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  1. #1
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    Overall Bicycle Markup

    From time to time, I see posts on the markup structure on bicycles - shop prices, online prices, import prices etc.
    Most seem to be from consumers; with some answers from retailers. Thus the overall picture is missed; as retailers only see their part of the channel

    I think it is interesting though not much different than other industries, except that the information flow is more 'underground' in bicycles.

    P&A markup is all over the place. But Bicycles as whole units do have a set 'rule of thumb' on pricing from FOB factory price to consumer list. It is 3 times. For example, a bike that leaves a factory at $500 will have a list price [msrp] of $1500.

    This mutiple covers all duty, shipping, markups, and re-markups alone the way. Each step of course adds a percentage based on previous step's cost. So the retail markup applies to the factory cost, the duty, the shipping, the distriputor's markup [which in turn is on duty, shipping, etc]. So $10 of shipping is passed to retailer as $14.00 and then passed to customer as about $25.

    The math is simple but kinda fuzzy along the way; but the rule stays about the same - MSRP = 3 x factory FOB

  2. #2
    flinty-eyed moderator
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    If correct (which I am doubtful based on my all my information), the real number in interest is wholesale actually. And the wholesale to retail margin is not remotely 3 times. Heck, if you are elligible for EP/Sponsored rider deals, you can get things at Manufacturer's cost- so it's not really much of a secret at all- especially if you read the trades like BRAIN, been to Interbike, worked in a shop ect.

    No 300% margins on bikes. Actually, bike margins kind of suck honestly at the IBD market. Parts and accessories have much better margins, and they are only keystoned best case senario. Labor and repairs are the financial lifeblood of many shops.

    So thank you, come again.

    ;)
    Dr. Cox: Lady, people aren't chocolates. Do you know what they are mostly? Bastards. Bastard-coated bastards with bastard fillings. But I don't find them half as annoying as I find naive bubble-headed optimists who walk around vomiting sunshine.

  3. #3
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    Doesn't seem that unreasonable

    Quote Originally Posted by wardinside
    The math is simple but kinda fuzzy along the way; but the rule stays about the same - MSRP = 3 x factory FOB
    With computer based gadgets the manufacturing price is about 25% of MSRP. If you spec a slightly higher priced chip, say $1 more, floor price rises $4.

    Business 101 kind of stuff.

  4. #4
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    not great

    I was a rep for a major manufacturer for a while and the margins on bikes just about pay the bills for the shop. accessories and service are the only real profit centers. that's ahy there are always parts discounts if you buy a bike...

  5. #5
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    I guess this is harder to understand than I thought

    The process of moving a bike from a factory to a consumer has costs and markups at every step. Brokers, Agents, Shipping companies, distributors, retailers, etc.

    The total process has a standard multiple of 3

    Bike leaves a factory at $500 -- MSRP is about $1500
    Bike leaves a factory at $600 -- MSRP is about $1800
    etc

    I am not saying the retailer has $1000 of margin in a $1500 bike - of course not
    In a $1500 bike there is $1000 of assorted expenses and markup along the way from
    the factory to the consumer.

  6. #6
    Grey Manrod
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    Makes sense to me...

    Quote Originally Posted by wardinside
    The process of moving a bike from a factory to a consumer has costs and markups at every step. Brokers, Agents, Shipping companies, distributors, retailers, etc.

    The total process has a standard multiple of 3

    Bike leaves a factory at $500 -- MSRP is about $1500
    Bike leaves a factory at $600 -- MSRP is about $1800
    etc

    I am not saying the retailer has $1000 of margin in a $1500 bike - of course not
    In a $1500 bike there is $1000 of assorted expenses and markup along the way from
    the factory to the consumer.
    But then, I don't know much about nothin'.

    At first glance, though, it seems to be an inefficient system if there's that much cost increase from Factory to Consumer. I suppose that's comparable to other industries?

  7. #7
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    Right, but who cares?

