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Pricing Differentials; Store Vs Online

Old 02-15-15, 12:34 PM
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I was looking at a pair of gloves in the LBS, and asked how much. The owner told me 35 dollars, just as I saw the MSRP sticker of 19.99. I told him I just saw the msrp, and he started cussing, came over, grabbed it, started scraping the sticker off, and told me as he was doing it I could have them for 25 right there. I passed.
Another time, I bought some park lube. Seven to eight dollars at most shops and online. He told me it was thirteen dollars plus tax. I thought about it, then decided what the hell, took out a card. He got pissed looking and asked didn't I have cash. told him all I had was a ten, and he grumpily took it. He lost a couple bucks even with CC fees. And he did have a working card machine, I asked.

If my bike broke down right in front of the local shop, and I knew he would have the part, I would be looking at an eight mile walk home carrying the bike. Then, if I really needed the part, I would drive fifty miles to the next town and by it at one of several shops that are more expensive than online, but are staffed with reasonable and sometimes knowledgeable people. There are several of those, and while I don't buy a lot of new bikes, I do spend a thousand or more a year on stuff for my projects, as well as pads, tires, and the like. The local shop has lost out on that by being a jerk.

I understand keeping stock is hard, and that I can get it to my house rather than have a shop order it for me. But, if its a part that am not 100% sure will fit, its safer to have a shop order it. And while I feel safe ordering tires I know I like, sometimes its fun to do the impulse purchase of a new brand you decide to try.
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Old 02-15-15, 12:40 PM
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for the most part, the online model isn't sustainable. Sure, one person can equip themselves that way, but you could also do the same thing by going to every bike-related flea market -- no reason to go to a bike store ever if you do that.

If you go online and are buying something that is effectively dropshipped from QBP, you are getting a very small discount from retail. I see this a lot for wheels, as one example. Other vendors are basically surplus dealers, and their deals are all closeouts and discontinued merchandise. The QBP drop-shippers may have some discontinued merchandise at very low prices to fool you into thinking that their prices are lower than normal. If a retailer is big enough to buy at oem/distributor prices and sells retail at wholesale prices, then it might be sustainable. But when they actually go and sell retail from a store, their prices go up considerably. I'm not sure where the ebay vendors of Park Tool product are coming from. I bought my truing stand online, it's one of the few major purchases where I"ve skipped my LBS.
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Old 02-15-15, 02:43 PM
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Originally Posted by unterhausen
If you go online and are buying something that is effectively dropshipped from QBP, you are getting a very small discount from retail. I see this a lot for wheels, as one example. Other vendors are basically surplus dealers, and their deals are all closeouts and discontinued merchandise. The QBP drop-shippers may have some discontinued merchandise at very low prices to fool you into thinking that their prices are lower than normal. If a retailer is big enough to buy at oem/distributor prices and sells retail at wholesale prices, then it might be sustainable. But when they actually go and sell retail from a store, their prices go up considerably. I'm not sure where the ebay vendors of Park Tool product are coming from. I bought my truing stand online, it's one of the few major purchases where I"ve skipped my LBS.
There are two large online retailers who have retail storefronts in my city (Portland). Western Bike Works and Universal Cycles. Their online prices are very low, and the prices in store are the same. I've talked to small LBS owners in town, who tell me those online prices are often equal to or lower than their (the small LBS') wholesale cost.
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Old 02-19-15, 12:18 AM
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Right now, I'm checking the sale on Performance Bike website... Many items are additional 20% off....
Almost each brand is 10, 20, 30% off, minus additional 20% during this sale. Park tool is also on "sale"... they give you 1 or 3% off to make some good looking red lettering next to it lol The problem is that there is no additional 20% off on Park Tool tools...

