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Old 08-10-07, 10:48 PM   #1
cantdrv55
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How the heck do bike shops stay in business?

Bought a SRAM Rival 10 speed 11-28 cassette from my LBS. It's a brand new product so only available through the distributor. Can't find it at Performance or Nashbar, etc. The part costs $99.99. My LBS installs it, adjusts the FD, RD, brakes, etc for me to make sure nothing is rubbing and shifting smoothly. The whole job took about an hour but they entertained my questions so it took a little longer. The total came up to $122.36.

That is freaking cheap. If I had brought my car in to a shop, bought a cosmetic part and had it installed, you can bet they'd charge me an arm and a leg just for the labor, let alone the huge mark-up on the part. Yeah, I know, the LBS had marked up the cassette. Still, it's pretty cheap for a drivetrain component.

How the heck do LBS's stay in business with such a thin margin?
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Old 08-11-07, 12:19 AM   #2
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30 percent mark up on the part and $23 on the labor. Around $53 per hour.
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Old 08-11-07, 12:26 AM   #3
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Most bikes shop owners do it for the love of cycling. They don't make that much money. There's overhead costs as well as employee payroll. That is why I try to support LBS's by not buying online or at the chain stores.
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Old 08-11-07, 07:02 AM   #4
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Mark up at most shops is keystone, 50%, so they make there money there. I would say that the labour costs are a little cheap, but they also took an hour to do it which is about 30 minutes too long. I know everyone says bike shops don't make any money, but I have never seen a poor bike shop owner.
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Old 08-11-07, 08:02 AM   #5
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It took the shop an hour to install a cassette and check the basic adjustments (which I assume wouldn't be too far off)? Sounds like a 15 minute job in reality. And an SRAM cassette doesn't cost anywhere near $100 to produce (although I'm not sure how much a shop makes on one).
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Old 08-11-07, 08:07 AM   #6
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There's a big bike shop in Davis California and its part of the University of California. At the UC Davis campus, there's about 20,000 students who ride bikes. So they have their own bike shop in a converted barn. The student fees support that bike shop plus the shop charges for repairs, etc. So for UC Davis, that shop gets free rent, an automatic customer base of 20,000 plus an annual membership fee subsidy. For visitors to the campus, there's even bike rentals. I suspect their typical customer base is the student-commuter.

This has got to be the ultimate in the non profit model for bike shops. Student commuters first, recreational and sport second.

Anybody here been to UC Davis bike shop?
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Old 08-11-07, 10:43 AM   #7
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Bike shops around here are doing very well for it being the worst economy in the country for the simple reason that those who have yet to flee the state often don't have gas money.
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Old 08-11-07, 12:13 PM   #8
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30 percent mark up on the part and $23 on the labor. Around $53 per hour.
The markup is closer to 100%.
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Old 08-11-07, 12:16 PM   #9
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There's a big bike shop in Davis California and its part of the University of California. At the UC Davis campus, there's about 20,000 students who ride bikes. So they have their own bike shop in a converted barn. The student fees support that bike shop plus the shop charges for repairs, etc. So for UC Davis, that shop gets free rent, an automatic customer base of 20,000 plus an annual membership fee subsidy. For visitors to the campus, there's even bike rentals. I suspect their typical customer base is the student-commuter.

This has got to be the ultimate in the non profit model for bike shops. Student commuters first, recreational and sport second.

Anybody here been to UC Davis bike shop?
We have something similiar at University of Toronto. Except that our student base is more like 50-60k students. However, we don't charge for repairs (opting for a sustainable culture instead - we teach them how to do it). We do charge for parts though.
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Old 08-11-07, 12:58 PM   #10
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How the heck do LBS's stay in business with such a thin margin?
a lot of them don't, in my experience.

love of cycling is no basis for a business model.

the survivors usually have large (and loyal) customer bases and a high volume of sales (particularly in mid-range bikes).

but the car repair business is not much more forgiving. the shop i work at charges $82/hr, with the appointments schedule running about a month out. but that doesn't mean the owners are living high on the hog - they aren't.
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Old 08-11-07, 01:04 PM   #11
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30 percent mark up on the part and $23 on the labor. Around $53 per hour.
Your $30 profit on the OP's part is actually 42% mark up, which is the percentage of "profit dollars" measured against the sellers cost. Measuring the "profit" against the selling price is SGP percentage (sales gross profit) which in this case would be 30%.