    Quote Originally Posted by wardinside
    Bike leaves a factory at $500 -- MSRP is about $1500
    Bike leaves a factory at $600 -- MSRP is about $1800
    etc
    What the rest of these guys are saying is that once a bike shop pays rent, power, phone, advertising, staff, etc, etc, that their 30% of the MSRP isn't enough to generate a profit. The rest of the money is sucked up by "the system." Basically, your message implies that we should all go in and beat the heck out of our bike shops looking for discounts on new bikes and everyone else knows they don't really have one to give you.

    You are right, it is simple if you are talking about the same things.

  8. #8
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    Quote Originally Posted by Brick Tamland
    At first glance, though, it seems to be an inefficient system if there's that much cost increase from Factory to Consumer. I suppose that's comparable to other industries?
    Let me assure you that if it could be done better, someone would be. Capitalism maybe messy, but it almost always finds holes if they exist. Check out the online bike retailers and see their lower prices for almost the same stuff. They are cutting out the bike shop and not the rest of "the system." If someone figures out to how to make this better, they would be rich. Since no one is doing this better it is fair to assume that it is impossible or very difficult.

    I hope no one thinks that everyone should work for free?

  9. #9
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    want to see some mark up check out bicycle helmets.

    The pro deals on $150 helmets are like $50 so basically wholesale is 50$ your retailer is marking it up a ton!!!!

  10. #10
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    Quote Originally Posted by spyro
    want to see some mark up check out bicycle helmets.

    The pro deals on $150 helmets are like $50 so basically wholesale is 50$ your retailer is marking it up a ton!!!!
    The bike shop does not pay pro deal price on a helmet. Pro deal is a percentage OFF the normal price (usually 20%) that is offered to employees. Pro deal is typically a direct transaction between the employee and the manufacturer.

  11. #11
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    Come on....

    Quote Originally Posted by spyro
    want to see some mark up check out bicycle helmets.

    The pro deals on $150 helmets are like $50 so basically wholesale is 50$ your retailer is marking it up a ton!!!!

    Wow. I've seen a ton of dumb stuff on here, but this statement might have hit the top of my list. "Pro Deals" or "Employee/ Industry Purchases" are for EMPLOYEES only. Even the highest volume dealers don't even get close to the discounts that employees do. Manufacturers sell products at manufacturing cost or below and write it off as an advertising expense (And when I say manufacturing cost, I'm talking about the actual materials used. Not R&D, testing, molds, etc.). If a shop employee loves his/her new helmet, they will sell more of them in the shop. That moves more units, the bike shop orders more, the helmet manufacturers sell more helmets. "Pro Deals" have nothing to do with Wholesale prices!!! Pro deals are advertising!!! The under-educated should really be careful what they type.

  12. #12
    100% torqued
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    Hi, my name is Rich and I am a recovering bike shop owner. Seriously. It is a stupid business to be in. All you need to figure out what your LBS is paying for things is look at the online joints, CBO, Jenson, Bike Tires Direct, Performance, Nashbar, etc. The lowest price you can find for a given item at any of them will be the bulk discounted wholesale price. That's right, I owned a store and could often find things for sale to the general public at a price lower than I could get it from my wholesalers. It takes a little research, and no it does not apply to every part but the deals avalilable on most products are impossible for a shop to compete on. My shop was a survivable business, it just was going to be a non-profit even though that was not the goal.

  13. #13
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    Mark up on bikes isn't much.. usually around 50%; meaning that a bike which retails for $3000 usually costs the dealer about $2000 (that's before taxes and S&H). Not much money is actually made off of selling a new bike.. much more from repairs and P&A.
    Parts have a more structured MSRP than bikes, most distributor catologues list the retail price and wholesale is half of that; 100% markup. Most shops sell new parts for a little under suggested reatil (where I live at least).
    Pro Deal is getting the part/bike straight from the manufacturer. Typically is around Wholesale minus 30-40%. Once again, a lot of bikes don't get much more than Wholesale -25%, but parts where R&D is a large fraction of the cost of the product (helmets are a good example) can be up to Wholesale -50%