Now we have a difference not only between "brick and mortar" and online, but also between brands, or to be exact Park Tool vs Everyone else.
I understand that Park Tool makes good quality, snob blue, long lasting tools. I also get theirs selling/pricing tactics, which are working very well to create a very strong brand image... Many people, smart shoppers are choosing best value. Park Tool is NOT the best value, especially to an average cutomer. When it comes to sales (online sales), their value is even much lower.
Same goes with Park Tool pricing at your local bike shop, where most if not all the tools are Park Tool brand...
Here is another reason why more and more people are buying online...You just can't beat the prices, choices and convenience.
Brick and mortar stores are still needed, but they are also stuck in 20th century.
If you want to keep your small local store going, keep it small, cheap to run, sell services, and be a hub for online shopping.
Some stores tried that model several years ago with a HUGE success. Perfect example would be a small store Treefortbikes.com in Ypsilanti, MI. It's an awesome service, great communication hub for online sales. Cyclists from all over US and Canada are buying stuff from them. So yeah....it can be done, and it can be very successful. It's the best of both worlds.

Check their "offices"

Last edited by lopek77; 02-19-15 at 12:34 AM. Reason: added You Tube videos
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Old 02-19-15, 12:47 AM
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Originally Posted by jyl
I've talked to small LBS owners in town, who tell me those online prices are often equal to or lower than their (the small LBS') wholesale cost.
Shimano is trying to cut out the middle man. At least in theory. So, everyone should have the option to buy direct from Shimano, if they care.

It doesn't mean that Shimano doesn't have multi-tier pricing, or sell bulk packaged items for different prices than individual packaged items.
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Old 02-19-15, 01:02 AM
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Originally Posted by unterhausen
for the most part, the online model isn't sustainable. Sure, one person can equip themselves that way, but you could also do the same thing by going to every bike-related flea market -- no reason to go to a bike store ever if you do that.

If you go online and are buying something that is effectively dropshipped from QBP, you are getting a very small discount from retail.
I get a huge discount from retail because I don't pay anything to drive my car to or from a decent shop (about $10 round trip at IRS reimbursement rates which aren't out of line with my actual costs) or loose time ($100+).
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Old 02-19-15, 06:20 AM
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Originally Posted by CliffordK
Shimano is trying to cut out the middle man. At least in theory. So, everyone should have the option to buy direct from Shimano, if they care.

It doesn't mean that Shimano doesn't have multi-tier pricing, or sell bulk packaged items for different prices than individual packaged items.
Why are they doing this?
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Old 02-19-15, 08:00 AM
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Originally Posted by noglider
Why are they doing this?
Shimano to slash number of North American distributors | Bicycle Retailer and Industry News

In theory, simplifying the distribution tree would create better/cheaper service for all.

In reality, Shimano has backorders and distribution problems.

They seem to support the "brick and mortar" distribution concept. But, they certainly also equip bikes sent to department stores, and I have no doubt support the big online retailers (while making it difficult for small home-based businesses).

