Troul 

Russia based Shimano retailers/distributors might start popping up.

Psimet2001 

Thanks. I was busy doing all of this between industry groups and facebook. Now i get to do it here is aftermarket users who think everyone in the industry is the devil.

Still evolving on my thoughts on this but....will hopefully cover some of it with my responses to these...

They are high in the US because of distinct territorial differences. Most product distribution form almost any product used to be based on geographic and monetary exchange differences. Online gray market exchange has really pushed these old systems to a place where they no longer work. So short answer: yeah... the prices are different. Prices aren't just a factor of the cost of a product. local currency, taxes, duties, marketing strategies, anti-trust or competition laws, etc. all play a role. The pricing to retail is established in America by Shimano North America. In Europe by Shimano EU. Shimano Japan makes products and sells to those groups. The problem is that none of them have been on the same page.

Yes. SRAM spent something like $6M fighting this. It has to do with all of the things I mentioned before. You see product truly isn't free to just run across all sorts of borders and when a manufacturer sells tons of product into one area that in fact is sent into a different one without paying tarrifss, duties, taxes, etc it sets up situations that the OEM can be held responsible for. SRAM stepped out and did the leg work. Don't ever kid yourself - this is not a move to help local bike shops. it is a move to help protect them and to maintain price integrity/value of the product in the market place. Apple does it. Garmin does it (didn't used to).

This is half right and half wrong. They are actually addressing the US wholesale dealer issue by addressing this. BUT they are doing this to maintain their own value int he marketplace. Don't kid yourself - they will go direct at some point and they won't be able to sell anything out of the inventory they have paid to stock in the US if everyone is buying it from Europe.

As for the price example - let me paint the actual picture of current state. Shimano part 12345 - MSRP $250. US wholesale ~$205. EU pricing with free shipping ~$165. Retail in Europe from these guys has been below US wholesale. It's actually been below EU wholesale as well. Shops all over the EU rage about it in industry groups all of the time.

...because LBSs are doing this and getting rich.....yeah run them out of town on a rail.

I get the just of what you are saying but here is what is missing to make the right thing happen all around. All OEMs need to decide what customers should pay for their product. They then need to maintain their own distribution network to help ensure SOME form of price integrity. While the short term benefit is that an end user is able to pay less for a part the net result is that the support structure for the product dies completely and the real value of the product in the marketplace drops to nothing.

This is the part where customers go apecrap. The disconnect is that people don't see that by constantly supporting a distribution system that is regularly selling for a massively depressed price they have in fact changed the market to only be able to value the product at that lower price. Competition is when everyone has the same base. Some figure out better ways to get products to market and can deliver a lower price to customers. They should be rewarded. When OEMs play such a stacked game and don't give everyone in the game the same chance to compete then we get anti-trust issues, collusion, price fixing, blah blah blah. It becomes a mess and in the end everyone loses even Shimano as now it's products wont even sell for what they need them to sell at even if they went direct.

Listen - everyone - I know this is lost on the VAST majority of you. It's reared its head in the death of retail as a way of doing business in the US. Who am I to say we need retail or not. What I can without a doubt 100% say is that things are REALLY bad in the industry right now. YOUR LBS will NOT be there if things don't change. The model just doesn't work anymore. The end price, the wholesale price, etc - something. Costs for shops have to drop and margins have to get higher or they will definitely cease to exist.

All of us in the industry have seen this coming for years. We get it. The smarter ones have changed their model. Some are knuckle dragging into the abyss blaming the customers the whole way.

Many of us get it. The customer isn't the problem (seems obvious but to a lot of people they feel they truly are the problem) obviously. The problem is the OEM that can't control how what it makes is sold. The OEM that makes such huge differences in pricing to different middlemen depending on what market and who they are. They are the root core of the problem. This is Shimano finally taking a small step towards trying to get things back to a reasonable place. For that, yes there is a sigh of relief from shops that are about to disappear. It doesn't mean that we all get to start selling Shimano. Most of us have moved on to other products. There isn't much of a margin there even if it was sold at full price. That's not really what this is about. It is about bringing the shop back into the conversation though.

