How do bike shops make their money?

I tried to word the subject so as not to make this a troll. I just want to
ask a question, not ignite flames. The troll about the Seattle bike shop
got me wondering...

I'm pretty sure I've heard that bike shops make their money from selling
complete bikes, not parts. I couldn't imagine buying a bike online anyway,
so no problem there.

But the parts are just really expensive at LBSs. I do all the work anyway,
so I'm not expecting THEM to work on a part I bought online. If LBSs are
not making much money off the parts, what's the big deal with getting them
online? Or did I just hear wrong?

--
-BB-
To reply to me, drop the attitude (from my e-mail address, at least)

BB wrote:
I tried to word the subject so as not to make this a troll. I just
want to ask a question, not ignite flames. The troll about the
Seattle bike shop got me wondering...

I'm pretty sure I've heard that bike shops make their money from
selling complete bikes, not parts. I couldn't imagine buying a bike
online anyway, so no problem there.

But the parts are just really expensive at LBSs. I do all the work
anyway, so I'm not expecting THEM to work on a part I bought online.
If LBSs are not making much money off the parts, what's the big deal
with getting them online? Or did I just hear wrong?

- Markups on high-end bikes (30-40%???)
- Markups on individual components
- Maintenance fees

--
- Zilla
Cary, NC
(Remove XSPAM)

"BB" wrote in message
...
I tried to word the subject so as not to make this a troll. I just want to
ask a question, not ignite flames. The troll about the Seattle bike shop
got me wondering...

I'm pretty sure I've heard that bike shops make their money from selling
complete bikes, not parts. I couldn't imagine buying a bike online anyway,
so no problem there.

But the parts are just really expensive at LBSs. I do all the work anyway,
so I'm not expecting THEM to work on a part I bought online. If LBSs are
not making much money off the parts, what's the big deal with getting them
online? Or did I just hear wrong?

--
-BB-
To reply to me, drop the attitude (from my e-mail address, at least)

Clothes

On Fri, 16 Jan 2004 18:05:42 -0600, "mfgp" wrote:

I'm pretty sure I've heard that bike shops make their money from selling
complete bikes, not parts.

It's the other way around.

Barry

"BB" wrote in message
...
I tried to word the subject so as not to make this a troll. I just want to
ask a question, not ignite flames. The troll about the Seattle bike shop
got me wondering...

I'm pretty sure I've heard that bike shops make their money from selling
complete bikes, not parts. I couldn't imagine buying a bike online anyway,
so no problem there.

But the parts are just really expensive at LBSs. I do all the work anyway,
so I'm not expecting THEM to work on a part I bought online. If LBSs are
not making much money off the parts, what's the big deal with getting them
online? Or did I just hear wrong?


Before I get going...I can't speak for all shops, or all shop owners. Also,
I make some generalizations that don't always apply - generalizations are
never universal. But, in my experience, here's how it goes:

Complete bikes make very little profit. That's why you never see, say, a
40% off sale (unless it's been on the floor two years). Bikes are
expensive, and most consumers don't see even $1000 for a bike as a sensible
price - only cyclists do. So, complete, new bikes are not heavily marked
up. For example, I recently built up a full-Campy Torelli bike, priced at
$2150. I think our cost was about 1800, and we were excited about the money
we would make on it.

Parts make a good sale...it's typical in my experience for parts to be
marked up 40-50% off of wholesale, depending on supply, demand, cost of
part, and who's buying it. 50% is good, but on a $100 derailleur, that's
only about $33 in profit...which pays the mechanic for 4 hours.
Accessories, like helmets, clothing, locks, and doohickeys get frequently
marked up over 50%, so solid profits come around their. Still, it's about
$10-40 a sale.

Our shop made profits mostly on repairs. Usually, we could get things
working without new parts, so we were only out the cost of grease, lube, and
a cable here and there. Pretty nominal for a job that took me an hour and
we could get $50 for it.

So, short-term, LBS profits come mostly form non-essentials like clothing,
water bottles, and helmets (okay, that's an essential, but a $150 helmet is
stupid - unless you're selling it). Long term, profits come from repeat
customers needing lots of repairs and lots of trinkets.

You may be thinking..."that doesn't sound like a lot of profits." Well,
you're right. Bike shops don't make a lot of money.

And why not online shopping? That's been done to death here, so google the
phrase "grey market" for the info. In short, online places make a shady
deal or two and sell parts (like OEM designates) that LBSs can't. Also,
they don't have storefronts or repair departments to staff and
maintain...keeping their overheads down. What's cheaper to run...a full-on
LBS with three people working at all times, or a bigass warehouse in a
business park somewhere where a few people a day come in to pack boxes?

Chris

"BB" wrote in message
...
I tried to word the subject so as not to make this a troll. I just want to
ask a question, not ignite flames. The troll about the Seattle bike shop
got me wondering...

I'm pretty sure I've heard that bike shops make their money from selling
complete bikes, not parts. I couldn't imagine buying a bike online anyway,
so no problem there.

But the parts are just really expensive at LBSs. I do all the work anyway,
so I'm not expecting THEM to work on a part I bought online. If LBSs are
not making much money off the parts, what's the big deal with getting them
online? Or did I just hear wrong?


