guadzilla

Well, a 20% gross margin on a sale is still better than a non-sale - a lot of business dont realize that you can make the same profit on higher sales with lower gross margins, and that increasing sales volume can also lead to a lowering of costs (greater discounts from suppliers).

I understand the need to keep cumulative gross margins high in order to pay for opex - but applying the target cumulative gross margin to each and every sale is poor business. Airlines and hotels have figured it out, which is why they offer variable pricing.

Innovative retail shops find a way to do this - or a way to not compete on the basis of price by providing some service proposition that cannot be matched by mail order.

V.

bathedinshadow

I agree, making some profit is better than making no profit at all. But perhaps I'm missing something. I wasn't a business major! I do know that I have gone into a hotel and got a room for $30 before (by asking a few times), and then watched another couple come in and pay over $100. As long as it doesn't cost more to have the staff clean the room and have the lights on for a few hours... profit.

We'll see what happens. No harm in trying as long as you aren't rude.

achoo

Tough titties. If they're trying to sell something for $3000 that I can match somewhere else for $2000, there's something wrong with their business model. I don't owe any business a damn thing. As I posted earlier, it's MY money I spend. If they want it, they get it on MY terms.

The only people I OWE anything to is my family.

If I can get my bike stuff for less money, that leaves me more money for the REALLY important people in my life.

And guess what? My wife runs her own small business. And for some reason, we don't ever feel like we're ENTITLED to have someone buy her products - at any price.

MY bottom line matters to me MORE than their bottom line does.

jdon

So, the "really important people" get whats left after your bike stuff?

recon455

He can't get it somewhere else for 2k.

I am not saying he should not bargain and try to get a deal. Indeed he should bargain and get a deal, and then bring his business to that shop, all else equal(customer service, mechanical service, selection, etc). Expecting them, or telling them, to cut 15% out of their profit margin is unreasonable, unless they rarely sell high end bikes, or it is the end of the year/new season.

eippo1

What people aren't addressing is the fact that the margin is graduated. Also you'll have a very hard time bargaining right now if the bike market is anything like New England. Bike shops here are having serious issues keeping up with demand because nobody expected this many people wanting new bikes. Many new bikes are going directly into customer's hands who have put money down after riding a similar bike or a different size.

nitropowered

I love these threads.

#1: Pay in cash. You have more bargaining power.
#2: don't expect deals in the spring. If you don't buy it, someone else will. You have more bargaining power in the winter when it is totally dead.
#3 bike shop owners don't get rich. As the saying goes, to make a million, you need two million.

bathedinshadow

Call me stupid (or don't), but why does paying in cash give you more bargaining power?

As well, "if you don't buy it, someone else will." How is that a factor when the shop is having to order the bikes anyway? If I buy it, isn't that one more person buying a bike? I really am asking - not being snarky.

MegaTom

Because the shop doesn't lose anything from the sale to merchant fees from the credit card companies and the money is immediately in their possession.

tuxbailey

Credit card transaction fee?

I think you should ask for a discount but there is no guarantee in getting it, given that other shops are asking the same or more. You might think that it is like bargaining over a car, but I don't think your LBS employees behave like car sales people, nor they might get the same incentives like car dealers get from automobile manufacturers.

And I don't think the hotel room example is quite the same. I imagine you might not get it for $30 if it is on a weekend in a popular locale; more appropriate if you were shopping in the winter.

roy5000x2

As a former bike shop employee, please don't try to bargain with prices. We'll give you a percent discount on accessories after buying a bike if it's a part of the store policy (or if we like you). I've only seen the owner of the LBS I worked at drop the price for a customer's bike once, and it was because the customer was a good friend, and the bike had been sitting around for 5 years. Bike shops don't make that much off of bike sales. Most of the profit comes in from labor and accessories.

Oh, and never quote prices off of the internet (unless quoting the MSRP of a product is somehow relevant). Customers that try to bargain with price at a LBS with online prices aren't looked upon to favorably by LBS employees.

duffymcpatzer

This was actually a fairly informative thread. Whoda thunk?

That said, I agree with the money bit on one hand but as a business owner myself (not bikes) I hate hagglers. However, at top end pricing I'd rather move product and get back the cash than wait for better margin.

I'm in the market now (damn my timing) for a couple of $3K framesets and I'm settling in to the idea of paying MSRP and staying local, but that is almost $500 in sales tax versus an internet sale! That buys a lot of accessories. Oh, the humanity.

In the end I will probably suck it up and stay local because I trust the pro-fit guy and the shop knows its stuff. oh, well!

guadzilla

You are correct. But bike shops typically tend to be run by people who are cyclists first and businessmen second - they confuse average profit with incremental profit.

V.

guadzilla

With all due respect, that is the worst way to conduct a business. *Expecting* the customer to pay full retail simply b/c you, the bike shop, have an inefficient business model doesnt make sense. You need to find a way to earn that business, and not have a sense of entitlement to it.