At some point all of you will have to make the decision. You either like having shops around or you don't. They either serve a purpose for you or they don't. There's no right answer and the answer is different for everyone. I simply ask everyone to honestly think about whether thwy ant shops to continue to be in their communities. If the answer to that is yes then you need to ask yourself why. What value do they give you that you can't get elsewhere. If you can figure that out then you need to realize you need to pay the adequate amount for that value. If that seems asinine then you were lying to yourself and you actually don't find value in the shop still being there. Like I said there is no right answer but people get really passionate about trying to answer that - both directions.

The time has come and the industry is in collapse. Figure it out for yourself.

Psimet2001 

I did a podcast on this. It is not a level playing field between regions and even within our own region. It is a simple fact that my wholesale price is higher than most of the retail prices you are seeing when you search on google for prices.

People, like yourself based on what you posted, really really have a hard time seeing or truly understanding this. I think it really has just become a part of the lexicon that everyone thinks shops are just super over priced and not in touch with the market or have no idea. Like they really ant to bleed the customer.

It's just simple fact - retail pricing is higher than my US wholesale. People who don't think say, "well then just buy it from them to sell it to us"....well I would still have to put some margin on it. Duh.

It's not like it's close either.

Why does it matter? In a way it doesn't. I have been telling customers forever that there is no reason for me to quote Shimano for them at all. They can get it cheaper from tons of places easier. Its like they don't get it, "well I'd be willing to pay a little moe and get it from you because then I would be getting the right thing and I want to spend money with you." I usually say something like, "That's nice and I appreciate it but listen - it's not even close. If I quote you anything you're going to think I hate you or are just out for money. In reality I am quoting my cost plus shipping from the distributor and maybe 10% - taking a loss on the transaction cost of simply buying it and moving the money - and I'm only charging that because I don't dare think of charging anywhere what I really need to charge because you'll never speak to me again. Even then you'll look at that price and walk away thinking I am an a-hole. So do us all a favor and just buy it from overseas. It won't hurt my feelings. If you need help putting it on then bring it in. I'd love to help. I charge for the service but i am reasonable."

If Shimano at least gets this in control or in the same ballpark - even if they lower MSRP across the board so customers also benefit then I can at least get back to having the talk with customers and quoting them when they actually do want to buy from me. It's really that bad.

As for me I went back to Shimano on my last build. I have a direct account. I went through their S-Tech training so I could get a discount below my wholesale (think employee pricing). Even then it almost was better to buy my own parts at EU retail pricing. I even called a US based bicycle OEM to ask if I could buy from their OEM pricing end even then it was a wash. It's really ridiculous.

Psimet2001 

Tires will be the next to fall in line. This kind of stuff can't continue or the industry will tear itself apart or the governments losing money in tax and tariff revenues will.

Tires are often available online for roughly what wholesale is. You can usually buy a big name tire and sell it within $2-$4 of what the going price overseas is and still "make" ~$8-$10 on the sale of the tire....sometimes. I only sell them because they are what we call hygiene products. Things you have to have or you have nothing. I stock what my racers want and that's it. Rest is special order.

Doctor Morbius

^^^ My dad was in the machine tool business. This sounds like a similar situation. Every sales rep had their own territory and they were not allowed to encroach on each other's territory. That was strictly verboten.

CliffordK

Precisely,

It is a pretty antiquated distribution web.

I have to wonder what Shimano USA's annual profits are. CEO pay? Markup?

It is a good theory. Ship products to a warehouse in the USA, then distribute locally. But, international shipping has gotten cheaper, faster, and more reliable over the years, and now can compete well with shipping across the USA, in part due to our own USPS that undercharges foreign shippers and overcharges domestic shippers.

Time to just flatten the distribution chain.

Anyway, this whole fiasco will help some of the US online retailers, but will do little to help the local bike shops.

I suppose it is time to hunt for some big New Years Eve sales!!!

CliffordK

If only they converted to 100% Di2, then they could do like the video industry that embeds regional codes into the videos so they won't play in the wrong country, even if it is a "local" video that is otherwise unavailable in the destination country.

jefnvk

I can understand this just fine. I also understand that when the route they go is to push for restricting competition instead of pushing back why they are put at a disadvantage by their suppliers, it doesn't really encourage sympathy.

It is obvious that they have enough push to make Shimano listen, if Shimano is putting pressure on CRC, use that to level your wholesale costs. Call me one of those new age millennials that ruin everything, I just don't buy into an outdated retail model in today's internet age that insists I should pay more to buy locally than I can to have the same thing shipped to me from across the world, because reasons.

