Say it aint so Shimano ... PART 2

Ryan Cousineau wrote:

Maybe I'm the kind of customer most shops would be glad to get rid of.
Maybe LBS proprietors mad about mail-order are not fairly compared to a
hub-and-spoke airline CEO complaining about the unfairness of competing
with point-to-point carriers. But my impression is that at least around
where I live, there are an awful lot of bike shops that have earned
their competition, and precious few that set benchmarks for service.

I think your situation is fairly typical. Once a cyclist starts
putting in serious mileage on or off-road, they inevitably tend to
wrench their own bikes with greater frequency. The alternative is too
much down time waiting for the LBS to get around to it. It's a
question of degree. If I lack a tool (headset installation, for
example) or run into a problem I can't handle, I'm back to the LBS for
help. The one I usually go to has never turned me away just because I
put the bike together myself and didn't buy so much as a tube from
their shop. Nor is their service any less reliable for my lack of
support. They have more than enough business from others to take up
the slack from the do-it-yourself crowd. Meanwhile, the latter still
buy 95% of our parts on-line and do 95% of our own wrenching.
--dt

Chuck Liu at wrote on 8/21/03 8:50 PM:
"Jim Edgar" wrote in message
...
If the "well managed" shop you speak of has better service, customer
relations, reputation, store quality, etc., - and they manage to
articulate
that difference in word and action - then they will get more customers -
far
more than they would get by cutting their margin on a headset.

If a well managed shop can provide all of the quality services you mentioned
above AND provide quality parts for lower prices, don't you think they will
get EVEN MORE customers?

Yep, that's true. If they didn't have to pay their workers or if the owner
didn't want to take a salary, that'd all work.

But, overhead in retail is a fact of operation - A shop with 2 or three
skilled wrenches and a couple knowledgeable sales people with actual riding
experience has more of it than one person operating out of a trailer and
container complex in Nevada, for example. Or maybe if it's a big discount
operation, they have a few part time high school kids (or the economic
equivilent) who pull and pack the orders.

Retail is an equation - let's say you do $500K in biz and decide to cut your
retail prices by 10%. If your gross margin was 35%, it drops to roughly
28%. Until word gets around that you have HOT PRICES, that means you're
going to take in $50K less. Since the gross profit on that $50K was
$17,500, at your new low gross margin, you need to actually increase sales
by $62,500 to keep the same cash flow. And you probably need that cash flow
because you haven't cut your operating expenses of rent, utilities,
advertising and salaries - all of which come out of that gross profit. This
is why most small shops who jump into discounting go out of business, they
don't work (or don't know how to work) the numbers.

-- Jim

In article ,
(Qui si parla Campagnolo) wrote:

Ryan-some snipped- Maybe I'm the kind of customer most shops would be glad
to
get rid of.
Maybe LBS proprietors mad about mail-order are not fairly compared to a
hub-and-spoke airline CEO complaining about the unfairness of competing
with point-to-point carriers. BRBR

Wrong about this. We fault no customer or MO place for buying or selling
anything. I fault manufacturers and distributors who cannot control their
distribution. If MO can get a shimano widget for less-sell it..if a customer
can get a Spegatonni frameset for less, buy it...but I won't fault any bike
shop for not liking the fact Spegatonni's are going out the back door at the
factory in Milano and ending up on E-bay

Fair enough; I like that policy .

The last route you suggested: in your experience, is the back door of
the factory a routine distribution means for some companies?

When I look at mail-order firms, their deals (not always a deal, but to
the extent that they are) seem to fall into three classes:

1) volume discounts or margin reductions: the mail-order company leans
on the manufacturer/distributor to get a better price on a large order,
or reduces the profit margin to themselves

2) close-outs: they buy surplus stock, bankruptcy sales, component
surpluses from frame makers, etc. The key is they get the product
through a non-traditional distribution route from a motivated seller.

3) special arrangement: one friend recently bought an aluminum "Fram

--
Ryan Cousineau, http://www.sfu.ca/~rcousine
President, Fabrizio Mazzoleni Fan Club

Jim- Retail is an equation - let's say you do $500K in biz and decide to cut
your
retail prices by 10%. If your gross margin was 35%, it drops to roughly
28%. Until word gets around that you have HOT PRICES, that means you're
going to take in $50K less. Since the gross profit on that $50K was
$17,500, at your new low gross margin, you need to actually increase sales
by $62,500 to keep the same cash flow. And you probably need that cash flow
because you haven't cut your operating expenses of rent, utilities,
advertising and salaries - all of which come out of that gross profit. This
is why most small shops who jump into discounting go out of business, they
don't work (or don't know how to work) the numbers. BRBR

C'mon Jim, don't confuse all this with facts or reality.

