Originally Posted by wahoonc
I believe what happens is WM contracts with a bike company to provide them with a certain number of bikes at a certain price point, the company starts shipping their stock bikes and quickly realizes that they are losing ground on profitability due to the price point required by WM so they start using cheaper components to keep their profit margins up.
It's actually worse than that. Suppliers are attracted to WM because it represents a huge market. Once a supplier contracts with WM, they can lose other distribution channels. This means they are often stuck with WM. It ends up being a bargain with the devil.
Then, WM's strategy is to come back every year
and require the supplier to reduce their costs.
WM's business model is a race to the bottom. It works because the consumer thinks the only thing that distinguishes "equivalent" products is price. That is, the consumer thinks that a $100 bike is the same exact thing
as a $1000 bike except the person selling the $1000 bike is ripping them off!
Last edited by njkayaker; 01-03-10 at 11:20 AM.