If I am a buyer, I dont go to a shop to be "looked upon favorably" by the employees. I go in there to buy a product at a price+service proposition that is acceptable to me. If it isnt, I will buy elsewhere.

Yes, good vibes are an important part of the service proposition of any specialist shop (bike shop, dive shop, etc), but the shop needs to leverage it to make a sale ("enjoy the good vibe here, no matter what, and hopefully, that will convince you to pay a little extra to shop with us"), and not use it as a favor they are doing to the customer ("if you dont bargain, we may look upon you favorably").

I understand the economics of a bike shop, but the sense of entitlement that is displayed by some LBS employees posting here makes me wonder how any of them survive!

V.

greatkeen

I assembled my bike by myself,becuase I believe it will cost less and the features of the bicycles will be better.And I can buy everything what I want according to my needs.I think it's a good way to buy your bike.

https://cgi.ebay.com/ws/eBayISAPI.dll...STRK:MESELX:IT

bathedinshadow

My point was that a profit is a profit. And yes, I'm aware of credit card transaction fee's. I just don't know how they work. E.g., are they based on the price, or a flat rate.

bathedinshadow

My issue with the "percent discount on accessories" is that I can buy accessories for far cheaper online, assuming I even need them. I would be looking for a discount because I'm trying to save money, not so that I can save money on something I'm not looking to buy. That's not saving at all.

I was just curious if the markup on road bikes was that much different than mountain bikes. I got an great discount on my mtb due to the fact that they do mark up the bikes a great deal. Unfortunately that shop doesn't sell Argon.

I mean no disrespect by asking for a discount, but as a consumer, I too need to get the best deal.

Bob Dopolina 

Where do you get 'marked up a great deal' on bikes? Seriously. You have been misinformed.

FULL margin on a bike is 30% on average, FULL margin. That isn't profit. From that money ALL the bills have to be paid including salaries and taxes.

Margins on accessories and clothing is much better so this is why you can get a discount here.

To the poster that said basically any sale is a good sale you couldn't be more wrong. Selling product at a loss is giving up the opportunity to make a profit on capitol that will only turn once in a season and it will kill you quick. Bike shops have to order bikes well before the selling season actually starts. They then typically have 90 days from delivery to make full payment. These kinds of terms will cover the bulk of their inventory and will involve the largest potion of their capital. This means they get one shot per selling season to make as much as they can on that money. If you start giving huge discounts you will find quite quickly that you can't even cover the cost of the product you've already committed to buying.

You can make more money selling a few helmets and tubes than you can from most bikes. Think about that for a minute. There is more actual profit in a tune up or two, and handful of helmets and a box of tubes than there is in a $2000.00 road bike.

I worked in and then managed several retail bike shops over the years and it was the same all over. Don't expect much of a discount on a new bike ESPECIALLY in the spring.

merlinextraligh

Might want to read Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007). Your statement was accurate prior to Leegin.

However, vertical price restraints, are no longer per se illegal, and may be upheld under a rule of reason.

Quijibo187

The shop I work at used to deal a fair bit with Argon.
We dropped them in favor of brands that have a better margin.
Although they tend to have a slightly lower msrp than some brands for a comparable bike,
their wholesale was just as high if not higher.
Left us less room for profit and less room for bargaining.

BikeWise1

The business model won't change anytime soon. It can't because the kind of shop that is good at "hands-on" customer service isn't interested in becoming PBK.

If you want it cheap, get it online and don't waste my time. :-) I can tell you that being a small shop I have a backlog of repair work because I am good at what I do. I did 23 road bike fits last week. These are people who want to see who they are dealing with and they want/need me here after the sale. If I take lots of time to answer all your questions, fit you, etc. and you want a discount, you've just told me that I am not worth what I ask. That's your prerogative to ask. It's my prerogative to decline. If I decide I want to move that bike for whatever reason (buying mistake, tired of looking at it, weird size, etc) and agree to the price you asked for and you still don't buy, you are clearly not my customer and will not be treated as such.

If that sounds harsh, I am sorry. But please realize: there are several retail channels offering differing levels of service. Low price shoppers need to find the channel that works for them and not expect other channels to operate similarly. I doubt you expect to walk into a virtual store and have your bike tweaked. It's a different way of doing business that sacrifices personal relationship for expediency.

IOW, bike shops are not built around low price at all costs.

BTW, for those who asked, cash is better. CC companies usually get 2-4% of the total of a sale. Miles and rewards cards cost the shop more to process (betcha didn't know we're the ones that finance those rewards!).

Of course, one bank locally started charging a "cash handling fee" on cash deposits. :-( We no longer bank there.

I don't love bikes per se. I love what bikes can do for people.

What I have stated does not come from a sense of entitlement, but rather the realization that not everyone who walks through my door cares if I am still here next year. I'm fine with them holding that opinion, but it doesn't mean I have to cheapen what we do because of it. We're busy because people love us and keep coming back and sending their friends. I'd say we're doing something right, and oddly, discounting every sale isn't part of it.