If a shop has a great rep for superior service, they don't have to discount
their parts, they can charge a fair margin. If people want to save $$, they can
go to the coop, get cheapo parts and no knowledge or service. People will go
there. Does the very best car repair place(called Pinson here in Boulder, for
US cars) discount their parts? Absolutely not.

Peter Chisholm
Vecchio's Bicicletteria
1833 Pearl St.
Boulder, CO, 80302
(303)440-3535
http://www.vecchios.com
"Ruote convenzionali costruite eccezionalmente bene"

Ryan- The last route you suggested: in your experience, is the back door of
the factory a routine distribution means for some companies? BRBR

VERY common, particularly in Europe, Italia specifically.



Peter Chisholm
Vecchio's Bicicletteria
1833 Pearl St.
Boulder, CO, 80302
(303)440-3535
http://www.vecchios.com
"Ruote convenzionali costruite eccezionalmente bene"

"Qui si parla Campagnolo" wrote in message
...

C'mon Jim, don't confuse all this with facts or reality.

If a shop has a great rep for superior service, they don't have to
discount
their parts, they can charge a fair margin. If people want to save $$,
they can
go to the coop, get cheapo parts and no knowledge or service. People will
go
there. Does the very best car repair place(called Pinson here in Boulder,
for
US cars) discount their parts? Absolutely not.

Peter Chisholm
Vecchio's Bicicletteria
1833 Pearl St.
Boulder, CO, 80302
(303)440-3535
http://www.vecchios.com
"Ruote convenzionali costruite eccezionalmente bene"

Now THAT I can agree with! If have far more customers than you can handle,
you can charge more than another place. Supply vs demand. If your store is
empty, maybe you SHOULD be out of business. Just because someone opens a
shop, doesn't mean they have a right to make money.

Cheers,

Scott..

Qui si parla Campagnolo at wrote on 8/23/03 5:15 AM:

Jim- Retail is an equation - let's say you do $500K in biz and decide to cut
your
retail prices by 10%. If your gross margin was 35%, it drops to roughly
28%. Until word gets around that you have HOT PRICES, that means you're
going to take in $50K less. Since the gross profit on that $50K was
$17,500, at your new low gross margin, you need to actually increase sales
by $62,500 to keep the same cash flow. And you probably need that cash flow
because you haven't cut your operating expenses of rent, utilities,
advertising and salaries - all of which come out of that gross profit. This
is why most small shops who jump into discounting go out of business, they
don't work (or don't know how to work) the numbers. BRBR

C'mon Jim, don't confuse all this with facts or reality.


Sorry... I'll try to return to hyperbole and conjecture... ;^)

If a shop has a great rep for superior service, they don't have to discount
their parts, they can charge a fair margin. If people want to save $$, they
can
go to the coop, get cheapo parts and no knowledge or service. People will go
there. Does the very best car repair place(called Pinson here in Boulder, for
US cars) discount their parts? Absolutely not.

That's actually my point, Peter. I was speaking to the poster who said that
the only thing shops have to do is discount their stuff and they will have
better results. My point was that it's actually a _bad_ business model to
mindlessly discount and expect sucess.

The better shops know better, and mix their level of service with
appropriate pricing. I'd much rather see quality parts like CK hubs and
headsets go for the MSRP - those products are worth it.

The great lowering of prices via discount internet/MO really _isn't_ in the
best interest of most cyclists. Yes, I know there are many people who don't
mind buying or making their own headset press for example, but there are a
lot more who just want their bike to run well without having any interest in
diagnostics or home repair.

I still think that what Shimano and Chris King are doing to maintain MSRP is
helpful to many independant shops, because then the customer will have to
evaluate the differences in quality of the work, timeliness of repairs,
proper levels of inventory and general customer service. Y'know, that whole
retail thing...

-- Jim

scott- Now THAT I can agree with! If have far more customers than you can
handle,
you can charge more than another place. BRBR

Correct. Our schedule is packed most of the year. Charging less for a part
doesn't give the wrenches any more time in the day. If by adding a 'good
wrench', and pay them properly, they may or may not pay for themselves, as
there are lots of expenses involved with another employee, but selling parts
below margin sure isn't going to help that.