Darth Lefty 

well poop

Cyclist0108

Is Shimano really cheaper at Chain Reaction? I just checked on a pair of shoes I got for $50 at REI (discounted). They are $70 (discounted) on Chain Reaction. I started checking a bunch of other stuff, and in many cases I can find parts at Universal Cycle or Jenson or Amazon for less. The complete groupsets do appear to be the cheapest, but that is the only thing I found to be consistently less expensive. (I didn't do anything close to a comprehensive investigation. I just sampled a few items of interest.)

CliffordK

We have no local sales tax, other than Oregon's new "bicycle tax" intended to target the small Local Bike Shops while giving the chain department stores a free ride.

But, I agree. Companies like Amazon and E-Bay probably could and should collect local sales taxes, although the small independents would struggle with organizing taxes for thousands of small municipalities across the country.

It could probably be done, but would almost need a 3rd party tax agency to facilitate. VISA/Mastercard? State Governments? Or, just collect local taxes on all sales?

There are some "Reciprocity" laws, such as allowing out of state driver's licenses in all states. It is quite possible that states could start passing reciprocity sales tax laws. We'll collect your taxes if you collect our taxes. It is unclear if Oregon, Alaska, Delaware, Montana, & New Hampshire would join, but quite possible the other 45 states would eventually join a sales tax reciprocity.

The bike industry, however, is likely just a drop in the bucket in the grand scheme of things.

Yeah, a lot of stuff is sold on Amazon, but the Bicycle industry is likely one of the few industries that is completely upside-down with repeated international online sales to some customers due to some kind of odd pricing scheme that puts international sales at almost half the price of domestic sales, and apparently international retail prices matching domestic wholesale prices.

Fix the fundamental price structure faults, and the issues will go away.

https://en.wikipedia.org/wiki/Shimano
It both is and is not surprising that North American sales only amount for 11% of Shimano's sales. I have to wonder what percent of those sales are attributed to actual new bicycles?

Obviously the grey market could throw those numbers around, but these grey market sales are likely only a drop in the bucket for Shimano.

One of the things. When I make a European order, Shimano parts are probably only about 1/4 of the order. Most of it will be tires, tubes, and other miscellaneous stuff. Stronglight? At the moment, I'm no longer buying Shimano chains. Probably the big remaining thing that I'll stock up on are cassettes, and I might start hunting for alternatives. I'm already eying IRD.

CliffordK

Hmmm, I wonder if there is a Google flaw that puts Ribble, Wiggle, Chain Reaction, etc at the top of people's search list. Google is, of course, a commercial business that sells the top search spots.

A few years ago when I used to use https://shopping.google.com, there was a bug that Google seemed to confuse dollars and pounds, so anything priced in pounds showed up much cheaper than it actually was.

Let me check my last couple of orders:
Chain Reaction:
Michelin Protek Cross Max. 700x35,
Chain Reaction (only had 35mm, I wanted 32): $22.30
Universal Cycles, $29.99
BikeTiresDirect, $39.99

Merlin
Vittoria Corsa Speed G+ Competition Tubular Tire, 700x25
Merlin: $56.24
Universal Cycles: $134 (apparently only in 23mm, I wanted 25)
BikeTiresDirect: $118.79

Vittoria Rally Tubular 700x25
Merlin: $21.32
Universal Cycles: $39
BikeTiresDirect: $37.04

I thought I'd try some Continental Inner Tubes:
Continental Cross 28 Inner Tube
Merlin: $3.36
Universal Cycles: $10.50
BikeTiresDirect: $8.76, I think.

