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Old 04-06-06, 09:14 PM   #1
somebodies
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Shop markup

How much is it? I am sure it varies,but general ideas, complete bikes, parts, etc. Thanks
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Old 04-06-06, 09:22 PM   #2
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not that much, its costly for any business to stay a float. markup is usually 40 to 20 percent. but with overhead (electric, phone, employees etc. etc.) that isnt so much
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Old 04-06-06, 10:18 PM   #3
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markup is almost always 30-35 percent. Bike shops make most of their money on clothing and parts where the markups can reach closer to 70 percent.
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Old 04-06-06, 10:28 PM   #4
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You could have just asked me on the road tonight! From what I've seen in bay area shops (mine doesn't really count since we keep very little active stock) markup is 75-100% for most components, 40-70% for the really expensive stuff. Complete bikes vary widely, but 35% is a safe estimate.
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Old 04-06-06, 11:53 PM   #5
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Our LBS marks their parts and accessories with "the full-blown retail" but then tells us that "I can give that to you for ........ " Full retail is 100% on most parts/accesories, less on bikes. They usually end up selling with 50% markup, but theirs is an old family-run business with a smaller than usual overhead.

Funny story: one day I was buying a set of handlebar grips in this shop. The "old man" was in the back room. Son calls out, "Hey Dad, how much for the Grab-Ons?" 'Old Man' shouts back. "Who's it for?" Son, "Uncle Ron!" (I'm not really their uncle by the way) Old Man yells back, "Ten bucks!"
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Old 04-07-06, 12:29 AM   #6
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Well from online sources comparing to in LBS shops. About 2x difference here, including shipping.
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Old 04-07-06, 09:50 AM   #7
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Mark-up, as a percentage, isn't the whole story.

As consumers, most of us care about the end price and how it compares to the price we'd pay elsewhere. We can decide which trade-offs to make: I'll patronage my local shop because the difference between their price and Nashbar's is small enough that I can "afford" to make the decision to pay extra and support my shop.

As shops, LBS's care about 2 #s--their purchase price and their markup. It seems like the bike industry really fixes the pricepoint to the end consumer--bike X retails for $1499. Yeah, you can get a deal from the LBS you know and you'll have some flexiblity to bargain, etc., but the same bike will list for the same price just about everywhere. However, different LBSs will pay a different amount for that bike based on their volume of purchases, competitiveness of the local market, etc. So, one shop may sell something for $100 that they bought for $70, and another shop will sell the same item for $100 when they paid $60. This makes a big difference in the shops' profit margins AND in consumers' ability to negotiate a better price. This dynamic favors the larger shops--they can sell the item for $10 less and make the same gross margin, which means they'll sell more of the item, get volume-pricing discounts, be able to offer lower prices, etc.

Aslo, where I live, there are some large multi-store local shops, and many small shops. The big shops seem interested in selling bikes--their service is really expensive and I think most of the service they do is on the bikes they sell (as part of the 1 year tune-up package). They are basically bike selling businesses. In contrast, the smaller shops offer very reasonable service prices, always check other things just to make sure there aren't any problems, and make you a good deal on any parts needed when they service the bike (lower price for a derailer when they notice it's bent and install it than walking in off the street to buy one). These shops are interested in making their money servicing bikes and make most of their money that way.

Different philosophies of retail management, different profit margins, and different pricing structures. Me and my money go to the smaller shop because I like their attitude, service, and have never felt hustled. At the big shops, I can't go in to buy an innertube without being offered a test ride on a $2000 bike.
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Old 04-07-06, 10:11 AM   #8
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Quote:
Originally Posted by toolboy
Funny story: one day I was buying a set of handlebar grips in this shop. The "old man" was in the back room. Son calls out, "Hey Dad, how much for the Grab-Ons?" 'Old Man' shouts back. "Who's it for?" Son, "Uncle Ron!" (I'm not really their uncle by the way) Old Man yells back, "Ten bucks!"
I don't get it.

That's not funny.
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Old 04-07-06, 12:57 PM   #9
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I don't get it.

That's not funny.
You had to be there!
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Old 04-07-06, 01:47 PM   #10
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AVERAGE EXPENSES FOR SPECIALTY BICYCLE RETAILERS

(From NBDA Cost of Doing Business Survey,
expressed as a percentage of gross annual sales)

Payroll Expenses — 20.5%

Occupancy Expenses — 7.7%

Advertising/Promotion — 3.%

Auto and Delivery — 0.5%

Depreciation — 0.9%

Insurance — 0.8%

Licenses/Other Taxes — 0.5%

Professional Services — 0.5%

Office Supplies/Postage — 1.2%

Telephone — 0.6%

Travel/Entertainment — 0.4%

Other operating expenses— 1.3%

TOTAL OPERATING EXPENSES — 37.7%

NET INCOME BEFORE TAX — 4.2%

GROSS MARGIN ON BICYCLE SALES — 36%

GROSS MARGIN ON CLOTHING SALES — 43%

GROSS MARGIN OTHER EQUPT. — 48.1%

Keep in mind that a roughly 50% margin means a 100% markup. Example. Part costs store $5.00. 100% markup to $10. Sold at $10 - made $5.00 - 50% GROSS Margin....

Paid for lights, labor, telephone supplies, etc.... -37.7% net margin = 12.3% in this case.

Just remember that LBSs are businesses. By their nature they must spread their overhead expenses over a smaller volume of sales than other sources of bike parts such as internet warehouses. The current LBS business model emphasizes "service" as the main value-added ingredidient to differetiate themselves from internet sources. In this business model the value of the service provided must equal or exceed the operating overhead expense added (at least from the customer's viewpoint). If it doesn't then you lose money, and you need to readjust your business model.

Free business lesson for shop owners - - - change the business to match the customer's perceived value if you are losing money....don't try to change the customer's perception of the value you provide.
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