  14. #14
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    Margins on bicycles fuzzier than on other products

    Calculating the true margins on bicycles is a bit fuzzier than for other products. While bicycle have the same types of overhead costs typically found on other products, unlike most other products a bicycle does not arrive at the retailer fully assembled and ready to sell. The dealer must unpack the bike and do the final assembly and adjustment - and this has real cost to the dealer, and cuts into the available margin. Different bicycles will require different amounts of labor to assemble and adjust - some suppliers delivery their bikes almost fully assembled and ready to go, and other suppliers delivery the bikes only partially assembed, so you can't necessarily compare the margins on two bikes sitting side by side on the dealers floor. There aren't many industries that still operate this way, but it is one of the things that makes the bicycle industry a bit unique.

    I'm sure Rich can expand on this (and the amount of headache it causes).

  15. #15
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    Quote Originally Posted by teoteoteo
    The bike shop does not pay pro deal price on a helmet. Pro deal is a percentage OFF the normal price (usually 20%) that is offered to employees. Pro deal is typically a direct transaction between the employee and the manufacturer.
    Exactly...

    For what its worth, most companys that offer a 'pro deal' classify it as a marketing expense, so they are able to rationalize the cost (read: loss of money) of it as a tool to push the product/brand. In most cases, pro deal cost is substantially lower than wholesale & sometimes it is even lower than the COG to the company selling it.

    Trust me, everyone in the industry would LOVE to have that kind of markup, to buy for $50 & sell for $150...unfortunately, that's not the case.

    Bike margins are typically in the mid 30% range, and that's before shipping/labor/salesperson wages/long-term service agreement/etc.

    We are not in this industry to get rich, that's for sure...

  16. #16
    100% torqued
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    Yeah bike assembly is a pain. The ones that come "nearly floor ready" blow. Generally I would spend time taking things apart and properly lubing and then reassembling. Not that I couldn't just slap them together as designed they just don't perform as well. Housing often needs to be resized, hubs adjusted, ,deraileur hangars straigheted after shipping, headsets need lube, pull the crankarms to make sure BB is tight/threads lubed. Brake pads are never aligned, posts and bolts not lubed. Takes a good wrench about an hour to 1.5 to do the job right. That same wrench could have built a wheel for which we charged $30, changed 7-8 flats at $10 ($5 tube/$5labor) each for 10 mins of labor. Granted its is not really labor lost but time and responsiveness to the customer who want repairs back quicker. Where it gets funny is cheap bikes take far more time to get them working right. Brakes in particular stink because mfgrs. cut corners with brands on them. A $250 bike cost about $140 in the box from the mfgr. (Assume free shipping cause you only buy these in bulk) If you ship an individual $250 bike you add $35. It already hurts. Now put it together for maybe a lost $40 (low side on a slow day). Does $180-$215 into a $250 bike sound right? It is.

    Suspension bikes need to be set up right, disc brakes can be a pain too because the mounts need facing, some times they simply aren't welded square, it is just a part of life wrenching though. It is much more enjoyable to build a frame up from scratch, with 105,Ult. DA, Centaur, Chorus, Rec and just do it right the first time. That was the direction I was going with the shop, custom builds based on your budget I just said hey it's really time to ride. I was swapping parts (saddles, stems, bars for width) at cost on stock bikes to make them fit the customer properly and eating $ there too because you replace OEM or MFGR brand bits with say Salsa parts and the the OEM bits only sell cheap if they ever move at all. Lets face it a good shop will fit you, and you as a consumer deserve it but like many things in the bike world it is expected to be included. I'm done with it as a business, and I'm glad to be. I still tinker and wrench, and always will.

    I was laughing with a regular the other day showing him some of my wholesale prices vs. what is easily found online.
    Last edited by Howzitbroke; 04-07-2006 at 10:53 AM.

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