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And that pays for rent, cost of maintaining inventory, employees when they're not able to charge for labor, business licenses, business property and liability insurance, other payroll expenses (SS, worker's comp ins), utilities, non-inventory property (computers, fixtures, etc). Your initial buy-in to carry lines of companies like Trek was $50k a few years ago. Might be higher now. And that's just one line, bikes only, without all the other stuff you need to have in the store.

You better love biking to want to stay in the business.
All so true and if he's doing real well as in above the average net profit percentages, he'll have about 5 bucks for a net profit (realistcly closer to 3-4 bucks) for any investment partners he may have, reinvestment into the business and expansion capital from the OP's posted example.

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The markup is closer to 100%.
This may be true as well which will pocket the business an extra two bucks from the OP's orginal post.

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Mark up at most shops is keystone, 50%, so they make there money there. I would say that the labour costs are a little cheap, but they also took an hour to do it which is about 30 minutes too long. I know everyone says bike shops don't make any money, but I have never seen a poor bike shop owner.
True to a point but I doubt their anywhere nears filthy stinkin rich either. This next comment may be appropiate for P&R but when did trying to make a comforatable living and doing better than average become a crime in this country?
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Old 08-11-07, 01:35 PM   #12
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There is shipping (which the shop bears) and the cost of maintaining inventory--- and depreciation. While it is easy to look at the margin and assume it is all gravy, it is not. The expenses of running a shop haven't even been mentioned.

What baffles me is how well staffed most shops are--- many small shops have more employees working at any given time than an Office Max, Comp USA, or any or the other no-service box stores.
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Old 08-11-07, 01:43 PM   #13
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How the heck do LBS's stay in business with such a thin margin?
Regrettably alot don't. Sounds like you got a good deal.
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Old 08-11-07, 03:54 PM   #14
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...Anybody here been to UC Davis bike shop?
Yes. Test rode some bikes there, including a folder by Joe Breeze.

They have a lot of used bikes for sale, especially toward the end of summer, just before the school year begins.

There is a lot of bustle and activity, and repair work going on. Students tend to drop by for little fixes, to keep their bikes going. It has a student-run, informal atmosphere.

They don't concentrate on higher end equipment; students tend to be on budgets, and they try to accommodate them.

There are at least four other bike shops in Davis, and they seem to be staying in business, even with the Bike Barn nearby.
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Old 08-11-07, 03:57 PM   #15
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My current LBS pet peeve is time to get parts. I understand that the store can't keep everything in stock. No problem there. But how come I can order something from any of numerous web vendors and have the part on my doorstep in three or four days (sometimes less), but if the shop orders the same part it might take up to ten days? When I'm getting service (technical help in picking out the part, recommendations to match my bike, size and riding style) I can deal with paying the higher price at an LBS for the same part --- their knowledge is part of what I'm paying for. But the service score starts to go down if I have to wait twice as long.

I'm not looking for a lesson in warehouses, suppliers, etc. It comes down to if I want something for a ride next weekend I'm buying on line because it's much more likely that I'll have the part in time.
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Old 08-11-07, 11:06 PM   #16
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The markup is closer to 100%.
110 - 125 % in some stores in Vancouver
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Old 08-11-07, 11:09 PM   #17
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My current LBS pet peeve is time to get parts. I understand that the store can't keep everything in stock. No problem there. But how come I can order something from any of numerous web vendors and have the part on my doorstep in three or four days (sometimes less), but if the shop orders the same part it might take up to ten days? When I'm getting service (technical help in picking out the part, recommendations to match my bike, size and riding style) I can deal with paying the higher price at an LBS for the same part --- their knowledge is part of what I'm paying for. But the service score starts to go down if I have to wait twice as long.