Interestingly I was recently comparing prices online and at the local LBS in
my 'nearest' small town.
I could get a fork for NZ$1900 at the LBS (they know me well and I have
spent lots of money with them in the past - obviously makes little
difference to them though!). It was going to cost $1400 including courier
fees online at another store in a larger town that operated an online store.
The instore price at the same shop was $1600.
Small local LBS=$1900
Large non-local LBS =$1600
Large non-local LBS's online store =$1400

The guy via email readily admitted that it was cheaper to buy from their
online store because they kept the businesses separate and there was
considerably fewer costs involved with the online store.

A note on profit: anyone in business for themselves will know that there is
a BIG difference between gross profit and net profit. By the time you pay
taxes, bills, miscellaneous costs, and the staff most of the money is gone.
It can be amazing how that big three digit difference between cost and
selling price can become a small two digit profit.
--
Westie

Chris wrote:

And why not online shopping? That's been done to death here, so
google the phrase "grey market" for the info. In short, online
places make a shady deal or two and sell parts (like OEM designates)
that LBSs can't. Also, they don't have storefronts or repair
departments to staff and maintain...keeping their overheads down.
What's cheaper to run...a full-on LBS with three people working at
all times, or a bigass warehouse in a business park somewhere where a
few people a day come in to pack boxes?

Chris


Someone can correct me if I'm wrong, but most good MO shops have a store
front and offer service. Actually, I can't think of a truly, mail order only
shop... anyone??

Anyway, I think a successful shop really needs to do both. And it can be
done pretty easily. A lot of shops find them selves in trouble because
they're making bad inventory decisions. Many just don't seem to be well
connected with the MTB community. I walk into shops here in LA/Orange County
and see tons of crap from years ago that they will never sell. The
managers/buyers for these shops, IMHO, need to be riders themselves and on
the message boards conversing with other riders and listening to what's
going on and aware of trends/needs. They should instinctively know what
people are searching for.

Also, most of the maintenance side of the LBS just plain suck.
Unprofessional and/or understaffed. It only took me a couple bad experiences
to become my own mechanic. Once that happens, it's easy to lose the sense of
importance for a LBS. Again, it boils down to bad business management.

We have a lot of shops here in Socal, and while I haven't been in all of
them, I've only found one that is doing it right. It's a tiny shop, but they
have high quality stuff, kick ass service, great prices, they ride, and have
a passion for the sport. Sad it's so rare.
--
Slacker

On Fri, 16 Jan 2004 19:25:10 -0800, "Slacker"
wrote:


Someone can correct me if I'm wrong, but most good MO shops have a store
front and offer service. Actually, I can't think of a truly, mail order only
shop... anyone??

Anyway, I think a successful shop really needs to do both. And it can be
done pretty easily. A lot of shops find them selves in trouble because
they're making bad inventory decisions. Many just don't seem to be well
connected with the MTB community. I walk into shops here in LA/Orange County
and see tons of crap from years ago that they will never sell. The
managers/buyers for these shops, IMHO, need to be riders themselves and on
the message boards conversing with other riders and listening to what's
going on and aware of trends/needs. They should instinctively know what
people are searching for.

Also, most of the maintenance side of the LBS just plain suck.
Unprofessional and/or understaffed. It only took me a couple bad experiences
to become my own mechanic. Once that happens, it's easy to lose the sense of
importance for a LBS. Again, it boils down to bad business management.

We have a lot of shops here in Socal, and while I haven't been in all of
them, I've only found one that is doing it right. It's a tiny shop, but they
have high quality stuff, kick ass service, great prices, they ride, and have
a passion for the sport. Sad it's so rare.

Gawwd Damn Slacker, you do actually have a brain in that head.

Peace,
Bill
....one speed to rule them all, one speed to find them,
one speed to bring them all and on the trails pass them
In the Land of Avalon where the geared pigs lie...

Gawwd Damn Slacker, you do actually have a brain in that head.

Peace,
Bill


I thought this was a given :-(


Hey, it could be worse.... I could be arguing the ethics of a world class
Dh'er practicing DH'ing on a DH course whilst going DH.
--
Slacker

"BB" wrote in message
...
I tried to word the subject so as not to make this a troll. I just want to
ask a question, not ignite flames. The troll about the Seattle bike shop
got me wondering...

I'm pretty sure I've heard that bike shops make their money from selling
complete bikes, not parts. I couldn't imagine buying a bike online anyway,
so no problem there.

But the parts are just really expensive at LBSs. I do all the work anyway,
so I'm not expecting THEM to work on a part I bought online. If LBSs are
not making much money off the parts, what's the big deal with getting them
online? Or did I just hear wrong?


When you sit down and do the math, bike shops have to mark things up a
certain amount just to make money (and that's not some dirty little thing -
it's their whole reason for existence.) Most often, we're competing against
other shops and if you really look at it, most shops have roughly the same
mark-up.

Mail order presents a rather intractable problem for shops. Most often,
they don't have the overhead of a shop and turn far more merchandise. That
means bulk pricing and lower costs, therefore they make the same money
selling the parts for less. What you end up having to decide is whether
you'd rather pay a bike shop for their expertise and convenience or buy the
stuff mail-order for less but with far less support.

If we sold at their prices, we would go out of business, and where would
that leave everyone?


---
International Bicycle
5326 E Independence Blvd
Charlotte, NC 28212
http://intbike.com
704 535-5501

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