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Old 08-22-10, 12:21 PM   #1
eyeclan
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How much does an LBS make on every bike?

Around how much money is left after the bike, it parts, shipping, and assembly are paid for?
How much for an entry level road bike <700-1000>, a mid-range <1400-1800>, and a high end <1800 - don't bother looking at the price tag>? I've heard that bike shops actually only make a little from every bike sold, and most of their profits come from service and accessories.
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Old 08-22-10, 12:55 PM   #2
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One of my favourite shops extends a 15% discount on parts and accessories to our co-op members but cannot extend this to new bikes because the markup and profit margin is too low.
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Old 08-22-10, 01:34 PM   #3
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bike industry has always run on low margins for 'branded' bikes - mostly in the 22% markup range. That does get enhanced by pre-season bookings incentives and other possible special programs a manufacturer might offer; but these ain't no great shakes...
Then , of course, there are additional built in costs, like freight, which cut that margin significantly.
When you start dealing with 'Private' label stuff or brands which are really just a 'label' and not a lot of support behind them, then the margins can go up significantly.
Accessories and the needed little crippty crap offers substantially more margin, but then you gotta sell a bunch of that stuff to make any volume. But they can offer a small discount to club riders to bring them thru the doors more often, since that's whoz likely gonna need stuff on an ongoing basis.
Hence, established bike shops with long histories are successful because they sell good stuff, sell wisely to the customer and support the after-sale issues.
That's your trade-off.
I do all of my own work, so sometimes I do feel bad that I'm not throwin as much business to the LBS as I'd like to. But if they have what I need, I don't mind buyin it there.
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Old 08-22-10, 01:55 PM   #4
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bike industry has always run on low margins for 'branded' bikes - mostly in the 22% markup range. That does get enhanced by pre-season bookings incentives and other possible special programs a manufacturer might offer; but these ain't no great shakes...
Then , of course, there are additional built in costs, like freight, which cut that margin significantly.
When you start dealing with 'Private' label stuff or brands which are really just a 'label' and not a lot of support behind them, then the margins can go up significantly.
Accessories and the needed little crippty crap offers substantially more margin, but then you gotta sell a bunch of that stuff to make any volume. But they can offer a small discount to club riders to bring them thru the doors more often, since that's whoz likely gonna need stuff on an ongoing basis.
Hence, established bike shops with long histories are successful because they sell good stuff, sell wisely to the customer and support the after-sale issues.
That's your trade-off.
I do all of my own work, so sometimes I do feel bad that I'm not throwin as much business to the LBS as I'd like to. But if they have what I need, I don't mind buyin it there.
Wow, an LBS really has stuff going hard for them ... no wonder the salesman seemed a bit miffed when I negotiated a bit on the bike (last year's model the same price as this year.)

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Old 08-22-10, 02:46 PM   #5
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Roughly 30%, but that covers keeping the doors open lights on mechanics paid and their health insurance too,
[hope they get some for the work]

Small parts and accessories are 'Keystone' cost is half of retail..

I note bikes for European market tend to be complete, lights mud guards ,and in case of touring bikes racks too.

The Margins for adding that stuff in US dealerships keeps the business afloat.
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Old 08-22-10, 02:53 PM   #6
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we used to joke all the time about how people seem to expect to be able to haggle on the price of a bike, but they would never go to the market and try and haggle on the price of a pound of bannanas