Peter Chisholm
Vecchio's Bicicletteria
1833 Pearl St.
Boulder, CO, 80302
(303)440-3535
http://www.vecchios.com
"Ruote convenzionali costruite eccezionalmente bene"

"Qui si parla Campagnolo" wrote in message
...
Tom- For many products, MSRPs are set somewhat above a typical selling
price.
It's a game, it's a way of making the usual selling price appear to be
a discount, and thus seem like a better deal. BRBR

Perhaps a game for some bike shops, but not ours. We don't inflate the
price
then say'I'll give you 10% off, 'jus cuz I like the cut of your jib' type
of
nonsense.

We price everything at MSRP if there is one, and use a standard margin if
there
is not. We do not price match or anything like that.

The hell they aren't. BRBR

If ya can get a CK hs for $88, go right ahead...Just like a $30 Conti GP
or a
$140 pair of SP pedals but don't slam a manufacturer for trying to protect
their retailers or their product.

Peter Chisholm
Vecchio's Bicicletteria
1833 Pearl St.
Boulder, CO, 80302
(303)440-3535
http://www.vecchios.com
"Ruote convenzionali costruite eccezionalmente bene"

A big issue here is locality as well - Peter's shop is in yuppie heaven
(Boulder, CO). I simply cannot afford Campy prices, MO or LBS (how do you
justify spending $200 on a Record rear derailleur vs. $75 DA?). As a
student I have spent about $1700 on a full Dura Ace Pinarello using Ebay,
MO, and LBS - a bike that would otherwise have cost me around $2500-$3000.
I do most of the work myself (using proper tools I bought MO), except an odd
wheel build or headset installation, when I don't feel too adventurous. So
if I walk into the LBS and ask for a derailleur clamp and the guy quotes me
$35, not willing to budge on the price, and I can get it for $15 through MO,
I feel I have given the LBS a chance. If he was just willing to deal a
little bit... I simply cannot afford it!

Now if you ride a fully loaded "MSRP-paid" C-40 of $5000 (as a well-off
cyclist in yuppie-town or anywhere else, for that matter) and need a $35
clamp, you probably just fork it out and have it installed by someone else
anyway...

You'll have my business if I can afford it as well, a sort of "let's meet
each other halfway"-type situation. I love the smell, excitement, and soul
of a great LBS, but I cannot survive supporting one all the time. I think
many LBS'es have to adapt to the times - the market has changed from a
mainly seller's to a mainly buyer's scenario.

"Qui si parla Campagnolo" wrote in message

A high end Ford isn't the same as a high end Mercedes either. Chorus,
altho
more expensive as well, is more like DA. Carbon and titanium isn't cheap.

Bad example (I'd rather say a fully loaded Camry vs. top-end Merc), but
exactly my point. It is senseless to pay more than double for the Merc if
you can have a Camry that will last as long, also has leather seats, also
drives at the posted 65mph, has all the other amenities, but may be less
prestigious. Even if it does fail, I can still buy two for less than the
price of one. So in the end it also has a lot to do with marketing of the
"superior" brand, along with perceived value increase vs. a top performing,
long-lasting, alternative. If that is important to a client, so be it, but
don't tell me that the alternative is lacking! It is merely a case of if I
want a Merc, I want a Merc, but I very likely don't need one.


MSRP for a C-40 frameset/fork/seatpost/stem is $4200, with a group it is a
lot
more, MSRP..why we don't sell them anymore, you can get a C-40 on-line for
$5000, complete.

Agian true, but if I buy a $5000 bike, I probably wouldn't mind paying MSRP
on small items. For me, every dollar counts...


basjan I think
many LBS'es have to adapt to the times - the market has changed from a
mainly seller's to a mainly buyer's scenario.

Knowledge, info, service hasn't changed.

Yes, and I am willing to pay for that knowledge/info/service, sometimes
$40/hour, but I have to offset with cheaper parts elsewhere. Remember,
knowledge also comes from learning and experience, so the gap decreases all
the time for small-time DIY "wrenches" like me...if only I could afford all
those gorgeous tools!!


Peter Chisholm
Vecchio's Bicicletteria
1833 Pearl St.
Boulder, CO, 80302
(303)440-3535
http://www.vecchios.com
"Ruote convenzionali costruite eccezionalmente bene"