Of course, each country/continent has its own distribution network, so Shimano America may be independent from wherever European suppliers source their parts.
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Old 02-19-15, 10:07 AM
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Design of Shimano distribution tree has no impact on cycling customer. That will not change prices in LBS, they will be high as always. Average customers just needs to find the cheapest distributor, which will be an online source.
It's a fact that buying power shape the price. Chain Reaction as the biggest online store in the world, is providing one of the lowest prices on the market. They still make money sending their items from Europe to USA, sometimes even offering free shipping.
What an average person doesn't know, is that the part which cost $50 at LBS, was sold to the distributor for $10, $20 bucks? Everything in between is a profit and/or cost for the next guy. If there is a direct sale Factory-Distributor/Dealer-End customer, there is a potential huge saving, which dealer can pocket it, or share with the customer. That's what we see with Chain Reaction Cycles store.
American distributors selling products to LBS, wanted to kill all the distribution channels that online stores were using. It was a big battle... Greedy LBS wanted to be better than greedy online stores...Business is business...It's all about making money. They dont care about customer....all the care is their bottom line. What they forgot is that it's the customer who will decide who will win the battle.
We know that online model is better, is growing fast, and people are price shopping. LBS has no chance to survive if their bottom line is based on selling stuff to a walk in customers...
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Old 02-19-15, 12:25 PM
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Originally Posted by lopek77
Design of Shimano distribution tree has no impact on cycling customer. That will not change prices in LBS, they will be high as always. Average customers just needs to find the cheapest distributor, which will be an online source.
It's a fact that buying power shape the price. Chain Reaction as the biggest online store in the world, is providing one of the lowest prices on the market. They still make money sending their items from Europe to USA, sometimes even offering free shipping.
What an average person doesn't know, is that the part which cost $50 at LBS, was sold to the distributor for $10, $20 bucks? Everything in between is a profit and/or cost for the next guy. If there is a direct sale Factory-Distributor/Dealer-End customer, there is a potential huge saving, which dealer can pocket it, or share with the customer. That's what we see with Chain Reaction Cycles store.
American distributors selling products to LBS, wanted to kill all the distribution channels that online stores were using. It was a big battle... Greedy LBS wanted to be better than greedy online stores...Business is business...It's all about making money. They dont care about customer....all the care is their bottom line. What they forgot is that it's the customer who will decide who will win the battle.
We know that online model is better, is growing fast, and people are price shopping. LBS has no chance to survive if their bottom line is based on selling stuff to a walk in customers...
What a bizarre fantasy.
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Old 02-19-15, 12:28 PM
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Originally Posted by AnkleWork
What a bizarre fantasy.
"Truth often confuse people"
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Old 02-19-15, 12:34 PM
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Originally Posted by loopy77
. . . the part which cost $50 at LBS, was sold to the distributor for $10, $20 bucks? . . .
More like $25 to $35.

Originally Posted by loopy77
. . . Everything in between is a profit and/or cost for the next guy. . .
So, you say that no LBS pays rent, utilities, wages, license fees, etc, and tax on each of those.

Originally Posted by loopy77
"Truth often confuse people"
Then, certainly, you are not "confuse."

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Old 02-19-15, 12:48 PM
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Originally Posted by AnkleWork
What a bizarre fantasy.
well, his numbers are not far off. A normal retail part that a bike shop sells for $50 is sold to them wholesale for $25. My understanding from seeing OEM pricing is that the markup at distributors is about 60%, so that means they paid a little under $16 for it. These are not just bike industry numbers, it's well established that this is a requirement to keep a retail establishment in business. But as pointed out by others, that doesn't really tell the story about profit on a given part. OTOH, if my local shop gives me a deal on a part that they order for me, and they charge me more than half of retail, I don't feel bad about taking money out of their pockets.
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Old 02-19-15, 01:05 PM
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Originally Posted by unterhausen
well, his numbers are not far off. A normal retail part that a bike shop sells for $50 is sold to them wholesale for $25. My understanding from seeing OEM pricing is that the markup at distributors is about 60%, so that means they paid a little under $16 for it. These are not just bike industry numbers, it's well established that this is a requirement to keep a retail establishment in business. . .
According to the U.S. Census Bureau, average retail markup is less than 28 percent of actual retail sales.
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Old 02-19-15, 01:29 PM
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Originally Posted by AnkleWork
According to the U.S. Census Bureau, average retail markup is less than 28 percent of actual retail sales.
AVERAGE across all retail... That kind of data is very, very useless... My average markup was at least 30-35%, with some items up to 80%...so right here that data is way off when it comes to my own past and existing businesses.

Same with an average annual income... Bill gates and most company owners are not making 50k a year, and none of almost 5 million retail sales workers are making 50k. So...average Joe is not making 50k...

Statistics have a big flaw....potential confusion it can cause.

