What's the mark up on new bikes?

[karlt]

Dawes are certainly poor about managing transitions, eBay is full of them at quite amazing discounts.

I was talking to an ex colleague who now works for a mage supermarket in purchasing about the road bike Asda were selling for £99.99 and how they were able to do it. He just smiled and said if I.knew what they were buying them for from the Philippines my jaw would drop.
Pressed further he said that 1000% mark up on bikes like these and similar from Sports Direct was not uncommon.

I'm not surprised. Mild cheddar is really cheap in bulk and you can make quite a few derailleur hangers out of a kilo.

[karlt]

Anyone know? Just when I see some of the bargains about like last years colours it makes me wonder how they do it. Also - what's price fixing? Sure loads of that goes on.

At this time of year 'in the bike trade' (i.e. not supermarkets and direct importers who are also retailers) there are cheap bikes about because

a) the retailers want to shift last year's stock and

b) the distributors want to shift last year's stock.

The first of these will have been selling these bikes all year (near RRP, without which they won't get supplied in the first place) and they will expect a 30 to 50% markup at near RRP. Out of that they have to pay for all the overheads, setup, warranty costs (to them, in time etc at least). When they sell these bikes off at the end of the year at -30% they have cut their margins to the bone or they are actually taking a hit overall in order to get people in through the door and clear space.

The distributors can also be left with stock. They will offer this into the trade to a chosen few retailers, at very keen prices.
The deal is often that it is a 'take it or leave it offer' and if the retailer does the latter, he may not get the offer the following year. This is how come certain shops always seem to have last year's model at keen prices, but only when it is last year's model. These bikes can work out about 40- 50% off original RRP by the time they come to retail, depending on how much the distributor and retailer want to get shot of them, respectively.

Direct 'own brand' importers (Decathlon, Halfords, Tescos etc) work to a different scheme altogether; there are fewer/no middlemen, which means that they can sell cheap and still make a packet. A few years ago Halfords were selling terrible Apollo MTBs for £100 and these bikes were allegedly costing Halfords about £15 a go, shipped. Things are a bit different now but they are still making out like bandits on some lines, you can be sure of that. When Halfords sell off their 'own brand' bikes at 'half price' they are still making a healthy profit margin.

cheers

Halfords are also not totally averse to advertising a £200 bike for £350 for a few weeks so that they can offer a "massive reduction" when they drop the price to the intended £200 for most of its retail life. I gather supermarkets do this with wine (very easy, since 90% of people (at a guess, I know it's true of me) only have the price to go on when judging the quality of a wine in the first place, so if you tell them it was £15 how are they to know it was only ever worth a fiver?) and I've spotted them doing it on cheese as well, which I did spot because cheese I do know, being essentially a bipedal mouse.

(two posts on the trot referencing cheese. Life is odd)

[TrekMad]

I suppose it's naive to imagine price fixing doesn't go on at both ends of the production/ retail channel. Samsung, Apple and Lenovo all use Foxconn ( substitute Trek, Giant and Specialized) to manufacture. I reckon a cosy conversation of the three with Foxconn would go a bit like this:

(3): We're offering £12 per unit for a finished product, at 1 million units a month.

Foxconn: How about £13.50?

(3): We're offering £12. We can go to the Philippines you know...

Foxconn: Okay, deal.

If you fix at one end, it's likely all the way through the retail channel, and us, the poor consumer mugs on the other end having to stump up! The answer is, don't stump up!

Quite a good and informative film from the 80's here about Halfords and Wester Ross and how they made their frames in house for £5 and selling on a bike costing £120.

Plus ca change!


http://m.youtube.com/#/watch?v=fL25BYkA6Xw

[greyingbeard]

We the consumer have choices
1 - do as salesman tells us and stump up
2 - shop around, gain knowledge, wait, get that bargain
3 - keep your old bike/telly/whatever and your money

[old_windbag]

I've kept my old telly and the picture is rubbish... where I had programmes before I just seem to have white noise. I've complained to the BBC but they just keep replying twittering on about some digital nonsense that I cannot fathom what they're on about. Anyway I'm determined to get a picture if it kills me .

This is one aspect of technology where sometimes the consumer gets no choice i.e the digital switchover. We have to progress for good reason most times, and that also happens in the cycle business where incompatibilities occur and eventually scrapping and purchasing anew can be the best option. I'm a little concerned about the possible FM switch off as from what I'm seeing on the internet it seems the transmission quality is likely to drop with DAB but it's early days we'll see.

On an aside MP3 related etc but connected with markup I see a lot of music artists bubbling on about payment from downloads etc and coming off certain sites. Can someone explain why someone thinks they should be paid a percentage for every copy of their track when the engineers behind the hardware and software of the technology its played on ( much more complex ) are not paid a percentage for every MP3 player/smartphone sold of the company brand they work for? They get paid a fixed salary and its onto the next big thing..... so music artists should get a fixed fee for producing their "goods" in similar vein. It would then be the companies marketing the "product" who would make money on the sold items, as Sony,Samsung etc make money from their smartphones but the design engineers get paid once. Music is a designed product at the end of the day. If we did apply the same royalty style payment our consumer goods would be pricey, there's a lot of hard work and long man hours behind them that often is taken for granted.