Continental Race 28 OEM Inner Tube
Merlin: $2.81
Universal Cycles: $7.50
BikeTiresDirect: $8.40

29er Tube (generic?)
Merlin: $2.24
Universal Cycles: $6
BikeTiresDirect: $6

Cyclus Shimano Bottom Bracket Tool
Merlin: $6.18
Universal Cycles. NO Stock, Park: $11.35, ICE: $12
BikeTiresDirect also has the Park for $11.95

Going back further, May order, bike-discount.de:
Wippermann Connex 11sx
bike-discount.de: $45.90 (got hit with about 4% shipping total)
Universal Cycles: $71

Wippermann Connex 9sx
bike-discount.de: $34.40
Universal Cycles: No Stock, other 9s Wipp chains: $32 to $91

Wippermann 11s Connex Link
bike-discount.de: $13.54
Universal Cycles: $26.99

Wippermann 9s Connex Link
bike-discount.de: $3.08
Universal Cycles: $7

Elite Bottle Cage Ciussi Inox
bike-discount.de: $16.62
Universal Cycles: $32.99

Busch + Müller USB-Werk AC
bike-discount.de: $62.63
Universal Cycles: No Stock

Busch + Müller Lumotec LUXOS B LED Headlight
bike-discount.de: $73.08
Universal Cycles: ??? Different stock items.
Actually, Universal Cycles has the Luxos U that I wanted, that bike-discount.de would not ship, but for 2x the cost

Shimano XT Jockey Wheels RD-M8000
bike-discount.de: $9.30
Universal Cycles: $19

Shimano XT / Ultegra / Saint Jockey Wheels
bike-discount.de: $9.30
Universal Cycles: $17

Whew, I did get some Shimano stuff in there.

Overall, I might have been OK with Universal Cycles for the Michelin Protek Cross Max tires. And, the snafu with the Luxos U (which was too expensive at Universal).

Otherwise, every other item saved me close to 50% by going overseas.

Note, I don't go with any single retailer, but will order from whoever works best for the order, although I do pad things out a bit with "fillers" that seem appropriate.

Oh, I also do buy some stuff from E-Bay and Amazon.
One retailer that I've hit a few times with Shimano, I think is Crosslake Sales which is a US company, I think. Maybe a few other E-Bay places.

I do also get some good Amazon deals, often undercutting E-Bay sellers.

Thinking about this, my pure Shimano overseas purchases are already really down. I did buy some 6800 groupset components a while ago, but I'm just not buying a lot from European online retailers. Barely used E-Bay?

It is almost like Shimano USA is forcing Shimano to fix a problem that isn't their problem. So, out of 3 orders, I would not have been able to purchase a couple of jockey wheels.

Darth Lefty 

SLX cassette for a long time was absolutely minimum at CRC, $47 while it was $60 everywhere American. But now a few of the other places (Jenson, Backcountry) are matching that.

HerrKaLeun

Bike 24 also belongs to Wiggle, so the majority of EU retailers will be impacted. I also foresee the US online retailers will raise prices. Right now Jenson is 20% more expensive than CRC, it soon will be more.

Good I just bought my drivetrain upgrade to 1x11. Hope by the next time I upgrade to 1x12 this will be resolved. Or I just postpone upgrading or look at sunrace etc.

This won't help LBS because US online still will be cheaper than LBS. In addition now I'm pissed off and will avoid LBS out of spite. So far I avoided them for lack of merchandise and price. They can't compete on price and instead of resolving the issues with the US pricing system, they lobby to cut out the competition.

I see that backfiring for Shimano. Many people upgrade because they want, not need. Now shimano pissed off the people that don't really need most of their products....I don't think all the people buying from Europe will now buy the same amount from the US. They will either consider SRAM et al, or just wait with upgrades.

I hope enough ebay sellers will sell shimano from Asia direct. I'm developing a big hate for US retailers because they pressured shimano to do that. Within reason i will make extra effort to avoid them. I just started buying some things from Jenson, but will reconsider that strongly.

Sy Reene

Out of curiosity, I took an item from your list -- the Corsa Speed tubs and did a price search. Your mention of Ribble, Wiggle etc is interesting, because generally speaking, in the google Shopping module, any of the UK dealers rarely or ever show up for me.

I don't know who Universal Cycles is, though I guess I'd suggest you find another option for US online sourcing, and it doesn't have to be Amazon (see below snapshot). FYI, your UniCycles still has about the same price you quoted.

THis was the point that I think Psimet missed from my last post. To some degree, it appears that US online pricing is fairly close to UK online pricing already. So the disparity to LBS pricing seems would be a simpler discussion issue than relegating explanation to lots of theories of why overseas cost structures are different, etc.

JonathanGennick 

It made my day when you said this, because I had thought the same to myself as I was reading down your list.

