My only experience in bike retail is as a consumer. However, a friend of mine left his stressful and boring database-programming job (two years ago) and is now living in France (cycling, snowboarding and so fourth). As his funds vanished he found a temporary job in a local French bike shop. Last week he came back for a visit and we had some beer and a good Indian meal. He told me that a CamelBAK that they buy for 30 euros is sold for 90 and bikes are sold for twice the price they pay for it. He offered me a Scott road bike for the shop price and the price was seriously low.
I agree that most bike shops are managed by decent hard working knowledgeable people. They provide good advice (although they may charge extra to fit you) and some race themselves. They should make money and I am more than happy to support them - but 50% margins seem to me unfair (if indeed this is the case). I thought I pay all this money for the exotic materials, R&D, expensive manufacturing and so on.
Coming from someone (myself) who runs a bike shop. I can assure you, shops are not operating on any were near 50% mark up on bikes. Parts and repairs help in paying the bills. That is why it is frustrating when customers sometimes mail order to save a a few bucks. The retail side of things is not always as easy at it seems. Nor are we shop owners getting rich on our shop income alone. Although it may be different in Europe…
I worked in retail (not bikes) but I think that a 100% markup on a bike is a great exaggeration.
In my experience the markup on a hard good (not clothes) is between 20 - 40 % You may think that is lot but think about this…
An expensive bike and a cheap bike take the same amount of time to build (more or less) Lets just say that the mechanic who gets paid X amount of dollars per hour builds a cheap bike that sells for 400 for a “profit” of 150, wait on top of the cost of the bike from the company, there is the direct cost of the mechanic. Now most bike shops will tune the bike a couple of times after you get it… Figuring the bike took 1.5 hours to build the 2 tune ups took 15 minutes each… that 150 profit has now turned into 20 - 30 dollars… if even that much…
Retail in general is a tough buisiness to be in, sports stores especially.
Now think about this though… The average markup on soft goods (t shirts, jeans, etc) was 100% That’s why I never buy clothes at full retail… That I think is rediculous
Well, considering our overhead is about 37-43% (that is neither an exaggeration nor a fabrication) it is incredibly expensive to keep the doors open. Incredibly expensive.
That means our cost on something that wholesales for $50.00 (our landed, on the floor cost price including overhead)is at a minimum, $68.50. That means at a “keystone” margin over wholesale we are getting $31.50 GROSS profit on a $100 retail sale after overhead but before salaries and taxes. I figure overhead in this context as rent, utilities, amortized cost of fixtures over a year- not including taxes and salaries). Our net on that $100 retail sale will look like $6-$8 total. That is $6-$8 net profit on a $100 sale for a product I paid the vendor $50 for.
Now, in fairness, that is after the salaries are paid. But I typically have taken no salary and given the lion’s share to the employees. I only take the profit (when there is some).
The mark-ups you describe are higher than what we are getting. In the real world 30% over our landed cost is all you can expect for a bike (so yeah, you stand to only break even on most bike sales after costs).
Bike shops, at least this one, are NOT taking you for a ride. One look at my house and car will tell you that. Sure, I travel a lot and have nice bike stuff, but I have an 8 year old $17,000 car I bought new and is all dented up and live in a very modest house that needs a new roof.
I guarantee you, I am not even coming close to getting rich. Truth is, we barely make decent living considering the hours we put in. Look at my posts on this forum- my first one was this morning at around 8:00AM our time. I am often here from 6:00 AM to well after 10:00 PM. That is common.
Good insight into the finances of a bike shop. Just for fun, have you ever tried to calculate your hourly wage? I would take a guess that its less than what you pay your employees.
I work for a professional services firm, we are all on a salary. I figured out what my per hour wage was once. It was too depressing, I’ll never do it again. If I do, I’ll end up quitting and becoming a plumber or electrician.
The last time I calculated my hourly wage it was about $9.00 per hour figured on an annual basis given just the time in the store but not including the other time spent on work related projects.
That is a tough figure to accurately calculate. Where do you draw the line between work and play? I mean, I could rationalize that all my Ironman training is for work since it helps establish our credibility within the industry. That would bump my hours way up and my hourly wage way down. I only figure the time in the shop as work time, and not even all of that…
Bike shops have a high mortality rate. I don’t know how they make it with so many bikes and parts available on the net these days.
