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High end road true cost

Old 05-08-06, 08:22 AM
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rogster
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High end road true cost

Does anyone know the manufacturer (Trek, Specialized, etc..) true cost for the building either one of their high end road bike ,assuming $2500+ range. I was casually talking to one of the LBS regarding what is the margin on the bike they sell. He told me pretty small and LBS make up by the number of the bikes they sell.

So, this get me thinking what is true cost of the bike itself. Of course , R&D plays a bit part. So if we were just talking on component pieces only, anyone has an idea ? Not sure if it will be a fair comparison by adding up all the invidual pieces that can be bought over the counter/internet.
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Old 05-08-06, 08:27 AM
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i don't think your lbs was telling you everything. There's a pretty big markup, sometimes 60-100%
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Old 05-08-06, 08:43 AM
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In my experience, the more expensive the bike, the greater the % margin. The component cost is relatively static, since Ultegra is Ultegra. For non-carbon frames, the engineering cost should be minimal. It's not like there's a whole lot of new thought that can be put into a traditional road frame. Aluminum tubesets aren't that much money either - Easton Elite goes for less than $100. Throw in a generic carbon fork for another $60 and you have yourself a $2000 road bike. Carbon fiber is harder to quantify, but once a design is out for a year, the biggest changes will be to its paint job. They might tweak the weave or something, but that's it. Look at Trek's OCLV bikes. They haven't changed significantly since the mid-90's. They would have made their engineering costs back after first season or two. There's also the trend toward rear carbon seat stays. I took a look at a Serotta Carbon/Ti bike, and it seems like all they did was slap a Reynolds carbon fork on the back end of it. It cost a fortune for a non-custom bike - lots of margin there, I'll bet.
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Old 05-08-06, 08:50 AM
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Every bike frame is probably made for $100-250 in Taiwan
Then hang parts sourced in bulk...

(Sure you can add business expenses, R&D, marketing, transportation, legal expenses, general administrative etc, but you get my point)
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Old 05-08-06, 09:20 AM
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Originally Posted by snoboard2
i don't think your lbs was telling you everything. There's a pretty big markup, sometimes 60-100%

That's complete BS, bike shops make relatively little on the bikes, they make most of the money on accessories and labor. I know how much my sponsor pays for his C'dales and he ain't making a killing on the floor sales price. BTW they are one of biggest C'dale dealers in TX so he's getting good rates from C'dale. For the amount of floor space a bike takes up compared to the markup, selling shorts, jerseys and shoes are bigger money makers than bikes.

When you compare the markup in home electronics, or clothes it makes you wonder how a bike shop makes any money at all.
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Old 05-08-06, 10:04 AM
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Here is what I remember seeing couple years ago

Cannondale R1000
employee price (aka pro-deal): 900
shop price (what the shop pays for): 1050
MRSP price: 1850

So I guess Cannondale only pay for around 400-500 to complete that R1000.

My friend also bought a brand new Scott Speedster S1 with full Utegra for just 850 from an ebay store (it 's a LBS in NC). And that Scott's MRSP is well above 2K.
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Old 05-08-06, 11:12 AM
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Originally Posted by snoboard2
i don't think your lbs was telling you everything. There's a pretty big markup, sometimes 60-100%
Where on earth did you get those numbers from? From my experience in the business I'd say local bike shops mark up bikes about 40% at the low end and maybe down to around 20% for the priciest bikes. And for that he still has to assemble and service the bike and maybe supply a kickstand.
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Old 05-08-06, 11:22 AM
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Originally Posted by Retro Grouch
Where on earth did you get those numbers from? From my experience in the business I'd say local bike shops mark up bikes about 40% at the low end and maybe down to around 20% for the priciest bikes. And for that he still has to assemble and service the bike and maybe supply a kickstand.
I think the markup on pricier bikes can be more than 20%. My Ruby Pro w/ Dura Ace retails for $4400 (some shops sell them for $4200). Wholesale on these is around $2500.
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Old 05-08-06, 11:25 AM
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I would say a bike with a list price of $3000 costs the dealer about $1500 (although it may sell for less than $3000.) I would imagine the cost to the manufacturer is in the area of $400 to $600. I don't have any inside knowledge. I just have many years of general business experience. In our industry list price is about 15 times manufacturing cost. I would imagine it would be much lower in the bicycle industry since the ticket is so much larger. 6 to 8 times manufacturing cost sounds about right. I define manufacturing cost as the cost of materials plus labor to assemble. I include no other costs in that. These numbers will vary hugely depending on how you define manufacturing cost.
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Old 05-08-06, 11:36 AM
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Originally Posted by El Diablo Rojo
That's complete BS, bike shops make relatively little on the bikes, they make most of the money on accessories and labor. I know how much my sponsor pays for his C'dales and he ain't making a killing on the floor sales price. BTW they are one of biggest C'dale dealers in TX so he's getting good rates from C'dale. For the amount of floor space a bike takes up compared to the markup, selling shorts, jerseys and shoes are bigger money makers than bikes.