I actually have a strong pecking-order with respect to buying online. I favor Jenson and Universal in that order, and actually just had a package from Universal land in my doorway yesterday.

CliffordK

I picked Universal Cycles for comparison since it is a Portland, OR company, and one of the previous posters mentioned it.

So, ProBikeKit says "USA", but I think is UK based (and thus no tax). Perhaps it has local warehouses, although that could be complex depending on how they stock their warehouses.

You are right that the top 3 on your list are coming in with a pretty decent grouping on your list.

Still, the Merlin is now up to $59.98, or a good $16 less than the other companies you picked out.

I think ProBikeKit is knocking an extra 10% off of their listed price, so that brings it down to just under $70, closing the difference down to $10, or just under 20% (but still in the UK).

Maelstrom 

I don't know about US, I buy most of my stuff stateside because of how cheap it is.

In Canada the price is seriously jacked up by chain supply. The company facilitating parts brought into Canada cause the problem here.

Sy Reene

Actually fwiw, PBK.com is interesting in that it's actually a US website, while the .uk variant is the overseas entity. If you buy from PBK.com the transaction is processed in US dollars from a company in Delaware.

indyfabz

It's not price fixing because you don't have two manufacturers, suppliers, etc., agreeing to fix prices.

honcho

We all want free markets unless they start to cost us. Just remember someone, somewhere, is trying to empty your wallet into their wallet.

There are so many variables in this situation.

The thread seems to be focused on Shimano's wholesale pricing to the US and Euro markets as the primary cause. Shimano has to deal with all the different currencies and the associated risks of fluctuating exchange rates between Japan, the countries they manufacture product in and the currencies of their markets. Managing transfer pricing to be both truly profitable and competitive in the marketplace in the face of ever-fluctuating currency values is both black art and weird science. Shimano, to remain an ongoing business, has to be profitable to its owners. Each decision on production, pricing and distribution demands consideration of how the decision(s) affects profitability and the successful continuation of the business.

Coupling Shimano's international pricing differentials with the value of the US dollar in relation to the UK pound and euro has made international transactions more attractive. The USA personal import duty free amount of $800 has added to the attractiveness of cross border purchases.

I'm not aware of how distributors in the USA like QBP and JBI play in all this. Distributors don't move product for free and I don't know if large retailers in Europe (or the USA) are able to purchase directly from Shimano to obtain better pricing.

It's hard to put the genie back in the bottle and rest assured there are plenty of folks scheming ways to exploit ever small price differentials to eek out a profit at someone else's expense.

unterhausen

the pricing disparities come from the fact that these retailers manage to get OEM pricing on the parts and then sell at retail. In the past, Shimano has chosen not to enforce their oem agreement with them, even though they really aren't bike manufacturers. They have been their own gray market suppliers.

Sy Reene

I don't understand all of the variables; not sure anyone does. But isn't Shimano eg. selling their product in Japanese Yen? Eg. they price a part at ~11,000 yen, which is about $100USD or $87 Euro or 79 Pound Sterling. No matter who is buying the product from Shimano, don't they have to come up with the equivalent of 11,000 yen? Any final price differentials are either due to Shimano choosing to price differently, or inefficiencies in some countries' supply line cost structure.

That is a commonly quoted reason; which I'm not sure is the case. This does not explain a lot of price disparities. Go back to the Corsa Speed Tubulars as a reference. Ok.. roughly $60 from Merlin, $78 'fulfilled' by Amazon but from some outfit called Lucky Cycles, or similar from Competitive Cyclist (I don't think these outfits are qualifying as OEMs). Then, go to a LBS site, such as Brands Cycle/Fitness or the referenced Universal -- $134 at either of these. That's over 70% higher cost.

CliffordK

Since I'm not actually in Portland (Universal Cycles and BikeTiresDirect are local there), I thought I'd see what the local Eugene shops had on their websites.

Two shops, Pauls & Hutches don't list any parts on their website.

One shop (Arriving by Bike) seems to have big ticket items listed, but don't list the little things like bike tubes or chains. They also don't list any prices.

Parts - Arriving By Bike? Transportation Store

In theory, looking at a website, I could decide if a store is even likely to have my order in stock. Hopefully listed items would be in stock and in the right sizes.