One thing I have noticed, however, is that bike shop employees seem to genuinely enjoy their craft. Go into CompUSA or WalMart and try to find the same level of excitement.
So, I try to support my local bike shops. If I need help, I know they will give it cheerfully.
But, yes, bike parts are way overpriced principally because the dollar is in the tank. Ten speed stuff is ridiculous…
Tom, and a lot of other of you, I hate to break it to you but sitting at the computer and hanging out on Slowtwitch isn’t work. It’s play. There was a recent post here from someone wanting to be entertained on friday afternoon while he waited for work to end . That’s not work. He should have just gone home or done some work. If he had got a paper towel and dusted the window sills he at least would have done something usefull. I first heard it from an engineering instructor I had who came from the USSR, that to many Americans think that the more time they spend at work, the better. They should just get in, do their work and go home.
You think that it is just the bike shop marking up %50-%100? Take a look at the food you are eating. I worked in the food industry for a while and there is %100 mark up on some products. A huge bag of mixed greens is about $5 and that will make salad for ~20, throw in $5 more and you get the peppers, carrots, etc. so for 10-15 you can sell 20 salads at $5 each, for $100. The diet coke you just got for $1 costs $0.40 to the store owner.
You have to factor in all of the other expenses for the shop (employees, rent, utils, 2 year old bikes that you still have in stock) to see that most shops aren’t making a lot on the %50 markup.
Tom, I not trying to put you down. I guess you can say in a stretch that this is advertising for you shop. But let’s see, you said that after all your hours in the shop you only make $9.00 per hour. How much would you pay someone for posting on Slowtwitch? For riding the Computrainer? For IM training?
For monitoring Slowtwitch and maintaining a high profile while also establishing credibility while also learning more about what customers are thinking?
That’s probably worth $15 per hour.
Riding the computrainer in the store as some sort of demo? Hmmm, not really worth too much unless it can transalte directly to sales somehow. Tough to say. Slowtwitch DOES translate directly to sales.
Training for Ironman, well, we can’t afford to pay anybody for that but it could be justified somehow as a promotion provided they nteracted with consumers enough to steer business directly to us. We are sending Mark Trzeciak to Todd Briggs and Sarah Colgrove’s “Iron Kamp” to do mechanical work for the athletes (our customers) training there. He gets his ususally hourly wage for that plus mileage.
It’s a tough business. There’s just not enough money to go around . But work is work and play is play. Play doesn’t pay much. Explains a little why Steve Larson went into real estate.
25% net margin? Hmmmm. Oil? Some technology like maybe chip manufacturing? Oh, oh… software.
A friend of mine who went to MIT for materials engineering and went on to work for Compound Semiconductors told me that if Microsoft replaced the software printing machines that turn out the disks we buy in their largest manufacturing facility and replaced them with printing presses turning out $20 bills around the clock they would make less money.
They should make money and I am more than happy to support them - but 50% margins seem to me unfair (if indeed this is the case).
Don’t spend any money on any bike gear. This will assure you that you are not being taken advantage of. Hell…don’t spend any money on anything. All these capitalist pigs making money off the backs of good working people is making my blood boil. Let’s all stop spending our money to do the things we want to do. I think that if I choose a hobby, somebody else should subsidize it. I think all LBS owners should provide me cut-rate pricing and free advice. If I work it right, maybe I can get them to do my training for me so that I can watch Oprah and eat BonBons until race day and then I’ll hit the course and wait to be called onto the podium.
Usual Disclaimer: The farcial opinion stated herein is all BS and should not be taken seriously. The opinion of the writer is simply early morning rambling taken to amuse said writer. Hope this helps.
I agree with your real point. It’s like going to a doctor. Much of what you are paying for is competence and advice. Some doctors have really low rates, but order lots of tests and medicines, which are often not necessary. Another doctor may charge more, but spend more time with you and save you elsewhere.
A good LBS will direct you to a better purchase even if it is less costly. Or, they might don’t buy that wheel now, it’s not that much better than what you own, and save your money a real improvement. Or direct you to alloy cranks instead of carbon, because the difference is not worth your extra cost. If you want them to be around and give that good advice, spend most of your bike money there.