BTW, Mr. Dopolina is correct in every regard.

cat4ever

Anyone thinking a 30-40% gross margin is a sweet deal for a bike shop for a high end bike is misguided. High end bikes move the slowest. The shop is going to sell a dozen $1,000 bike before selling one $6,000 model.

Of course an online shop doing business around the world from the garage of the webmaster is going to be able to offer much lower prices on everything than a local shop. A shop has employees, rent, heat, garbage removal, security system, landscaping cost, snow removal cost, unemployment insurance, building insurance, liability insurance, etc. etc. etc. and isn't available to sell merchandise 24hr/day

From a merchant standpoint, price shoppers are price shoppers. I don't love them or hate them. I just know that they will NOT be long term customers because I know there will be something we sell that is not THE cheapest in town.

/not a shop owner or employee - other business owner

Dan The Man

Bargaining is actually a win win situation for shop owners. The ideal situation would be if they could sell the bike to every person and the highest possible price that person would pay for it until just above the marginal cost of that bike. Bargaining lets them capture the market of the wealthy who don't need to bargain at a high profit margin. It also allows them to capture a greater portion of the customers who do not want the product at the high price but still at a margin of profit, increasing their total profit and market. The key is that they have to be able to bargain hard enough to find out the highest price you are willing to pay for the bike. You of course are trying to do the opposite.

Psimet2001 

Most of the individuals in this thread - even the ones that have worked in shops - don't have a true understanding of how the industry operates.

Without having much time to post - It's spring and I'm selling stuff - I will throw out the following:

Cash is king. Always has been and always will be. Credit card processing costs - quite a bit on a lot of transactions. 2%-4% from most companies. I get a discount for my transaction load but it is still a lot, and by far my biggest operating expense (even more than shipping) that is worked into my cost of sales.

BTW - if you can't figure out why cash is king for any reason outside of CC fees...well then you shouldn't be posting in this thread.

Bikes are horrid. You pay for them well in advance of selling them, everyone thinks you're banking on them and wants everything off in a discount, the industry protects them as though they are some sort of gold - gold that will make everyone who touches it poor. On top of that you might get to flip that capital once a year.

Now margins in the 30% range (GROSS MARGIN numbnuts). Let's say you go to a shop and he has a $2000 bike there. He probably paid $1400 for the bike. Then he had to pay the fees associated with the transaction, the shipping to get the bike there, the kid or himself to assemble it, etc. Let's just assume all of that was free. He "made" $600 right? If he sells it to you at "full price".

OK...you pay with a CC - let's say 3% = that's $60 the bank just took.

Meh....Polish president died in a plane wreck and the plant I am working in (during the day ) is 99% Polish. I don't really have time to post a lot....

....listen. According to the NBDA the average net margin after expenses and taxes for shops in the US - before the bad economy - was 3%-4%. So basically the best the shop owner can really hope for from the sale of a full MSRP bike is about the same as what the CC company took on the transaction ~$60 in this example.

When you go in and ask for $50 or $200 off....you see where is leaves everyone.

It's always your right to ask. Yes you can go down the street and ask for a better deal. Keep in mind when you get one though...that shop is losing money. They may be selling it to free up cash, to get flip inventory even at a loss, or because they are poor business people and don't understand what is really going on.

Bottom line is that if they keep that up they will be out of business. Period.

Oh...and here's your moment of Zen - I have heard pretty good rumors that all of the major bike brands have direct web to consumer internet channels established. They are all in a standoff waiting for the first one to pull the trigger and then they all will. You can say what you want about whether it's a good idea or not, etc but you all know it's coming.

The current industry is rooted in this NOT happening with the actual bikes. When it does happen/ if they do let it happen, it will DESTROY a majority of the shops out there.

Personally it doesn't bother me, and I believe it opens up some avenues for people like myself, but the industry will be turned upside down for sure. Coming soon? Probably not. It won't come from the big guns at first but they will do it in reaction to others who will have done it.

Don't be surprised if you start seeing it as unique product with different branding, etc at first.

Born

Hey another person from the lower mainland! Unfortunately you won’t find too many deals at this time of year, best time is in late summer or fall when everyone is getting rid of stock for next year’s models, but you probably already know this and want your bike now. There are a ton of bikes stores in the lower mainland and competition is pretty high keeping prices relatively low. Instead of looking for bargaining on the bike itself right now, see who will give the best deals on equipment by buying a bike there and if they will give you a free professional fit. You can also ask to see if they can upgrade some of the parts like a better saddle.

Speed theory has great service with guys that have some serious technical knowledge. However I have not bought a bike there, but they will likely give you give a discount on equipment, which would be nice since they have lots of great stuff in stock. As you are coming from North Van, you probably will not be frequenting the west side too much and that might not be the best choice. The best prices and overall service for me has always been La Bicicletta on Broadway, but I am not sure if they carry Argon bikes. They will definitely give you a deal on equipment if you buy a bike there and a free professional fit. I personally wouldn’t go to John Henry as most of the equipment they carry is more for mtb bikes and you will probably find yourself not going there to feed your bike schwag needs.