mconlonx 

I come from a manufacturing background, although books, not helmets.

Material differences involved at the point of production is not expensive compared to the MSRP of a helmet, true, but the price of materials at point of production is exponential in both cases. A $20 helmet probably costs $2 to manufacture; a $200 helmet with the exact same safety characteristics probably costs $20 to produce.

Cheap helmets rely on amortization of fixed costs over a very large manufacturing run; expensive helmets don't have that same luxury. Both helmets are subjected to the same testing criteria, and 1,000,000 helmets produced under the same testing cost may be priced very differently than 10,000 helmets of an exclusive model. Same with R&D costs, manufacturing fixed costs, and marketing -- a lower unit sale expectation drives a higher price.

High end helmets have different/better(?) material costs, higher R&D/marketing costs per unit. This is an economic truth, not subject to emotional whims. While the effective safety or other benefits regarding high price helmets vs. low end helmets are certainly up for debate, the development, marketing, and manufacturing aspects are not.

I-Like-To-Bike

I will repeat, again, what wphamilton has posted about your demonstrations of "economic truth" (i.e. assumptions.)

"I'm not being argumentative, but just pointing out that there are a lot of assumptions in your arguments, not really supported, and some of them to me are dubious." Dubious, at best; guesswork more likely.

ricebowl

Buy the cheap helmet with less holes, punch out your own extra holes. You'll get a cheap helmet with lighter weight and better ventilation. I'm sure the helmet will still meet safety standards.

wphamilton

That may all be true, but I'd have to see the numbers. It's not necessarily true that there is much of a difference per unit between a run of 1,000,000 and 10,000. R&D and fixed manufacturing costs, I'd have to see specific numbers there also. We can't just make a global statement like that. Without specifics I'll agree to disagree, and I am skeptical that production costs of the $200 helmet is ten times the production cost of the $20 helmet. Looking at all of it together, even if we're generous I don't see the price difference from costs.

It's governed by supply and demand, as is the pricing of most products. The unusual aspect is the luxury pricing of high end helmets.

wphamilton

From my noggin-topper thread:

cruiserhead

This is a dumb thread
Top line helmets are expensive because the market will pay for it.
They make big profit margins on them

It's styrofoam and plastic.

They all meet the same safety standards, so buy whatever you like. It's all the same with regards to safety.

The only helmets you can say are safer is the airbag helmet and MIPS helmets.

JoeyBike

Well, of course the materials are inexpensive compared to the price of anything you hope to profit from. Everything (materials and labor) up to the final testing of the final product costs money. Then the manufacturer figures out how much each widget cost them and they mark up the wholesale price so they can buy groceries, pay the light bill, etc. Then the retailer is going to mark up the product 40% above wholesale (minimal for a specialty mom & pop free standing shop). If there is a distributer between the manufacturer and the bike shop he gets a cut of 1-5% depending on lots of factors. Then there is shipping - SOMEONE pays for that too, from China to the USA West Coast, then trucked and flown all over the country. These things all add up no matter what you are selling.

Tell that to the Evil Empire (***-Mart). I think you might get an argument from them more enlightening that what I can conjure up here.

Call any printing company RIGHT NOW. Ask them how much to get ONE THING printed. Then ask them about 1000, 10,000, and so on. This is how the real world of production works. Setup and cleanup costs get spread out over more units. Material purchasing gets more powerful buying expanded styrene but the train load than by the gallon. Deny that all you want, it's easy enough to check on the Intertron.

Most big helmet making companies (if not all) don't hire people for ONE DAY to test helmets. They are on staff testing new models and prototypes of future designs 300 days a year. Someone pays their salaries and that someone is the consumer/end user ultimately. A lot of those geniuses are revered (and paid) like rocket scientists and have contracts with "no compete" clauses.

Open your eyes then.

I have worked in production fields as well as retail fields exclusively for the past 40 years. You are entitled to believe what you want. I can't inject 40 years of knowledge and experience into you instantly.

You want to purchase Toyota Corolla, you pay $. If you want to purchase a Formula 1 Race car, the car will cost you a ton, and the support staff ten tons. Why? They are both just cars right? And the Formula 1 only seats one person and has no air conditioner. Go figure.

JoeyBike

No one is denying that. You pay for the magic that makes 2 ounces of "plastic" just as protective as 10 ounces of "plastic". Would a cheap bike helmet protect your head better than a $5 styrene cooler on your head?

You got one thing correct here:

I thank you for your contribution to that end.

wphamilton

OK I'll take you up on that.

