down in components but a step in frame --- as a beginner I think I will be happy with the apex and since it SRAM they are all compatible ... So a future upgrade to red would or maybe Force would be great
05-16-11, 02:51 AM
#148
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I would have to agree, because if someone buys the bike from your shop and not the other one in town, then they are more likely to come back and continue spending money on accessories and service (which is what keeps them in business).
The other thing is, if I walk into a store as a new customer to buy a pair of tires, that probably isnt going to make me a lifelong customer as I am buying a commodity. But if I go in to buy a high-involvement product (a new bike), then the shop that makes me walk away feeling great about the purchase has my business for a long, long time.
So it is worth doing a little "extra" with an initial sale of a gateway item like a bike.
V.