I'm not looking for a lesson in warehouses, suppliers, etc. It comes down to if I want something for a ride next weekend I'm buying on line because it's much more likely that I'll have the part in time.
I too echo this sentiment. Seems like any part, component etc out of the ordinary takes between 15 to 30 days or more to order, yetr i can buy it online and have it in less than 7, even with Canada Customs delays. Often times when try to get a part from a LBS, they have to get it from their rep, who has to get it from a distributor in Quebec, who may or may not have it, so they have to get it from the states.
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Old 08-12-07, 06:54 AM   #18
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My current LBS pet peeve is time to get parts. I understand that the store can't keep everything in stock. No problem there. But how come I can order something from any of numerous web vendors and have the part on my doorstep in three or four days (sometimes less), but if the shop orders the same part it might take up to ten days? When I'm getting service (technical help in picking out the part, recommendations to match my bike, size and riding style) I can deal with paying the higher price at an LBS for the same part --- their knowledge is part of what I'm paying for. But the service score starts to go down if I have to wait twice as long.

I'm not looking for a lesson in warehouses, suppliers, etc. It comes down to if I want something for a ride next weekend I'm buying on line because it's much more likely that I'll have the part in time.
Most shops will tell you it's because the distributor has a 'minimum order' of $500... The complete story is there is a $500 minimum order to qualify for free shipping.
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Old 08-12-07, 08:02 AM   #19
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Ha! You think you've got it bad with LBS parts orders delays?

I'm here in Shimanoland, and can't get all of the 2007 XT parts I want, because,

"The manufacturer is out of stock."

I tried bike shops all over Kyoto and Osaka; same story.
My best guess is that everything's been shipped over to the place where the biggest consumer base is.
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Old 08-12-07, 03:17 PM   #20
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Ha! You think you've got it bad with LBS parts orders delays?

I'm here in Shimanoland, and can't get all of the 2007 XT parts I want, because,

"The manufacturer is out of stock."

I tried bike shops all over Kyoto and Osaka; same story.
My best guess is that everything's been shipped over to the place where the biggest consumer base is.

Boy, would that ever be aggrivating.
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Old 08-12-07, 06:46 PM   #21
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My current LBS pet peeve is time to get parts. I understand that the store can't keep everything in stock. No problem there. But how come I can order something from any of numerous web vendors and have the part on my doorstep in three or four days (sometimes less), but if the shop orders the same part it might take up to ten days? When I'm getting service (technical help in picking out the part, recommendations to match my bike, size and riding style) I can deal with paying the higher price at an LBS for the same part --- their knowledge is part of what I'm paying for. But the service score starts to go down if I have to wait twice as long.

I'm not looking for a lesson in warehouses, suppliers, etc. It comes down to if I want something for a ride next weekend I'm buying on line because it's much more likely that I'll have the part in time.

I was going to find something at nashbar that a shop might have to order(We stock all this stuff) so I tried: track cog, Singulator, lock ring, Miche, Nitto, Sugino, Sturmey(and Sturmey Archer), Fox Fork, Avid Ultimate,... Oh wait, did find Soma cogs spelled with K.
The regular price, from Nashbar, for a Soma cog is $29.95(Sale price right now is $24.95) The shipping for this cog is $7.25 for UPS round(3-4 days shipping depending on ship to location). If I should happen to be out of this cog and have to order it for you it will still be $29.95 but it might take a day or two longer because we do not charge for shipping(There are some exceptions to this, order a Yakima Roof case and you pay the motor freight) because we try to make orders that meet the free shipping requirement.
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Old 08-12-07, 06:53 PM   #22
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There's a big bike shop in Davis California and its part of the University of California. At the UC Davis campus, there's about 20,000 students who ride bikes. So they have their own bike shop in a converted barn. The student fees support that bike shop plus the shop charges for repairs, etc. So for UC Davis, that shop gets free rent, an automatic customer base of 20,000 plus an annual membership fee subsidy. For visitors to the campus, there's even bike rentals. I suspect their typical customer base is the student-commuter.

This has got to be the ultimate in the non profit model for bike shops. Student commuters first, recreational and sport second.

Anybody here been to UC Davis bike shop?
Are you sure this is the case? That the bike shop is privately owned but just happens to operate on the campus?
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Old 08-12-07, 09:11 PM   #23
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Are you sure this is the case? That the bike shop is privately owned but just happens to operate on the campus?

its like that on a lot of campuses, UBC in vancouver for example, has over 100 private business operating on campus land.
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Old 08-12-07, 11:15 PM   #24
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We had about two freaky months of rain this year followed by a lot of heat. Talked to an LBS owner the other day, said they barely stayed in business. They're at the mercy of a lot of external factors.
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Old 08-12-07, 11:19 PM   #25
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Support your LOCAL BIKE SHOP.
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