What does Walmart manufacture, that they get an economy of scale with from production? Or are their low costs due more to their purchasing power and other economies of scale?

In the "real world of production", how much does a cubic foot of styrene cost when purchased by the trainload? How much by the truckload? How much styrene is used per helmet?

Does Specialized have a team of scientists on staff, or even one genius on staff, merely for testing, full time 300 days a year?

How does the analogy work with Formula 1 racing cars and styrofoam helmets? I don't see many elements in common and am anticipating your illumination.

Regarding shipping. Is shipping of 20 containers of stuff on a freighter from China cheaper that two sets of ten containers? What is the increase per cubic foot from one truck filled with freight and two trucks? Ten times? None? Are you saying that Specialized or Bell operate their own fleet of distribution trucks like Walmart?

Finally, I don't follow how the bit about no-compete clauses fits in with design costs. I've signed half a dozen myself, and a lot of non-disclosure agreements, but I don't think that it ever raised anyone's costs.

I-Like-To-Bike

What percentage of the expensive road bike helmet market in the U.S. are airbag or MIPS helmets? Anything greater than what could be described as minuscule? IOW not a factor when discussing luxury pricing of expensive road bike helmets.

mconlonx 

Guesswork and assumptions only because I work manufacturing in a different industry, but manufacturing/pricing realities are the same across the board. Fixed costs and overhead contribute more toward unit cost of delivered product for products of lower quantity. Expensive helmets are manufactured in nowhere near the quantity of low-price helmets and involve upgraded materials. Even if expensive helmets were manufactured at the same qty as low-price helmets, they'd still be more expensive due to material and manufacturing process. Because they are manufactured at lower quantities, unit prices are even higher.

These are economic truths, for sure. Not dubious, not guesswork: economics.

JoeyBike

Figured you would. I am waiting for a load of laundry to finish up at the moment so I'll bite.

Wal-Mart is well known for taking a popular product (like RubberMade tubs) that was manufactured in the USA and after some time spoiling the company (RubberMade) with huge orders they INSIST the company they deal with give them better and better deals. Sooner or later, something is gonna give. So the company (RubberMade) is FORCED to take manufacturing to China, or starve. Or close up. So RubberMade goes to China and takes advantage of Wal-Marts HUGE manufacturing presence over there and can now make every product cost much less, even though the basic cost of production is the same. How? "Slave" labor. Cheap wages, no health insurance, and disposable employees.

Now RubberMade COULD have told Wally to go Eff himself and cut back their production to 10% and charge double for every product while Wally will tool up in China and start knocking off RubberMade under a different name. Wally might just do that anyway one day, even if RubberMade complied.

So why would RubberMade (they actually did this) fire almost all of their employees and move production to China? Because they could take advantage of Wally's immense power over there. How did Wally get this power? VOLUME OF BUSINESS. Volume brings down costs.

Yes, there are other economics involved but in the end VOLUME is king in every way.

I couldn't care less. But I can tell you that 10,000 gallons of styrene costs less PER GALLON than going to Hobby Lobby and buying ONE gallon. Way less. We could be talking about anything here - ball bearings, nuts and bolts, knives and forks. You want someone to make you a ONE OF A KIND Buck Knife, it's gonna cost a bunch. If you want Buck to make you 10,000 of them to sell at retail, they will cost you some fraction of that one off.

Yes. As does almost any high tech manufacturer where R&D is not just Rip-off-and-Duplicate.

The "one off" Formula 1 is just a car. Four wheels (rarely 6), a steering wheel, a seat, and a seat belt. But the amount of high quality brain power that goes into a race car is astronomical as compared to an entry level sedan. All of the unobtanium materials needed to build the lightest (within race specs) fastest car and highly skilled people (who are in limited supply as well) needed to be successful factor into the price of not only the car, but the cost of the dish soap who sponsors them.

In other words, the statement that "An expensive helmet costs the same to think up, test, and manufacture as a low end helmet" is just idiotic. The car example was just to compare an item that is OBVIOUSLY more labor and dollar intense and perhaps easier to grasp for some here. A car is just a car. Not really. A helmet is just a helmet? No.

I mentioned shipping because no one else had. You look at a handful of "plastic and styrene" and sometimes forget that it didn't just materialize at the bike shop. It had to be shipped. The consumer pays for that in the selling price EVEN if the bike shop got free shipping. SOMEONE payed the shipping and that someone is not in business to lose money. It always trickles down to the consumer.