Looking at my shopping list above, I don't see any exact matches. There are two other brands of stainless bottle cages that might substitute, and several items that I very much doubt they carry, although it is possible one of the "road" shops would carry the tubulars.

I suppose I could call ahead to make sure they could pre-order my parts and mark them up. But, I hate riding, say 3 hours RT to pick up items that I'm not sure a store carries.

Psimet2001 

Yeah... you have the right idea just not the right scale. Currency and exchange rate fluctuations don't account for pricing structures that allow for foreign RETAIL prices to be BELOW US WHOLESALE pricing by double digit %.

This is not completely a currency issue.

Not sure how you are not aware of how US distribution plays in this. First of all JBI doesn't carry Shimano. Shimano a while back killed access to all but SBS, KHS and Q. If you didn't have an account with them then you had to go Shimano Direct. In essence you are supposed to receive the same pricing for all products regardless of where you buy them as a retailer. In other words - I have wholesale accounts with distributors AND Shimano direct. If I search for a part I will see the same pricing regardless of which one of those entities I buy it from. That price is the US WHOLESALE price.

What people don't seem to get or understand is that Shimano sells to all sorts of entities. Bicycle OEMs, Distributors, Direct Dealers, etc. In very general terms the more volume each channel represents then the lower the price they pay. Bicycle OEMs that do large volume pay WAY less than anyone else int eh chain. Trek pays pennies for what we pay hundreds for. It's not that drastic but the structure difference is terrifyingly large.

In other words - Q pays less than we do. Enough to allow them to make money when they sell it to us. For those not in touch with the realities of business that means anywhere from 20%-40% of a margin. Then it gets to the retailer (us) where we have to add a 20-40% margin to cover our overhead and costs. It's easy to see that there is a huge amount of price inflation the longer the chain is. We have gotten to the point that 1 link has to be removed from the chain.

I did an extensive podcast on all of this that does seem to explain it to a lot of people enough that at one point I was asked to be on a logistics industry podcast.

When the supply chain is end routed all hell breaks loose. This happens frequently in Europe because honestly they are way more free market than the US is. They actively stand in the way of legally pursuing entities when they violate agreements. Small guy decides to create a "Bicycle Company" making their own bicycles (or assembling them) called "XYZ Cycles". They go through the application process with Shimano EU and secure an OEM account at the lowest volume level. They place a large order for build kits. In 2 years when Shimano inventory levels finally catch up with the order (small dig at their inability to hold inventory) they fold company XYZ and sell the kits direct to consumer. Or leave the company open. Shimano usually just doesn't care - or at least hasn't cared.

As you can see from the model listed above - XYZ was able to buy for a price level about where the distributors like Q buy at. They then have nothing handcuffing them from selling to enthusiasts who hang out on forums. Nothing that is except for the legal agreements they signed when Shimano agreed to sell to them at a reduced rate with the idea that they were putting the parts on bikes they sold and selling everything as a package. XYZ is then able to sell to you guys at a price that normally US wholesalers would pay to e the parts from our distributors- like Q's selling price to us. That is how we end up with retail prices online that are lower than US wholesale.

We call that gray market. It is product that has an illegal source. The sale of it is in direct violation of agreements that were signed. There used to be so much of it that no one could keep up with taking everyone to court. Now companies like SRAM and Garmin (well garmin because GPS units are considered critical to national security so homeland defense got involved) serialize their products. They actively shop the grey market online and when they receive the product they verify it's genuine and check their records to see who they sold it to and track down the chain that led to the product bleed. SRAM spent $6M in Europe on court cases.

Why do they (OEM's like Shimano and SRAm) care though? They care because OEMs are starting to go direct to customer. Shimano will eventually follow suit. But why on earth would they do that when their product has been cheapened in the market already? Think of the money they could make by selling direct to customer at MSRP. They keep their cut, the distributors cut, and the retailers cut and make good money. If they don't fight this they in essence set their company and profitability back massively.

They ignored all of this for years because of a lot of factors. It was small to them. The only people complaining seemed to be US retailers who were the ones who were being cast aside by you guys because we're the devil for not just buying at wholesale and then taking a loss on selling it. They were still getting money - everything they make they sell to someone soooo why care? Now that they want to go customer direct the pricing issues cut them to the bone. It's now going to take money directly out of their pocket and they have cheapened the value of their product.