as others said the margins are really low, and the funny thing sometimes the more expensive the bike the less you make.
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Old 08-22-10, 04:00 PM   #7
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I used to work at a bike shop and never got used to the idea that many shoppers wanted to haggle over the price of a low end bike. They'd drive up in a new Mercedes or BMW. Then try to get the shop owner/manager to drop the price a few dollars. The markup is too small for a shop to do that. Then after they bought the bike they'd want to haggle on the price of a low end truck rack.
Lets see. $45,000 for the car. $500 for the bike. $120 for the bike rack. Whats wrong with that picture?
They say they want the bike for exercise and to get healthy. Being cheap is not the way to get healthy. Do they try to haggle about their gym membership costs?
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Old 08-22-10, 08:33 PM   #8
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I used to work at a bike shop and never got used to the idea that many shoppers wanted to haggle over the price of a low end bike. They'd drive up in a new Mercedes or BMW. Then try to get the shop owner/manager to drop the price a few dollars. The markup is too small for a shop to do that. Then after they bought the bike they'd want to haggle on the price of a low end truck rack.
Lets see. $45,000 for the car. $500 for the bike. $120 for the bike rack. Whats wrong with that picture?
They say they want the bike for exercise and to get healthy. Being cheap is not the way to get healthy. Do they try to haggle about their gym membership costs?
How low does the value of my car have to be in order for it to be acceptable for me to negotiate the price
I want to pay for a bike ? If the store owner drives a $60,000 car is it then ok to try and negotiate.
Unless I am missing something nobody can force me to buy something at a certain price
and nobody can be forced to sell me something at a certain price. Something about a free market.
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Old 08-22-10, 09:34 PM   #9
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If you got only X to spend on a bike, there will be something in that price-point.

thats why manufacturers have so many models with different parts picks.

your champagne tastes on a beer pocket book will get you a reasonable value ,
Just may be Andre's sparkling wine and not from France ..

You can get used bikes , many shops have some on consignment . there .
My local does.

Car analogy? heck the Bike shop owner's wife may have a career
as a Lawyer or Doctor, or the payments are expensive..

some people need prestige.. even in the bike they want.
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Old 08-22-10, 10:05 PM   #10
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Around how much money is left after the bike, it parts, shipping, and assembly are paid for?
How much for an entry level road bike <700-1000>, a mid-range <1400-1800>, and a high end <1800 - don't bother looking at the price tag>? I've heard that bike shops actually only make a little from every bike sold, and most of their profits come from service and accessories.
After assembly, fitting, after-sale service, coverage of any warranty issues and other "hidden" costs, bike shop profit margins on new bikes are down in the single digit percentages. Accessories and clothing margins might start in the 50% range, but the percentage drops as the item gets more expensive.

The shops I patronize extend 10% discounts to bike club members. I rarely take advantage of this since I know I'm paying for them to be around for me. I could buy more stuff online (I do for some more generic purchases), but nothing beats the physical process of walking into a shop, putting cash on the counter, and walking out with what you want.
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Old 08-23-10, 09:30 AM   #11
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low margins are another reason why there's so much variability of on-floor sales service...
this being true for much of 'retail', but LBS are different than other retail in many ways.
its not uncommon to have only a few reasonably paid staff in a small store, cause they can't afford to pay more.
not likely that any small LBS owner is gonna be drivin a Jag, unless the bike shop is a diversion from the real money maker.
so regular employees are usually not well paid.
that doesn;t mean that they don;t work. what it means is that they don;t stay for very long. so what you get are noobs which have to learn the intricacies of working with a broad range of customers, fitting their needs and knowing the products.
Sooner or latter they gotta move on also to make more bread.
and a lot of the money a shop has is tied up in the bikes and other inventory you see , layin, standin and hangin.
you can;t sell from an empty shelf - and buyers want to see variety when they walk in...
Hence when asked, I might recommend a LBS, but also advise they should always involve the owner/mgr/known longterm employee who has some history if they are buying a bike or other significant purchase. Not so much for price but just to have that qualified 2nd opinion. I never mention 'price' when speaking about a shop, because that's up to the buyer to decide what they'll pay.
I do know that the backup of good bike knowledge makes a huge difference for anyone buying their 1st and 2nd bikes (and often later when it comes to new technology...) and the cycling experience gets off to the best possible start.
anyway, always best, as a buyer, to come in with a smile on your face, and leave the same way, even if you don;t buy.
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Old 08-23-10, 09:41 AM   #12
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we used to joke all the time about how people seem to expect to be able to haggle on the price of a bike, but they would never go to the market and try and haggle on the price of a pound of bannanas

as others said the margins are really low, and the funny thing sometimes the more expensive the bike the less you make.
I think some people equate buying a bike with buying a car which has always involved negotiation and a bit of horse trading. It is a vehicle after all ;-) Do they also try to negotiate on purchases like food, clothing and household purchases? I doubt it, at least in the USA. I did grow up in the Philippines though where "bargaining" was part of almost every purchase.
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Old 08-24-10, 08:48 PM   #13
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There are a couple of points, I buy things that are on sale in the grocery store, if bananas are on sale I buy them instead of the peaches that are not on sale.