Specialized does not want "their" geniuses jumping ship to a competitor or starting their own company. This is a testimonial to how important these people are and how few of them are available. They have to be engineers AND visionaries. And want to work for someone else (at least in the beginning). These people GET PAID $$$$$$$. Their paychecks come from VOLUME of cheap helmets and extra MARKUP of the more high-tech, limited production models.

Without the high falutin geniuses, designers, and artists - this is what your helmet would look like:



And it would work better according to some of our resident geniuses here on BF.

wphamilton

That's one typical scenario, among a number of Walmart practices. The point is that Walmart's economy of scale is not due to production costs. In other words, bad example on your part, the China comments notwithstanding.


It's probably the most relevant question I asked. I could buy enough of that stuff to make one helmet for about a dollar, less than two for the fancy dual-layer stuff. So the most they could possibly save with volume is a dollar.



They don't have a scientist on staff exclusively for testing helmets. And not a team of scientists for testing helmets.


In other words,
1) not at all relevant to helmets because the amount of brain power to build a Formula 1 car is incomparable to that needed to design a helmet, and
2) One-off costs are not the same as your 10,000 small factory run.

Since you don't answer specifically, I'll say that the bulk shipping of material is a smaller fraction of the cost. It's not really a relevant factor in the 10-100 times retail price difference.


Your point is that they have to pay high salaries to these guys, and the non-compete is an indication of that, right? Well, I'll grant engineers etc in design especially since Specialized makes a lot of components - but I'd be surprised if all or even more than one or two are dedicated exclusively to designing bike helmets. Non-compete agreement meaning they're paid a lot, I've got to be blunt here Joey. In among some of your salient points is a bit of smoke, and that's an example. Walmart, shipping costs, volume cost of foam, those are other examples. It would be more credible to stick with kevlar reinforcement, variable density layers, anti-microbial padding, and in-shell molded vs other shaping, which gets you at least partway from Specialize's $40 helmet and their $250 one.

mconlonx 

How much to make a mold for the helmet? Let's call it $10,000. Manufacture 100,000 inexpensive helmets with that mold and unit cost for the mold per helmet is $0.10. High end helmet mold costs the same, but sales expections lead to an order of 10,000 helmets. $1.00 unit cost for that mold for the more expensive helmet.

Let's say overhead is a fixed cost for the manufacturing procurer of $10,000 per product. Inexpensive helmet is now $0.20, expensive helmet is now $2.00.

And this doesn't even get into materials cost differences between the two products. Plus a host of other factors -- this is just a mold + overhead. Want to continue? Let's say the fixed cost of setting a line up for production is $10,000. That brings the inexpensive helmet to $0.30, the expensive helmet to $3.00. If we keep going, the inexpensive helmet arrives at the brand's warehouse at $4.00 and the expensive helmet hits the warehouse at $30.00. Once it gets through distribution and retail channels, you have $40 and $300 helmets. 10x is a common gauge for manufacturing unit cost to retail price.

Really, those who don't understand why expensive helmets are expensive have no real grasp of manufacturing cost realities and basic manufacturing economics.

wphamilton

Actual numbers would be more credible than these are, and your other estimations.

For example, not specifically helmets, but you can find quotes for around $1,000-1,500 for a custom styrene injection mold.

Everyone (I think) understands why smaller production runs are more expensive. What isn't clear is what this difference actually is.

mconlonx 

I just tossed numbers out to illustrate the point that a few don't seem to fully understand. Not sure that your quote for a styrene injection mold is any more credible, since there's no reference to volume or complication...

Are you in helmet manufacturing? Do you know what the actual numbers are? Can you provide quotes to manufacture 10,000 helmets of one design with upgraded material and 100,000 of another, more basic design? Do you have any more credibility regarding manufacturing / retail costs than I do?

A company will sell a product as cheap as they can and still make the markup/profit they expect or demand. What that target is depends on the company and competitive marketplace.

spare_wheel

and part of the increased cost is likely due to the structural components, lamination, and engineering that allow a 190 gm helmet with aero-airflow to protect about as well as a 350 gm helmet with crappy vents.

wphamilton

Nope, and that's why I don't say that the difference in retail price is due to R&D and manufacturing costs!

Generalities are sometimes true, but just throwing numbers out and basing the generality on them is dubious.

Differences in helmet retail prices are extreme.

That's rather contrary to the general principles of supply and demand isn't it? The company will sell it for the most they can get, provided there is sufficient demand at that price point, eventually reaching an equilibrium price and production levels depending on demand at that price.