When you compare the markup in home electronics, or clothes it makes you wonder how a bike shop makes any money at all.
"That's complete BS, bike shops make relatively little on the bikes". Now thats complete B.S.
First of all, most bike shops make a very nice profit from everything they sell or they wouldnt be in the business. No one gets into it to just barely get by. The standard profit margins are in the 40% range. Secondly most bike shops sell there bikes at full retail and only come off their price maybe 10% if you work them for a discount. There is plenty of room for steeper discounts if they want to move the item. I belive I know the bike shop you are refering to and they are definetly making some nice coin. And that is fine, they should be able to make as much as they can if the market will support them. But dont think that they are just able to make ends meet. Wrong.
I do my shopping at 3 local shops and each one has something to offer over there compitition. But I also work each shop for the best deal and have no problem walking away from any deal that is not in my favor or at least I feel it is fair to me and the shop both.
Loyalty should be the shops responsibility not mine.
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Old 05-08-06, 12:54 PM
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And markup is not profit.
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Old 05-08-06, 01:06 PM
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Originally Posted by curiouskid55
And markup is not profit.
Thank you. That was my point, first they do not mark bikes up 100% like originally posted. Second and most important MARK UP IS NOT PROFIT. The retail floor space that one bike takes up could be used for a rack of jerseys, which have a much higher profit margin. So based on the amount of floor space that bikes take up that alone makes bikes less profitable than accessories. My best friend and god father to both of my girls owned a bike shop in SoCal. He's given me the numbers and they aren't as big as you might think.
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Old 05-08-06, 01:08 PM
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In the 90's when I was working in a shop, bikes were marked with a 30% markup. And, customers walk in thinking that the shop owes them something or that the customer's doing them a favor just for walking through the door and get a percentage knocked off of that.

The money's made with accessories. Bike margins are small.

And there are more shops than not that just get by. It's not the jewelry industry, so don't act like anyone's marking stuff up 100%. If they are, they won't be in business long unless they're the only shop within a day's drive.
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Old 05-08-06, 01:11 PM
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Trek has 50% discount for some teams they sponsor.
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Old 05-08-06, 01:11 PM
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Originally Posted by cbip
Loyalty should be the shops responsibility not mine.

True enough, but you shouldn't walk in believing that you're God's gift to customers either. You're not entitled to anything in terms of discounts. You should expect competitive pricing and great service anywhere you go to purchase anything. But I've seen more customers than not that believe that their presence automatically earns them a discount.

No one runs a LBS with it in mind that they'll retire early. It's not a license to run a bad LBS, which there are plenty of in this world. But there are a ton of people that think that they're owed something the second they walk in the door. You'll find those same people getting a meal from food samples at Whole Foods.
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Old 05-08-06, 02:22 PM
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Originally Posted by ImprezaDrvr
True enough, but you shouldn't walk in believing that you're God's gift to customers either. You're not entitled to anything in terms of discounts. You should expect competitive pricing and great service anywhere you go to purchase anything. But I've seen more customers than not that believe that their presence automatically earns them a discount.