Now when I go to the bike shop I work on a deal for the bike i want, if the shop doesn't like the offer, they don't sell me a bike. I have also found that at some shops the salesman does not have the authority to lower the price but the owner of the shop does.

I stock up on tubes when they are on sale, if the LBS is having a sale I will shop.
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Old 08-24-10, 11:02 PM   #14
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I used to work at a bike shop and never got used to the idea that many shoppers wanted to haggle over the price of a low end bike. They'd drive up in a new Mercedes or BMW. Then try to get the shop owner/manager to drop the price a few dollars. The markup is too small for a shop to do that. Then after they bought the bike they'd want to haggle on the price of a low end truck rack.
Lets see. $45,000 for the car. $500 for the bike. $120 for the bike rack. Whats wrong with that picture?
They say they want the bike for exercise and to get healthy. Being cheap is not the way to get healthy. Do they try to haggle about their gym membership costs?
It is because the customer haggled that led to savings that results in him driving the BMW or Benz which was prolly haggled down too. But for you, well GM has a nice new Chevy waiting for you at full MSRP.

The higher end the bike, the more margin it will be. I've noticed LBS here slash quite a bit off these top end bikes % vs. the lower end models.
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Old 08-25-10, 07:29 PM   #15
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The seller can always say "no." But, if you don't ask, you can not get (as my Grandpa told me).
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Old 08-25-10, 08:01 PM   #16
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... Do they try to haggle about their gym membership costs?
... yes, I also "haggled" the price of my gym membership. Believe it or not, I got a fantastic deal!
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Old 08-25-10, 08:02 PM   #17
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There are a couple of points, I buy things that are on sale in the grocery store, if bananas are on sale I buy them instead of the peaches that are not on sale.

Now when I go to the bike shop I work on a deal for the bike i want, if the shop doesn't like the offer, they don't sell me a bike. I have also found that at some shops the salesman does not have the authority to lower the price but the owner of the shop does.

I stock up on tubes when they are on sale, if the LBS is having a sale I will shop.
Smart shopper.
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Old 08-25-10, 08:16 PM   #18
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I've noticed LBS here slash quite a bit off these top end bikes % vs. the lower end models.
Actually the deals are at the mid range bikes. The margins seem low at the bottom and top ends.
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Old 08-25-10, 08:41 PM   #19
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if they arent marked up, how can the shops afford to drop the prices so much at model year change?
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Old 08-25-10, 09:26 PM   #20
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if they arent marked up, how can the shops afford to drop the prices so much at model year change?
It still costs money to store old inventory. It's better to move out the old to make room for the new.
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Old 08-25-10, 09:29 PM   #21
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if they arent marked up, how can the shops afford to drop the prices so much at model year change?
If it's anything like the golf industry, they get concessions to eliminate old inventory where there will be a price adjustment on old stock in order for them to purchase new stock. It doesn't do the manufacturers any favors if the LBS's aren't buying new merchandise to move, either.
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Old 08-25-10, 09:51 PM   #22
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There's also taxes to be paid on inventory that is in stock over the 12/31-1/1 year change. Rather than keep inventory sitting around and pay taxes they'll discount inventory by a % of the amount of tax so they lose less by moving it even at a loss than by keeping it and putting the tax money into it for another year or portion thereof.
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Old 08-27-10, 06:13 AM   #23
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It still costs money to store old inventory. It's better to move out the old to make room for the new.
The dealers also aren't bound by MSRP/MAP when the next years models come out.
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Old 08-27-10, 05:29 PM   #24
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You also sell old inventory at a loss just to get it off the books...been there done that. And take the write down off the taxes.

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Old 08-27-10, 06:24 PM   #25
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They don't make all that much and they provide a valuable service... give them the business
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