JoeyBike

Keep in mind that high end helmets come in SIZES as part of a better fit / more comfort package. Some manufacturers simply make XS-XXL requiring six different molds while other companies make helmets in actual hat sizes which may bump the number of molds for ONE HELMET DESIGN up to 10. "One size fits most" retention mechanisms are heavy and used as cost cutting tools only, since it is unlikely that more than one person in a household will use one helmet and adjust the size every time they need to use the "family helmet".

"One size fits most" cheapo helmets sometimes come in "regular" and "giant head" varieties requiring two molds at most.

Don't forget that during the R&D phase of production it could take 20 one-off helmets to get it right. It might take 100 more to test for impact every conceivable way, especially when using new designs and materials. They break helmets with a dozen different shaped rams, and hit those helmets from AT LEAST five angles. 12 x 5 = 60 helmets at the very least for just ONE problem solving session. Then re-design if needed and another 60 helmets with the slightly tweaked design. It is not impossible that a test for one helmet could break 60 helmets from 5 different lots totaling in the hundreds. Try ordering 60 "special" helmets and see how much that's gonna cost ya. It all gets kicked down the road to the consumer at some point.

mconlonx 

Difference in retail price is only lightly affected by material costs for manufacturing. The major difference in retail pricing between lower end and higher end helmets is the quantity manufactured. Which figures into R&D, overhead, and other fixed costs.

It is not at all contrary to principles of supply and demand since supply is based on projected demand at a given price. Which is driven by what a helmet manufacturer thinks the market will bear and directly influences manufacturing order quantities. Marketing tells Production how much they think they can sell at a given price, Production comes back with manufacturing quotes, Marketing ponders manufacturing prices at different quantities vs. projected sales, may adjust retail price or manufactured quantity up or down to reflect manufacturing reality at desired profit/markup while accounting for competing product from other companies.

Expensive helmets are expensive because the bean-counters have figured out their equilibrium price, and order (supply) based on sales expectations (demand) at that particular price.

If there was only one helmet manufacturer in the world, that price would be a pure figure, but since there are many helmet manufacturers and it is a competitive field, yes, high end helmets like any other commodity are sold as cheap as can be based on manufacturing costs and expected profit.

mconlonx 

Good point. Low end helmet, high number production, low fixed cost for molds; high end helmet, low production number higher fixed cost for molds.

A decent buyer will get those for free, less mold costs... If it doesn't pass, however, new molds...

Which is why expensive helmets are expensive...

JoeyBike

Yup.

wphamilton

That's what I've been saying. And that "R&D, overhead, and other fixed costs" do not approach the retail price difference, even keeping an anticipated margin in mind.

Since we don't have actual cost numbers, we don't know who's right about that. I see an extreme distance in prices for a relatively small variation in product.

I'd say this is almost right, but you're more likely to want to optimize total profit than any given profit margin, absent any special considerations. It's not at all the same thing - you can demand any profit margin you like, no matter how cheap or expensive it is to produce it, and you're not going to see it unless there's a strong enough demand for what you produce. Unless it's a luxury priced item, or even a Veblen good (which I think it is).

KonAaron Snake 

I have been watching this thread in annoyance for some time.

Some costs are spread across a company, some are spread across a factory, a machine or a department. How those costs are assigned to cost pools, and ultimately units, varies with the industry and specifics of manufacture. In general terms what mcolnox is saying is true. If a factory is building two lines that require similar materials, and one has larger runs, the larger run will typically have a significantly lower cost/unit associated with it. There are other variables involved - does the more expensive unit require a more expensive____, but material cost is likely relatively minimal in any case.

Economies of scale play a role, as does the needed skill and training of the labor...inventory methodology plays a role for the merchandiser...there are a lot of variables in assigning cost and assessing profit for both the retailer AND the manufacturer. If the more expensive helmet takes longer to sell, that effects how profitable it is for the merchandiser. Shipping small batches of pricey helmets costs a lot more than a large order of cheaper ones. What is the manufacture fail rate for both lines? The return rate? A helmet with less material could very well have higher fail rates.

All of which is to say that unless you have the manufacturing and accounting data in front of you for the retailer AND manufacturer, you really don't know what products are more or less profitable for a company. Even that data can be suspect based on internal politics and management motivation. As an example, look at the film industry. It is nearly impossible to tell how much a film really cost.

JoeyBike

You just LOOKING at the exterior of the product? From that perspective, a department store "road" bike looks much like a Specialized S-Works road bike with different paint to the untrained eye. The department store bike costs $150.00 and the S-Works costs $10,000.00+

I think you would be surprised at the actual difference between an entry level helmet and a top end helmet if you saw them cut into tiny pieces exposing the unseen engineering most of which you (or I) would not understand.