No one runs a LBS with it in mind that they'll retire early. It's not a license to run a bad LBS, which there are plenty of in this world. But there are a ton of people that think that they're owed something the second they walk in the door. You'll find those same people getting a meal from food samples at Whole Foods.
I agree, but if a shop wants to keep my busniess they will give me a discount on every thing I buy if I ask, and its priced at retail. It doesnt have to be huge but some discount is going to be given if I have spent money with them before and they expect my good advertising of their store. Word of mouth is more valuable than any advertisment in the paper and bad experiences passed around will hurt anyones busniess.
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Old 05-08-06, 02:26 PM
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Originally Posted by cbip
I agree, but if a shop wants to keep my busniess they will give me a discount on every thing I buy if I ask, and its priced at retail. It doesnt have to be huge but some discount is going to be given if I have spent money with them before and they expect my good advertising of their store. Word of mouth is more valuable than any advertisment in the paper and bad experiences passed around will hurt anyones busniess.
Considering the type of service you recieve at a shop is important as well. You live in area with many shops, I've been to most of them and believe me some of those shops have better customer service than others. If price is the only thing that drives you then that's your choice, it really doesn't suprise me.
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Old 05-08-06, 02:32 PM
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Originally Posted by cbip
I belive I know the bike shop you are refering to and they are definetly making some nice coin. .
This statement alone illustrates just how little you really do know.
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Old 05-08-06, 02:34 PM
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Originally Posted by El Diablo Rojo
Considering the type of service you recieve at a shop is important as well. You live in area with many shops, I've been to most of them and believe me some of those shops have better customer service than others. If price is the only thing that drives you then that's your choice, it really doesn't suprise me.
What doesnt suprise you? That I expect to get better than just good service and that I expect to get some kind of discount for my continued support of local bike shops. I am missing the It doesnt suprise me point.
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Old 05-08-06, 02:38 PM
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wait a minute, all the above arguments are irrevelant.

The OP just want to know the true cost which costs the manufacturer (Trek, Specialized, etc..) for building their high end road bikes

So, who cares how much is the LBS markup, or how much is their profit.
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Old 05-08-06, 02:42 PM
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90% of all statistics are made up on the fly.

This thread reminds me of the quote, "letting the blind lead the blind"
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Old 05-08-06, 02:44 PM
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My understanding (from a friend who was in the bicycle industry for many years) is that bikes typically have about a 30-35% markup from dealer cost to list price. A $3000 retail bicycle costs your LBS about $2000-$2100 plus floor plan costs (the interest to finance inventory), handling/assembly/prep costs, etc. That means if they sell you that $3K bike for full price their gross profit is probably in the $800 range. Pretty healthy at that point. But many bike shops do discount. I got my $4600 MSRP bike for $600 below retail cost. And that means the dealer still made $600+ on the unit. But that $600 discount was about half the profit built into the bike's price.

Bike shops make MUCH more money on accessories like bike jerseys - which typically have 100%+ markups (i.e. an item that retails for $100 cost the shop $50 or less).
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Old 05-08-06, 02:45 PM
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Originally Posted by rapidcarbon
.

The OP just want to know the true cost which costs the manufacturer (Trek, Specialized, etc..) for building their high end road bikes

.
Well cost of manufacture is pretty cheap on just about any mass produced product. For example the cost to build Oakley Thumps is about 7 bucks, they retail for close 400 bucks. For any company that is producing their products in Asia the COM is going to be very inexpensive. Trek an C'dale will have higher manufacturing costs for the US made frames.

When breaking it down it's much less expensive to buy a CAAD8 w/DA at retail than to build one with exact same components from retail. C'dale gets significant price breaks from Shimano that shops do not.
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Old 05-08-06, 02:46 PM
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Originally Posted by rapidcarbon
wait a minute, all the above arguments are irrevelant.

The OP just want to know the true cost which costs the manufacturer (Trek, Specialized, etc..) for building their high end road bikes

So, who cares how much is the LBS markup, or how much is their profit.
Only those people that want to work a discount on a purchase. If you have money burning a hole in your pocket send some my way it sounds like you pay full retail price when you buy.
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Old 05-08-06, 03:00 PM
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To me the real problem with bike shops making money is the cost of the components. Shimano essentially has a monopoly.

Just looking at a road group....why does this stuff cost so much? Because shimano can get away with charging that much. I bet their margins are by far the greatest along this distribution chain.

I'm not a real expert on mtn components but typically they seem far cheaper....maybe that's the effect from SRAM?
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