[horizon]

Anyone know? Just when I see some of the bargains about like last years colours it makes me wonder how they do it.
Also - what's price fixing? Sure loads of that goes on.

Building a bike costs around £2.00 in China. Yes that's two pounds. The parts don't cost much more. The really expensive bit is the business rates/overheads/staff costs etc etc of a bike shop. Getting it to the customer requires a huge mark up.

[NUKe]

Then there's frame building - back in the day a 531 tubeset was about £30, and lugs £15. That's about the time I paid £425 for a Brian Rourke Italia with Columbus, which was actually cheaper! How they can justify £1200 for an 853 frame is beyond me.

Not sure this is quite valid. A handbuilt frame set takes time to build and paint . Why do you begrudge paying for the Artisans time. other things which have to be costed in to the overall equation is the time spent helping you choose the frame, the running costs of the shop/ workshop rates and electricity and so it goes on. If you want cheap buy off the peg and get the one size fits all

[Mark1978]

I thought price fixing was when every dealer sold at exactly the same price. I can think of a couple of brands that do this - presumably the companies won't allow the shops to deviate? I remember Ford got done for price fixing cars but can't remember exactly how it worked.

Getting dealers to sell at the same price is not price fixing, it could simply be a part of their dealer contract. If a manufacturer wants to set a price for their product, they are entitled to do that.

However if say Trek got together with Scott & Cannondale and agreed that they weren't going to sell 105 equipped carbon bikes for less than £2,000, then that would be price fixing as there is collusion. It can often be difficult to prove as prices naturally arrive at the same levels due to natural competition.

[hamster]

Price fixing is the kind of activity that allows companies like Apple to pay Foxconn in China £12 for.a finished iPhone which they then retail in the West for £650...

Dream on. The components alone cost way more than that. The LCD screen is around $60, the ICs $200 or so. Foxconn get paid the $12 to assemble the iPhone.

Price fixing is where companies club together to agree minimum prices and prevent the normal effects of competition. There have been huge cases in LCD and CRT displays, memory chips, concrete to name but a few.

[nullemont]

Well the answer is it all depends where in the supply chain you look.
In simple terms a bike manufacturer will have profit margins as will a distributor (where one is involved)as will the retailer.(Retail margins will vary considerably bewtween for example on line and bricks and mortar,lbs and chain etc etc.)
All will have differing levels of profit margin both gross and net.

[nullemont]

Dawes are certainly poor about managing transitions, eBay is full of them at quite amazing discounts.

I'm not surprised. Mild cheddar is really cheap in bulk and you can make quite a few derailleur hangers out of a kilo.

Just what cheese are you on???

[TrekMad]

That's a fairly moot point as even small LBS are now importing directly from China via Alibaba who take a small commission on the sale. Our local bike shop has probably supplied over 50% of the carbon frames in the area. He sells them for £299.99. He buys on bulk and also resells to other bike shops outside the area at trade.

I've seen bulk purchase (500+ units) on Alibaba for £36 a frame. The way it works is that several frame manufacturers will put in bids for your order if you are bulk buying and obviously it gets very cut throat the more you order. So mark ups of 800-1000% are a real possibility. Makes you wonder about the actual production costs.

[Mark1978]

I'm not surprised. Mild cheddar is really cheap in bulk and you can make quite a few derailleur hangers out of a kilo.

Dérailleur hangers? Don't be an idiot. Everyone knows that cheese is used to make Continental tyres.

[TrekMad]

And Emmental makes excellent inner tubes..

Its the holes you see

[edocaster]

That's a fairly moot point as even small LBS are now importing directly from China via Alibaba who take a small commission on the sale. Our local bike shop has probably supplied over 50% of the carbon frames in the area. He sells them for £299.99. He buys on bulk and also resells to other bike shops outside the area at trade.

I've seen bulk purchase (500+ units) on Alibaba for £36 a frame. The way it works is that several frame manufacturers will put in bids for your order if you are bulk buying and obviously it gets very cut throat the more you order. So mark ups of 800-1000% are a real possibility. Makes you wonder about the actual production costs.

That's interesting.

To comply with EU anti-dumping laws and avoid a 48.5% duty your LBS would have to follow: http://www.bike-eu.com/laws-regulations ... ts-1018977

It makes less sense to bulk purchase 500+ units when keeping units to below 300 per month keeps below the de minimis threshold. Beyond that, the importer has to apply for an exemption and show the value of Chinese parts is no more than 59% of the bike.

This basically ensures that large EU assemblers can't do what the small LBS's can do, not without sticking to just the cheapest bargain basement frames/components from China. It's actually a niche LBS's can take advantage of - decent assembly and a discerning choice of components/frame from the experience the LBS brings to the table.