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Old 02-19-15, 01:42 PM
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well, it has to be true, nobody lies to the census
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Old 02-19-15, 01:54 PM
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Originally Posted by unterhausen
well, it has to be true, nobody lies to the census
Yes, but the "average number" is only useful to goverment, and not to individual. Statistics are easy to shape and interpret.
There may be 3 THE BIGGEST STORES in the world...each for different reason. It may be a square footage, number of yearly customers, or according to sales figures. Even sales figures can be play with...before and after taxes.
That's how it is my friends.
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Old 02-19-15, 01:58 PM
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Originally Posted by lopek77
AVERAGE across all retail... That kind of data is very, very useless... My average markup was at least 30-35%, with some items up to 80%...
Then why did you post earlier that any LBS' minimum markup is 60% of retail price [$20 cost on $50 price]?
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Old 02-19-15, 02:33 PM
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Originally Posted by AnkleWork
Then why did you post earlier that any LBS' minimum markup is 60% of retail price [$20 cost on $50 price]?
I didn't say that. Every word, dot and question mark means something in the sentence... Not trying to be an ass, but it's important to read with understanding. OTOH, I'm sorry when some sentences may confuse some. English is my third language.
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Old 02-19-15, 03:39 PM
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Maybe the $20 price was a mistake.

What I don't understand is that I can get items online from the UK faster with free shipping and good warranty service than my LBS tells me they pay for it from the official North American distributor. Something seems messed up with the bike industry.
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Old 02-19-15, 03:42 PM
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Originally Posted by asmac
Maybe the $20 price was a mistake.

What I don't understand is that I can get items online from the UK faster with free shipping and good warranty service than my LBS tells me they pay for it from the official North American distributor. Something seems messed up with the bike industry.
Middlemen making money.
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Old 02-19-15, 04:43 PM
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Just a quick research. Popular 6,7,8 speed chain Sram PC-850.

-Cheapest prices for USA consumers - from another continent...
-All places offers free shipping. Some above $50, $75 or $99
-Local stores are $20+, BUT, and that's just not right - They advertise much lower prices on their website than the real one in stores...

Even the online price of $20.99 from biggest chain in Michigan is still off $2 comparing to what I just saw on their shelves...Store price is $22.99 + 6% TAX
Again, different prices for exactly the same product.

There is 157% difference between the most expensive one and the cheapest one. And we are talking about retail prices...

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Old 02-19-15, 04:44 PM
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Originally Posted by lopek77
I didn't say that. Every word, dot and question mark means something in the sentence... Not trying to be an ass, but it's important to read with understanding. OTOH, I'm sorry when some sentences may confuse some. English is my third language.
So when you wrote "Design of Shimano distribution tree has no impact on cycling customer" do claim you meant something like "Design of Shimano distribution tree absolutely has an impact on cycling customer"?

Just FYI: arithmetic works the same in every language.
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Old 02-19-15, 04:51 PM
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Originally Posted by AnkleWork
So when you wrote "Design of Shimano distribution tree has no impact on cycling customer" do claim you meant something like "Design of Shimano distribution tree absolutely has an impact on cycling customer"?

Just FYI: arithmetic works the same in every language.
Now you picking on something completely else...

I said :

Design of Shimano distribution tree has no impact on cycling customer. That will not change prices in LBS, they will be high as always. Average customers just needs to find the cheapest distributor, which will be an online source.

which is absolutely true.

Customer doesn't care where, how and who is bringing product to the store. Price/quality/value is what they are looking for.
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Old 02-19-15, 06:51 PM
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Originally Posted by lopek77
Greedy LBS
The 'Greedy LBS' owner probably clears $35k a year if he is lucky. The guy that runs my LBS does not even take a salary anymore. The seasonal business sits nearly idle for 6 months in winter with the only reduction from summer costs is to lay off the mechanics. If we want te LBS around in the next decade to keep us rolling, we have to consider maybe we need to support at least the good ones that do deserve our support. Paying an extra $3 for a set of gloves is a very small premium to me to ensure I have someone around to adjust my gears and BS with about the new DI2 systems and great old steel rides. What has become of 'relationships' in this online world? If I am in a pinch my LBS will fix my bike while I wait and even show up early for me so I can pick up something I need on the way to work. Try to get that from Performance Bike. And hanging out in my LBS is a pleasure I occasionally indulge in on a Saturday morning when I want to get out of the house for a while. When I do that I also pick up a set of tires I do not need or buy another new seat. They earn my money far more than Performance does, even if they are a couple of bucks more expensive.
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